<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

(Mark One)

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

For the fiscal year ended  December 31, 2003
                           -----------------

[   ]     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:  333-84114
                         ---------

                                1st Colonial Bancorp, Inc.
                           --------------------------
        Exact name of small business issuer as specified in its charter)

         United States                                     01-0715542
         -------------                                     ----------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                        Identification No.)

          1040 Haddon Avenue

       Collingswood, New Jersey                                08108
       ------------------------                               ------
Address of principal executive offices                      (Zip Code)

Issuer's telephone number: (856) 858-1100
                          ---------------

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

Securities registered pursuant to Section 12(g) of the Act:  None.

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

      The issuer's revenues for its most recent fiscal year were $ 5,063,000.


                                       1
<PAGE>

      The aggregate market value of issued and outstanding voting and non-voting
equity securities held by non-affiliates of the issuer based upon a price of
$11.15 per share, the average of the bid and asked prices of the issuer's
common stock on March 19, 2004, is $10,917,132. For purposes of this
calculation, all directors and executive officers of the issuer, and their
associates, have been considered affiliates.

      The number of shares of Common Stock outstanding on March 12, 2004 was
1,349,940.

      Transitional Small Business Disclosure Format (Check One): Yes [ ]; No [X]





                                        2
<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

     1st Colonial Bancorp, Inc. is a Pennsylvania business corporation and bank
holding company registered under the Bank Holding Company Act of 1956. 1st
Colonial was incorporated on February 26, 2002 for the purpose of acquiring the
bank, thereby enabling the bank to operate within a holding company structure.
On June 30, 2002, 1st Colonial acquired 100% of the outstanding shares of the
bank.

     The principal activities of 1st Colonial are owning and supervising the
bank. The bank is a community-oriented, full-service commercial bank providing
commercial and consumer financial services to businesses and individuals in
Camden County, New Jersey and surrounding areas. We believe that we will
continue to gain market share in our geographic market. We compete with the many
existing and larger financial institutions in our geographic market by
emphasizing personalized service, responsive decision making and an overall
commitment to excellence.

     The bank offers commercial and consumer loans of all types, including real
estate loans, residential mortgage loans, home equity loans and lines of credit,
auto loans and other credit products. The bank's deposit services include
business and individual demand and time deposit accounts, NOW accounts, money
market accounts, Individual Retirement Accounts and holiday accounts. Our
strategy for deposit acquisition and development has been to attract and retain
core deposits, and we traditionally have not priced our deposits to attract
short-term relationships. We do not accept brokered deposits. The bank is not
authorized to offer trust services and does not presently offer the sale of
investment products such as mutual funds to its customers.

     We provide a number of convenience-oriented services and products to our
customers, including direct payroll and social security deposit services,
bank-by-mail services, letters of credit, access to a national automated teller
machine network, safe deposit boxes, night depository facilities, notary
services, courier services and travelers checks. We also offer telephone banking
services that enable our customers to obtain account information, effectuate
transfers between accounts, order new checks and make stop payment requests. In
addition, we intend to begin offering Internet-banking services to our customers
in the third quarter of 2004, using a third party service provider.

     We have outsourced virtually all of our data processing operations to a
third party service provider with respect to deposit accounts, checking
accounts, loan accounts and other matters, as well as ATM processing services.
We also use third parties to provide certain credit card processing services and
escrow deposit processing services.

     As of December 31, 2003, we employed 23 full-time and three part-time
employees.

BUSINESS STRATEGY

     Our mission is to become the leading community bank in our market area by
meeting the credit needs of local businesses and residents, providing
relationship banking and customer service that is superior to the larger banks
in our market area, and offering products and services responsive to local
needs. We intend to increase our market share and presence by opening additional
branch offices at convenient and strategic locations and through growth at our
existing offices.

     We target small and mid-sized businesses as well as professional practices
such as lawyers, medical doctors and accountants in our market area. In
addition, we have had success marketing our deposit account services to local
government entities such as municipalities, school districts and public
authorities. This success is largely due to the experience and reputation of our
management in serving municipal and local government entities in our
marketplace. These deposit relationships are typically operating accounts and
longer-term certificates of deposit, which we believe are a stable source of
funding for us.

     We actively pursue business relationships with our targeted clientele
through diligent calling efforts and by capitalizing on our knowledge of the
market and pre-existing business relationships. Our goal is to establish

                                       3
<PAGE>

deposit and lending relationships that are based on service, will result in
long-standing relationships and will lead to referrals from our satisfied
customers.

     As an added convenience for our government and business customers, we began
offering courier pick-up and delivery services to these customers in 2003. We
also are planning to add up to two full-service branches by the first quarter of
2006, although we have no definitive arrangements to establish any branches at
this time.

     An important element of our strategy is to capitalize on the prior
experience of our management team in our market, as well as their pre-existing
business relationships. Prior to organizing the bank, our president, Gerard M.
Banmiller, helped organize Community National Bank of New Jersey located in
Camden County, New Jersey, and served as its president from 1987 until its sale
in 1998. James E. Strangfeld, the bank's executive vice president, directed
various business and consumer banking operations for the southern New Jersey
divisions of two large regional banks from 1986 to 2000. Many of the bank's
customers, including governmental entities and local businesses, were customers
of Mr. Banmiller and Mr. Strangfeld in their prior positions. It is a
fundamental belief of management that having knowledge of our local markets
facilitates a bank's deposit gathering capabilities and its ability to make
sound credit decisions. This extensive knowledge of our local markets has
allowed us to develop and implement a highly focused and disciplined approach to
deposit and lending relationships with the customers in our market area.

     We believe that our knowledge of the local banking market and our emphasis
on service, when combined with the application of sound lending practices, will
create value for our shareholders.

                                 LOAN PORTFOLIO

     The bank is an active lender with a loan portfolio that includes commercial
mortgages, commercial loans, consumer installment loans and home equity loans.
At December 31, 2003, we had loans of $65.8 million (net of a $768,000 allowance
for loan losses and including $121,000 in net deferred costs), representing
55.7% of total assets, compared to $53.6 million at December 31, 2002.

  LENDING POLICY

     The Bank's lending policies and procedures establish the basic guidelines
governing its lending operations. Generally, the guidelines address the type of
loans we seek, target markets, underwriting and collateral requirements, terms,
interest rate and yield consideration and compliance with laws and regulations.
The policies are reviewed and approved by the Board of the Bank. The Bank
supplements its own supervision of the loan underwriting and approval process
with quarterly loan audits by independent, outside professionals experienced in
loan review work. All new loans in excess of $100,000, as well as a
representative sample of the portfolio, are reviewed on a quarterly basis by
this independent loan review firm.

     The Board maintains a loan committee consisting of at least four "outside"
directors. Outside directors are directors who are not officers of the Bank. Our
senior lending officer and other loan officers present loans to the loan
committee for consideration, but are not voting members of the committee. The
loan committee is authorized to consider and approve all loan requests in excess
of the lending authority delegated to the loan officers. Credit review and
analysis on each loan is prepared by the individual loan officers for
presentation to the loan committee. Loan approval requires a majority of the
voting members present.

     The Bank requires at least two authorized signatures for any loan in excess
of $100,000. The authorized approval level required is a function of the
aggregate amount of credit exposure to the borrower and any related entity. The
senior lending officer, the president/chief executive officer, or the vice
president, loan department, may approve loans up to $100,000. Other loan
officers may approve loans up to an individual lending authority approved by the
Board of Directors.

     The President/chief executive officer and the senior lending officer, or
the senior lending officer and the vice president, loan department may approve
loans up to an amount not to exceed $500,000. All loans in excess of $500,000 up
to $1,000,000 are presented to the loan committee for approval, and all loans in
excess of $1,000,000 are presented to the board of directors for approval.

                                       4
<PAGE>

  COMMERCIAL AND COMMERCIAL REAL ESTATE LOANS

     Our lending activity is concentrated primarily in commercial and commercial
real estate loans. At December 31, 2003, commercial and commercial real estate
loans equaled $44.2 million, or 66.5%, of the loan portfolio. The commercial and
commercial real estate loan portfolio is comprised of $17.0 million of
commercial and industrial loans, as well as $27.2 million of loans secured by
commercial and multi-family real estate. These commercial real estate loans have
an average loan to value ratio under 80%. Other than loans to operators of
nonresidential buildings, which amount to $8.2 million or 12.4% of total loans,
there is no material concentration in the commercial and commercial real estate
loan portfolio within any business or industry segment. Our strategy is to make
commercial and commercial real estate loans based on our analysis of a
borrower's ability to repay the loan out of its operating cash flows. With few
exceptions, we also obtain real estate or other collateral for a commercial or
commercial real estate loan, and typically require repayment guarantees by
principals of a borrower. Most of our commercial and commercial real estate
loans are made to a diverse group of businesses of small and medium size. Except
for one land loan in the amount of $1.1 million as of December 31, 2003, we have
no land or residential development loans.

  RESIDENTIAL REAL ESTATE/CONSUMER LOANS

     Residential real estate and consumer loans together equaled $19.4 million,
or 29.2% of the loan portfolio at December 31, 2003. The residential real estate
portfolio consists primarily of home equity loans. The consumer loan portfolio
consists primarily of automobile and personal loans. Approximately 85.3% of the
residential real estate/consumer portfolio at December 31, 2003 is home equity
loans. The average loan to value ratio of these loans is approximately 80%.
Substantially all residential first mortgage loans originated by us are sold in
the secondary market on a servicing released basis.

  CONSTRUCTION

     Construction loans equaled $2.9 million, or 4.3% of the loan portfolio at
December 31, 2003. This portfolio consists of loans to contractors for the
purpose of constructing or renovating single-family homes and loans to business
owners for the purpose renovating existing facilities. All of these loans mature
within one year. The average loan to value ratio of these loans is approximately
80%. The bank limits its lending to single-facility projects, and does not
finance any tract developments.

                                       5
<PAGE>

     The following table summarizes the bank's loan portfolio by type of loan on
the dates indicated.

<Table>
<Caption>
                                                                      AT DECEMBER 31,
                                 -----------------------------------------------------------------------------------------
                                         2003                   2002                   2001                   2000
                                 --------------------   --------------------   --------------------   --------------------
                                           PERCENT OF             PERCENT OF             PERCENT OF             PERCENT OF
                                 AMOUNT      TOTAL      AMOUNT      TOTAL      AMOUNT      TOTAL      AMOUNT      TOTAL
                                 -------   ----------   -------   ----------   -------   ----------   -------   ----------
                                                                  (DOLLARS IN THOUSANDS)
<S>                              <C>       <C>          <C>       <C>          <C>       <C>          <C>       <C>
Type of Loan:
Commercial.....................  $16,953      25.52%    $17,565      32.43%    $13,782      37.64%    $ 6,244      43.70%
Real estate -- commercial......   27,227      40.99%     18,895      34.88%     12,280      33.53%      3,554      24.88%
Real estate -- residential.....   16,512      24.86%     12,147      22.43%      6,588      17.99%      3,478      24.34%
Construction...................    2,884       4.34%      3,213       5.93%      2,120       5.79%         --         --
Consumer.......................    2,853       4.29%      2,348       4.33%      1,850       5.05%      1,012       7.08%
                                 -------     ------     -------    -------     -------    -------     -------     ------
Total gross loans..............   66,429     100.00%     54,168     100.00%     36,620     100.00%     14,288     100.00%
                                             ======                =======                =======
Less allowance for loan
  losses.......................     (768)                  (576)                  (335)                  (110)
Plus deferred loan costs
  (fees).......................      121                     30                    (24)                     5
                                 -------                -------                -------                -------
Loans, net.....................  $65,782                $53,622                $36,261                $14,183
                                 =======                =======                =======                =======
</Table>

     The following table sets forth the estimated maturity of the bank's loan
portfolio at December 31, 2003. The table does not include prepayments or
scheduled principal repayments.

<Table>
<Caption>
                                                      MATURITY DISTRIBUTION
                                   ------------------------------------------------------------
                                   WITHIN ONE YEAR   ONE-FIVE YEARS   OVER FIVE YEARS    TOTAL
                                   ---------------   --------------   ---------------   -------
                                                      (DOLLARS IN THOUSANDS)
<S>                                <C>               <C>              <C>               <C>
Commercial.......................      $ 9,664          $ 7,048           $  241        $16,953
Construction.....................        2,884               --               --          2,884
Real estate mortgage(1)..........        4,050           30,356            9,333         43,739
Consumer.........................          874            1,719              260          2,853
                                       -------          -------           ------        -------
Total............................      $17,472          $39,123           $9,834        $66,429
                                       =======          =======           ======        =======
</Table>

---------------

(1) Includes all mortgage and home equity loans.

     The following table sets forth the dollar amount of all loans due after
December 31, 2003 which have pre-determined interest rates and which have
floating or adjustable rates.

<Table>
<Caption>
                                                                   FLOATING OR
                                                   FIXED RATES   ADJUSTABLE RATES    TOTAL
                                                   -----------   ----------------   -------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                <C>           <C>                <C>
Commercial.......................................    $ 9,326         $ 7,627        $16,953
Real Estate -- construction......................      1,088           1,796          2,884
Real Estate -- mortgage(1).......................     34,821           8,918         43,739
Consumer.........................................      2,788              65          2,853
                                                     -------         -------        -------
Total............................................    $48,023         $18,406        $66,429
                                                     =======         =======        =======
</Table>

---------------

(1) Includes all mortgage and home equity loans.

     Loans held for sale are residential mortgage loans that are subject to
purchase commitments from third-party investors such as mortgage companies.
Funds for these sales have not yet been received from the investors. The bank
usually receives funds within one week of the loan closing. The bank receives
interest income from the investor from the date the loan closes to the date
funds are received from the investor. At December 31, 2003, there were $281,000
in loans held for sale compared to $63,000 at December 31, 2002 and

                                        6
<PAGE>

$182,000 at December 31, 2001. Interest earned from loans held for sale totaled
$23,000 for 2003 compared to $13,000 for 2002 and $14,000 for 2001, and is
included in interest on loans.

RISK ELEMENTS

     Risk elements in the loan portfolio include loans past due, non-accrual
loans, other real estate owned and a concentration of loans to one type of
borrower. We closely monitor the loan portfolio to reduce the risk of delinquent
and problem credits. Strict underwriting criteria, which include loan to value
and debt to income ratios, are followed, which also helps reduce credit risk in
the loan portfolio. The loan review function is performed by an outside entity
that evaluates loan quality, including adherence to underwriting criteria. This
outside entity reports directly to the Audit Committee of the Board of
Directors. The OCC, as the bank's primary regulator, also reviews the loan
portfolio as part of its review process. The bank's lending activity extends to
individuals and small and medium sized businesses located primarily within the
greater Cherry Hill, New Jersey area. Consistent with its focus on providing
community-based financial services, the bank does not attempt to diversify its
loan portfolio geographically by making significant amounts of loans to
borrowers outside its market area. For a description of the bank's market area,
see "Market Area" below.

ASSET QUALITY

     The bank manages asset quality and controls credit risk through
diversification of the loan portfolio and the application of policies designed
to foster sound underwriting and loan monitoring practices. The bank's senior
officers are charged with monitoring asset quality, establishing credit policies
and procedures subject to approval by the Board of Directors, seeking the
consistent application of these policies and procedures across the bank and
adjusting policies as appropriate for changes in market conditions.

     Non-performing assets include non-performing loans and foreclosed real
estate held for sale. Non-performing loans consist of loans where the principal,
interest, or both, is 90 or more days past due and loans that have been placed
on non-accrual. Income recognition of interest is discontinued when, in the
opinion of management, the collectibility of such interest becomes doubtful. A
loan is generally classified as non-accrual when principal or interest has been
in default for a period of 90 days or more or because of a deterioration in the
financial condition of the borrower such that payment in full of principal or
interest is not expected. Loans past due 90 days or more and still accruing
interest are loans that are generally well secured and in process of collection.
When loans are placed on non-accrual, accrued income from the current period
will be reversed from current earnings. Consumer loans are to be charged off
when principal or interest is 120 or more days delinquent or will be placed on
non-accrual if the collateral is insufficient to recover the principal. The bank
had no non-performing loans or non-accrual loans at December 31, 2003. As of
December 31, 2003, for purposes of accounting and reporting in accordance with
SFAS 15, the bank had no troubled debt restructuring. As of December 31, 2003,
for purposes of accounting and reporting in accordance with SFAS 114, the bank
had no "impaired" loans.

ALLOWANCE FOR LOAN LOSSES

     The bank determines the provision for loan losses through a quarterly
analysis of the allowance for loan losses. Factors such as changes in the nature
and volume of the portfolio, overall portfolio quality, concentrations of credit
risk, review of specific problem loans, current economic conditions and trends
that may affect the ability of borrowers to pay, and prior loss experience
within the various categories of the portfolio are considered when reviewing the
risks in the portfolio. All loans greater than $100,000 and all classified loans
are analyzed individually. While management believes the allowance for loan
losses is currently appropriate, future additions to the allowance may be
necessary based on changes in general economic conditions and/or the condition
of specific borrowers. The allowance is reviewed quarterly by the Board of
Directors and senior management of the bank. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowance for loan losses. Such agencies may require the bank to recognize
additions to the allowance based on their judgments about information available
to them at the time of their examination.

                                        7
<PAGE>

     In addition to management review, an external service provides a detailed
loan review analysis. In the course of a year, all loans in excess of $100,000
are reviewed and rated. In addition, other smaller loans are reviewed on a
random basis. At each quarterly review cycle, all classified loans are assigned
a specific reserve allocation based on the guidelines established in the bank's
credit policy which was approved by the Board of Directors. These could range
from 2.5%-10% on special mention loans; 10%-25% on substandard loans; 50%-75% on
loans rated doubtful and 100% on any loan rated loss.

     The balance of any rated loan is deducted from the remaining general
portfolio classification. The general category is currently segregated by
commercial real estate loans, commercial and industrial loans, residential real
estate loans, construction loans and other consumer loans. Each category of loan
is then assigned loss factors based on a review of the following areas: (i)
historical losses [(due to limited loss experience, we use the loss experience
of peer banks as reported in the Uniform Bank Performance Report)]; (ii)
policies and procedures; (iii) economic conditions; (iv) nature and volume; (v)
management; (vi) oversight; (vii) concentrations; and (viii) external factors.
The sum of the assigned loss factors is then applied to the outstanding balance
of the respective category.

     The bank has no credit exposure to foreign countries or foreign borrowers
or highly leveraged transactions.

     The following table sets forth the year-end balances and changes in the
allowance for possible loan losses and certain ratios as of December 31, 2003,
2002, 2001 and 2000:

<Table>
<Caption>
                                                             DECEMBER 31,
                                                 -------------------------------------
                                                  2003      2002      2001      2000
                                                 -------   -------   -------   -------
                                                        (DOLLARS IN THOUSANDS)
<S>                                              <C>       <C>       <C>       <C>
Allowance for loan losses, beginning of
  period.......................................  $   576   $   335   $   110   $     0
Loans charged-off:
  Consumer.....................................      (40)      (49)        0         0
Recoveries:
  Consumer.....................................        7        15         0         0
                                                 -------   -------   -------   -------
Net charge-offs................................      (33)      (34)        0         0
Provision charged to operations................      225       275       225       110
                                                 -------   -------   -------   -------
Balance, end of year...........................  $   768   $   576   $   335   $   110
                                                 =======   =======   =======   =======
Average loans, net of deferred costs(1)........  $60,183   $47,430   $24,923   $ 6,936
Total gross loans at year end..................  $66,550   $54,198   $36,596   $14,293
Ratios:
Net charge-offs to:
  Average loans, net of deferred costs.........     0.05%     0.07%     0.00%     0.00%
  Allowance as a percentage of total gross
     loans.....................................     1.15%     1.06%     0.92%     0.77%
</Table>

---------------

(1) Includes average balance of loans held for sale of $382 in 2003 and $156 in
    2002. Interest income on loans held for sale was $23 in 2003 and $13 in
    2002.

     Loans charged off will represent the bank's recognition of losses
previously provided for in the overall allowance for loan losses through the
provisions charged to operations in the respective periods.

                                        8
<PAGE>

     The following schedule sets forth the allocation of the allowance for
possible loan losses among various categories. The allocation is based upon the
historical experience of the bank, the historical experience of the bank's
management while at other institutions and management's review of the specific
amount or specific loan category in which future losses may ultimately occur.
However, the entire allowance for possible loan losses is available to absorb
future loan losses in any category. The bank is unable to accurately predict in
what category future charge offs and recoveries may actually occur.

                ALLOCATION OF ALLOWANCE FOR POSSIBLE LOAN LOSSES

<Table>
<Caption>
                                                     DECEMBER 31,
                               ---------------------------------------------------------
                                     2003                2002                2001
                               -----------------   -----------------   -----------------
                               AMOUNT   PERCENT*   AMOUNT   PERCENT*   AMOUNT   PERCENT*
                               ------   --------   ------   --------   ------   --------
                                                (DOLLARS IN THOUSANDS)
<S>                            <C>      <C>        <C>      <C>        <C>      <C>
Commercial...................   $275     25.52%     $235     32.43%     $150     37.64%
Real estate -- commercial....    256     40.99%      170     34.88%      107     33.53%
Real estate -- residential...    102     24.86%       75     22.43%       31     17.99%
Construction.................     27      4.34%       29      5.93%       19      5.79%
Consumer.....................    108      4.29%       67      4.33%       28      5.05%
                                ----    -------     ----    -------     ----    -------
                                $768    100.00%     $576    100.00%     $335    100.00%
                                ====    =======     ====    =======     ====    =======
</Table>

---------------

* Percentages indicate percent of loans in each category to total loans.

SECURITIES

     Securities, primarily U.S. treasury and U.S. government agency securities,
totaled $33.9 million or 28.7% of total assets at December 31, 2003. The bank's
securities portfolio serves several purposes. Portions are held to maturity. The
remaining portions are used to assist the bank in liquidity and asset/liability
management. Total amortized cost of securities at December 31, 2003 was $33.9
million or 28.7% of total assets compared to $31.0 million or 31.5% of total
assets at December 31, 2002.

     Securities are classified as investment securities held-to-maturity when
management has the intent and the bank has the ability at the time of purchase
to hold the securities to maturity. Investment securities held-to-maturity are
carried at cost adjusted for amortization of premiums and accretion of
discounts. Securities to be held for indefinite periods of time are classified
as securities available-for-sale and are carried at fair market value.
Securities available-for-sale include securities that may be sold in response to
changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, general liquidity needs and other similar factors. The
bank's recent purchases of investment securities have been U.S. government and
agency securities with short- to medium-term maturities and adjustable rate
mortgage backed securities.

     Securities available-for-sale are reflected at fair value with unrealized
gains and losses, net of tax, if any, being included in the bank's accumulated
other comprehensive income account. The fair value of the securities
available-for-sale, as of December 31, 2003 was $28.0 million, which resulted in
a tax adjusted unrealized loss on such securities included in accumulated other
comprehensive income, a component of shareholders' equity, of $73,000. The fair
value at December 31, 2002 was $29.9 million, which resulted in a tax adjusted
unrealized gain on such securities included in shareholders' equity of $101,000
as of December 31, 2002.

                                        9
<PAGE>

     The following tables summarize the composition of our investment securities
portfolio at December 31, 2003 and 2002.

                              SECURITIES PORTFOLIO

<Table>
<Caption>
                                                           AT DECEMBER 31, 2003
                                              -----------------------------------------------
                                                 HELD TO MATURITY        AVAILABLE FOR SALE
                                              ----------------------   ----------------------
                                              AMORTIZED   ESTIMATED    AMORTIZED   ESTIMATED
                                                COST      FAIR VALUE     COST      FAIR VALUE
                                              ---------   ----------   ---------   ----------
<S>                                           <C>         <C>          <C>         <C>
Municipal securities........................   $5,808       $5,796      $    --     $    --
U.S. government securities..................       --           --       18,536      18,479
Mortgage-backed securities..................       --           --        9,265       9,200
Equity securities...........................       --           --          306         306
                                               ------       ------      -------     -------
Total.......................................   $5,808       $5,796      $28,107     $27,985
                                               ======       ======      =======     =======
</Table>

<Table>
<Caption>
                                                           AT DECEMBER 31, 2002
                                              -----------------------------------------------
                                                 HELD TO MATURITY        AVAILABLE FOR SALE
                                              ----------------------   ----------------------
                                              AMORTIZED   ESTIMATED    AMORTIZED   ESTIMATED
                                                COST      FAIR VALUE     COST      FAIR VALUE
                                              ---------   ----------   ---------   ----------
<S>                                           <C>         <C>          <C>         <C>
Municipal securities........................   $1,220       $1,218      $    --     $    --
U.S. government securities..................       --           --       19,196      19,317
Mortgage-backed securities..................       --           --       10,376      10,413
Equity securities...........................       --           --          204         204
                                               ------       ------      -------     -------
Total.......................................   $1,220       $1,218      $29,776     $29,934
                                               ======       ======      =======     =======
</Table>

                                        10
<PAGE>
     The amortized cost and weighted average yield of the bank's investment
securities and securities available-for-sale at December 31, 2003, by
contractual maturity, are reflected in the following table. Actual maturities
will differ from contractual maturities because certain borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.

<Table>
<Caption>
                                        DUE 1 YEAR      DUE         DUE       DUE AFTER
AT DECEMBER 31, 2003                     OR LESS     1-5 YEARS   5-10 YEARS   10 YEARS     TOTAL
--------------------                    ----------   ---------   ----------   ---------   -------
<S>                                     <C>          <C>         <C>          <C>         <C>
Investments securities held to
  maturity:
Municipal Securities:
  Amortized cost......................    $5,808      $    --      $   --      $   --     $ 5,808
  Weighted average yield(1)...........      1.79%          --          --          --        1.79%
                                          ------      -------      ------      ------     -------
Total amortized cost..................    $5,808      $    --      $   --      $   --     $ 5,808
                                          ======      =======      ======      ======     =======
Weighted average yield................      1.79%          --          --          --        1.79%
Investment securities available for
  sale:
US government agency securities:
  Amortized cost......................        --      $18,536      $   --      $   --     $18,536
  Weighted average yield..............        --         2.85%         --          --        2.85%
Mortgage backed securities:
  Amortized cost......................    $  343      $ 1,385      $1,817      $5,720     $ 9,265
  Weighted average yield..............      3.81%        3.61%       3.45%       2.99%       3.20%
Equity securities:
  Amortized cost......................    $   --      $    --      $   --      $  306     $   306
  Weighted average yield..............        --           --          --        5.41%       5.41%
Total amortized cost..................    $  343      $19,921      $1,817      $6,026     $28,107
                                          ======      =======      ======      ======     =======
Total fair value......................    $  341      $19,854      $1,804      $5,986     $27,985
                                          ======      =======      ======      ======     =======
Weighted average yield................      3.81%        2.90%       3.45%       3.11%       2.99%
</Table>

---------------

(1) Yields on tax-exempt securities were adjusted to a tax-equivalent basis
    using a 34% rate.

DEPOSITS

     The bank's predominate source of funds is depository accounts. The bank's
deposit base is comprised of demand deposits, savings and money market accounts
and other time deposits.

                                        11
<PAGE>

     The following table sets forth the distribution of average deposits by
major category and the average rate paid in each year as applicable.

                        DISTRIBUTION OF AVERAGE DEPOSITS

<Table>
<Caption>
                                                 YEARS ENDED DECEMBER 31,
                                 ---------------------------------------------------------
                                       2003                2002                2001
                                 -----------------   -----------------   -----------------
                                 AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE   AVERAGE
                                 BALANCE    RATE     BALANCE    RATE     BALANCE    RATE
                                 -------   -------   -------   -------   -------   -------
                                                  (DOLLARS IN THOUSANDS)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>
Non-interest bearing demand
  deposits.....................  $18,320     0.00%   $14,786     0.00%   $ 8,327     0.00%
Interest bearing demand
  deposits.....................   31,344     1.69%    19,772     2.16%     9,460     2.94%
Money market deposits..........   15,109     0.64%    12,231     1.57%    13,883     2.90%
Savings deposits...............    5,293     0.59%     3,873     0.98%     1,807     1.49%
Time deposits..................   20,296     2.68%    14,342     2.96%     9,667     4.38%
                                 -------             -------             -------
  Total/weighted average
     rate......................  $90,362     1.33%   $65,004     1.66%   $43,144     2.62%
                                 =======    =====    =======    =====    =======    =====
</Table>

     The following table is a summary of time deposits of $100,000 or more (all
of which are certificates of deposit) by remaining maturities as of December 31,
2003:

                MATURITIES OF TIME DEPOSITS OF $100,000 AND OVER

<Table>
<Caption>
                                                                AMOUNT      PERCENT
                                                              ----------   ----------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Three months or less........................................   $ 9,737       57.67%
Three to six months.........................................     3,043       18.02%
Six to twelve months........................................     2,548       15.09%
Over twelve months..........................................     1,556        9.22%
                                                               -------      -------
                                                               $16,884      100.00%
                                                               =======      =======
</Table>

     Total deposits at December 31, 2003 were $104.3 million compared to total
deposits of $82.9 million at December 31, 2002. Certificates of deposit totaled
$26.2 million and $16.9 million at December 31, 2003 and December 31, 2002,
respectively.

     As new deposits are generated from the bank's existing branch as well as
any future branches, the bank expects to use these funds, to the extent that
they grow faster than loan growth, for investment securities and other earning
assets. Management expects to manage the growth of deposits in any new branches
as it does in its current operations, by interest rate management and marketing.

     The bank's strategy for deposit acquisition and development has been to
attract and retain core deposits, and the bank has not priced its deposits to
attract short-term relationships. In addition, we have had success marketing our
deposit account services to local government entities such as municipalities,
school districts and public authorities. This success is largely due to the
experience and reputation of our management in handling local government entity
business, which has led to referrals and additional relationships. These
deposits are typically operating accounts and longer term certificates of
deposit, so they are a stable source of funding for us.

SHORT-TERM BORROWINGS

     The bank has no funding dependence on short-term borrowings. Typically the
short-term borrowings are in the form of securities sold under repurchase
agreements and are an accommodation for significant depositor

                                        12
<PAGE>

relationships that have excess large investable balances for short periods. The
majority of these repurchase agreements mature within 90 days.

     The following table summarizes short-term borrowing and weighted average
interest rates paid:

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                                             ------------------------
                                                              2003     2002     2001
                                                             ------   ------   ------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                          <C>      <C>      <C>
Average daily amount of short-term borrowings outstanding
  during the period........................................  $5,284   $5,217   $3,908
Weighted average interest rate on average daily short-term
  borrowings...............................................    0.78%    1.59%    3.40%
Maximum outstanding short-term borrowings outstanding at
  any month-end............................................  $8,296   $7,065   $6,071
Short-term borrowings outstanding at period end............  $4,087   $6,033   $5,460
Weighted average interest rate on short-term borrowings at
  period end...............................................    0.49%    1.00%    1.91%
</Table>

MARKET AREA

     We are located in the southwestern part of New Jersey, approximately five
miles east of the City of Philadelphia, Pennsylvania, which is the fifth largest
city in the United States. Our market area consists of the greater Cherry Hill,
New Jersey area and the Borough of Westville, New Jersey. Our target market
includes the towns of Collingswood, Haddonfield, Westville and Cherry Hill.

COMPETITION

     The banking business in our service area, as well as the balance of New
Jersey and the Philadelphia area, is highly competitive with respect to both
loans and deposits and is dominated by a number of major regional and
super-regional banks and non-depository institutions which have many offices.
Many of these institutions, particularly the larger banking firms that have
enhanced their local presence through mergers in recent years, have
substantially greater resources and offer a wider array of services than we do.
In addition, many of these institutions are permitted to make larger loans than
we can. In addition, the present bank regulatory environment has undergone
significant change. This change affects the banking industry and competition
between banks and non-bank financial institutions. There have been significant
regulatory, statutory and case law changes in the bank merger and acquisition
area, in the products and services banks can offer, and in the non-banking
activities in which bank holding companies can engage. We face competition for
loans and

                                        13
<PAGE>

deposits from institutions such as credit unions, mortgage brokers, mortgage
banking companies, mutual funds, money market funds, investment bankers,
insurance companies and others. These non-bank financial institutions have the
power to acquire and own banks that could compete with us. See "Supervision and
Regulation."

     We compete with these institutions primarily on the basis of service,
quality and hours of operation. We believe that the local presence of our senior
management and Board of Directors, and their collective familiarity with our
service area, affords us an advantage in service, quality and understanding the
needs of our customer base.

                           SUPERVISION AND REGULATION

GENERAL

     We are registered as a bank holding company and are subject to supervision
and regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Act of 1956, as amended. As a bank holding company, our activities
and those of the bank are limited to the business of banking and activities
closely related or incidental to banking. Bank holding companies are required to
file periodic reports with and are subject to examination by the Federal Reserve
Board.

     The Federal Reserve Board has issued regulations under the Bank Holding
Company Act that require a bank holding company to serve as a source of
financial and managerial strength to its subsidiary banks. As a result, the
Federal Reserve Board, pursuant to such regulations, may require us to stand
ready to use our resources to provide adequate capital funds to the bank during
periods of financial stress or adversity.

     The Bank Holding Company Act prohibits us from acquiring direct or indirect
control of more than 5% of the outstanding shares of any class of voting stock,
or substantially all of the assets of, any bank, or from merging or
consolidating with another bank holding company, without prior approval of the
Federal Reserve Board. Additionally, the Bank Holding Company Act prohibits us
from engaging in or from acquiring ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any company engaged in a
non-banking business, unless such business is determined by the Federal Reserve
Board to be so closely related to banking as to be a proper incident thereto.
The types of businesses that are permissible for bank holding companies to own
have been expanded by recent federal legislation; see discussion of Gramm-
Leach-Bliley Act below.

     The bank is a national bank chartered under the National Bank Act, and is
subject to regulation, supervision and examination by the OCC and, in certain
respects, by the Federal Reserve Board and the Federal Deposit Insurance
Corporation (the "FDIC"). The FDIC, through the Bank Insurance Fund, insures all
deposits held by the bank up to a maximum of $100,000 for any one customer.

     The OCC, which has primary supervisory authority over the bank, regularly
examines banks in such areas as reserves, loans, investments, management
practices, and other aspects of operations. These examinations are designed for
the protection of the bank's depositors rather than the bank's shareholders. The
bank must furnish annual and quarterly Call Reports to the OCC, which has the
authority under the Financial Institutions Supervisory Act to prevent a national
bank from engaging in an unsafe or unsound practice in conducting its business.

     The various laws and regulations administered by the OCC affect corporate
practices, such as the payment of dividends, incurrence of debt and acquisition
of other financial institutions and companies, and

                                        14
<PAGE>

affect business practices, such as the payment of interest on deposits, the
charging of interest on loans, the types of business conducted and the location
of offices.

SARBANES-OXLEY ACT

     On July 30, 2002, the Sarbanes-Oxley Act, or SOX, was enacted. SOX is not a
banking law, but applies to all public companies, including 1st Colonial. The
stated goals of SOX are to increase corporate responsibility, to provide for
enhanced penalties for accounting and auditing improprieties at publicly traded
companies and to protect investors by improving the accuracy and reliability of
corporate disclosures pursuant to the securities laws. SOX is the most
far-reaching U.S. securities legislation enacted in some time. SOX generally
applies to all companies, both U.S. and non-U.S., that file or are required to
file periodic reports with the Securities and Exchange Commission, or the SEC,
under the Securities Exchange Act of 1934, or the Exchange Act. Given the
extensive SEC role in implementing rules relating to many of SOX' new
requirements, the final scope of these requirements remains to be determined.

     SOX includes very specific additional disclosure requirements and new
corporate governance rules, requires the SEC and securities exchanges to adopt
extensive additional disclosure, corporate governance and other related rules
and mandates further studies of specified issues by the SEC and the Comptroller
General. SOX represents significant federal involvement in matters traditionally
left to state regulatory systems, such as the regulation of the accounting
profession, and to state corporate law, such as the relationship between a board
of directors and management and between a board of directors and its committees.
SOX addresses, among other matters:

     - audit committees;

     - certification of financial statements by the chief executive officer and
       the chief financial officer;

     - the forfeiture of bonuses or other incentive-based compensation and
       profits from the sale of an issuer's securities by directors and senior
       officers in the twelve month period following initial publication of any
       financial statements that later require restatement;

     - a prohibition on insider trading during pension plan black out periods;

     - disclosure of off-balance sheet transactions;

     - a prohibition on personal loans to directors and officers;

     - expedited filing requirements for Form 4 statements of changes of
       beneficial ownership of securities required to be filed by officers,
       directors and 10% shareholders;

     - disclosure of whether or not a company has adopted a code of ethics;

     - "real time" filing of periodic reports;

     - auditor independence; and

     - various increased criminal penalties for violations of securities laws.

     The SEC has been delegated the task of enacting rules to implement various
provisions with respect to, among other matters, disclosure in periodic filings
pursuant to the Exchange Act. To date, the SEC has implemented some of the
provisions of SOX. However, the SEC continues to issue final rules, reports, and
press releases. As the SEC provides new requirements, we will review those rules
and comply as required.

USA PATRIOT ACT

     In October 2001, the President signed into law the USA PATRIOT Act. This
Act was in direct response to the terrorist attacks on September 11, 2001, and
strengthens the anti-money laundering provisions of the Bank Secrecy Act. Most
of the new provisions added by this Act apply to accounts at or held by foreign
banks, or accounts of or transactions with foreign entities. The bank does not
have a significant foreign business and does not expect this Act to materially
affect its operations. This Act does, however, require the banking

                                        15
<PAGE>

regulators to consider a bank's record of compliance under the Bank Secrecy Act
in acting on any application filed by a bank. As the bank is subject to the
provisions of the Bank Secrecy Act (i.e., reporting of cash transactions in
excess of $10,000), the bank's record of compliance in this area will be an
additional factor in any applications filed by it in the future. To the bank's
knowledge, its record of compliance in this area is satisfactory and its
processes and procedures to insure compliance with this Act are satisfactory.

GRAMM-LEACH-BLILEY ACT

     In November 1999 the Gramm-Leach-Bliley Act (the "GLB Act") became law. The
GLB Act made significant changes in U.S. banking law, principally by repealing
the 1933 Glass-Steagall Act. Under the GLB Act, banks and other financial
companies, such as securities firms and insurance companies, are now able to
combine and be commonly owned. The GLB Act also permits bank holding companies
and banks to engage in a broader range of financially related activities than
was available to them before the passage of the GLB Act, including insurance and
securities underwriting, merchant banking and real estate development and
investment. The GLB Act, however, does not authorize banks or their affiliates
to engage in commercial activities that are not financial in nature, such as
manufacturing.

     The GLB Act creates a new category of bank holding company called a
"financial holding company." In order to avail itself of the expanded financial
activities permitted under the GLB Act, a bank holding company must notify the
Federal Reserve that it elects to be a financial holding company. A bank holding
company can make this election if it, and all its bank subsidiaries, are well
capitalized, well managed, and have at least a satisfactory Community
Reinvestment Act rating, each in accordance with the definitions prescribed by
the Federal Reserve and the regulators of the company's subsidiary banks. Once a
bank holding company makes such an election, and provided that the Federal
Reserve does not object to such election, the financial holding company may
engage in financial activities (i.e., securities underwriting, insurance
underwriting, and certain other activities that are financial in nature as to be
determined by the Federal Reserve) by simply giving a notice to the Federal
Reserve within thirty days after beginning such business or acquiring a company
engaged in such business. This makes the regulatory approval process to engage
in financial activities much more streamlined than it was under prior law. We
have no present intention of electing to become a financial holding company.

     The GLB Act also permits certain financial activities to be undertaken by a
subsidiary of a national bank. Generally, for financial activities that are
conducted as a principal, such as a securities underwriter or dealer holding an
inventory, a national bank must be one of the 100 largest national banks in the
United States and have debt that is rated investment grade. However, smaller
national banks may own a securities broker or an insurance agency, or certain
other financial agency entities under the GLB Act. Under prior law, national
banks could only own an insurance agency if it was located in a town of fewer
than 5,000 residents, or under certain other conditions. Under the GLB Act,
there is no longer any restriction on where the insurance agency subsidiary of a
national bank is located or does business.

     The GLB Act also contains a number of provisions that affect the operations
of all financial institutions. One of the provisions relates to the financial
privacy of consumers, authorizing the federal banking regulators to adopt rules
that would limit the ability of banks and other financial entities to disclose
non-public information about consumers to entities that are not affiliates.
Under these rules, banks must establish a disclosure policy for non-public
customer information, disclose the policy to their customers, and give their
customers the opportunity to object to non-public information being disclosed to
a third party.

CAPITAL REQUIREMENTS

     Under federal regulations, Bank must maintain a minimum ratio of qualified
total capital to risk-weighted assets of 8.0%. Risk-weighted assets are
determined by multiplying the various categories of assets by the appropriate
risk-weighing factor (ranging from 0% to 100%) under applicable regulations.
Certain off-balance sheet items, such as standby letters of credit, are included
in assets for these purposes at a "credit equivalent" value, determined by
multiplying the off-balance sheet item by a credit conversion factor established
by applicable regulations. At least half of the total capital must be comprised
of common equity, retained

                                        16
<PAGE>

earnings and a limited amount of permanent preferred stock, less goodwill ("Tier
1 capital"). The remainder ("Tier 2 capital") may consist of a limited amount of
subordinated debt, other preferred stock, certain other instruments and a
limited amount of loan and lease loss reserves. The sum of Tier 1 capital and
Tier 2 capital is "total risk-based capital." Federal regulations also require a
minimum ratio of Tier 1 capital to risk-weighted assets of 4.0%.

     In addition, federal regulations have established a minimum leverage ratio
(Tier 1 capital to quarterly average assets less goodwill) of 3.0% for banks and
bank holding companies that meet certain specified criteria, including that they
have the highest regulatory rating. All other banks and bank holding companies
are required to maintain a leverage ratio of 3.0% plus an additional amount of
at least 100 to 200 basis points. The regulations also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.

     Banking regulators continue to indicate their desire to raise banking
organization capital requirements beyond their current levels. However,
management is unable to predict whether higher capital ratios will be imposed
and, if so, at what levels and on what schedule.

     Any national bank not in compliance with applicable capital requirements
may be subject to certain growth restrictions, issuance of a capital directive
by the appropriate federal regulator, and various other possible enforcement
actions by the appropriate federal regulators, including a cease and desist
order, civil monetary penalties, and the establishment of restrictions on
operations. In addition, the institution could be subject to appointment of a
receiver or conservator or a forced merger into another institution.

LIMITS ON DIVIDENDS

     The amount of dividends that may be paid by the bank depends upon the
bank's earnings and capital position, and is limited by federal law, regulations
and policies.

     As a national bank subject to the regulations of the OCC, the bank must
obtain approval for any dividend if the total of all dividends declared in any
calendar year would exceed the total of its net profits, as defined by
applicable regulations, for that year, combined with its retained net profits
for the preceding two years, less any required transfers to surplus. In
addition, the bank may not pay a dividend in an amount greater than its
undivided profits then on hand after deducting its losses and bad debts. For
this purpose, bad debts are generally defined to include the principal amount of
loans which are in arrears with respect to interest by six months or more unless
such loans are fully secured and in the process of collection. Moreover, for
purposes of this limitation, the bank is not permitted to add the balance in its
allowance for loan loss account to its undivided profits then on hand; however,
it may net the sum of its bad debts as so defined against the balance in its
allowance for loan loss account and deduct from undivided profits only bad debts
as so defined in excess of that amount.

     In addition, the OCC is authorized to determine under certain circumstances
relating to the financial condition of a national bank that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof. The payment of dividends that deplete a bank's capital base could be
deemed to constitute such an unsafe or unsound practice.

LOANS TO ONE BORROWER LIMITATION

     Under applicable OCC regulations, a national bank's total outstanding loans
and extensions of credit to one borrower may not exceed 15 percent of the bank's
capital and surplus, plus an additional 10 percent of the bank's capital and
surplus if the amount that exceeds the bank's 15 percent general limit is fully
secured by readily marketable collateral, which is defined to include certain
financial instruments and bullion. To qualify for the additional 10 percent
limit, the bank must perfect a security interest in the collateral under
applicable law and the collateral must have a current market value at all times
of at least 100 percent of the amount of the loan or extension of credit that
exceeds the bank's 15 percent general limit. At December 31, 2003, the Bank's
loans to one borrower limitation was $1.4 million.

                                        17

<PAGE>

COMMUNITY REINVESTMENT

     Under the Community Reinvestment Act ("CRA"), a bank has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop types of products and services that it believes are best
suited to its particular community, consistent with the CRA. The CRA requires
the OCC, in connection with its examination of national banks, to assess the
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution. The OCC is required to provide a written evaluation of an
institution's CRA performance utilizing a four tiered descriptive rating system,
which rating is disclosed to the public.

     The Community Reinvestment Act was amended by the GLB Act to provide that
small banks (those under $250 million in assets) that received an "outstanding"
on their last CRA exam will not have to undergo another CRA exam for five years,
or for four years if their last exam was "satisfactory." In addition, any CRA
agreement entered into between a bank and a community group must be disclosed,
with both the bank and the group receiving any grants from the bank detailing
the amount and use of the funding provided.

PROMPT CORRECTIVE ACTION

     The federal banking agencies are required to take "prompt corrective
action" in respect of banks that do not meet minimum capital requirements. There
currently are five capital tiers: "well capitalized," "adequately capitalized,"
"under capitalized," "significantly under capitalized" and "critically under
capitalized." The bank is "well capitalized." The following table sets forth the
minimum capital ratios that a bank must satisfy in order to be considered well
capitalized or adequately capitalized under OCC regulations:

<Table>
<Caption>
                                                              ADEQUATELY       WELL
                                                              CAPITALIZED   CAPITALIZED
                                                              -----------   -----------
<S>                                                           <C>           <C>
Total risk-based capital ratio..............................      8%            10%
Tier 1 risk-based capital ratio.............................      4%             6%
Leverage ratio..............................................      4%             5%
</Table>

     The FDIC's regulations establish specific actions that are permitted or, in
certain cases required, to be taken by regulators with respect to institutions
falling within one of the three undercapitalized categories. Depending on the
level of the institution's capital, the agency's correction powers can include:
requiring a capital restoration plan; placing limits on asset growth and
restrictions on activities; requiring the institution to issue additional stock
(including voting stock) or be acquired by another institution in a transaction
supervised by the FDIC; placing restrictions on transactions with affiliates;
restricting the interest rate the institution may pay on deposits; ordering a
new election for the institution's board of directors; requiring that certain
senior executive officers or directors be dismissed; prohibiting the institution
from accepting deposits from correspondent banks; prohibiting the payment of
principal or interest on subordinated debt; and, in the most severe cases,
appointing a receiver for the institution. A bank that is undercapitalized is
required to submit a capital restoration plan. Under certain circumstances, a
"well capitalized", "adequately capitalized" or "undercapitalized" institution
may be required to comply with restrictions applicable to the next lowest
capital category.

SAFETY AND SOUNDNESS STANDARDS

     The OCC and the other federal banking agencies have adopted "Interagency
Guidelines Establishing Standards for Safety and Soundness" ("Guidelines").
These operational and managerial standards address an institution's general
practices, and are designed to provide a framework for the federal bank
regulators to determine whether those practices are sound in principle and
whether procedures are in place to ensure that they are applied in the normal
course of business. The guidelines cover such areas as internal controls, loan

                                        18
<PAGE>

documentation, credit underwriting, interest rate exposure, asset growth and
compensation. Banks failing to meet these standards are required to submit
compliance plans to their appropriate federal regulators.

     The OCC is also required to perform annual on-site bank examinations, place
limits on real estate lending by banks and impose more stringent auditing
requirements.

INSURANCE OF ACCOUNTS AND REGULATIONS BY THE FDIC

     The bank is a member of the Bank Insurance Fund, which is administered by
the FDIC. Deposits are insured up to the applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examination of, and to require reporting by, FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious risk
to the Bank Insurance Fund.

     The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. Under the system, institutions classified as
well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to risk-weighted assets ("Tier 1 risk-based capital") of at
least 6% and a risk-based capital ratio of at least 10%) and considered healthy
pay the lowest premium, while institutions that are less than adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
total risk-based capital ratio of less than 8%) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The FDIC is authorized to increase assessment rates, on a semi-annual
basis, if it determines that the reserve ratio of the Bank Insurance Fund will
be less than the designated reserve ratio of 1.25% of Bank Insurance Fund
insured deposits. In setting these increased assessments, the FDIC must seek to
restore the reserve ratio to that designated reserve level, or such higher
reserve ratio as established by the FDIC.

     The current premium schedule for Bank Insurance Fund insured institutions
ranges from 0 to 27 basis points per $100 of deposits. The bank is in the
category of institutions that pay zero in FDIC insurance premiums. In addition
FDIC premiums, all insured institutions are required to pay a Financing
Corporation assessment, in order to find the interest on bonds issued to resolve
thrift failures in the 1980s. The current annual rate for all insured
institutions is 1.54 basis points for each $100 in domestic deposits. These
assessments are revised quarterly and will continue until the bonds mature in
the year 2017.

LEGISLATIVE PROPOSALS AND REFORMS

     Legislative and regulatory proposals regarding changes in banking, and the
regulation of banks, thrifts and other financial institutions, are considered
from time to time by the executive branch of the federal government, Congress
and various state governments. Certain of these proposals, if adopted, could
significantly change the regulation of banks and the financial services
industry. We cannot predict whether any of these proposals will be adopted or,
if adopted, how these proposals will affect us.

IMPACT OF MONETARY POLICIES

     The profitability of the banking business depends in large part on the
difference between the interest rate paid by us on deposits and other
borrowings, and the interest rate received by us on loans extended to customers
and securities held in our portfolio, comprise the major portion of our
earnings. In addition, we attempt to generate revenues by assessing fees on our
services, to the extent the competitive market will allow such fees.

     The earnings and growth of the bank and of the banking industry as a whole
is affected not only by general domestic and foreign economic conditions, but
also by the monetary and fiscal policies of the United States and its agencies,
particularly the Federal Reserve Board. The Federal Reserve Board affects the
national economy by its open market operations in United States government
securities, limitations upon

                                        19
<PAGE>

savings and time deposit interest rates, and adjustments to the discount and
reserve retention rates applicable to borrowings by banks which are members of
the Federal Reserve System. These actions of the Federal Reserve Board influence
the growth of bank loans, investments and deposits and affect interest rates
charged on loans and paid on deposits. The nature and impact of any future
changes in monetary policies cannot be predicted but, in any event, may have a
material effect on the our results of operations.

TRANSACTIONS WITH AFFILIATES

     National banks must comply with Sections 23A and 23B of the Federal Reserve
Act ("Sections 23A and 23B") and Regulation W under that act relative to
transactions with affiliates in the same manner and to the same extent as if the
bank were a Federal Reserve member bank. A bank holding company, its
subsidiaries and any other company under common control are considered
affiliates of the bank. Generally, Sections 23A and 23B and Regulation W: (i)
limit the extent to which the insured association or its subsidiaries may engage
in certain covered transactions with an affiliate to an amount equal to 10% of
such institution's capital and surplus and place an aggregate limit on all such
transactions with affiliates to an amount equal to 20% of such capital and
surplus, and (ii) require that all such transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate. The term "covered transaction" includes the making
of loans, the purchase of assets, the issuance of a guarantee and similar types
of transactions. Any loan or extension of credit by the bank to an affiliate
must be secured by collateral in accordance with Section 23A and Regulation W.
Exemptions from Section 23A or 23B may be granted only by the Federal Reserve.
The bank has not been significantly affected by the rules regarding transactions
with affiliates.

     The bank's authority to extend credit to executive officers, directors and
10% shareholders, including 1st Colonial, as well as entities controlled by such
persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Pursuant to these laws and regulations, any loan made
by the bank to an executive officer or director, or his or her affiliates, (i)
was made in the ordinary course of business, (ii) was made on terms and
conditions substantially the same as those offered to unaffiliated individuals
and (iii) did not involve more than the normal risk of repayment. The bank has
not made any loans to a 10% shareholder. Generally, Regulation O also places
individual and aggregate limits on the amount of loans the bank may make to such
persons based, in part, on the bank's capital position, and requires certain
board approval procedures to be followed.

                                        20
<PAGE>

ITEM 2. PROPERTIES

     Our headquarters are located at 1040 Haddon Avenue, Collingswood, New
Jersey. The property, which houses the administrative headquarters and a full
service banking office, is leased by the bank. The building has two stories
containing approximately 3,800 total square feet of space. The annual base
rental through 2004 is $45,000, not including taxes, utilities and insurance,
which increases to $49,500 for 2005. After 2005, the rent increases annually
based on increases in the consumer price index, with a minimum annual increase
of 3%. The initial term of the lease is through 2009, with options in favor of
the bank to renew the lease for two additional five-year terms. The property is
well maintained and suitable to our present needs and operations.

     Certain back office and administrative functions are located in office
space leased by the bank at 900 Haddon Avenue, Collingswood, New Jersey. This
lease expires in 2006.

     On January 16, 2003 the bank opened a branch office at 321 Broadway,
Westville, New Jersey. The bank purchased this facility from another financial
institution. The bank did not purchase any deposits or loans in this
transaction. In addition to the existing vault, drive-through teller windows and
night depository facility, the facility was expanded to include multiple
customer service representative locations and a drive-up automated teller
machine.

                                      21

<PAGE>


ITEM 3. LEGAL PROCEEDINGS

     We are periodically parties to or otherwise involved in legal proceedings
arising in the normal course of business, such as claims to enforce liens,
claims involving the making and servicing of real property loans, and other
issues incident to our business. We do not believe that there is any pending or
threatened proceeding against us which, if determined adversely, would have a
material effect on our business or financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                       22
<PAGE>


                                    PART II

ITEM 5. MARKET FOR THE COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND SMALL
        BUSINESS ISSER'S PURCHASES OF EQUITY SECURITIES

     Our common stock is traded on the OTC Bulletin Board under the symbol FCOB.
An active trading market does not currently exist for our common stock. As of
March 18, 2004, the bid price for the common stock was $10.90, and the asked
price was $11.20, without any adjustment to reflect the 5% stock dividend
payable April 15, 2004 to shareholders of record as of April 1, 2004. The
following tables set forth the high and low last sale information, as reported
by the OTC Bulletin Board, as of the most recent practicable date and for the
periods indicated below. The 5% stock dividend payable in April 2004 is
reflected only in the second table.

                    SALE PRICE INFORMATION FOR COMMON STOCK

<TABLE>
<CAPTION>
                                                               SALE PRICE(1)
                                                              ---------------
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
                                                                   2002
First Quarter...............................................  $ 9.76   $ 8.81
Second Quarter..............................................    9.29     8.57
Third Quarter...............................................    9.05     6.90
Fourth Quarter..............................................    8.58     6.45
                                                                   2003
First Quarter...............................................  $ 9.81   $ 7.86
Second Quarter..............................................   11.00     8.71
Third Quarter...............................................   11.00    10.00
Fourth Quarter..............................................   11.10    10.05
                                                                   2004
First Quarter (Through 3/18/04).............................  $11.75   $10.80
</TABLE>

---------------

(1) Prices are adjusted to reflect the 5% stock dividend paid by 1st Colonial on
    April 15, 2003.

  SALE PRICE INFORMATION FOR COMMON STOCK, AS ADJUSTED FOR 2004 STOCK DIVIDEND

<TABLE>
<CAPTION>
                                                               SALE PRICE(1)
                                                              ---------------
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
                                                                   2002
First Quarter...............................................  $ 9.30   $ 8.39
Second Quarter..............................................    8.85     8.16
Third Quarter...............................................    8.62     6.57
Fourth Quarter..............................................    8.17     6.14
                                                                   2003
First Quarter...............................................  $ 9.34   $ 7.49
Second Quarter..............................................   10.48     8.30
Third Quarter...............................................   10.48     9.52
Fourth Quarter..............................................   10.57     9.57
                                                                   2004
First Quarter (Through 3/18/04).............................  $11.19   $10.29
</TABLE>

---------------

(1) Prices are adjusted to reflect the 5% stock dividend paid by 1st Colonial on
    April 15, 2003 and to reflect the 5% stock dividend to be paid by 1st
    Colonial on April 15, 2004 to shareholders of record as of April 1, 2004.

     As of December 31, 2003, there were options outstanding to purchase 75,823
shares of common stock and warrants outstanding to purchase 356,001 shares of
common stock.

     As of December 31, 2003, there were 293 holders of record of our common
stock.

     Ryan Beck & Co.; Midwest Research Securities Corp., a subsidiary of First
Tennessee National Bank; and Janney Montgomery Scott, LLC make a market in our
common stock. Making a market involves maintaining bid and ask quotations and
being able, as principal, to effect transactions in reasonable quantities at
those prices, subject to securities laws and regulatory constraints.
Additionally, the development of a liquid public market depends on the existence
of willing buyers and sellers, the presence of which is not within our control.
An active and liquid market may not develop for the common stock.

     StockTrans, Inc. serves as transfer agent and registrar for our common
stock.

                                       23
<PAGE>

Dividend Policy

     Since our inception in June 2000, we have not paid a cash dividend, and we
do not intend to pay cash dividends for the foreseeable future. We desire to
retain our net income to support the growth of the bank. Any payment of cash
dividends to our shareholders would be dependent on the payment of a cash
dividend from the bank to us. The payment of cash dividends by the bank to us is
limited under federal banking law. See "Item 1. Business--Supervision and
Regulation -- Limits on Dividends."

     On January 15, 2002, we effected a 10% stock split in the form of a stock
dividend to shareholders of record on January 2, 2002. On April 15, 2003, we
paid a 5% stock dividend to shareholders of record on April 1, 2003. On November
19, 2003, we declared a 5% stock dividend payable on April 15, 2004 to
shareholders of record on April 1, 2004. We will continually review whether to
pay additional stock dividends in the future.




                                        24
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

      The following presents management's discussion and analysis of our
financial condition and results of operations and should be read in conjunction
with the financial statements and related notes included elsewhere in this Form
10-KSB. This Form 10-KSB contains forward-looking statements that involve risks
and uncertainties. You can find many of these statements before and after words
such as "may," "could," "should," "will," "would," "believe," "expect,"
"anticipate," "estimate," "project," "intend," "plan," "seek," "assume" or
similar expressions.

     These forward-looking statements, implicitly and explicitly, include the
assumptions underlying the statements and other information with respect to our
beliefs, plans, objectives, goals, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and
business, including our

     - expectations for continued acceptance and success in the banking and
       business communities in our market area;

     - expectations as to the amount, mix, yield and other characteristics of
       the deposits and loans we expect to acquire and make; and

     - expectations and estimates with respect to our revenues, expenses,
       earnings, return on equity, return on assets, efficiency ratio, asset
       quality and other financial data and capital and performance ratios.

     Although we believe that the expectations reflected in our forward-looking
statements are reasonable, these statements involve risks and uncertainties that
are subject to change based on various important factors (some of which are
beyond our control). The following factors, among others, could cause our
financial performance to differ materially from our goals, plans, objectives,
intentions, expectations, and other forward-looking statements:

     - the strength of the United States economy in general and the strength of
       the regional and local economies in which we conduct operations;

     - the effects of, and changes in, trade, monetary and fiscal policies and
       laws, including interest rate policies of the Board of Governors of the
       Federal Reserve System;

     - inflation, interest rate, market and monetary fluctuations;

     - our ability to raise the capital necessary on a timely basis to support
       our continued asset growth and geographic expansion;

     - our ability to maintain and continue to obtain the desired customers and
       employees;

     - our timely development of new products and services in a changing
       environment, including the features, pricing and quality compared to the
       products and services of our competitors;

     - the willingness of prospective customers to substitute our products and
       services for the bank products and services they currently use, and the
       impact of competition from banks, thrifts and others in our market;

     - changes in the timing and structure of our growth and related
       transactions and other changed facts and circumstances resulting from the
       passage of time;

     - the impact of changes in financial services policies, laws and
       regulations, including laws, regulations and policies concerning taxes,
       banking, securities and insurance, and the application thereof by
       regulatory bodies;

     - technological changes;

     - change in consumer spending and savings habits; and

     - regulatory or judicial proceedings.

      If one or more of the factors affecting our forward-looking information
and statements proves incorrect, then our actual results, performance or
achievements could differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this Form 10-KSB.
Therefore, we caution you not to place undue reliance on our forward-looking
information and statements. We do not intend to update our forward-looking
information and statements, whether written or oral, to reflect any change. All
forward-looking statements attributable to us are expressly qualified by these
cautionary statements.


OVERVIEW

     Effective June 30, 2002, the bank became a wholly owned subsidiary of 1st
Colonial, which has no material operations other than ownership of the bank.
Therefore, the financial statements of 1st Colonial prior to June 30, 2002 are
the historical statements of the bank. All per share data has been restated for
the effect of the 10% stock dividend paid on January 15, 2002 to shareholders of
record as of January 2, 2002, and the 5% stock dividend paid on April 15, 2003
to shareholders of record as of April 1, 2003.

     The bank conducts community banking activities by accepting deposits from
the public and investing the proceeds in loans and investment securities. The
bank's lending products include commercial loans and lines of credit, consumer
and home equity loans, and multi-family residential and non-residential real
estate loans. In order to manage its liquidity and interest rate risk, the bank
maintains an investment portfolio consisting of municipal, U.S. government and
mortgage-backed securities, most of which are investment grade. The bank's loan
and investment portfolios are funded with deposits as well as collateralized
borrowings secured by the bank's investment securities.

     Our earnings are largely dependent upon net interest income (the difference
between what we earn on our loans and investments and what we pay on deposits
and borrowings). In addition to net interest income, our net income is impacted
by our loan loss provision, other income (mostly deposit fees and income from
sale of loans held for sale) and other expense (such as salaries and benefits,
professional fees, occupancy cost and data processing expenses).

CRITICAL ACCOUNTING MATTERS

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates. Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the allowance for loan
losses and the valuation of the deferred tax assets.

     The allowance for loan losses is established through a provision for loan
losses charged to operations. The allowance is maintained at a level that
management believes will be adequate to absorb estimated losses on existing
loans based on the collectibility of the loans and prior loss experience.
Management uses significant estimates to determine the allowance for loan
losses. Management's evaluations consider such factors as changes in the nature
and volume of the portfolio, overall portfolio quality, concentrations of credit
risk, review of specific problem loans, current economic conditions and trends
that may affect the borrowers' ability to pay, and prior loss experience within
various categories of the portfolio. Loans are charged against the allowance
when they are determined to be uncollectible.

     In addition, regulatory authorities, as an integral part of their
examinations, periodically review the allowance for loan losses. They may
require additions to the allowance based upon their judgments about information
available to them at the time of examination.

                                       25
<PAGE>

     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established against deferred tax assets
when, in the judgment of management, it is more likely that not that such
deferred tax assets will not become available.

     The realizability of deferred tax assets is dependent upon various factors,
including the generation of future taxable income, the existence of taxes paid
and recoverable, the reversal of deferred tax liabilities, and tax planning
strategies. Based upon these and other factors, management determined during
2001 that it is more likely than not that the bank will realize the benefits of
these deferred tax assets and, as a result, removed the previously established
valuation allowance.

COMPARISON OF FINANCIAL CONDITION: YEAR ENDED DECEMBER 31, 2003 VERSUS YEAR
ENDED DECEMBER 31, 2002

     Our assets totaled $118.1 million at December 31, 2003, as compared to
$98.3 million at December 31, 2002, an increase of $19.8 million or 20.1%. Our
assets at December 31, 2003, consisted primarily of cash and cash equivalents,
including federal funds sold, which totaled $16.5 million, investment
securities, which totaled $33.8 million and loans, including loans held for
sale, which totaled $66.8 million. Premises and equipment totaled $935,000 at
December 31, 2003, and consisted primarily of our Westville branch and leasehold
improvements. Our assets at December 31, 2002 consisted primarily of cash and
cash equivalents, including federal funds sold of $12.2 million, investment
securities of $31.2 million, and loans of $54.3 million. The $19.8 million
increase in total assets was primarily due to an increase in loans of $12.4
million, an increase in investment securities of $2.6 million, and an increase
in short-term investments, such as Federal Funds sold and interest bearing
deposits of $4.2 million. This increase in assets was funded by an increase in
deposits of $21.4 million, as partially offset by a decrease in short-term
borrowings of $1.9 million. The increase in loans was due to general growth in
our loan portfolio resulting from the continued execution of our business plan.

     Our deposits totaled $104.3 million at December 31, 2003, as compared to
$82.9 million at December 31, 2002, an increase of $21.4 million or 25.8%. This
increase was the direct result of the establishment of new business
relationships with municipalities and other commercial accounts and the opening
of our branch office in Westville, New Jersey on January 16, 2003. The Westville
branch location was purchased in August 2002, renovated and equipped at a total
cost of $480,000 at December 31, 2003.

     Non-interest bearing demand deposits totaled $20.4 million and
interest-bearing demand deposits totaled $37.3 million at December 31, 2003,
increases of 22.6% and 25.5% as compared to balances of $16.6 million and $29.7
million, respectively, at December 31, 2002. This increase in demand deposits
was the result of the new Westville office and new relationships established
with municipal entities and commercial accounts. Savings and money market
deposits totaled $20.4 million and certificates of deposit totaled $26.2 million
at December 31, 2003, increases of 3.6% and 55.2%, respectively, as compared to
balances of $19.7 and $16.9 million, respectively, at December 31, 2002.

NET INTEREST INCOME

     The principal source of our revenue is net interest income. Net interest
income is the difference between income earned on loans and securities and the
interest paid on deposits and borrowed funds. Interest-earning assets are
comprised primarily of loans and securities, while deposits represent the major
portion of interest bearing liabilities. Changes in the volume and mix of
interest-earning assets and interest-bearing liabilities, as well as their
respective yields and rates, have a significant impact on the level of net
interest income. Net interest margin is calculated as net interest income
divided by average earning assets and represents our net yield on our earning
assets.

                                        26

<PAGE>

     Interest on loans is included in interest income on the accrual method over
the terms of the loans based upon the principal balances outstanding. During the
fiscal years ended December 31, 2003, 2002 and 2001, average interest-earning
assets were $99.9 million, $73.7 million and $50.2 million, respectively. During
these same periods, our net yields on average interest-earning assets (net
interest margin) were 3.55%, 3.97%, and 3.85%, respectively.

AVERAGE BALANCE, INTEREST INCOME AND EXPENSE, AVERAGE YIELD AND RATES

     The following table illustrates the average balances of total
interest-earning assets and total interest-bearing liabilities for the periods
indicated, showing the average distribution of assets, liabilities,
shareholders' equity, and the related income, expense, and corresponding
weighted average yields and costs. The average balances used for the purposes of
these tables and other statistical disclosures were calculated by using the
daily average balances. Non-accruing loans, if any, are included in the average
balances of loans.

                                        27
<PAGE>

<Table>
<Caption>
                                             YEAR ENDED                      YEAR ENDED                     YEAR ENDED
                                          DECEMBER 31, 2003              DECEMBER 31, 2002              DECEMBER 31, 2001
                                    -----------------------------   ----------------------------   ----------------------------
                                               INTEREST   AVERAGE             INTEREST   AVERAGE             INTEREST   AVERAGE
                                    AVERAGE    INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/    AVERAGE   INCOME/    YIELD/
                                    BALANCE    EXPENSE     RATE     BALANCE   EXPENSE     RATE     BALANCE   EXPENSE     RATE
                                    --------   --------   -------   -------   --------   -------   -------   --------   -------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                 <C>        <C>        <C>       <C>       <C>        <C>       <C>       <C>        <C>
ASSETS
Interest earning assets:
  Federal funds sold..............  $  6,953    $   78     1.12%    $11,006    $  176     1.60%    $11,776    $  418     3.55%
Investment Securities:
  Taxable(1)......................    28,945       870     3.01%     14,683       647     4.41%     12,977       810     6.24%
  Tax-exempt(2)...................     3,826        71     1.86%        604        17     2.81%        564        26     4.61%
                                    --------    ------              -------    ------              -------    ------
    Total Securities..............    32,771       941     2.87%     15,287       664     4.34%     13,541       836     6.17%
Loans, net of deferred
  fees/costs(3)...................    60,183     3,769     6.26%     47,430     3,251     6.85%     24,923     1,943     7.80%
                                    --------    ------              -------    ------              -------    ------
  Total interest earning assets...    99,907     4,788     4.79%     73,723     4,091     5.55%     50,240     3,197     6.36%
                                    --------    ------     ----     -------    ------     ----     -------    ------     ----
Non-interest earning assets:
  Cash and due from banks.........     4,258                          3,017                          2,036
  Other assets(4).................     1,629                          1,107                            770
  Less: allowance for loan
    losses........................      (681)                          (472)                          (194)
                                    --------                        -------                        -------
    Total non-interest earning
      assets......................     5,206                          3,652                          2,612
                                    --------                        -------                        -------
      Total assets................  $105,113                        $77,375                        $52,852
                                    ========                        =======                        =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
  Deposits:
    Interest bearing demand.......  $ 31,344    $  531     1.69%    $19,772    $  427     2.16%    $ 9,460    $  278     2.94%
    Money market..................    15,109        97     0.64%     12,231       192     1.57%     13,883       403     2.90%
    Savings.......................     5,293        31     0.59%      3,873        38     0.98%      1,807        27     1.49%
    Time deposits.................    20,296       544     2.68%     14,342       425     2.96%      9,667       423     4.38%
                                    --------    ------              -------    ------              -------    ------
  Total interest bearing
    deposits......................    72,042     1,203     1.67%     50,218     1,082     2.15%     34,817     1,131     3.25%
    Short-term borrowings.........     5,284        41     0.78%      5,217        83     1.59%      3,908       133     3.40%
                                    --------    ------              -------    ------              -------    ------
  Total interest bearing
    liabilities...................    77,326     1,244     1.61%     55,435     1,165     2.10%     38,725     1,264     3.26%
                                    --------    ------     ----     -------    ------     ----     -------    ------     ----
Non-interest bearing liabilities:
  Demand deposits.................    18,320                         14,786                          8,327
  Other liabilities...............       186                            237                            129
                                    --------                        -------                        -------
Total non-interest bearing
  liabilities.....................    18,506                         15,023                          8,456
                                    --------                        -------                        -------
Total liabilities.................    95,832                         70,458                         47,181
                                    --------                        -------                        -------
Shareholders' equity..............     9,281                          6,917                          5,671
                                    --------                        -------                        -------
  Total liabilities and
    shareholders' equity..........  $105,113                        $77,375                        $52,852
                                    ========                        =======                        =======
Net interest spread...............                         3.18%                          3.45%                          3.10%
Net interest income/net interest
  margin..........................              $3,544     3.55%               $2,926     3.97%               $1,933     3.85%
                                                ======     ====                ======     ====                ======
Average interest earning assets as
  a percentage of interest bearing
  liabilities.....................    129.20%                        132.99%                        129.74%
</Table>

---------------

(1) All taxable investment securities are classified as available for sale. The
    average balance for taxable securities excludes the SFAS 115 valuation
    allowance.

(2) All tax-exempt investment securities are classified as held to maturity.
    Interest income on tax-exempt investment securities is presented on a
    tax-equivalent basis. Tax exempt yields were adjusted to a tax-equivalent
    basis using a 34% rate.

                                        28
<PAGE>

(3) Includes average balance of loans held for sale of $382 in 2003, $156 in
    2002 and $160 in 2001. Interest income on loans held for sale was $23 in
    2003, $13 in 2002 and $14 in 2001.

(4) Excludes the average balance of deferred tax assets related to the SFAS 115
    valuation allowance on investment securities available for sale.

RATE/VOLUME ANALYSIS

     Future net interest income will be affected by changes in both average
interest rates and average volumes of interest-earning assets and
interest-bearing liabilities. The following tables set forth certain information
regarding changes in interest income and interest expense for the periods
indicated for each category of interest-earning assets and interest-bearing
liabilities. Information is provided on changes attributable to (i) changes in
volume (changes in average volume multiplied by prior rate), (ii) changes in
rate (changes in average rate multiplied by prior average volume), and (iii)
total change. Changes due to the combination of rate and volume changes (change
in average volume multiplied by change in average rate) have been allocated on a
consistent basis between rate and volume variances based on the percentage of
the rate or volume variance to the sum of the two absolute variances.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31, 2003
                                                                         VERSUS
                                                              YEAR ENDED DECEMBER 31, 2002
                                                             ------------------------------
                                                               INCREASE (DECREASE) DUE TO
                                                              VOLUME      RATE       TOTAL
                                                             --------    -------    -------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                                          <C>         <C>        <C>
Interest Income:
  Federal funds sold.......................................   $  (54)     $ (44)      $(98)
  Investment securities -- taxable.........................      478       (255)       223
  Investment securities -- tax exempt(1)...................       62         (8)        54
  Loans....................................................      817       (299)       518
                                                              ------      -----       ----
     Total change in interest income.......................   $1,303      $(606)      $697
                                                              ------      -----       ----
Interest Expense:
  Interest bearing checking................................   $  211      $(107)      $104
  Money market deposits....................................       37       (132)       (95)
  Savings deposits.........................................       11        (18)        (7)
  Time deposits............................................      163        (44)       119
  Short-term borrowings....................................        1        (43)       (42)
                                                              ------      -----       ----
     Total change in interest expense......................      423       (344)        79
                                                              ------      -----       ----
Total change in net interest income........................   $  880      $(262)      $618
                                                              ======      =====       ====
</Table>

                                        29
<PAGE>

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31, 2002
                                                                        VERSUS
                                                             YEAR ENDED DECEMBER 31, 2001
                                                            ------------------------------
                                                              INCREASE (DECREASE) DUE TO
                                                             VOLUME      RATE       TOTAL
                                                            --------    -------    -------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                         <C>         <C>        <C>
Interest Income:
  Federal funds sold......................................   $  (25)     $(217)     $(242)
  Investment securities -- taxable........................       96       (259)      (163)
  Investment securities -- tax exempt(1)..................        2        (11)        (9)
  Loans...................................................    1,568       (260)     1,308
                                                             ------      -----      -----
     Total change in interest income......................   $1,641      $(747)     $ 894
                                                             ------      -----      -----
Interest Expense:
  Interest bearing checking...............................   $  239      $ (90)     $ 149
  Money market deposits...................................      (43)      (168)      (211)
  Savings deposits........................................       22        (11)        11
  Time deposits...........................................      165       (163)         2
  Short-term borrowings...................................       36        (86)       (50)
                                                             ------      -----      -----
     Total change in interest expense.....................      419       (518)       (99)
                                                             ------      -----      -----
Total change in net interest income.......................   $1,222      $(229)     $ 993
                                                             ======      =====      =====
</Table>

---------------

(1) Tax-exempt yields were adjusted to a tax-equivalent basis using a 34% rate.

COMPARISON OF RESULTS OF OPERATIONS

  YEAR ENDED DECEMBER 31, 2003 VERSUS YEAR ENDED DECEMBER 31, 2002

     General.  Net income increased 1.0% to $500,000 for the year ended December
31, 2003, as compared to net income of $495,000 for the period ended December
31, 2002. This increase was due to a $697,000 increase in net interest and total
other income, coupled with a $50,000 reduction in the provision for loan losses,
which were only partially offset by a $736,000 increase in total other expense
and a $6,000 increase in income tax expense.

     Basic earnings per share, without giving effect to our 5% stock dividend
payable on April 15, 2004 to shareholders of record on April 1, 2004, decreased
to $0.37 for the year ended December 31, 2003 ($0.36 on a diluted basis) from
$0.46 for the year ended December 31, 2002 ($0.45 on a fully diluted basis).
Giving effect to this pending stock dividend, earnings per share for 2003 would
be $0.35 (basic and diluted), compared to $0.44 for 2002 ($0.43 on a diluted
basis). This decrease was due to the issuance of additional shares of common
stock in our public offering of units completed in December 2002, which shares
had only a marginal effect on the weighted average number of shares outstanding
for 2002. In the offering, we sold 267,119 units and each unit consisted of one
share of common stock and one warrant to purchase an additional share of common
stock.

     Total interest income increased 16.6% to $4.8 million from $4.1 million
primarily due to the growth and mix of earning assets. Total other income
increased 48.0% or by $97,000 to $299,000 from $202,000, due to increased
deposit fees, gains on sale of mortgage loans and other fees as partially offset
by an 83.3% decline in gains on sale of investments to $4,000 from $24,000 in
the previous year. Total other expenses increased 36.4% or $736,000 to $2.8
million from $2.0 million due to growth related expenses from staffing
increases, new marketing initiatives, increased regulatory compliance costs and
more customer volume and activity, as well as increased expenses related to the
opening of our new Westville office.

     Net Interest Income.  Interest income increased by $679,000 to $4.8 million
from $4.1 million, primarily due to a $26.2 million increase in average earning
assets. Interest and fees on loans increased by $518,000 for

                                        30
<PAGE>

the year ended December 31, 2003, due to an increase in average loans and loans
available for sale outstanding of $12.8 million or 26.9% from the prior period,
which more than offset the decline in the average yield on the loan portfolio.
The average yield on our loan portfolio declined from 6.85% in 2002 to 6.26% in
2003 due to the declining interest rate environment. Interest on federal funds
sold decreased by $98,000 due to a decrease of $4.1 million in average balances
and lower yields caused by market rate declines. Interest and dividends on
investments increased by $259,000 for the period due to an increase of $17.5
million in average outstanding balances. The increase was partially offset by an
overall decline in the yield on investment securities caused by a decline in
market interest rates. The average yield on investment securities declined to
2.87% in 2003 from 4.34% in 2002.

     Total interest expense increased $79,000 from the prior period, due
principally to a $21.9 million increase in average interest bearing liabilities.
The increase in the average balance of deposits was ameliorated by the lower
rates paid on deposit accounts and short term borrowings, as the cost of
interest bearing liabilities declined from 2.10% in 2002 to 1.61% in 2003. Our
net interest margin was 3.55% for the year ended December 31, 2003 as compared
to 3.97% for the prior period ended December 31, 2002, as our interest earning
assets repriced downward to a greater degree than our interest bearing
liabilities.

     Provision for Loan Losses.  The provision for loan losses decreased to
$225,000 for year ended December 31, 2003 compared to $275,000 for the prior
period. Factors such as changes in the nature and volume of the portfolio,
overall portfolio quality, concentrations of credit risk, review of specific
problem loans, current economic conditions and trends that may affect the
ability of borrowers to pay, and prior loss experience within the various
categories of the portfolio are considered when reviewing the risks in the
portfolio. The allowance for loan losses was $768,000 at December 31, 2003, or
1.15% of total outstanding loans. See "Business -- Allowance for Loan Losses"
for more information.

     The bank's loan portfolio is relatively unseasoned due to the fact that we
commenced operations in 2000. Therefore, our historical charge-off and
non-performing loan statistics may not be indicative of future trends.

     Total Other Income.  Other income, primarily service charges on deposit
accounts and gains on sale of mortgages held for sale, increased $97,000 to
$299,000 for the year ended December 31, 2003. Fees from deposit account holders
for the year ended December 31, 2003 were approximately $139,000 compared to
$85,000 in the prior period. This 63.5% increase was principally due to deposit
growth. For the year ended December 31, 2003, we recorded gains on the sale of
residential mortgage loans held for sale of $103,000 compared to $62,000 in the
prior period. This was primarily due to increased refinancing activity due to
lower interest rates during the year. In general, we sell all newly originated
fixed-rate residential mortgage loans into the secondary market on a servicing
released basis. The increase of $22,000 to $53,000 in 2003 from $31,000 in 2002,
in other fees and charges was primarily volume related. Gains on sale of
investments available for sale for the year ended December 31, 2003 declined to
$4,000 compared to $24,000 in the year ended December 31, 2002.

     Total Other Expense.  Total other expenses for the year ended December 31,
2003 increased $736,000 or 36.4% to $2.8 million compared to $2.0 million in the
prior period. Most of the increases were due to growth related factors:

     - Employee related expenses were $1.2 million for the year compared to
       $842,000 for the year ended December 31, 2002, reflecting additions to
       our staff as well as normal compensation increases.

     - Occupancy and equipment expenses increased $117,000 to $335,000 for the
       year ended December 31, 2003, compared to $218,000 in the prior period.
       The opening of our Westville branch office in January 2003 accounted for
       $72,000 of these increases.

     - Advertising expenses increased $70,000 to $145,000 for the year ended
       December 31, 2003 compared to $75,000 in the prior period. This was due
       to increased activity relating to our Westville opening and other
       marketing campaigns designed to increase community awareness of our
       presence, products and capabilities.

                                        31
<PAGE>

     - Due to increased business volume, data processing expenses increased
       23.3% to $275,000 for the year ended December 31, 2003 compared to
       $223,000 for the year ended December 31, 2002.

     - Professional services, including audit, loan review, and legal expenses
       increased $27,000 to $222,000 during the year ended December 31, 2003
       compared to $195,000 for the comparable prior period. This increase was
       primarily related to our growth.

     - Other operating expenses included postage, ATM charges, telephone
       expenses, business development costs and other miscellaneous expenses.
       These expenses also included a loss of $19,000 on the replacement of
       equipment during the year ended December 31, 2003. Due to growth and
       increased activity, other operating expenses increased $137,000 or 29.2%
       to $607,000 for the year ended December 31, 2003, compared to $470,000
       for the year ended December 31, 2002.

     Income Taxes.  Our recorded income tax expense for the year ended December
31, 2003 was $335,000 compared to $329,000 in the prior period. The increase in
income tax expense is due to higher pre-tax income for the year ended December
31, 2003 as compared to the prior period. The effective rates for the year ended
December 31, 2003 and 2002 were 40.1% and 39.9%, respectively.

  YEAR ENDED DECEMBER 31, 2002 VERSUS YEAR ENDED DECEMBER 31, 2001

     General.  Net income increased 37.1% to $495,000 for the year ended
December 31, 2002 as compared to net income of $361,000 for the period ended
December 31, 2001. Basic earnings per share, without giving effect to our 5%
stock dividend payable on April 15, 2004, increased to $0.46 for the year ended
December 31, 2002 ($0.45 on a diluted basis) from $0.37 (basic and diluted) for
the year ended December 31, 2001. Giving effect to the stock dividend, net
income per share for 2002 was $0.44 ($0.43 on a fully diluted basis) compared to
$0.35 for 2001 (basic and diluted). This increase in net income was due to a
$1.0 million increase in net interest and other income, which was partially
offset by a $423,000 increase in income tax expense, a $422,000 increase in
total other expense, and a $50,000 increase in the provision for loan losses.

     Total interest income increased 28.1% to $4.1 million from $3.2 million
primarily due to the growth and mix of earning assets. Total other income
increased 19.5% or by $33,000 due to increased deposit fees, gains on sale of
residential mortgage loans and other fees, as partially offset by a 63.1%
decline in gains on sale of investments to $24,000 from $65,000 in the previous
year. Total other expenses increased $422,000 to $2.0 million from $1.6 million,
or 26.4%, due to increased staff, additional occupancy expenses and volume
related charges.

     Net Interest Income.  Total interest income increased 28.1% to $4.1 million
from $3.2 million primarily due to the growth and mix of earning assets.
Interest and fees on loans increased by $1.3 million for the year ended December
31, 2002, due to an increase in average loans and loans available for sale
outstanding of $22.5 million or 90.3% from the prior period. Interest on federal
funds sold decreased by $242,000 due to lower yields caused by market rate
declines and a decrease of $770,000 in average balances. Interest and dividends
on investments decreased by $169,000 for the period due to a general decline in
market interest rates.

     Total interest expense decreased $99,000 from the prior period, due
principally to a decrease in the average rate paid on deposits and short-term
borrowings from 3.26% to 2.10%. Our net interest margin was 3.97% for the year
ended December 31, 2002 as compared to 3.85% for the prior period ended December
31, 2001.

     Provision for Loan Losses.  Our provision for loan losses for 2002 was
$275,000, representing a $50,000, or 22.2%, increase over the $225,000 recorded
for 2001. Provisions for loan losses are charged to income to bring the
allowance for loan losses to a level deemed appropriate by management based on
factors discussed under "Business -- Allowance for Loan Losses." The increase in
the 2002 provision was principally due to the substantial growth in our loan
portfolio combined with management's view of the appropriate level of reserves
given the state of the economy in 2002. The allowance for loan losses was
$576,000 at December 31, 2002, representing 1.06% of total outstanding loans.
The allowance for loan losses at December 31, 2001 was $335,000 or 0.91% of
total outstanding loans at that date.

                                        32
<PAGE>

     Total Other Income.  We derive a significant portion of our other income
from fees assessed on retail and business deposit account holders. Fees from
deposit account holders for the year ended December 31, 2002 were approximately
$85,000 compared to $47,000 for the year ended December 31, 2001. This increase
is primarily the result of deposit growth. In addition, during 2002 we recorded
income from the sale of residential mortgages held-for-sale in the amount of
$62,000 and gains on the sale of available-for-sale securities in the amount of
$24,000. For the year ended December 31, 2001, we recorded gains on sale of
mortgages held-for-sale in the amount of $46,000 and gains on sale of
available-for-sale securities of $65,000.

     Total Other Expenses.  Total other expenses for the year ended December 31,
2002 increased 26.4% to $2.0 million as compared to $1.6 million for the year
ended December 31, 2001. Most of the increases were due to the following growth
related factors:

     - Salaries, wages and employee benefit expenses were $842,000 for the year
       ended December 31, 2002 as compared to $770,000 in the prior period,
       reflecting additions to our staff as well as normal compensation
       increases.

     - In the second quarter of 2002, the bank moved its accounting and
       operations department to a new location. This coupled with additional
       equipment for the added staff resulted in 29.8% increase in occupancy and
       equipment expenses to $218,000 from $168,000 in the prior year.

     - As the volume of our business increased due to our growth, data
       processing expenses for the year ended December 31, 2002 were $223,000, a
       54.9% increase from the previous period.

     - Professional services increased $77,000 to $195,000 in 2002 from $118,000
       in 2001, as audit and loan review fees increased 75.9% from $58,000 in
       2001 to $102,000 in 2002. Legal expenses also increased during the period
       from $41,000 in 2001 to $68,000 in 2002.

     - Other operating expense increased $127,000 to $470,000 in 2002 from
       $343,000 in 2001, as the growth in deposits and assets caused FDIC/OCC
       premiums and assessments to increase from $25,000 in 2001 to $45,000 in
       2002, an increase of 80.0%. In addition, during 2002 we increased our
       dependence on outside couriers used for pick-up and delivery services to
       our customers. (The bank's internal courier service did not commence
       operations until 2003.) As a result of this and general growth, postage
       and courier related expenses increased to $77,000 in 2002, a 108.1%
       increase from the prior period.

     Income Taxes.  During 2002, we recorded an income tax expense of $329,000,
compared to a net tax benefit of $94,000 for 2001. This net tax benefit was due
to the reversal of the valuation allowance on our deferred tax assets in the
amount of $194,000, which offset our current tax expense of $125,000. We have
deferred tax assets because of differences that arise between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.

LIQUIDITY

     Liquidity represents an institution's ability to meet present and future
financial obligations through either the sale or maturity of existing assets or
the acquisition of additional funding through liability management. Liquid
assets include cash, interest-bearing deposits with banks, federal funds sold,
securities classified as available-for-sale, and loans maturing within one year.
As a result of our management of liquid assets and the ability to generate
liquidity through additional deposits or borrowings, we are able to maintain
overall liquidity sufficient to satisfy our deposit withdrawal requirements and
meet our customers' borrowing needs.

     At December 31, 2003 cash, cash equivalents, securities classified as
securities available for sale, and federal funds sold totaled $44.5 million and
were 37.7% of total assets. However, we have pledged $26.1 of our securities
available for sale as collateral for uninsured municipal deposits held by us and
uninsured deposits that underlie retail repurchase agreements, which adversely
impacts our liquidity position. Asset liquidity is also provided by managing
loan maturities. At December 31, 2003, approximately $29.6 million or 44.3% of

                                        33
<PAGE>

loans would mature or reprice within a one-year period. To the extent possible,
loans are funded with deposits or other funding with coinciding maturity or
repricing dates.

     Net cash provided by operating activities for the year ended December 31,
2003 was $721,000 compared to $838,000 for the previous period. The difference
can be attributed to an increase in mortgage loans available for sale offset by
increased accretion of discounts on securities. An increase in other assets also
contributed to the change.

     Net cash used in investing activities was $15.8 million for the year ended
December 31, 2003 compared with $30.8 million for the previous year. Proceeds
from prepayments and redemptions of securities in excess of the prior year, as
well as a slower pace of loan growth, accounted for the majority of this change.

     Cash provided by financing activities was $19.5 million in fiscal year 2003
compared with $18.2 million in fiscal year 2002. Deposit growth was partially
offset by a decline in short-term borrowings. In addition, in December 2002, we
completed a public offering of units of common stock and warrants. In the
offering, we sold 267,119 units at an offering price of $8.10 per unit. Each
unit consisted of one share of common stock and one warrant to purchase an
additional share of common stock. 1st Colonial raised net proceeds of $1.9
million in the offering, and these proceeds were included in cash provided by
financing activities in fiscal year 2002.

CAPITAL RESOURCES

     The assessment of capital adequacy depends on a number of factors such as
asset quality, liquidity, earnings performance, changing competitive conditions,
economic forces and growth and expansion activities. We seek to maintain a
capital base to support our growth and expansion activities, to provide
stability to current operations and to promote public confidence.

     The bank's capital position exceeds regulatory minimums. The primary
indicators relied on by the OCC and other bank regulators in measuring strength
of capital position are the Tier 1 risk-based capital ratio, total risk-based
capital ratio and leverage ratio. Tier 1 capital consists of common and
qualifying preferred shareholders' equity less goodwill. Total capital consists
of Tier 1 capital, qualifying subordinated debt and a portion of the allowance
for possible loan losses. Risk-based capital ratios are calculated with
reference to risk weighted assets, which consist of both on and off balance
sheet risks (such as letters of credit, lines of credit and home equity lines).

     We manage capital ratios to exceed regulatory minimums. The bank's Tier 1
risk-based capital ratio was 13.52% at December 31, 2003. The bank's total
risk-based capital ratio was 14.60% at December 31, 2003. These ratios are in
excess of the mandated minimum requirements of 4.00% and 8.00%, respectively.
The leverage ratio consists of Tier 1 capital divided by quarterly average
assets. At December 31, 2003, the bank's leverage ratio was 8.73%, which
exceeded the required minimum leverage ratio of 4.00%. Management anticipates
these ratios to decline as capital is leveraged in support of deposit and asset
growth.

     The following table shows our regulatory capital ratios and shareholders'
equity to total assets as of December 31, 2003:

<Table>
<Caption>
                                                              AT DECEMBER 31, 2003
                                                              ---------------------
                                                              REGULATORY    ACTUAL
                                                                MINIMUM      RATIO
                                                              -----------   -------
<S>                                                           <C>           <C>
Total risk-based capital ratio..............................     8.0%       14.60%
Tier 1 risk-based capital ratio.............................     4.0%       13.52%
Tier 1 leverage ratio.......................................     4.0%        8.73%
Shareholders' equity to total assets........................     None        8.09%
</Table>

CONTRACTUAL OBLIGATIONS

     We enter into contractual obligations in the normal course of business as a
source of funds for its asset growth and its asset/liability management, to fund
acquisitions, and to meet required capital needs. These

                                        34

<PAGE>

obligations require us to make cash payments over time as detailed in the table
below (For further information regarding our contractual obligations refer to
Notes 9, 10, 15 and 16 of our Financial Statements, herein.):

                             PAYMENTS DUE BY PERIOD

<Table>
<Caption>
CONTRACTUAL OBLIGATIONS                             LESS THAN    1-3      4-5      AFTER
AT DECEMBER 31, 2003                       TOTAL     1 YEAR     YEARS    YEARS    5 YEARS
-----------------------                   -------   ---------   ------   ------   -------
                                                          (IN THOUSANDS)
<S>                                       <C>       <C>         <C>      <C>      <C>
Borrowings..............................  $ 4,087    $ 4,087    $    0   $    0     $0
Certificates of deposit.................   26,232     20,577     2,251    3,404      0
Operating leases........................      363         78       185      100      0
Capital leases..........................        0          0         0        0      0
                                          -------    -------    ------   ------     --
Total contractual cash obligations......  $30,682    $24,742    $2,436   $3,504     $0
                                          =======    =======    ======   ======     ==
</Table>

OFF-BALANCE SHEET INSTRUMENTS

     We do not have any off-balance sheet arrangements as that term is defined
in Item 303 of SEC Regulation S-B (such as guarantee contracts, credit or
liquidity support arrangements, derivative instruments or variable interests in
other entities). We are, however, a party to financial instruments with
off-balance sheet risk in the normal course of business to meet the financing
needs of its customers and to manage its own exposure to fluctuations in
interest rates. These financial instruments include commitments to extend
credit. These financial instruments involve elements of credit and interest rate
risk in excess of the amount recognized in the balance sheet. The contract or
notional amounts of these financial instruments reflect the extent of our
involvement in particular classes of financial instruments.

     Our exposure to credit loss in the event of non-performance by the other
party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. We use the same
credit policies in making commitments and conditional obligations as we do for
on-balance sheet instruments. Unless noted otherwise, we do not require and are
not required to pledge collateral or other security to support financial
instruments with credit risk.

                   AMOUNT OF COMMITMENT EXPIRATION PER PERIOD

<Table>
<Caption>
                                              TOTAL
OTHER COMMERCIAL COMMITMENTS                 AMOUNTS    LESS THAN    1-3     4-5     AFTER
AT DECEMBER 31, 2003                        COMMITTED    1 YEAR     YEARS   YEARS   5 YEARS
----------------------------                ---------   ---------   -----   -----   -------
                                                            (IN THOUSANDS)
<S>                                         <C>         <C>         <C>     <C>     <C>
Commitments to extend credit:
  Lines of Credit.........................   $3,666      $3,274     $392     $0     $    0
                                             ------      ------     ----     --     ------
  Unfunded residential mortgages..........    4,653         522        0      0      4,131
                                             ------      ------     ----     --     ------
Total commercial commitments..............   $8,319      $3,796     $392     $0     $4,131
                                             ======      ======     ====     ==     ======
</Table>

     For further information regarding our commitments, refer to Note 16 to the
"Notes to Financial Statements" included in this prospectus.

INTEREST SENSITIVITY

     An important element of both earnings performance and the maintenance of
sufficient liquidity is management of the interest sensitivity gap. The interest
sensitivity gap is the difference between interest-rate sensitive assets and
interest-rate sensitive liabilities in a specific time period. Interest rate
"gap analysis" is a common, though imperfect, measure of interest rate risk,
which measures the relative dollar amounts of interest-earning assets and
interest-bearing liabilities which re-price within these specific time periods,
either through maturity or rate adjustment. A "positive gap" for a given period
means that the amount of interest-earning assets maturing or otherwise repricing
within that period exceeds the amount of interest-bearing

                                        35
<PAGE>

liabilities maturing or otherwise repricing within the same period. Accordingly,
in a declining interest rate environment, an institution with a "positive gap"
would generally be expected, absent the effects of other factors, to experience
a decrease in the yield on its assets greater than the decrease in the cost of
its liabilities and its net interest income should be negatively affected.
Conversely, the cost of funds for an institution with a "positive gap" would
generally be expected to increase more slowly than the yield on its assets in a
rising interest rate environment, and such institution's net interest income
generally would be expected to be positively affected by rising interest rates.
If we had a "negative gap" position with respect to a given time period, it
would indicate that more liabilities may reprice within that time period than
assets, with the result that rising rates may have a negative impact on interest
rate spread and therefore on earnings.

     The gap can be managed by repricing assets or liabilities, by selling
securities or loans held-for-sale, by replacing an asset or liability at
maturity or by adjusting the interest rate during the life of an asset or
liability. Matching the amounts of assets and liabilities repricing in the same
time interval contributes to preserving net interest margins and minimizing the
impact on net interest income in periods of rising or falling interest rates. We
evaluate interest sensitivity risk and then formulate guidelines regarding asset
generation and pricing, funding sources and pricing, and off-balance sheet
commitments (such as letters of credit, lines of credit and credit card lines)
in order to manage sensitivity risk. These guidelines are based on management's
outlook regarding future interest rate movements, the state of the regional and
national economy, and other financial and business risk factors.

     The following table illustrates our interest sensitivity gap position at
December 31, 2003. It summarizes the contractual repayment terms or nearest
repricing dates of our interest earning assets and interest-bearing liabilities.
This table presents a position that existed at one particular day (December 31,
2003) and therefore is not necessarily indicative of our position at any other
time.

INTEREST SENSITIVITY ANALYSIS

<Table>
<Caption>
                                                  MATURING OR REPRICING IN:
                                      -------------------------------------------------
                                       WITHIN     4-12       1-5      OVER
                                      3 MONTHS   MONTHS     YEARS    5 YEARS    TOTAL
                                      --------   -------   -------   -------   --------
<S>                                   <C>        <C>       <C>       <C>       <C>
Interest earning assets:
  Federal funds sold................  $ 9,735    $    --   $    --   $    --   $  9,735
  Interest bearing deposits.........      500         --        --        --        500
  Investment securities held to
     maturity.......................      387      5,421        --        --      5,808
  Investment securities
     available-for-sale.............    8,812      8,169    10,493       511     27,985
  Loans and mortgages available for
     sale...........................   20,579      9,005    36,536       711     66,831
                                      -------    -------   -------   -------   --------
       Total interest earning
          assets....................  $40,013    $22,595   $47,029   $ 1,222   $110,859
                                      =======    =======   =======   =======   ========
Interest bearing liabilities:
  Deposits:
     Interest bearing demand........  $ 6,612    $18,680   $ 9,014   $ 3,005   $ 37,311
     Money market...................    2,646      3,402     9,073        --     15,121
     Savings........................      762        709     2,836       946      5,253
     Time deposits $100,000 and
       over.........................    9,737      5,591     1,556        --     16,884
     Time deposits less than
       $100,000.....................    2,277      2,972     4,099        --      9,348
  Other borrowed money..............    4,087         --        --        --      4,087
                                      -------    -------   -------   -------   --------
       Total interest bearing
          liabilities...............  $26,121    $31,354   $26,578   $ 3,951   $ 88,004
                                      =======    =======   =======   =======   ========
  Period gap........................  $13,892    $(8,759)  $20,451   $(2,729)  $ 22,855
                                      =======    =======   =======   =======   ========
  Cumulative gap....................  $13,892    $ 5,133   $25,584   $22,855
                                      =======    =======   =======   =======
  Ratio of cumulative gap to total
     interest earning assets........    12.53%      4.63%    23.08%    20.62%
                                      =======    =======   =======   =======
</Table>

     While securities available-for-sale are presented in the foregoing table
according to the earlier of their stated maturities or call dates, such
investments can, if necessary, be sold at any time in reaction to interest rate
changes or funding demands.

                                        36
<PAGE>

     We manage our interest rate sensitivity gap to, among other things, control
the exposure of our net interest margin such that a 200 basis point increase or
decrease in market rates will impact net interest income by no more than
approximately 15% in any one year period. At December 31, 2003, we estimate that
if interest rates increased by 200 basis points, projected net interest income
for 2003 would decrease by 3.4% despite the fact that we had a positive gap.
This is due to the fact that callable agency securities would not be called and
we would not be able to reinvest these funds into higher yielding investments.
Given the current interest rate levels, all interest rates could not decline 200
basis points. We estimate that a 100 basis point decrease would cause net
interest income to decrease approximately 7.4%. This is due to callable agency
securities being called, necessitating reinvestment into lower yielding
investments.

     As noted previously, securities available for sale, while presented in the
table at their stated maturities or possible call date whichever is shorter, can
be sold any time and are an active interest sensitivity gap management tool.
Further, the magnitude and timing of changes to deposit rate changes can be
managed to further minimize the exposure of net interest margin. For example,
savings deposits and certain interest bearing demand deposits, while recorded at
their first possible repricing opportunity, would not likely react as quickly to
a market rate change as their first recorded repricing opportunity would
indicate.

RECENT ACCOUNTING PRONOUNCEMENTS

  TECHNICAL CORRECTIONS TO FASB STATEMENTS.

     In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. This Statement rescinds FASB
Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made
to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB
Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This
Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions.

     The provisions of this Statement related to the rescission of Statement 4
shall be applied in fiscal years beginning after May 15, 2002. Any gain or loss
on extinguishment of debt that was classified as an extraordinary item in prior
periods presented that does not meet the criteria in Opinion 30 for
classification as an extraordinary item shall be reclassified.

     The provisions in paragraphs 8 and 9(c) of this Statement related to
Statement 13 shall be effective for transactions occurring after May 15, 2002,
with early application encouraged. All other provisions of this Statement shall
be effective for financial statements issued on or after May 15, 2002, with
early application encouraged.

     The adoption of this Statement did not have an impact on 1st Colonial's
earnings, financial condition or equity.

  COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

     In June 2002, the FASB issued SFAS No. 146 Accounting for Costs Associated
with Exit or Disposal Activities. This Statement requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. The standard
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).

     The provisions of this Statement are to be applied prospectively for exit
or disposal activities that are initiated after December 31, 2003, with early
application encouraged. 1st Colonial does not expect the adoption of this
Statement to have an impact on its earnings, financial condition, or equity.
                                        37

<PAGE>

  ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS

     In October 2002, the FASB issued Statement No. 147, Acquisitions of Certain
Financial Institutions, which amends SFAS No. 72, Accounting for Certain
Acquisitions of Banking or Thrift Institutions, SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, and FASB Interpretation No. 9.
Except for transactions between two or more mutual enterprises, this Statement
removes acquisitions of financial institutions from the scope of both Statement
No. 72 and Interpretation 9 and requires that those transactions be accounted
for in accordance with FASB Statements No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets. Thus, the requirement in paragraph 5
of Statement No. 72 to recognize any excess of the fair value of liabilities
assumed over the fair value of tangible and identifiable intangible assets
acquired as an unidentifiable intangible asset no longer applies to acquisitions
within the scope of this Statement. In addition, this Statement amends Statement
No. 144 to include in its scope long-term customer-relationship intangible
assets of financial institutions such as depositor- and borrower-relationship
intangible assets and credit cardholder intangible assets. Consequently, those
intangible assets are subject to the same undiscounted cash flow recoverability
test and impairment loss recognition and measurement provisions that Statement
No. 144 requires for other long-lived assets that are held and used. With some
exceptions, the requirements of Statement No. 147 are effective October 1, 2002.
The adoption of this Statement did not have an impact on 1st Colonial's
earnings, financial condition, or equity.

  ACCOUNTING FOR STOCK-BASED COMPENSATION

     In December 2002, FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123. SFAS No. 148 amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 amends the disclosure requirements of Statement 123
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The provisions of SFAS No. 148
are effective for fiscal years ending after December 15, 2002, except for
financial reports containing condensed financial statements for interim periods
for which disclosure is effective for periods beginning after December 15, 2002.
Adoption of SFAS No. 148 did not impact 1st Colonial's earnings, financial
condition, or equity. However, 1st Colonial did modify its disclosures related
to the method of accounting for stock-based employee compensation in accordance
with SFAS No. 148.

  GRANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES

     During 2002, FASB Interpretation No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees Including Indirect Guarantees of
Indebtedness of Others, was issued. FASB Interpretation No. 45 requires a
guarantor to include disclosure of certain obligations, and if applicable, at
the inception of the guarantee, recognize a liability for the fair value of
other certain obligations undertaken in issuing a guarantee. The recognition
requirement is effective for guarantees issued or modified after December 31,
2003. Adoption of FASB Interpretation No. 45 did not have an impact on 1st
Colonial's earnings, financial condition, or equity.

  CONSOLIDATION OF VARIABLE INTEREST ENTITIES

     During 2002, FASB Interpretation No. 46, Consolidation of Variable Interest
Entities, was issued. FASB Interpretation No. 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. Adoption of FASB
Interpretation No. 46 did not have an impact on 1st Colonial's earnings,
financial condition, or equity.

  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In April 2003, the FASB issued Statement No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities. This Statement amends and
clarifies financial accounting and reporting

                                        38
<PAGE>


for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. With some exceptions, this Statement is effective for
contracts entered into or modified after June 30, 2003. The adoption of this
Statement did not have an impact on 1st Colonial's earnings, financial
condition, or equity.

  FINANCIAL INSTRUMENTS WITH DEBT AND EQUITY CHARACTERISTICS

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003, except for mandatorily redeemable financial instruments of
nonpublic entities. The adoption of this Statement did not have an impact on 1st
Colonial's earnings, financial condition, or equity.

                                        39
<PAGE>


ITEM 7. FINANCIAL STATEMENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Statements of Financial Condition as of
  December 31, 2003 and 2002
Consolidated Statements of Operations for the years ended
  December 31, 2003, 2002 and 2001
Consolidated Statements of Shareholders' Equity and
  Comprehensive Income for the years ended
  December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended
  December 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements

                                       40
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
1st Colonial Bancorp, Inc.:

     We have audited the accompanying consolidated statements of financial
condition of 1st Colonial Bancorp, Inc. and subsidiary (the Company) as of
December 31, 2003 and 2002, and the related consolidated statements of
operations, shareholders' equity and comprehensive income, and cash flows for
each of the years in the three-year period ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2003 and 2002, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
2003, in conformity with accounting principles generally accepted in the United
States of America.

/s/ KPMG LLP

Philadelphia, PA
February 6, 2004

                                       41
<PAGE>

                           1ST COLONIAL BANCORP, INC.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2003 AND 2002

<Table>
<Caption>
                                                                 2003        2002
                                                              ----------   ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
                                       ASSETS
Cash and due from banks.....................................   $  6,281     $ 6,156
Federal funds sold..........................................      9,735       6,005
Interest-bearing deposits...................................        500          --
                                                               --------     -------
     Cash and cash equivalents..............................     16,516      12,161
                                                               --------     -------
Investments held to maturity (fair value of $5,796 at
  December 31, 2003 and $1,218 at December 31, 2002)........      5,808       1,220
Securities available for sale (amortized cost of $28,107 at
  December 31, 2003 and $29,776 at December 31, 2002).......     27,985      29,934
Mortgage loans held for sale................................        281          63
Loans.......................................................     66,550      54,198
  Less allowance for loan losses............................       (768)       (576)
                                                               --------     -------
     Net loans..............................................     65,782      53,622
Premises and equipment, net.................................        935         763
Accrued interest receivable.................................        373         341
Deferred tax assets.........................................        301         181
Other assets................................................         91          35
Total assets................................................   $118,072     $98,320
                                                               ========     =======

                        LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Deposits..................................................   $104,323     $82,948
  Short-term borrowings.....................................      4,087       6,033
  Accrued interest payable..................................          8          10
  Income taxes payable......................................         48          51
  Other liabilities.........................................         55          76
                                                               --------     -------
     Total liabilities......................................    108,521      89,118
                                                               --------     -------
Shareholders' equity:
  Common stock, $0 par value; authorized 5,000,000 shares;
     issued and outstanding 1,347,130 shares at December 31,
     2003 and 1,343,590 shares at December 31, 2002.........         --          --
  Additional paid-in capital................................      9,238       8,935
  Retained earnings.........................................        386         166
  Accumulated other comprehensive (loss) income.............        (73)        101
                                                               --------     -------
     Total shareholders' equity.............................      9,551       9,202
                                                               --------     -------
Total liabilities and shareholders' equity..................   $118,072     $98,320
                                                               ========     =======
</Table>

          See accompanying notes to consolidated financial statements.

                                       42
<PAGE>

                           1ST COLONIAL BANCORP, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<Table>
<Caption>
                                                                 2003             2002            2001
                                                            --------------   --------------   ------------
                                                            (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)
<S>                                                         <C>              <C>              <C>
Interest income:
  Loans...................................................    $    3,769       $    3,251       $  1,943
  Federal funds sold and interest-bearing deposits........            78              176            418
  Investments:
     Taxable..............................................           870              647            810
     Nontaxable...........................................            47               11             17
                                                              ----------       ----------       --------
       Total interest income..............................         4,764            4,085          3,188
                                                              ----------       ----------       --------
Interest expense:
  Deposits................................................         1,203            1,082          1,131
  Short-term borrowings...................................            41               83            133
                                                              ----------       ----------       --------
       Total interest expense.............................         1,244            1,165          1,264
                                                              ----------       ----------       --------
       Net interest income................................         3,520            2,920          1,924
Provision for loan losses.................................           225              275            225
                                                              ----------       ----------       --------
       Net interest income after provision for loan
          losses..........................................         3,295            2,645          1,699
                                                              ----------       ----------       --------
Other income:
  Service charges on deposit accounts.....................           139               85             47
  Gain on sales of mortgage loans held for sale...........           103               62             46
  Other income, service charges, and fees.................            53               31             11
  Gain on sales of securities available for sale..........             4               24             65
                                                              ----------       ----------       --------
       Total other income.................................           299              202            169
                                                              ----------       ----------       --------
Other expenses:
  Compensation and employee benefits......................         1,175              842            770
  Occupancy and equipment expenses........................           335              218            168
  Advertising expense.....................................           145               75             58
  Data processing expense.................................           275              223            144
  Professional services...................................           222              195            118
  Other operating expenses................................           607              470            343
                                                              ----------       ----------       --------
       Total other expenses...............................         2,759            2,023          1,601
                                                              ----------       ----------       --------
       Income before income taxes.........................           835              824            267
Income tax expense (benefit)..............................           335              329            (94)
                                                              ----------       ----------       --------
       Net income.........................................    $      500       $      495       $    361
                                                              ==========       ==========       ========
Earnings per share:
  Basic earnings per share................................    $     0.37       $     0.46       $   0.37
  Diluted earnings per share..............................          0.36             0.45           0.37
Weighted average number of shares outstanding:
  Basic earnings per share................................     1,344,313        1,084,834        981,270
  Diluted earnings per share..............................     1,377,461        1,088,773        984,270
</Table>

          See accompanying notes to consolidated financial statements.

                                       43
<PAGE>

                           1ST COLONIAL BANCORP, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<Table>
<Caption>
                                                                      ACCUMULATED
                                                                         OTHER
                                            ADDITIONAL   RETAINED    COMPREHENSIVE       TOTAL
                                   COMMON    PAID-IN     EARNINGS       (LOSS)       SHAREHOLDERS'   COMPREHENSIVE
                                   STOCK     CAPITAL     (DEFICIT)      INCOME          EQUITY          INCOME
                                   ------   ----------   ---------   -------------   -------------   -------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                <C>      <C>          <C>         <C>             <C>             <C>
Balance at December 31, 2000.....  $  --      $5,785       $(597)        $ 114          $5,302
Proceeds from private
  placement......................     --       1,122          --            --           1,122
Stock split effected in the form
  of a dividend, 10%.............     --          93         (93)           --              --
Net unrealized loss on securities
  available for sale, net of
  tax............................     --          --          --           (16)            (16)          $ (16)
Net income.......................     --          --         361            --             361             361
                                                                                                         -----
Total comprehensive income.......                                                                        $ 345
                                   -----      ------       -----         -----          ------           =====
Balance at December 31, 2001.....     --       7,000        (329)           98           6,769
Proceeds from stock offering.....     --       1,931          --            --           1,931
Exercise of director's options...     --           4          --            --               4
Net unrealized gain on securities
  available for sale, net of
  tax............................     --          --          --             3               3           $   3
Net income.......................     --          --         495            --             495             495
                                                                                                         -----
Total comprehensive income.......                                                                        $ 498
                                   -----      ------       -----         -----          ------           =====
Balance at December 31, 2002.....     --       8,935         166           101           9,202
Stock issuance expenses..........     --          (9)         --            --              (9)
Exercise of warrants.............     --          32          --            --              32
Stock dividend...................     --         280        (280)           --              --
Net unrealized loss on securities
  available for sale, net of
  tax............................     --          --          --          (174)           (174)          $(174)
Net income.......................     --          --         500            --             500             500
                                                                                                         -----
Total comprehensive income.......                                                                        $ 326
                                   -----      ------       -----         -----          ------           =====
Balance at December 31, 2003.....  $  --      $9,238       $ 386         $ (73)         $9,551
                                   =====      ======       =====         =====          ======
</Table>

          See accompanying notes to consolidated financial statements.

                                       44
<PAGE>

                           1ST COLONIAL BANCORP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<Table>
<Caption>
                                                                2003       2002       2001
                                                              --------   --------   --------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
  Net income................................................  $    500   $    495   $    361
                                                              --------   --------   --------
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation and amortization...........................       113         90         74
    Amortization (accretion) of premium (discount) on
       securities, net......................................       173         19        (32)
    Amortization of deferred fees/cost, net.................        41         10          7
    Gain on sales of mortgage loans held for sale...........      (103)       (62)       (46)
    Gain on sales of securities available for sale..........        (4)       (24)       (65)
    Loss on fixed asset retirements.........................        19         --         --
    Provision for loan losses...............................       225        275        225
    Cash disbursed for mortgage banking activities..........   (21,771)   (12,784)    (9,840)
    Cash received for mortgage banking activities...........    21,656     12,965      9,704
    Increase in accrued interest receivable.................       (32)       (11)       (84)
    Deferred income tax benefit.............................       (14)       (19)      (219)
    (Increase) decrease in other assets.....................       (56)        26        (17)
    (Decrease) increase in accrued interest payable.........        (2)       (20)        21
    (Decrease) increase in income taxes payable.............        (3)       (74)       125
    Decrease in other liabilities...........................       (21)       (48)        (6)
                                                              --------   --------   --------
       Total adjustments....................................       221        343       (153)
                                                              --------   --------   --------
       Net cash provided by operating activities............       721        838        208
                                                              --------   --------   --------
Cash flows from investing activities:
  Proceeds from maturities and sales of securities available
    for sale................................................    28,129     21,714      9,525
  Proceeds from maturities of securities held to maturity...     1,220        931         --
  Purchases of securities held to maturity..................    (5,808)      (935)    (1,216)
  Purchases of securities available for sale................   (31,665)   (35,344)   (17,180)
  Repayment of principal of securities available for sale...     5,036        893        568
  Increase in loans receivable, net.........................   (12,426)   (17,646)   (22,310)
  Capital expenditures......................................      (304)      (411)       (80)
                                                              --------   --------   --------
       Net cash used in investing activities................   (15,818)   (30,798)   (30,693)
                                                              --------   --------   --------
Cash flows from financing activities:
  Net increase in deposits..................................    21,375     15,683     43,971
  Net (decrease) increase in short-term borrowings..........    (1,946)       573      3,467
  Issuance of common stock, net.............................        23      1,935      1,122
                                                              --------   --------   --------
       Net cash provided by financing activities............    19,452     18,191     48,560
                                                              --------   --------   --------
       Net increase (decrease) in cash and cash
         equivalents........................................     4,355    (11,769)    18,075
Cash and cash equivalents at beginning of year..............    12,161     23,930      5,855
                                                              --------   --------   --------
Cash and cash equivalents at end of year....................  $ 16,516   $ 12,161   $ 23,930
                                                              ========   ========   ========
Supplemental disclosures:
  Cash paid during the year for:
    Interest................................................  $  1,242   $  1,185   $  1,243
    Income taxes............................................       350        346        319
  Noncash items:
    Net change in unrealized gains on available for sale
       securities, net of taxes of $106 for 2003, $8 for
       2002 and ($65) for 2001..............................      (174)         3        (16)
    Issuance of stock dividend..............................       280         --         93
</Table>

          See accompanying notes to consolidated financial statements.

                                       45
<PAGE>

                           1ST COLONIAL BANCORP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

(1) NATURE OF OPERATIONS

     1st Colonial Bancorp, Inc. (the Company) is a Pennsylvania corporation
headquartered in Collingswood, New Jersey, and the parent company of 1st
Colonial National Bank (the Bank). The Bank opened for business on June 30,
2000, and provides a wide range of business and consumer financial services
through its two New Jersey branch offices located in Collingswood and Westville.

     The Company was organized as the holding company for the Bank, in
connection with the reorganization approved by the Bank's shareholders at the
annual meeting on June 12, 2002. As a bank holding company registered under the
Bank Holding Company Act of 1956, the Company is subject to the supervision and
regulation of the Board of Governors of the Federal Reserve System (the FRB).
The Bank is a national bank whose deposits are insured by the Bank Insurance
Fund (BIF) of the Federal Deposit Insurance Corporation (FDIC). The Company's
operations and those of the Bank are subject to supervision and regulation by
FRB, the FDIC, and the Office of the Comptroller of the Currency (OCC). The
principal activity of the Bank is to provide its local communities with general
commercial and retail banking services. The Bank is managed as one business
segment.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of the parent
company, 1st Colonial Bancorp, Inc., and its wholly owned subsidiary, 1st
Colonial National Bank.

  (b) USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

  (c) CASH AND CASH EQUIVALENTS

     For purposes of reporting cash flows, cash and cash equivalents include
cash and amounts due from banks, interest-bearing deposits (including
certificates of deposit with original terms of three months or less), and
federal funds sold. Generally, federal funds sold are repurchased the following
day.

  (d) INVESTMENTS HELD TO MATURITY

     Debt securities that management has the positive intent and ability to hold
until maturity are classified as held to maturity and are carried at their
remaining unpaid principal balance, net of unamortized premiums or unaccreted
discounts. Premiums are amortized and discounts are accreted using a method that
produces results that approximate level yield over the estimated remaining term
of the underlying security.

  (e) SECURITIES AVAILABLE FOR SALE

     Securities not classified as held to maturity are classified as available
for sale and are stated at fair value. Unrealized gains and losses are excluded
from earnings and are reported as accumulated other comprehensive (loss) income,
net of tax, a separate component of shareholders' equity, until realized. Gains
and losses are determined using the specific-identification method and are
accounted for on a trade-date basis.

                                       46
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (f) MORTGAGE LOANS HELD FOR SALE

     The Bank originates and sells residential mortgage loans (without recourse)
servicing released to the secondary market. This activity enables the Bank to
fulfill the credit needs of the community while reducing its overall exposure to
interest rate and credit risk. These loans are reported at the lower of their
cost or fair market value.

  (g) LOANS

     Loans are stated at the principal amount outstanding, net of deferred loan
fees and costs. Interest income is accrued on the principal amount outstanding.
Loan origination fees and related direct costs are deferred and amortized to
interest income over the term of the respective loan as a yield adjustment.

     Loans are reported as nonaccrual if they are past due as to principal or
interest payments for a period of 90 days or more. Exceptions may be made if a
loan is deemed by management to be well collateralized and in the process of
collection. Loans that are on a current payment status may also be classified as
nonaccrual if there is serious doubt as to the borrower's ability to continue
interest or principal payments. When a loan is placed in the nonaccrual
category, interest accruals cease and uncollected accrued interest receivable is
reversed and charged against current interest income. Nonaccrual loans are
generally not returned to accruing status until principal and interest payments
have been brought current and full collectibility is reasonably assured.
Impaired loans are measured based on the present value of expected future
discounted cash flows, the market price of the loan, or the fair value of the
underlying collateral if the loan is collateral dependent. For purposes of
applying the measurement criteria for impaired loans, the Bank excludes large
groups of smaller balance homogeneous loans, primarily consisting of residential
real estate and consumer loans, as well as commercial loans with balances of
less than $100,000. The recognition of interest income on impaired loans is the
same as for nonaccrual loans discussed above.

  (h) ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses reflects management's best estimate of
losses, both known and inherent, in the existing loan portfolio. Management uses
significant estimates to determine the allowance for loan losses. Management's
estimates consider such factors as changes in the nature and volume of the
portfolio, overall portfolio quality, review of specific problem loans, and
current economic conditions that may affect the borrowers' ability to pay. The
provision for loan losses charged to operating expenses represents the amount
necessary to maintain an appropriate allowance. Loan losses are charged directly
against the allowance for loan losses when loans are determined to be
uncollectible. Recoveries on previously charged-off loans are added to the
allowance when received.

     In addition, regulatory authorities, as an integral part of their
examinations, periodically review the allowance for loan losses. They may
require additions to the allowance based upon their judgments about information
available to them at the time of examination.

  (i) PREMISES AND EQUIPMENT

     Premises and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the expected useful lives of the assets. Amortization of leasehold improvements
is computed using the straight-line method over the shorter of the useful lives
or the remaining lease term. Software costs, furniture, and equipment have
depreciable lives of 3 to 10 years. Building and improvements have estimated
useful lives of 30 years. The costs of maintenance and repairs are expensed as
they are incurred, and renewals and betterments are capitalized.

                                       47
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (j) OTHER REAL ESTATE OWNED

     Other real estate owned would be comprised of properties acquired through
foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Other
real estate owned is recorded at the lower of the carrying value of the loan or
the fair value of the property, net of estimated selling costs. Costs relating
to the development or improvement of properties are capitalized, while expenses
related to the operation and maintenance of properties are expensed as incurred.
Gains or losses upon dispositions are reflected in earnings as realized. The
Bank had no real estate owned at December 31, 2003 and 2002.

  (k) EARNINGS PER SHARE

     Basic earnings per share is calculated as net income divided by the
weighted average number of shares outstanding. Dilutive earnings per share
includes dilutive common stock equivalents as computed under the treasury stock
method using average common stock prices. Share and per-share data for all
periods presented have been restated to reflect the 10% stock dividend paid on
January 15, 2002 and the 5% stock dividend paid on April 15, 2003.

  (l) INCOME TAXES

     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as operating loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established against deferred tax assets
when, in the judgment of management, it is more likely than not that such
deferred tax assets will not become available.

                                       48
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (m) STOCK OPTIONS

     As of December 31, 2003, the Company had four stock-based compensation
plans, which are described more fully in note 19. The Company accounts for those
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 cost is 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 earnings per share
if the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation (dollars in thousands, except
per-share amounts).

<Table>
<Caption>
                                                                        BASIC     DILUTIVE
                                                                      EARNINGS    EARNINGS
                                                            NET          PER         PER
                                                           INCOME       SHARE       SHARE
                                                         ----------   ---------   ---------
<S>                                                      <C>          <C>         <C>
2003:
  As reported..........................................    $ 500         0.37        0.36
  Compensation expense.................................     (102)       (0.07)      (0.07)
                                                           -----        -----       -----
  Pro forma............................................    $ 398         0.30        0.29
                                                           =====        =====       =====
2002:
  As reported..........................................    $ 495         0.46        0.45
  Compensation expense.................................      (44)       (0.04)      (0.04)
                                                           -----        -----       -----
  Pro forma............................................    $ 451         0.42        0.41
                                                           =====        =====       =====
2001:
  As reported..........................................    $ 361         0.37        0.37
  Compensation expense.................................      (29)       (0.03)      (0.03)
                                                           -----        -----       -----
  Pro forma............................................    $ 332         0.34        0.34
                                                           =====        =====       =====
</Table>

  (n) RECENT ACCOUNTING PRONOUNCEMENTS

  Costs Associated with Exit or Disposal Activities

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS No. 146
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring).

     The provisions of SFAS No. 146 are to be applied prospectively for exit or
disposal activities that are initiated after December 31, 2003, with early
application encouraged. The adoption of SFAS No. 146 did not have an impact on
the Company's earnings, financial condition, or equity.

 Guarantor's Accounting and Disclosure Requirements for Guarantees

     During 2002, FASB Interpretation No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees Including Indirect Guarantees of
Indebtedness of Others, was issued. Interpretation No. 45 requires a guarantor
to include disclosure of certain obligations, and if applicable, at the
inception of the guarantee, recognize a liability for the fair value of other
certain obligations undertaken in issuing a guarantee.

                                        49
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The recognition requirement is effective for guarantees issued or modified after
December 31, 2003. Adoption of Interpretation No. 45 did not have an impact on
the Company's earnings, financial condition, or equity.

 Consolidation of Variable Interest Entities

     In December 2003, the Financial Accounting Standards Board (FASB) issued a
revised FASB Interpretation No. 46, Consolidated of Variable Interest Entities
(FIN 46R). This interpretation addresses how a business should evaluate whether
it has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaced
FASB interpretation No. 46, Consolidated of Variable Interest Entities, which
was originally issued in January 2003. FIN 46R will be applied to variable
interest entities created after December 13, 2003.

  Derivative Instruments and Hedging Activities

     In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. With some exceptions, SFAS No.
149 is effective for contracts entered into or modified after June 30, 2003. The
adoption of SFAS No. 149 did not have an impact on the Company's earnings,
financial condition, or equity.

 Financial Instruments with Debt and Equity Characteristics

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003, except for mandatorily redeemable financial instruments of
nonpublic entities. The adoption of SFAS No. 150 did not have an impact on the
Company's earnings, financial condition, or equity.

 Accounting for Temporary Impairment and Its Application to Certain Investments

     In November 2003, the Emerging Issues Task Force (EITF) issued EITF Issue
No. 03-1, The Meaning of Other-Than-Temporary and Its Application to Certain
Investments. The requirements apply to investments in debt and marketable equity
securities that are accounted under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and to investments by not-for-profit
entities accounted for under SFAS No. 124, Accounting for Certain Investments
Held by Not-for-Profit Organizations, and the requirements apply only to annual
financial statements. The additional disclosures required by EITF Issue No. 03-1
include the following items: the amount of unrealized losses and related fair
market values of investment securities, the nature of the investment securities,
the number of investment securities that are in an unrealized position, the
severity and during of the impairments, the cause of impairments, and a
conclusion as to whether any of the unrealized losses represent an
other-than-temporary impairment. As a result of the implementation of EITF Issue
No. 03-1, the Company's disclosures related to investment securities have been
modified.

                                        50
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) COMMON STOCK OFFERING

     On December 20, 2002, the Company completed its public offering of units of
common stock and warrants. In the offering, the Company sold 267,119 units at an
offering price of $8.10 per unit. Each unit consisted of one share of common
stock and a warrant to purchase an additional share of common stock during the
next three years at a purchase price of $9.14 per share. The Company raised net
proceeds of $1.93 million in the offering. These proceeds are being used to
fund, among other things, the continued growth of the Bank, including the
establishment of additional branches.

(4) COMMON STOCK DIVIDENDS

     On November 19, 2003, the Company declared a 5% stock dividend to all
shareholders of record as of April 1, 2004 payable on April 15, 2004.

     On April 15, 2003, the Company paid a 5% stock dividend to all shareholders
of record as of April 1, 2003. On January 15, 2002 the Company paid a 10% stock
dividend to all shareholders of record as of January 2, 2002. The number of
shares and earnings per share amounts were restated to reflect the stock
dividends paid on January 15, 2002 and April 15, 2003 as of the earliest date
presented herein.

(5) CASH AND DUE FROM BANKS

     The Bank is required to maintain certain daily average reserve balances in
accordance with FRB requirements. At December 31, 2003 and 2002, the FRB reserve
requirement was $1,444,000 and $533,000, respectively.

     In addition, the Bank was required to maintain $200,000 in cash reserves at
its correspondent banks at both December 31, 2003 and 2002.

(6) INVESTMENT SECURITIES

     A comparison of amortized cost and approximate fair value of investment
securities held to maturity and securities available for sale at December 31,
2003 and 2002 is as follows (in thousands):

<Table>
<Caption>
                                                                   2003
                                             ------------------------------------------------
                                                           GROSS        GROSS
                                             AMORTIZED   UNREALIZED   UNREALIZED
                                               COST        GAINS        LOSSES     FAIR VALUE
                                             ---------   ----------   ----------   ----------
<S>                                          <C>         <C>          <C>          <C>
Investments held to maturity:
  Municipal securities.....................   $ 5,808        --           (12)        5,796
                                              -------       ---          ----        ------
Total......................................   $ 5,808        --           (12)        5,796
                                              =======       ===          ====        ======
Securities available for sale:
  U.S. government securities...............   $18,536        54          (111)       18,479
  Mortgage-backed securities...............     9,265        13           (78)        9,200
  Equity securities........................       306        --            --           306
                                              -------       ---          ----        ------
Total......................................   $28,107        67          (189)       27,985
                                              =======       ===          ====        ======
</Table>

                                        51
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                   2002
                                             ------------------------------------------------
                                                           GROSS        GROSS
                                             AMORTIZED   UNREALIZED   UNREALIZED
                                               COST        GAINS        LOSSES     FAIR VALUE
                                             ---------   ----------   ----------   ----------
<S>                                          <C>         <C>          <C>          <C>
Investments held to maturity:
  Municipal securities.....................   $ 1,220        --            (2)        1,218
                                              -------       ---          ----        ------
Total......................................   $ 1,220        --            (2)        1,218
                                              =======       ===          ====        ======
Securities available for sale:
  U.S. government securities...............   $19,196       121            --        19,317
  Mortgage-backed securities...............    10,376        44            (7)       10,413
  Equity securities........................       204        --            --           204
                                              -------       ---          ----        ------
Total......................................   $29,776       165            (7)       29,934
                                              =======       ===          ====        ======
</Table>

     The scheduled maturities of investments held to maturity and securities
available for sale at December 31, 2003 is as follows (in thousands):

<Table>
<Caption>
                                                 INVESTMENTS HELD       SECURITIES AVAILABLE
                                                   TO MATURITY                FOR SALE
                                              ----------------------   ----------------------
                                              AMORTIZED                AMORTIZED
                                                COST      FAIR VALUE     COST      FAIR VALUE
                                              ---------   ----------   ---------   ----------
<S>                                           <C>         <C>          <C>         <C>
Due in one year or less.....................   $5,808       5,796           --           --
Due after one year up to five years.........       --          --       18,657       18,603
Due after five years up to ten years........       --          --        1,738        1,736
Due after ten years.........................       --          --        7,406        7,340
Equity securities...........................       --          --          306          306
                                               ------       -----       ------       ------
Total.......................................   $5,808       5,796       28,107       27,985
                                               ======       =====       ======       ======
</Table>

     Proceeds from sales of securities available for sale totaled $2,203,000 and
$2,019,000 during 2003 and 2002, respectively. Gross gains realized from the
sale of securities available for sale totaled $4,000 and $24,000 for the year
ended December 31, 2003 and 2002, respectively. There were no losses realized on
sales of securities in 2003 and 2002.

     At December 31, 2003, the Company pledged $26,062,000 in investment
securities as collateral for uninsured municipal deposits and uninsured deposits
underlying retail repurchase agreements.

     The Bank is required to maintain an investment in Federal Reserve Bank
stock. The amount of this stock requirement is based on Bank capital. The Bank
had $266,000 and $204,000 in Federal Reserve Bank stock at December 31, 2003 and
2002, respectively.

                                        52
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents investments with unrealized losses at December
31, 2003. All of these investments have been in an unrealized loss position for
less than 12 months.

<Table>
<Caption>
                                                                           UNREALIZED
                                                              FAIR VALUE     LOSSES
                                                              ----------   ----------
<S>                                                           <C>          <C>
Investments held to maturity:
  Municipal securities......................................   $ 5,126         (12)
                                                               -------        ----
     Total..................................................     5,126         (12)
                                                               -------        ----
Securities available for sale:
  U.S. government securities................................     9,911        (111)
  Mortgage-backed securities................................     8,399         (78)
                                                               -------        ----
     Total..................................................    18,310        (189)
                                                               -------        ----
Total temporarily impaired investments......................   $23,436        (201)
                                                               =======        ====
</Table>

     There are eleven fixed-rate municipal securities with an aggregate
unrealized loss position of $12,000 at December 31, 2003. These securities were
issued by local New Jersey municipalities and mature within 12 months. Repayment
of municipal securities is expected from tax revenues.

     There are seven fixed-rate U.S. government agency securities with an
aggregate unrealized loss position of $111,000 at December 31, 2003. These
securities mature within five years. The repayment of these securities, if held
to maturity, is guaranteed by the issuing U.S. government agency.

     There are six mortgage-backed securities with an aggregate unrealized loss
position of $78,000 at December 31, 2003. The weighted average life of these
mortgage backed securities is 4.2 years. Approximately $68,000 of the unrealized
loss on mortgage backed securities relates to four GNMA securities with an
aggregate fair value of $5,859,000. The repayment of mortgage-backed securities,
if held to maturity, is guaranteed by the U.S. government in the case of GNMA
securities, and issuing U.S. government agencies.

     The temporary impairment of the aforementioned investments relates to the
difference between the yield on the securities and the current market rate for
similar securities. Fixed-rate securities are generally exposed to greater
market value adjustment than their variable-rate counterparts. The fair value
and unrealized loss for fixed-rate investments was $16,773,000 and $124,000,
respectively, at December 31, 2003. The temporary impairment of fixed-rate
investments is likely to continue in a rising interest rate environment.

     All temporarily impaired investments are bank qualified investments. There
has been no significant change in the credit quality of issuers since the
securities were purchased.

                                        53

<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) LOANS RECEIVABLE

     Loans receivable consist of the following at December 31, 2003 and 2002 (in
thousands):

<Table>
<Caption>
                                                               2003      2002
                                                              -------   -------
<S>                                                           <C>       <C>
Commercial..................................................  $16,953   $17,565
Real estate -- commercial...................................   27,227    18,895
Real estate -- residential..................................   16,512    12,147
Construction................................................    2,884     3,213
Consumer....................................................    2,853     2,348
                                                              -------   -------
                                                               66,429    54,168
Less allowance for loan losses..............................     (768)     (576)
Deferred loan costs.........................................      121        30
                                                              -------   -------
Loans receivable, net.......................................  $65,782   $53,622
                                                              =======   =======
</Table>

     The Bank is subject to a loans-to-one-borrower limitation of 15% of capital
funds. At December 31, 2003, the loans-to-one-borrower limitation was
$1,444,000; this excludes an additional 10% of adjusted capital funds or
$962,000, which may be loaned if collateralized by readily marketable securities
as defined by regulations. At December 31, 2003, there are no loans outstanding
or committed to any one borrower that individually or in the aggregate exceed
that limit.

     The Bank lends primarily to customers in its local market area. Most loans
are mortgage loans. Mortgage loans include loans secured by commercial and
residential real estate and construction loans. Accordingly, lending activities
could be affected by changes in the general economy, the regional economy, or
real estate values. At December 31, 2003 and 2002, mortgage loans totaled
$46,623,000 and $34,255,000, respectively. Mortgage loans represent 70.1% and
63.2% of total gross loans at December 31, 2003 and 2002, respectively.

     The Bank did not have any nonaccrual or impaired loans at or during the
year ended December 31, 2003 and 2002.

     The following is a summary of the activity of the allowance for loan losses
(in thousands):

<Table>
<Caption>
                                                              2003   2002   2001
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Balance, beginning of year..................................  $576   $335   $110
Provision for loan losses...................................   225    275    225
Charge-offs, net............................................   (33)   (34)    --
                                                              ----   ----   ----
Balance, end of year........................................  $768   $576   $335
                                                              ====   ====   ====
</Table>

                                        54
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) PREMISES AND EQUIPMENT, NET

     Premises and equipment at December 31, 2003 and 2002 are summarized as
follows (in thousands):

<Table>
<Caption>
                                                               2003    2002
                                                              ------   -----
<S>                                                           <C>      <C>
Furniture and equipment.....................................  $  505   $ 317
Building and land...........................................     374      --
Construction in progress....................................      --     312
Leasehold improvements......................................     335     332
                                                              ------   -----
                                                               1,214     961
Accumulated depreciation and amortization...................    (279)   (198)
                                                              ------   -----
Premises and equipment, net.................................  $  935   $ 763
                                                              ======   =====
</Table>

     Depreciation expense was $113,000, $90,000, and $74,000 for the years ended
December 31, 2003, 2002, and 2001, respectively.

     The Company leases its main office and operations center, both of which are
located in Collingswood, New Jersey. The Company owns its branch located in
Westville, New Jersey. The Westville branch opened in January 2003.

(9) DEPOSITS

     Deposits consist of the following major classifications at December 31,
2003 and 2002 (dollars in thousands):

<Table>
<Caption>
                                           2003                            2002
                              ------------------------------   -----------------------------
                              WEIGHTED                % OF     WEIGHTED               % OF
                              AVERAGE                TOTAL     AVERAGE               TOTAL
                                RATE      AMOUNT    DEPOSITS     RATE     AMOUNT    DEPOSITS
                              --------   --------   --------   --------   -------   --------
<S>                           <C>        <C>        <C>        <C>        <C>       <C>
Interest checking...........    1.70%    $ 37,311     35.8%      2.24%    $29,722     35.8%
Noninterest checking........      --       20,406     19.6         --      16,649     20.1
Money market................    0.50       15,121     14.5       1.43      15,268     18.4
Savings.....................    0.38        5,253      5.0       1.00       4,403      5.3
Certificates of deposit.....    2.35       26,232     25.1       3.14      16,906     20.4
                                ----     --------    -----       ----     -------    -----
Total.......................    1.29%    $104,323    100.0%      1.76%    $82,948    100.0%
                                ====     ========    =====       ====     =======    =====
</Table>

     The Bank has a concentration of deposits from local municipalities.
Municipal deposits, which are mostly interest checking accounts, were
$29,453,000 or 28.2% of total deposits at December 31, 2003 and $18,750,000 or
22.6% of total deposits at December 31, 2002. Municipal deposit accounts in
excess of $100,000 are collateralized by investment securities with a carrying
value of $18,810,000 at December 31, 2003.

     Certificates of deposit accounts of $100,000 and over totaled $16,884,000
and $10,498,000 at December 31, 2003 and 2002, respectively.

                                        55
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Interest expense on deposits consisted of the following for the year ended
December 31, 2003, 2002, and 2001 (dollars in thousands):

<Table>
<Caption>
                                                              2003     2002     2001
                                                             ------   ------   ------
<S>                                                          <C>      <C>      <C>
Interest checking..........................................  $  531   $  427   $  278
Money market...............................................      97      192      403
Savings....................................................      31       38       27
Certificates of deposit....................................     544      425      423
                                                             ------   ------   ------
Interest expense on deposits...............................  $1,203   $1,082   $1,131
                                                             ======   ======   ======
</Table>

     The following is a schedule of certificates of deposit by maturities as of
December 31, 2003 (in thousands):

<Table>
<S>                                                           <C>
Year ended December 31:
  2004......................................................  $20,577
  2005......................................................    1,532
  2006......................................................      719
  2007......................................................    3,336
  2008......................................................       68
                                                              -------
  Total.....................................................  $26,232
                                                              =======
</Table>

(10) BORROWING AVAILABILITY

     At December 31, 2003, the Bank had a secured line of credit with First
Tennessee Bank in the aggregate amount of $1.8 million, and an unsecured line of
credit with Atlantic Central Bankers Bank in the aggregate amount of $4 million.
At December 31, 2003, the Bank had no balances outstanding against its lines of
credit. The Bank had borrowed funds outstanding for 12 days in 2003. The amounts
outstanding ranged from $140,000 to $2,823,000. Total outstanding loans averaged
$35,000 for the year ended December 31, 2003. The Bank borrowed $110,000 for a
period of two days during 2002.

                                        56
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) EARNINGS PER SHARE

     The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share calculation for the years ended December
31, 2003, 2002, and 2001 (dollars in thousands, except per-share data):

<Table>
<Caption>
                                                                  NO. OF SHARES   PER-SHARE
                                                     NET INCOME    OUTSTANDING     AMOUNT
                                                     ----------   -------------   ---------
<S>                                                  <C>          <C>             <C>
2003:
  Basic earnings per share.........................     $500        1,344,313      $ 0.37
  Effect of dilutive stock equivalents.............       --           33,148       (0.01)
                                                        ----        ---------      ------
  Diluted earnings per share.......................     $500        1,377,461      $ 0.36
                                                        ====        =========      ======
2002:
  Basic earnings per share.........................     $495        1,084,834      $ 0.46
  Effect of dilutive stock equivalents.............       --            3,939       (0.01)
                                                        ----        ---------      ------
  Diluted earnings per share.......................     $495        1,088,773      $ 0.45
                                                        ====        =========      ======
2001:
  Basic earnings per share.........................     $361          981,270      $ 0.37
  Effect of dilutive stock equivalents.............       --            3,000          --
                                                        ----        ---------      ------
  Diluted earnings per share.......................     $361          984,270      $ 0.37
                                                        ====        =========      ======
</Table>

     Earnings per share is calculated on the basis of weighted average number of
shares outstanding. Options to purchase 75,823, 49,943, and 32,429 shares of
common stock were outstanding at December 31, 2003, 2002, and 2001,
respectively. Warrants to purchase 356,001, 359,519, and 92,400 shares of common
stock were outstanding at December 31, 2003, 2002, and 2001, respectively.
Options and warrants, to the extent dilutive, were included in the denominator
in the computation of earnings per diluted share. Options to purchase 0, 29,145,
and 10,178 shares were antidilutive for 2003, 2002, and 2001, respectively, and,
therefore, excluded from the calculation of earnings per diluted common share.
Warrants to purchase 92,400, 359,519, and 92,400 shares were antidilutive for
2003, 2002, and 2001, respectively.

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following required disclosure of the estimated fair value of financial
instruments has been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

     The methods and assumptions used to estimate the fair values of each class
of financial instrument are as follows:

 (a) CASH AND CASH EQUIVALENTS, ACCRUED INTEREST RECEIVABLE, AND ACCRUED
 INTEREST PAYABLE

          The items are generally short term in nature, and accordingly, the
     carrying amounts reported in the statements of financial condition are
     reasonable approximations of their fair values.

                                        57
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (b) INVESTMENT SECURITIES

          Fair values for investment securities are based on quoted market
     prices, if available. If quoted market prices are not available, then fair
     values are based on quoted market prices of comparable instruments.

  (c) LOANS AND MORTGAGE LOANS HELD FOR SALE

          For variable-rate loans that reprice frequently and with no
     significant change in credit risk, fair value is based on carrying value.
     The fair value for other loans receivable was estimated using a discounted
     cash flow analysis, which uses interest rates currently being offered for
     loans with similar terms to borrowers of similar credit quality.
     Consideration was given to prepayment speeds, economic conditions, risk
     characteristics, and other factors considered appropriate.

  (d) DEPOSITS

          The fair values of deposits subject to immediate withdrawal, such as
     interest and noninterest checking, statement savings, and money market
     demand deposit accounts, are equal to their carrying amounts in the
     accompanying statements of financial condition. Fair values for
     certificates of deposit are estimated by discounting future cash flows
     using interest rates currently offered on certificates of deposit with
     similar remaining maturities.

  (e) OFF-BALANCE-SHEET INSTRUMENTS

          Off-balance-sheet instruments are primarily comprised of loan
     commitments and unfunded lines of credit that are generally priced at
     market rate at the time of funding. Therefore, these instruments have
     nominal value prior to funding.

                                        58
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair value of the Company's financial instruments at December
31, 2003 and 2002 was as follows (in thousands):

<Table>
<Caption>
                                                      2003                    2002
                                              ---------------------   ---------------------
                                              CARRYING   ESTIMATED    CARRYING   ESTIMATED
                                               AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                              --------   ----------   --------   ----------
  <S>                                         <C>        <C>          <C>        <C>
  Financial assets:
    Cash and cash equivalents...............  $ 16,516    $ 16,516    $12,161     $12,161
    Investments held to maturity............     5,808       5,796      1,220       1,218
    Investments available for sale..........    27,985      27,985     29,934      29,934
    Mortgages held for sale.................       281         281         63          63
    Loans receivable, net...................    65,782      65,638     53,622      54,798
    Accrued interest receivable.............       373         373        341         341
                                              --------    --------    -------     -------
  Total financial assets....................  $116,745    $116,589    $97,341     $98,515
                                              ========    ========    =======     =======
  Financial liabilities:
    Demand deposits.........................  $ 57,717    $ 57,717    $46,371     $46,371
    Money market deposits...................    15,121      15,121     15,268      15,268
    Savings deposits........................     5,253       5,253      4,403       4,403
    Certificates of deposit.................    26,232      26,609     16,906      17,164
    Short-term borrowings...................     4,087       4,087      6,033       6,033
    Accrued interest payable................         8           8         10          10
                                              --------    --------    -------     -------
  Total financial liabilities...............  $108,418    $108,795    $88,991     $89,249
                                              ========    ========    =======     =======
<Caption>
                                              NOTIONAL                NOTIONAL
                                               AMOUNT                  AMOUNT
                                              --------                --------
  <S>                                         <C>        <C>          <C>        <C>
  Off-balance-sheet instruments:
    Commitments to extend credit............  $  8,319    $     --    $ 7,202     $    --
                                              ========    ========    =======     =======
</Table>

(13) INCOME TAXES

     Total income tax expense (benefit) was allocated for the years ended
December 31, 2003, 2002, and 2001, as follows (in thousands):

<Table>
<Caption>
                                                              2003    2002   2001
                                                              -----   ----   ----
<S>                                                           <C>     <C>    <C>
Income before income taxes..................................  $ 335   $329   $(94)
Shareholders' equity for unrealized gain (loss) on
  securities available for sale.............................   (106)    (8)    65
                                                              -----   ----   ----
                                                              $ 229   $321   $(29)
                                                              =====   ====   ====
</Table>

                                        59
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Income tax expense (benefit) consisted of the following for the years ended
December 31, 2003, 2002, and 2001 (in thousands):

<Table>
<Caption>
                                                              2003   2002   2001
                                                              ----   ----   -----
<S>                                                           <C>    <C>    <C>
Federal:
  Current...................................................  $267   $268   $ 105
  Deferred..................................................   (13)   (16)   (220)
                                                              ----   ----   -----
                                                               254    252    (115)
                                                              ----   ----   -----
State:
  Current...................................................    83     80      20
  Deferred..................................................    (2)    (3)      1
                                                              ----   ----   -----
                                                                81     77      21
Total.......................................................  $335   $329   $ (94)
                                                              ====   ====   =====
</Table>

     The following is a reconciliation between expected tax expense (benefit) at
the statutory rate of 34% and actual tax expense (in thousands):

<Table>
<Caption>
                                                              2003   2002   2001
                                                              ----   ----   -----
<S>                                                           <C>    <C>    <C>
At federal statutory rate...................................  $284   $280   $  91
Adjustments resulting from:
  State tax, net of federal benefit.........................    55     52      14
  Tax-exempt interest income................................   (13)    (3)     (5)
  Decrease in valuation allowance...........................    --     --    (194)
  Other.....................................................     9     --      --
                                                              ----   ----   -----
Total.......................................................  $335   $329   $ (94)
                                                              ====   ====   =====
</Table>

                                        60
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Significant deferred tax assets and liabilities of the Bank at December 31,
2003 and 2002 are as follows (dollars in thousands):

<Table>
<Caption>
                                                              2003   2002    2001
                                                              ----   -----   ----
<S>                                                           <C>    <C>     <C>
Deferred tax assets:
  Depreciation..............................................  $ --   $  --   $  2
  Organization costs........................................    42      70     93
  Book bad debt reserves -- loans...........................   296     223    134
  Unrealized losses on securities available for sale........    49      --     --
                                                              ----   -----   ----
     Total gross deferred tax assets........................   387     293    229
  Less valuation allowance..................................    --      --     --
                                                              ----   -----   ----
     Net deferred tax assets................................   387     293    229
                                                              ----   -----   ----
Deferred tax liabilities:
  Depreciation..............................................    (4)     (4)    --
  Deferred loan costs.......................................   (77)    (45)    (1)
  Unrealized gains on securities available for sale.........    --     (57)   (65)
  Prepaid expenses..........................................    (5)     (6)    (9)
                                                              ----   -----   ----
     Total gross deferred tax liabilities...................   (86)   (112)   (75)
                                                              ----   -----   ----
Net deferred tax asset......................................  $301   $ 181   $154
                                                              ====   =====   ====
</Table>

     The realizability of deferred tax assets is dependent upon various factors,
including the generation of future taxable income, the existence of taxes paid
and recoverable, the reversal of deferred tax liabilities, and tax planning
strategies. Based upon these and other factors, management determined during the
fourth quarter of 2001 that it is more likely than not that the Bank will
realize the benefits of these deferred tax assets and, as a result, reversed the
valuation allowance.

     Management has determined that it is more likely than not that the Bank
will realize the benefits of deferred tax assets that exist at December 31,
2003.

(14) PROPERTIES

     The Bank operates from its main office in Collingswood, New Jersey, and its
Westville, New Jersey branch office. In addition, the Bank maintains an
operations center in Collingswood, New Jersey.

     The Westville branch location was purchased on August 30, 2002. Subsequent
to regulatory approval and renovation, this new branch opened in January 2003.

     The main office and operations center are leased. The main office lease
expires in December 2009 with options to renew for two additional five-year
terms. The operations center lease expires in January 2006.

                                        61
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future minimum payments under leases are summarized as follows (dollars in
thousands):

<Table>
<S>                                                           <C>
2004........................................................  $ 78
2005........................................................    83
2006........................................................    52
2007........................................................    50
2008........................................................    50
Thereafter..................................................    50
                                                              ----
                                                              $363
                                                              ====
</Table>

     Total rent expense was $76,000, $62,000, and $45,000 for the years ended
December 31, 2003, 2002, and 2001, respectively.

(15) CAPITAL LEASES

     At December 31, 2002, the Bank was obligated, under noncancelable capital
leases, for a portion of its computer equipment. The Bank repaid these leases in
full in July 2003.

(16) COMMITMENTS AND CONTINGENCIES

  (A) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business. These financial instruments include commitments
to extend credit to meet the financing needs of its customers. Such commitments
have been made in the normal course of business and at current prevailing market
terms. The commitments, once funded, are principally to originate commercial
loans and other loans secured by real estate. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance-sheet instruments.

     Commitments issued to potential borrowers of the Bank at December 31, 2003
and 2002 were as follows (dollars in thousands):

<Table>
<Caption>
                                                               2003     2002
                                                              ------   ------
<S>                                                           <C>      <C>
Fixed-rate commitments......................................  $  444   $1,216
Variable/adjustable-rate commitments........................   7,875    5,986
                                                              ------   ------
Total.......................................................  $8,319   $7,202
                                                              ======   ======
</Table>

  (B) LEGAL PROCEEDINGS

     At December 31, 2003, the Company was neither engaged in any existing nor
aware of any pending legal proceedings. From time to time, the Bank is a party
to legal proceedings within the normal course of business wherein it enforces
its security interest in loans made by it, and other matters of a similar
nature.

(17) RELATED-PARTY TRANSACTIONS

     The Bank routinely enters into transactions with its directors and
officers. Such transactions are made in the ordinary course of business on
substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with other customers, and do not, in the opinion of management, involve more
than normal credit risk or present other unfavorable features. The aggregate
amount of loans to such related parties was $1,443,000 and $406,000 at December
31, 2003 and 2002, respectively. During 2003 and 2002, new loans and credit line
advances to such related parties amounted

                                        62
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to $1,436,000 and $517,000, respectively, and repayments amounted to $399,000
and $983,000, respectively. The aggregate amount of deposits from related
parties was $7,216,000 and $10,515,000 at December 31, 2003 and 2002,
respectively.

     The Bank engaged in certain property inspection services and branch
renovations with an entity that is affiliated with a director of the Bank. Such
aggregate services amounted to fees of $86,000, $110,000, and $1,000 for the
years ended December 31, 2003, 2002, and 2001, respectively. Such fees were
capitalized as premises and equipment. The Bank engages a law firm that is
affiliated with a director of the Bank for certain debt collection services.
Total fees for such services amounted to $9,000, $7,000, and $0 for the years
ended December 31, 2003, 2002, and 2001, respectively. In management's opinion,
the terms of the services provided were substantially equivalent to that which
would have been obtained from unaffiliated parties.

(18) DIVIDEND POLICY

  (A) COMPANY

     The Company has not paid a cash dividend since its inception in June 2000.
Any payment of cash dividends to our shareholders would be dependent on the
payment of a cash dividend from the Bank to the Company. The payment of cash
dividends by the Bank to the Company is limited under federal banking law. The
Company's future dividend policy is subject to the discretion of its board of
directors and will depend upon a number of factors, including future earnings,
financial conditions, cash needs, and general business conditions. Holders of
common stock will be entitled to receive dividends as and when declared by the
board of directors out of funds legally available for that purpose.

  (B) BANK

     The amount of dividends that may be paid by the Bank depends upon the
Bank's earnings and capital position, and is limited by federal law,
regulations, and policies. As a national bank subject to the regulations of the
OCC, the Bank must obtain approval for any dividend if the total of all
dividends declared in any calendar year would exceed the total of its net
profits, as defined by applicable regulations, for that year, combined with its
retained net profits for the preceding two years, less any required transfers to
surplus. In addition, the Bank may not pay a dividend in an amount greater than
its undivided profits then on hand after deducting its losses and bad debts.

     In addition, the OCC is authorized to determine under certain circumstances
relating to the financial condition of a national bank that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof. The payment of dividends that deplete a bank's capital base could be
deemed to constitute such an unsafe or unsound practice.

(19) STOCK OPTION PLANS AND STOCK WARRANTS

     Common stock options and warrants for all periods presented herein were
adjusted to reflect the 10% stock dividend paid on January 15, 2002 and the 5%
stock dividend paid on April 15, 2003.

  (A) STOCK OPTIONS

     Two new stock option programs were adopted in April 2003.

     The 2003 Employee Stock Option Plan provides up to 75,000 options for key
employees. The exercise price of options granted under this program will be
equal to at least the fair market value of common stock as of the grant date.
Options vest over a period of time no less than 12 months as designated by the
board of directors. Options expire 10 years from the grant date. There were no
options granted under this plan during 2003.

                                        63
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The 2003 Outside Director Plan provides up to 50,000 options for
nonemployee directors. The exercise price of options granted under this program
will be equal to at least the fair market value of common stock as of the grant
date. Options become fully vested 11 months after the grant date. Options expire
10 years from the grant date. In April 2003, 7,500 options were granted at an
exercise price of $9.15 per share.

     The Company adopted the Bank's Employee and Outside Director Stock Option
Plans as part of the reorganization and formation of the holding company in
2002. The discussion that follows refers to these two stock option plans as the
Original Employee Stock Option Plan and the Original Outside Director Stock
Option Plan.

     A total of 46,778 options were granted under the Original Employee Stock
Option Plan. In February 2002, 10,501 options were granted at an exercise price
of $9.76 per share. In January 2003, 10,500 options were granted at an exercise
price of $8.21 per share. The exercise price of all options granted under the
Original Employee Plan was equal to the fair market value of the common stock at
grant date. Options vest in five equal annual installments commencing on the
first anniversary of the grant and expire 10 years after the grant date. No
options are available for future grants under the Original Employee Stock Option
Plan. At December 31, 2003, 41,513 options were outstanding under this plan.

     A total of 28,263 options were granted under the Original Outside Director
Stock Option Plan. In June 2002, 8,466 options were granted at an exercise price
of $9.12 per share. In January 2003, 7,880 options were granted at an exercise
price of $8.21 per share. The exercise price of all options granted under the
Original Outside Director Plan was equal to the fair market value of the common
stock at grant date. All options outstanding under the Original Outside Director
Plan are fully vested. Options expire 10 years after the grant date. No options
are available for future grants under the Original Outside Director Stock Option
Plan. At December 31, 2003, 26,810 options were outstanding under this plan.

     A summary status of the Company's stock option plans as of December 31,
2003 and 2002, and the changes during the years then ended, is as follows:

<Table>
<Caption>
                                                     2003                      2002
                                            -----------------------   -----------------------
                                                        WEIGHTED                  WEIGHTED
                                                        AVERAGE                   AVERAGE
                                            SHARES   EXERCISE PRICE   SHARES   EXERCISE PRICE
                                            ------   --------------   ------   --------------
<S>                                         <C>      <C>              <C>      <C>
Outstanding, beginning of year............  49,943       $8.25        32,429       $7.52
Granted...................................  25,880        8.49        18,967        9.48
Exercised and forfeited...................      --          --        (1,453)       7.96
                                            ------       -----        ------       -----
Outstanding, end of year..................  75,823       $8.33        49,943       $8.25
                                            ======       =====        ======       =====
Options exercisable at December 31........  40,396                    17,838
                                            ======                    ======
Weighted average fair value of options
  granted during the year.................               $5.05                     $6.73
                                                         =====                     =====
</Table>

                                        64
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes all stock options outstanding and
exercisable for option plans as of December 31, 2003 segmented by range of
exercise prices:

<Table>
<Caption>
                                                 OUTSTANDING                EXERCISABLE
                                       -------------------------------   -----------------
                                                            WEIGHTED
                                                WEIGHTED     AVERAGE              WEIGHTED
                                                AVERAGE     REMAINING             AVERAGE
                                                EXERCISE   CONTRACTUAL            EXERCISE
                                       NUMBER    PRICE        LIFE       NUMBER    PRICE
                                       ------   --------   -----------   ------   --------
<S>                                    <C>      <C>        <C>           <C>      <C>
Stock options:
  $6.50 - $8.00......................  20,798    $6.93      6.5 years    14,237    $6.93
  $8.01 - $9.00......................  28,558     8.37      8.4 years    15,593     8.43
  $9.01 - $10.00.....................  26,467     9.38      8.5 years    10,566     9.25
                                       ------    -----      ---------    ------    -----
Total................................  75,823    $8.33      7.9 years    40,396    $8.12
                                       ======    =====      =========    ======    =====
</Table>

     The following table summarizes the fair value of each option grant in 2003
and 2002 using the Black-Scholes pricing model and the significant assumptions
used therein.

<Table>
<Caption>
 GRANT     OPTION    EXERCISE   FAIR VALUE   RISK-FREE     CASH      EXPECTED    EXPECTED
  DATE      PLAN      PRICE     PER OPTION     RATE      DIVIDENDS     LIFE     VOLATILITY
--------  --------   --------   ----------   ---------   ---------   --------   ----------
<S>       <C>        <C>        <C>          <C>         <C>         <C>        <C>
Apr 2003  Director    $9.15       $5.63        4.01%      none       10 years       45
Jan 2003  Employee     8.21        4.82        4.15       none       10 years       41
Jan 2003  Director     8.21        4.82        4.15       none       10 years       41
Jun 2002  Director     9.12        6.53        4.98       none       10 years       57
Feb 2002  Employee     9.76        6.89        4.98       none       10 years       55
</Table>

  (B) STOCK WARRANTS

     Stock warrants were issued on two separate occasions.

     In connection with the Bank's initial stock offering in 2000, the Bank
issued warrants to purchase 92,400 shares of the Bank's common stock at $10.04
per share. These warrants expire in June 2005. All 92,400 of these warrants are
outstanding at December 31, 2003.

     In connection with the Company's public stock offering in December 2002,
the Company issued 267,119 units. Each unit consisted of one share of common
stock, no par value, and one warrant to purchase one share of common stock at an
exercise price of $9.14. The warrants expire in December 2005. During 2003,
3,518 of these warrants were exercised. The remaining 263,601 warrants are
outstanding at December 31, 2003.

(20) REGULATORY MATTERS

     The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the

                                        65
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
2003 and 2002, the Bank meets all capital adequacy requirements to which it is
subject.

     As of December 31, 2003, the most recent notification from the FDIC
categorized the Bank as well-capitalized under the regulatory framework for
prompt corrective action. To be categorized as well-capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's category.

     The Bank's actual capital amounts and ratios at December 31, 2003 and 2002
are presented in the following table (dollars in thousands):

<Table>
<Caption>
                                                                                TO BE
                                                                           WELL-CAPITALIZED
                                                          FOR CAPITAL        UNDER PROMPT
                                                            ADEQUACY      CORRECTIVE ACTION
                                           ACTUAL           PURPOSES          PROVISIONS
                                       ---------------   --------------   ------------------
                                       AMOUNT    RATIO   AMOUNT   RATIO    AMOUNT     RATIO
                                       -------   -----   ------   -----   --------   -------
<S>                                    <C>       <C>     <C>      <C>     <C>        <C>
At December 31, 2003:
  Total capital (to risk-weighted
     assets).........................  $10,332   14.60%  $5,660     8%     $7,075     10%
  Tier I capital (to risk-weighted
     assets).........................    9,564   13.52    2,830     4       4,245       6
  Tier I capital (to average
     assets).........................    9,564    8.73    4,383     4       5,479       5
At December 31, 2002:
  Total capital (to risk-weighted
     assets).........................  $ 9,623   16.38%  $4,693     8%     $5,866     10%
  Tier I capital (to risk-weighted
     assets).........................    9,047   15.40    2,346     4       3,520       6
  Tier I capital (to average
     assets).........................    9,047   10.18    3,555     4       4,444       5
</Table>

     As a DeNovo bank, the OCC requires the Bank to maintain a level of equity
capital equal to at least 8% of total assets for the first three years of
operation. As of July 1, 2003, this restriction was lifted. The Bank's required
leverage ratio is currently 4%.

(21) PARENT COMPANY FINANCIAL INFORMATION

     A summary of the balance sheets at December 31, 2003 and 2002 follows
(dollars in thousands):

<Table>
<Caption>
                                                               2003     2002
                                                              ------   ------
<S>                                                           <C>      <C>
                                   ASSETS
Cash in subsidiary..........................................  $   43   $   50
Investment in subsidiary....................................   9,490    9,148
Deferred tax asset..........................................      14        4
Other assets................................................       5       --
                                                              ------   ------
Total assets................................................  $9,552    9,202
                                                              ======   ======
                    LIABILITIES AND SHAREHOLDERS' EQUITY
Payable to subsidiary.......................................  $    1   $   --
Shareholders' equity........................................   9,551    9,202
                                                              ------   ------
Total liabilities and stockholders' equity..................  $9,552   $9,202
                                                              ======   ======
</Table>

                                        66
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of the statements of operations for the year ended December 31,
2003 and the period from June 30, 2002 (inception) to December 31, 2002 follows
(dollars in thousands):

<Table>
<Caption>
                                                              2003   2002
                                                              ----   ----
<S>                                                           <C>    <C>
Equity income from subsidiary...............................  $515   $256
                                                              ----   ----
Other expenses:
  Organizing expense........................................    --      9
  Other operating expenses..................................    24      3
                                                              ----   ----
     Total other expenses...................................    24     12
                                                              ----   ----
     Income before income tax benefit.......................   491    244
Income tax benefit..........................................    (9)    (4)
                                                              ----   ----
Net income..................................................  $500   $248
                                                              ====   ====
</Table>

     A summary of the statements of cash flows for the year ended December 31,
2003 and the period from June 30, 2002 (inception) to December 31, 2002 follows
(dollars in thousands):

<Table>
<Caption>
                                                              2003     2002
                                                              -----   -------
<S>                                                           <C>     <C>
Cash flows from operating activities:
  Net income................................................  $ 500   $   248
                                                              -----   -------
  Adjustments to reconcile net income to net cash used in
     operating activities:
       Equity in income from subsidiary.....................   (516)     (256)
       Increase in deferred tax assets......................    (10)       (4)
       Increase in payable to subsidiary....................      1        --
       Increase in other assets.............................     (5)       --
                                                              -----   -------
          Total adjustments.................................   (530)     (260)
                                                              -----   -------
          Net cash used in operating activities.............    (30)      (12)
                                                              -----   -------
Cash flows from investing activities:
  Investment in subsidiary..................................     --    (1,873)
                                                              -----   -------
          Net cash used in investing activities.............     --    (1,873)
                                                              -----   -------
Cash flows from financing activities:
  Issuance of common stock, net.............................     23     1,935
                                                              -----   -------
          Net cash provided by financing activities.........     23     1,935
                                                              -----   -------
          Net (decrease) increase in cash and cash
            equivalents.....................................     (7)       50
Cash and cash equivalents at beginning of period............     50        --
                                                              -----   -------
Cash and cash equivalents at end of period..................  $  43   $    50
                                                              =====   =======
Noncash items:
  Net change in unrealized gains on available for sale
     securities, net of taxes of $106 for 2003 and $8 for
     2002...................................................  $(174)  $     3
  Issuance of stock dividend................................    280        --
</Table>

                                        67
<PAGE>
                           1ST COLONIAL BANCORP, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(22) OTHER COMPREHENSIVE INCOME (LOSS)

     Other comprehensive income (loss) components and related tax benefits are
as follows for the years ended December 31, 2003, 2002, and 2001 (in thousands):

<Table>
<Caption>
                                                                              2003
                                                              -------------------------------------
                                                              BEFORE-TAX   TAX BENEFIT   NET-OF-TAX
                                                                AMOUNT      (EXPENSE)      AMOUNT
                                                              ----------   -----------   ----------
<S>                                                           <C>          <C>           <C>
Unrealized losses on securities available for sale:
  Unrealized holding losses arising during the year.........    $(276)        $104         $(172)
  Less reclassification adjustment for gains included in net
     income.................................................       (4)           2            (2)
                                                                -----         ----         -----
Other comprehensive loss....................................    $(280)        $106         $(174)
                                                                =====         ====         =====
</Table>

<Table>
<Caption>
                                                                              2002
                                                              -------------------------------------
                                                              BEFORE-TAX   TAX BENEFIT   NET-OF-TAX
                                                                AMOUNT      (EXPENSE)      AMOUNT
                                                              ----------   -----------   ----------
<S>                                                           <C>          <C>           <C>
Unrealized gains on securities available for sale:
  Unrealized holding gains arising during the year..........     $ 19         $ (2)         $ 17
  Less reclassification adjustment for gains included in net
     income.................................................      (24)          10           (14)
                                                                 ----         ----          ----
Other comprehensive income..................................     $ (5)        $  8          $  3
                                                                 ====         ====          ====
</Table>

<Table>
<Caption>
                                                                              2001
                                                              -------------------------------------
                                                              BEFORE-TAX   TAX BENEFIT   NET-OF-TAX
                                                                AMOUNT      (EXPENSE)      AMOUNT
                                                              ----------   -----------   ----------
<S>                                                           <C>          <C>           <C>
Unrealized losses on securities available for sale:
  Unrealized holding losses arising during the year.........     $114         $(91)         $ 23
  Less reclassification adjustment for gains included in net
     income.................................................      (65)          26           (39)
                                                                 ----         ----          ----
Other comprehensive income..................................     $ 49         $(65)         $(16)
                                                                 ====         ====          ====
</Table>

                                        68
<PAGE>



ITEM 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure.

     None.

ITEM 8A.   Controls and Procedures

     As of the end of the period covered by this report, 1st Colonial, under the
supervision and with the participation of its management, including the Chief
Executive Officer and the Chief Financial Officer, evaluated the effectiveness
of the design and operation of 1st Colonial's disclosure controls and
procedures. Based on that evaluation, 1st Colonial's Chief Executive Officer and
Chief Financial Officer concluded that 1st Colonial's disclosure controls and
procedures are effective. There were no significant changes to 1st Colonial's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.

     Securities and Exchange Commission Rule 13a-14 defines "disclosure controls
and procedures" as controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that such
information is accumulated and communicated to the issuer's management,
including its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.

                             PART III

ITEM 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a) of the Exchange
          Act

Board of Directors

     The table set forth below contains information concerning our board of
directors, including their principal occupations or employment during the past
five years and their ages.

<Table>
<Caption>
                                                                    DIRECTOR
NAME                                                          AGE   SINCE(1)
----                                                          ---   --------
<S>                                                           <C>   <C>
LINDA M. ROHRER.............................................  56      2000
Since 1985, Ms. Rohrer has owned and served as the President
of Rohrer and Sayers Real Estate, a commercial and
residential real estate sales company. Ms. Rohrer served as
a director of Community National Bank of New Jersey from
October 1988 to May 1996.
GERARD M. BANMILLER.........................................  56      2000
Mr. Banmiller has been President and Chief Executive Officer
of the bank since its opening in June 2000. From October
1999 to June 2000, Mr. Banmiller organized the bank on a
full-time basis. He served as a Regional President of Hudson
United Bank from August 1998 until September 1999. He served
as a director and President of Community National Bank of
New Jersey from its formation in 1987 until its acquisition
by Hudson United Bank in August 1998.
MARY R. BURKE...............................................  47      2002
Since July 1993, Ms. Burke has owned, and served as the
President and Treasurer of, Standardized Test Scoring Co.,
Inc., an independent assessment service organization. Since
August 2003, she also has served as the principal of St.
Rose of Lima School in Haddon Heights, New Jersey. From
January 2003 to June 2003, she served as principal of Christ
the King Regional School in Haddonfield, New Jersey.
THOMAS A. CLARK, III........................................  49      2000
Mr. Clark is a practicing attorney. Since 1992, he has been
a shareholder, officer and director of the law firm of
Cureton Caplan, P.C.
LETITIA G. COLOMBI..........................................  58      2000
Since May 2001, Ms. Colombi has served as the Mayor of the
Borough of Haddonfield, New Jersey, and since 1985, she has
been a Borough Commissioner and the Director of Public Works
for Haddonfield. From August 1998 until April 2000, she
served as a member of an advisory board at Hudson United
Bank. Ms. Colombi served as a director of Community National
Bank of New Jersey from October 1988 to August 1998.
GERALD J. DEFELICIS.........................................  76      2000
Since 1984, Mr. DeFelicis has been retired, having served
from 1945 to 1984 with Sun Company, Inc., where he held the
position of Manager of Systems Policy and Strategic
Facilities. From August 1998 to April 2000, Mr. DeFelicis
served as a member of an advisory board at Hudson United
Bank. Mr. DeFelicis served as a director of Community
National Bank of New Jersey from 1987 to August 1998.
JOHN J. DONNELLY IV.........................................  48      2001
Since 1998, Mr. Donnelly has served as President of J.J.
Donnelly Inc., a general contractor in the commercial
construction industry. From 1992 to 1998, Mr. Donnelly
served as President of John J. Donnelly Inc.
EDUARDO F. ENRIQUEZ.........................................  46      2000
Since 1994, Dr. Enriquez has been self-employed as a Doctor
of Medicine. Since 1997, he has been a member of the
Physicians Counsel to the Board of Trustees of Virtua Health
Systems.
</Table>

                                        69
<PAGE>

<Table>
<Caption>
                                                                    DIRECTOR
NAME                                                          AGE   SINCE(1)
----                                                          ---   --------
<S>                                                           <C>   <C>
MICHAEL C. HAYDINGER........................................  33      2002
From 1994 to the present, Mr. Haydinger has served as the
Controller of First Montgomery Group, a real estate
management and construction firm in Marlton, New Jersey.
HARRISON MELSTEIN...........................................  61      2002
Mr. Melstein is retired. From 1985 to 2002, he was a
registered pharmacist and owned and operated Ames Drug Store
in Collingswood, New Jersey.
STANLEY H. MOLOTSKY.........................................  67      2000
Mr. Molotsky is a counselor in financial matters. Since
1988, Mr. Molotsky has been the owner and operator of SHM
Financial Group, a financial counseling firm.
</Table>

---------------

(1) Includes service as a director of the bank.

EXECUTIVE OFFICERS

     Set forth below is certain information concerning our executive officers.

GERARD M. BANMILLER.  Mr. Banmiller is the President and Chief Executive Officer
of 1st Colonial and the bank. He is also a director. Please see "Board of
Directors" above for more information regarding Mr. Banmiller.

JAMES E. STRANGFELD.  Mr. Strangfeld serves as Executive Vice President of 1st
Colonial and Executive Vice President and Senior Loan Officer the bank. From
1996 until being engaged by the bank in 2000, Mr. Strangfeld served as a
Regional Executive with PNC Bank in Cherry Hill, New Jersey, where he directed
the consumer banking operations for 40 branches in Burlington and Camden
Counties. From 1986 to 1996, he served as Senior Vice President/Manager
Community Lending for Chemical Bank New Jersey, where he directed all functions
of its New Jersey Community Lending Department, which was designed to service
small business customers.

ROBERT C. FAIX.  Mr. Faix serves as Senior Vice President and Chief Financial
Officer of 1st Colonial and the bank. From June 2000 until being engaged by the
bank in May 2001, Mr. Faix served as the Senior Vice President and Chief
Financial Officer of Crusader Holding Corp., the holding company for Crusader
Savings Bank. From July 1999 through June 2000, Mr. Faix served as Senior Vice
President and Chief Financial Officer for the Student Finance Corp., a subprime
student lender located in Newark, Delaware. From June 1998 through June 1999,
Mr. Faix served as the Vice President and Controller of Keystone Bank, N.A., a
commercial bank located in Horsham, Pennsylvania. From May 1995 through June
1998, Mr. Faix served as the Senior Vice President and Chief Financial Officer
of American Heritage FCU, a credit union located in Philadelphia, Pennsylvania.

                                        70
<PAGE>


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the directors and officers of any issuer having any
class of equity securities registered under Section 12 of the Exchange Act, and
any persons owning ten percent or more of such class of equity securities, to
file in their personal capacities initial statements of beneficial ownership,
statements of changes in beneficial ownership and annual statements of
beneficial ownership with the Securities and Exchange Commission (the "SEC").
The Common Stock of 1st Colonial is not registered under Section 12 of the
Exchange Act. Therefore, 1st Colonial's directors, officers and 10% shareholders
are not subject to the requirements of Section 16(a).

CODE OF ETHICS

      1st Colonial has not adopted a code of ethics that applies to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. 1st Colonial's
wholly owned subsidiary, 1st Colonial National Bank, has a Conflicts of Interest
and Business Ethics Policy that applies to all officers and employees of the
bank. This policy covers (i) disqualification arising from a conflict of
interest; (ii) the receipt of gifts, entertainment and favors; (iii) outside
employment with another for-profit business, (iv) improper use of bank
information, and (v) consequences of ethics violation. Because the sole material
asset of 1st Colonial is the common stock of the bank, and because 1st
Colonial's principal executive officer, principal financial officer and
principal accounting officer are the principal executive officer, principal
financial officer and principal accounting officer of the bank, 1st Colonial did
not believe it was necessary or desirable to prepare and adopt a its own
separate code of ethics. Further, the common stock of 1st Colonial is not listed
or traded on a stock exchange or on Nasdaq; therefore, 1st Colonial is not
required to have a code of ethics.

AUDIT COMMITTEE FINANCIAL EXPERT

      1st Colonial's board of directors does not have an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission, serving on its audit
committee. The board of directors believes that all members of its audit
committee are financially literate and experienced in business matters, and that
one or more members of the audit committee are capable of (i) understanding
generally accepted accounting principles ("GAAP") and financial statements, (ii)
assessing the general application of GAAP principles in connection with our
accounting for estimates, accruals and reserves, (iii) analyzing and evaluating
our financial statements, (iv) understanding our internal controls and
procedures for financial reporting; and (v) understanding audit committee
functions, all of which are attributes of an audit committee financial expert.
However, the board of directors believes that there is not any audit committee
member who has obtained these attributes through the experience specified in the
SEC's definition of "audit committee financial expert." Further, like many
small companies, it is difficult for 1st Colonial to attract and retain board
members who qualify as "audit committee financial experts," and competition for
these individuals is significant. The board believes that its current audit
committee is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."

ITEM 10.   Executive Compensation.

                                       71
<PAGE>

REMUNERATION OF EXECUTIVE OFFICERS

     The following table sets forth the compensation paid to our Chief Executive
Officer during the years ended December 31, 2003, 2002 and 2001 and any
executive officer who received cash compensation exceeding $100,000 during such
years:

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                                          OTHER ANNUAL
NAME AND PRINCIPAL POSITION                 YEAR     SALARY     BONUS    COMPENSATION(1)
---------------------------                 ----    --------   -------   ---------------
<S>                                         <C>     <C>        <C>       <C>
Gerard M. Banmiller,......................  2003    $153,258   $10,000       $24,383
  President and Chief                       2002     137,500    16,000        21,204
  Executive Officer                         2001     114,423    25,000        17,695
James E. Strangfeld.......................  2003    $127,758   $ 8,500       $ 3,888
  Executive Vice                            2002     115,000    14,000         3,883
  President                                 2001      98,654    20,000         3,851
Robert C. Faix............................  2003    $ 97,132   $ 6,500       $11,719
  Senior Vice President                     2002      92,500     3,000         8,079
  and Chief Financial Officer               2001(2)   55,384     5,000         2,625
</Table>

---------------

(1) Consists of an automobile expense allowance, life, health and long-term
    disability insurance annual premiums, and club membership dues.

(2) Mr. Faix commenced his employment in May 2001.

EMPLOYMENT AGREEMENTS

     Gerard M. Banmiller, the President, Chief Executive Officer and a director
of 1st Colonial and the bank, has an employment agreement with the bank. This
agreement has an initial three-year term and provides for annual one-year
extensions on each anniversary of June 29, 2000, the date the bank received
regulatory authority to open for business, unless the bank or Mr. Banmiller
gives prior written notice of nonrenewal to the other party. On and after
January 1, 2002, Mr. Banmiller is entitled to receive an annual base salary of
not less than $100,000. Except for a reduction which is proportionate to a
company-wide reduction in executive pay, the annual base salary paid to Mr.
Banmiller in any period cannot be less than the annual base salary paid to him
in any prior period.

     Under his agreement, Mr. Banmiller is entitled to participate in any
incentive compensation and employee benefit plans that the bank maintains. He
also is entitled to participate in and enjoy any other plans and arrangements
which provide for sick leave, vacation, sabbatical, or personal days, club
memberships and dues, education payment or reimbursement, business-related
seminars, and similar fringe benefits provided to or for the executive officers
of the bank from time to time. He also is entitled to be reimbursed for amounts
he pays as lease or loan payments due with respect to the lease or purchase of
his automobile, up to and not to exceed an amount equal to $500.00 per month.

                                        72

<PAGE>

     In the event the bank terminates Mr. Banmiller's employment for "Cause" as
defined in his agreement, he will be entitled to receive his accrued but unpaid
base salary and an amount for all accumulated but unused vacation time earned
through the date of his termination.

     In the event the bank terminates Mr. Banmiller's employment without Cause,
he will be entitled to receive, during the remaining term of his agreement, an
annual amount equal to the greater of (i) his highest base salary received
during one of the two years immediately preceding the year in which he is
terminated, or (ii) his base salary in effect immediately prior to his
termination. In addition, during the remaining term of his agreement, Mr.
Banmiller will annually be entitled to (i) an amount equal to the higher of the
aggregate bonuses paid to him in one of the two years immediately preceding the
year in which he is terminated and (ii) an amount equal to the sum of the
highest annual contribution made on his behalf (other than his own salary
reduction contributions) to any tax qualified and non-qualified defined
contribution plans maintained by the bank in the year in which he is terminated
or in one of the two years immediately preceding such year. Mr. Banmiller will
also be entitled to certain retirement, health and welfare benefits.

     In the event Mr. Banmiller terminates his employment with the bank for
"Good Reason," as defined in his agreement, he will be entitled to receive the
same annual amounts and benefits he would be entitled to receive if he was
terminated without Cause, but for a period of three years from the date of
termination of employment. In the event Mr. Banmiller terminates his employment
with the bank without Good Reason, he will be entitled to receive his accrued
but unpaid base salary until the date of termination and an amount for all
accumulated but unused vacation time through the date of the termination of his
employment. In the event of Mr. Banmiller's death or disability during the term
of his employment, he and his eligible dependents or his spouse and her eligible
dependents, as the case may be, will be entitled to receive the same annual
amounts and benefits Mr. Banmiller would be entitled to receive if he was
terminated without Cause, but only for a period of one year from the date of
termination of employment. They will also be entitled to certain health and
welfare benefits.

     In the event that Mr. Banmiller is required to pay any excise tax imposed
under Section 4999 of the Internal Revenue Code (or any similar tax imposed
under federal, state or local law), as a result of any compensation and benefits
received under his agreement in connection with a change in control, the bank
will pay him an additional amount such that the net amount retained by him,
after the payment of such excise taxes (and any additional income tax resulting
from such payment by the bank), equals the amount he would have received but for
the imposition of such taxes.

     The employment agreement further provides that in the event Mr. Banmiller's
employment is terminated for any reason or he voluntarily terminates his
employment, he may not, for a period of 12 months after the date of termination,
without the prior written consent of the Board of Directors, become an officer,
director or a shareholder or equity owner of 4.9% or more of any entity engaged
in the banking, lending, asset management, mutual fund, financial planning or
investment security business within the New Jersey Counties of Camden,
Gloucester, Burlington, Salem, Atlantic, Cape May or Cumberland, or any other
county in which the bank has an office. In addition, during his employment and
for a period of 12 months following the termination of his employment, except
following a change in control of the bank, Mr. Banmiller may not solicit,
endeavor to entice away from the bank, its subsidiaries or affiliates, or
otherwise interfere with the relationship of the bank or its subsidiaries or
affiliates with, any person who is, or was within the then most recent 12-month
period, an employee or associate of the bank or any of its subsidiaries or
affiliates.

     The bank also has employment agreements with Mr. Strangfeld, its Executive
Vice President and Senior Loan Officer, and Mr. Faix, its Senior Vice President
and Chief Financial Officer. These agreements are substantially identical to Mr.
Banmiller's employment agreement (including containing the covenant not to
compete described above), except that they provide that (i) the executive is
entitled to receive an annual base salary of at least $90,000; (ii) the
executive is not entitled to be reimbursed for any amounts he pays as lease or
loan payments with respect to his automobile; (iii) in the event the bank
terminates the executive's employment without cause, he will be entitled to his
salary and benefits as determined in the same manner as under Mr. Banmiller's
agreement, but for one year only and (iv) in the event the executive terminates
his employment for "Good Reason," he will be entitled to his salary and benefits
as determined in the same

                                        73
<PAGE>

manner, but for a period of (a) 18 months in the event of a termination prior to
a change in control of the bank or (b) two years in the event of a termination
after a change in control of the bank.

     The bank's obligations under its employment agreements with Mr. Banmiller,
Mr. Strangfeld and Mr. Faix are guaranteed by 1st Colonial.

OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information concerning the grant of stock
options during the fiscal year ended December 31, 2003 to our named executive
officers.

<Table>
<Caption>
                                     NUMBER OF     PERCENTAGE OF
                                    SECURITIES     TOTAL OPTIONS
                                    UNDERLYING       GRANTED TO        PER SHARE
                                      OPTIONS       EMPLOYEES IN    EXERCISE OR BASE   EXPIRATION
NAME                               GRANTED(1)(2)   FISCAL YEAR(3)     PRICE(2)(4)         DATE
----                               -------------   --------------   ----------------   ----------
<S>                                <C>             <C>              <C>                <C>
Gerard M. Banmiller..............      5,250(5)         50.0%            $8.22          1/14/13
  President and Chief Executive
  Officer
James E. Strangfeld..............      3,150(5)         30.0%            $8.22          1/14/13
  Executive Vice President
Robert C. Faix...................      1,050(5)         10.0%            $8.22          1/14/13
  Senior Vice President and Chief
  Financial Officer
</Table>

---------------

(1) Amounts represent securities underlying incentive stock options granted
    under the bank's Employee Stock Option Plan. In April 2003, this plan was
    terminated and replaced by the 1st Colonial Bancorp, Inc. Employee Stock
    Option Plan. The termination of the bank's plan does not effect any options
    that were outstanding at the time of such termination.

(2) Reflects adjustments resulting from the 5% stock dividend distributed April
    15, 2003.

(3) 1st Colonial does not have any employees. This percentage reflects the grant
    as a percentage of the total options granted to employees of the bank, but
    does not include options to purchase 15,380 shares granted in fiscal year
    2003 to directors of 1st Colonial and the bank who are not employees.

(4) The exercise price per share is equal to the fair market value on the date
    the option was granted. The exercise price may be paid in cash, or upon the
    approval of our Stock Option Plan Committee, in shares of common stock
    valued at their fair market value on the date of exercise, or in a
    combination thereof.

(5) Options will vest and become exercisable in five equal annual installments
    commencing on the first anniversary of the date of grant and continuing on
    each successive anniversary of such date. Notwithstanding the foregoing, in
    the event of a "change in control" of the bank, all outstanding options
    become exercisable in three equal annual installments commencing on the
    first anniversary of the date of grant and continuing on each successive
    grant date anniversary. If the optionee's employment terminates due to
    retirement, death or disability, the optionee or his legal representative
    may exercise the option until the earlier of the expiration of the term of
    the option or three months after the termination of employment. If the
    optionee's employment is terminated for any reason except retirement, death
    or disability, all options terminate on the date employment is terminated,
    unless our Stock Option Plan Committee permits the optionee to exercise the
    option until the earlier of the expiration of the term of the option or
    three months after the termination of employment.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

     No options were exercised during the year ended December 31, 2003 by our
named executive officers. The following table sets forth the aggregate options
to purchase shares of common stock held by our named executive officers at
December 31, 2003, separately identifying exercisable and unexercisable options,
and the

                                        74
<PAGE>

aggregate dollar value of in-the-money unexercised options, separately
identifying exercisable and unexercisable options.

<Table>
<Caption>
                                           NUMBER OF SECURITIES
                                          UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                              OPTIONS HELD AT           IN-THE-MONEY OPTIONS AT
                                                12/31/03(1)                   12/31/03(2)
                                        ---------------------------   ---------------------------
NAME                                    EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                                    -----------   -------------   -----------   -------------
<S>                                     <C>           <C>             <C>           <C>
Gerard M. Banmiller...................     8,800          15,215        $35,383       $169,824
James E. Strangfeld...................     3,904           8,238         14,986         92,254
Robert C. Faix........................       679           2,583          1,630         29,078
</Table>

---------------

(1) Reflects adjustments resulting from the 10% stock dividend distributed on
    January 15, 2002 and the 5% stock dividend distributed on April 15, 2003.

(2) Based upon the mean between the bid and asked prices of the common stock of
    $11.43 per share on December 31, 2003, less the exercise price of the
    options.

DIRECTOR COMPENSATION

     The Chairman of the Board receives a quarterly retainer of $1,000 for
service on the Board, and each director, other than Mr. Banmiller, receives a
quarterly retainer of $500. Each committee chairman receives an annual retainer
of $500 for chairing such committee. Each director, except for Mr. Banmiller and
each committee chairman (other than the loan committee chairman, who receives
both the retainer and the per meeting fee), receives $50 per committee meeting
attended. An aggregate of $32,750 was paid to directors during the year ended
December 31, 2003, for attendance at Board and committee meetings.

     Options to purchase shares of common stock have been granted to directors
of 1st Colonial and the bank, and directors of 1st Colonial and the bank will
receive additional stock options at each annual shareholders' meeting and at
other times determined by our Stock Option Plan Committee in its discretion. On
January 15, 2003, each non-employee director of the bank was granted options to
purchase 828 shares of 1st Colonial common stock, at an exercise price of $7.82
per share (amounts are adjusted to reflect the April 2003 and pending April 2004
5% stock dividends). On April 22, 2003, the date of our annual meeting of
shareholders, each non-employee director of the bank was granted options to
purchase 788 shares of 1st Colonial common stock, at an exercise price of $8.71
per share (amounts are adjusted to reflect the pending April 2004 5% stock
dividend). On the date of the 2004 annual meeting of shareholders, which we
anticipate will be held in May 2004, each nonemployee who is elected as a
director of 1st Colonial or the bank will automatically be granted options to
purchase 750 shares of our common stock. All of the directors of 1st Colonial
also are directors of the bank.

     Options have a term of ten years from the date of grant. Options vest on
the earlier of the date on which (i) the optionee has completed 11 months of
continuous service as a director of 1st Colonial or the bank from the date of
grant or (ii) a change in control of the 1st Colonial or the bank occurs. In the
event of the optionee's retirement from the board of directors, death or
disability, his or her stock options lapse at the earlier of three months from
the date of retirement, death or disability, or the expiration of the term of
the option. If his or her service as a director is terminated for any reason
except retirement, death or disability, all options terminate upon the date
service is terminated, unless the Stock Option Plan Committee permits the
optionee to exercise such options until the earlier of the expiration of the
term of the option or three months after the termination of service.

     1st Colonial maintains a directors and officers liability insurance policy.
The policy covers all directors and officers of 1st Colonial and the bank for
certain liability, loss, or damage that they may incur in their capacities as
such. To date, no claims have been filed under this insurance policy.

                                        75
<PAGE>


ITEM 11.  Securities Ownership of Certain Beneficial Owners and
          Management and Related Shareholder Matters

PRINCIPAL SHAREHOLDERS OF THE COMPANY

     The following table sets forth information regarding persons known by us to
own more than 5% of the outstanding shares of 1st Colonial common stock as of
December 31, 2003.

<TABLE>
<CAPTION>
                                       Shares of Common Stock
Name and Address of Beneficial Owner     Beneficially Owned
------------------------------------   ----------------------
                                         Amount    Percent(1)
                                       ---------   ----------
<S>                                   <C>          <C>
Michael C. Haydinger                  101,131(2)      7.4%
78 Main Street
Marlton, NJ 08053

Linda M. Rohrer                        92,428(3)      6.8%
310 West Cuthbert Blvd.
Haddon Township, NJ 08108
</TABLE>

(1)  In each case, the percentage was calculated on a fully
     diluted basis assuming that the beneficial owner's warrants
     and outstanding vested options were exercised.

(2)  Consists of 1,576 shares that Mr. Haydinger has the right
     to acquire upon the exercise of vested stock options,
     38,754 shares owned by First Montgomery Properties,
     48,447 shares owned by Marlton Investment Group
     and 12,354 shares of common stock that Marlton Investment
     Group has the right to acquire upon the exercise of
     warrants.  Mr. Haydinger is an executive officer of both of
     these related companies and through his position exercises
     voting and investment power over these shares.
     Mr. Haydinger also is a director of 1st Colonial.

(3)  Includes 3,907 shares that Ms. Rohrer has the right to
     acquire upon the exercise of vested stock options and
     12,354 shares that Ms. Rohrer has the right to acquire upon
     the exercise of warrants.  Ms. Rohrer is Chairman of the
     Board of Directors of 1st Colonial.

SECURITY OWNERSHIP OF MANAGEMENT

     The following table sets forth certain information concerning the number of
shares of our common stock held as of December 31, 2003, by each person known by
us to be the beneficial owner of more than five percent of our outstanding
common stock, each director, each executive officer, and all directors and
executive officers as a group.

                  AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)

<Table>
<Caption>
                                                          SOLE VOTING     SHARED
                                               TOTAL          AND       VOTING AND
                                             BENEFICIAL   INVESTMENT    INVESTMENT   PERCENT OF
NAME OF BENEFICIAL OWNER                     OWNERSHIP       POWER        POWER       CLASS(2)
------------------------                     ----------   -----------   ----------   ----------
<S>                                          <C>          <C>           <C>          <C>
Linda M. Rohrer(3).........................    92,428        92,428            0         6.8%
Gerard M. Banmiller(4).....................    60,892        15,217       45,675         4.5%
Mary R. Burke(5)...........................     8,074         8,074            0         0.6%
Thomas A. Clark, III(6)....................    26,549        26,549            0         2.0%
Letitia G. Colombi(7)......................     9,460         3,751        5,709         0.7%
Gerald J. DeFelicis(8).....................    23,644        23,644            0         1.8%
John J. Donnelly, IV(9)....................    29,168        22,868        6,300         2.2%
Eduardo F. Enriquez(10)....................    37,227        27,859        9,368         2.7%
Michael C. Haydinger(11)...................   101,131        12,354       88,777         7.4%
Harrison Melstein(12)......................    37,540        31,830        5,710         2.8%
Stanley H. Molotsky(13)....................    27,704        20,354        7,350         2.1%
James E. Strangfeld(14)....................    10,152         5,742        4,410         0.8%
Robert C. Faix(15).........................     6,689         6,342          347         0.5%
All directors and executive officers as a
  group (13 persons)(16)...................   470,658       297,012      173,646        32.5%
</Table>

---------------

 (1) Based on information furnished by the respective individuals, as of
     December 31, 2003, and our books and records as of such date. Under
     applicable regulations, shares are deemed to be beneficially owned by a
     person if he or she directly or indirectly has or shares the power to vote
     or dispose of the shares. Unless otherwise indicated, the named beneficial
     owner has sole voting and dispositive power with respect to the shares.
     Under applicable regulations, a person is deemed to have beneficial
     ownership of shares which may be received upon the exercise of outstanding
     stock options or warrants if the option or warrant is exercisable within 60
     days. All warrants held by our executive officers and directors are fully
     vested, have a three-year term expiring on December 16, 2005 and have an
     exercise price of $9.14 per share.

 (2) The percentage is calculated on a fully diluted basis (as if such person's
     or group's vested options and warrants were exercised).

 (3) Includes 3,907 shares that Ms. Rohrer has the right to acquire upon the
     exercise of vested stock options, and 12,354 shares that Ms. Rohrer has the
     right to acquire upon the exercise of vested warrants.

 (4) Includes 42,735 shares jointly owned by Mr. Banmiller with his spouse,
     10,898 shares that Mr. Banmiller has the right to acquire upon the exercise
     of vested stock options and 2,940 shares that Mr. Banmiller and his wife
     have the joint right to acquire upon the exercise of vested warrants.

 (5) Includes 1,576 shares that Ms. Burke has the right to acquire upon the
     exercise of vested stock options.

 (6) Includes 6,563 shares owned by the Cureton Caplan Hunt Scaramella & Clark
     Profit Sharing Plan over which Mr. Clark has control, 3,029 shares that Mr.
     Clark has the right to acquire upon the exercise of vested stock options
     and 1,260 shares that Mr. Clark has the right to acquire upon the exercise
     of vested warrants.

                                        76
<PAGE>

 (7) Includes 4,659 shares owned by Ms. Colombi's spouse, 1,050 shares that Ms.
     Colombi's spouse has the right to acquire upon the exercise of vested
     warrants, and 3,029 shares that Mrs. Colombi has the right to acquire upon
     the exercise of vested stock options.

 (8) Includes 3,029 shares that Mr. DeFelicis has the right to acquire upon the
     exercise of vested stock options, and 3,090 shares that Mr. DeFelicis has
     the right to acquire upon the exercise of vested warrants.

 (9) Includes 3,029 shares that Mr. Donnelly has the right to acquire upon the
     exercise of vested stock options, 3,150 shares that Mr. Donnelly has the
     right to acquire upon the exercise of vested warrants, 3,150 shares owned
     by The Eighdies, LLC, a limited liability company in which Mr. Donnelly has
     a 25% membership interest, and 3,150 shares that The Eighdies, LLC has the
     right to acquire upon the exercise of vested warrants.

(10) Includes 3,029 shares that Dr. Enriquez has the right to acquire upon the
     exercise of vested stock options; 2,470 shares that Dr. Enriquez has the
     right to acquire upon the exercise of vested warrants; 4,685 shares jointly
     owned by Dr. Enriquez with his spouse; 4,685 shares that Dr. Enriquez and
     his spouse have the joint right to acquire upon the exercise of vested
     warrants; 2,727 shares owned by the Eduardo F. Enriquez MD LLC Profit
     Sharing Plan FBO Eduardo G. Enriquez (the "Enriquez Profit Sharing Plan"),
     over which Dr. Enriquez has sole voting and investment control; and 2,727
     shares that the Enriquez Profit Sharing Plan has the right to acquire upon
     the exercise of vested warrants.

(11) Includes 1,576 shares that Mr. Haydinger has the right to acquire upon the
     exercise of vested stock options, 38,754 shares owned by First Montgomery
     Properties, 48,447 shares owned by Marlton Investment Group and 12,354
     shares of common stock that Marlton Investment Group has the right to
     acquire upon the exercise of warrants. Mr. Haydinger is an executive
     officer of First Montgomery Properties and Marlton Investment Group (which
     are affiliated companies) and through his position exercises voting and
     investment power over these shares.

(12) Includes 1,576 shares that Mr. Melstein has the right to acquire upon the
     exercise of vested stock options, 2,100 shares that Mr. Melstein has the
     right to acquire upon the exercise of vested warrants, and 5,710 shares
     that Mr. Melstein owns jointly with his spouse.

(13) Includes 3,029 shares that Mr. Molotsky has the right to acquire upon the
     exercise of vested stock options, 3,675 shares owned by Mr. Molotsky's
     spouse and 3,675 shares that Mr. Molotsky's spouse has the right to acquire
     upon the exercise of vested warrants.

(14) Includes 2,310 shares owned by Mr. Strangfeld's spouse, 1,050 shares
     jointly owned by Mr. Strangfeld and his spouse, 1,050 shares that Mr.
     Strangfeld and his spouse have the joint right to acquire upon the exercise
     of vested warrants, and 5,164 shares that Mr. Strangfeld has the right to
     acquire upon the exercise of vested stock options.

(15) Includes 347 shares jointly owned by Mr. Faix with his spouse, 1,092 shares
     that Mr. Faix has the right to acquire upon the exercise of vested stock
     options and 2,625 shares that Mr. Faix has the right to acquire upon the
     exercise of vested warrants.

(16) Includes 43,963 shares that the directors and officers, in the aggregate,
     have the right to acquire upon the exercise of vested stock options and
     58,680 shares that the directors and officers, in the aggregate, have the
     right to acquire upon the exercise of vested warrants.


                                        77
<PAGE>


EQUITY COMPENSATION PLAN INFORMATION

     The following table provides certain information regarding securities
issued or issuable under 1st Colonial's equity compensation plans as of December
31, 2003.

<TABLE>
<CAPTION>
                                                                                        Number of shares of
                                                                                      common stock remaining
                                      Number of shares of                              available for future
                                       common stock to be       Weighted-average       issuance under equity
                                    issued upon exercise of    exercise price of        compensation plans
                                      outstanding options,    outstanding options      (excluding securities
        Plan category                warrants and rights(1)   warrants and rights   reflected in first column)
------------------------------      -----------------------   -------------------   ---------------------------
<S>                                 <C>                       <C>                   <C>
Equity compensation plans
  approved by security holders               75,823                $   8.33                     117,500

Equity compensation plans not
  approved by security holders                    0                       0                           0

Total                                        75,823                $   8.33                     117,500
</TABLE>

(1)  Does not include outstanding warrants to acquire
     92,402 shares of common stock issued in 2000 to the
     underwriter of 1st Colonial National Bank's initial public
     offering of common stock, or outstanding warrants to
     acquire 263,601 shares of common stock issued in
     December 2002 as part of 1st Colonial's public
     offering of common stock and warrants.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INDEBTEDNESS OF MANAGEMENT

     The bank offers various types of loans to its directors, officers, and
employees. Pursuant to applicable Federal law, any loan made by the bank to a
director, officer, employee or other affiliate is made on substantially the same
terms and conditions available to non-related borrowers (in particular as to
interest rate and collateral). In addition, applicable Federal law requires that
the risk of nonpayment not be greater than the risk of nonpayment on loans to
non-related borrowers, and that the loan must be approved by a majority of the
full Board of Directors, with the loan applicant not voting or influencing the
vote.

TRANSACTIONS WITH RELATED PERSONS

     Certain directors and officers of the bank are customers of the bank during
the year ended December 31, 2003, had banking transactions with the bank in the
ordinary course of business. Similar transactions may be expected to occur in
the future. All loans and commitments to loan were made under substantially the
same terms, including interest rates, collateral, and repayment terms, as those
prevailing at the time for comparable transactions with other persons and, in
the opinion of bank's management, do not involve more than the normal risk of
collection or present other unfavorable features. The aggregate amount of loans
to such related parties was $1,443,000 and $406,000 at December 31, 2003 and
2002, respectively. During 2003 and 2002, new loans and credit line advances to
such related parties amounted to $1,436,000 and $517,000, respectively, and
repayments amounted to $399,000 and $983,000, respectively. The aggregate amount
of deposits from related parties was $7,216,000 and $10,515,000 at December 31,
2003 and 2002, respectively.

     The Bank retained an entity that is affiliated with John J. Donnelly IV, a
director of the Bank, to perform certain property inspection services and branch
renovations. The total amount paid by the bank for such services amounted to
fees of $86,000, $110,000 and $1,000 for the year ended December 31, 2003, 2002
and 2001. Such fees were capitalized as premises and equipment. Mr. Donnelly's
company was selected by the bank pursuant to a competitive bidding process
involving other general contractors.

     The bank engages a law firm that is affiliated with Thomas A. Clark III, a
director of the Bank, for certain debt collection services. Total fees for such
services amounted to $9,000, $7,000 and $0 for the year ended December 31, 2003,
2002 and 2001, respectively. The terms of the services provided were
substantially equivalent to that which would have been obtained from
unaffiliated parties.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Our bylaws provide that we will indemnify our directors and officers to the
maximum extent permitted by Pennsylvania law. Pennsylvania law provides that a
Pennsylvania corporation may indemnify directors, officers, employees and agents
of the corporation against liabilities they may incur in such capacities for any
action taken or failure to act, whether or not the corporation would have the
power to indemnify the person

                                        78
<PAGE>

under any provision of law, unless such action or failure to act is determined
by a court to have constituted recklessness or willful misconduct. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors and officers pursuant to the foregoing provisions or
otherwise, we have been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in that Act, and is therefore unenforceable.

                                        79
<PAGE>


ITEM 13.  Exhibits and Reports on Form 8-K

          (a)  Exhibits:  The exhibits attached hereto are
                          listed in the Exhibit Index
                          immediately following the signature
                          pages to this Form 10-KSB.

          (b)  Reports on Form 8-K:

               The following reports on Form 8-K were filed by
               the Bank during the quarter ended December 31,
               2003:

               (i)  Form 8-K filed on October 21, 2003 reporting
                    matters under Items 7 and 12.

Item 14.  Principal Accountant Fees and Services

AUDIT FEES

     Total annual audit fees billed for professional services rendered by KPMG
LLP during the 2003 and 2002 fiscal years for the audit of our annual financial
statements and the review of the financial statements included in our quarterly
reports on Form 10-QSB, or services that are normally provided by KPMG LLP in
connection with statutory and regulatory filings or engagements for those fiscal
years, totaled $57,591 and $65,946, respectively.

AUDITED RELATED FEES

      Total annual audit fees billed during the 2003 and 2002 fiscal years for
assurance and related services by KPMG LLP that are reasonably related to the
performance of the audit or review of 1st Colonial's financial statements and
not reported in the paragraph above under "Audit Fees" were $0 and $5,648,
respectively.

TAX FEES

      The total fees billed during the 2003 and 2002 for professional services
rendered by KPMG LLP for tax compliance, tax advice, and tax planning services
were $14,525 and $11,025, respectively. Specifically, these services involved
preparation of the consolidated tax returns and guidance on tax accruals.

ALL OTHER FEES

      There were no fees billed by KPMG LLP during our 2003 and 2002 fiscal
years for any other services rendered to 1st Colonial other than the amounts set
forth above.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

      All auditing services (which may entail providing comfort letters in
connection with securities underwritings) and all non-audit services to be
provided to 1st Colonial by its auditors that are not prohibited by law must be
pre-approved by 1st Colonial's audit committee pursuant to such processes as are
determined to be advisable, before such services can commence. Pre-approval may
include blanket pre-approval of non-prohibited services for limited dollar
amounts which the audit committee, in its business judgment, does not believe
possess the potential for abuse or conflict. The audit committee has not granted
any such blanket pre-approval as of the date of this Form 10-KSB.


                                       80
<PAGE>
      The pre-approval requirement is not applicable with respect to the
provision of non-audit services if:

      -     the aggregate amount of all such non-audit services provided to 1st
            Colonial constitutes not more than five percent of the total amount
            of revenues paid by 1st Colonial to its auditor during the fiscal
            year in which the non-audit services are provided;

      -     such services were not recognized by 1st Colonial at the time of the
            engagement to be non-audit services; and

      -     such services are promptly brought to the attention of the audit
            committee and approved prior to the completion of the audit by the
            audit committee or by one or more members of the audit committee to
            whom authority to grant such approvals has been delegated by the
            audit committee.

      The audit committee may delegate to one or more designated members of that
committee the authority to grant required pre-approvals. However, the audit
committee has not delegated that authority as of the date of this Form 10-KSB.
The decisions of any member to whom authority is so delegated to pre-approve an
activity must be presented to the full committee at its next scheduled meeting.
There were no waivers by the audit committee of the pre-approval requirement for
permissible non-audit services in 2003.

                                       81
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the issuer has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                            1ST COLONIAL BANCORP, INC.

Dated: March 17, 2004       By:  /s/ Gerard M. Banmiller
                                 -----------------------------
                                 Gerard M. Banmiller,
                                 President and Chief Executive
                                 Officer

                       (Signatures continued on next page)

                                       82

<PAGE>



                                   SIGNATURES
                                   (Continued)

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the small
business issuer and in the capacities and on the dated indicated.

/s/ Linda M. Rohrer                       Dated:  March 17, 2004
-----------------------------------
Linda M. Rohrer
Chairman of the Board

/s/ Gerard M. Banmiller                   Dated:  March 17, 2004
-----------------------------------
Gerard M. Banmiller,
President, Chief Executive Officer
and a Director


-----------------------------------
Mary R. Burke, Director

/s/ Letitia G. Colombi                    Dated:  March 17, 2004
-----------------------------------
Letitia G. Colombi, Director

/s/ Thomas A. Clark, III                  Dated:  March 17, 2004
-----------------------------------
Thomas A. Clark, III, Director

/s/ Gerald DeFelicis                      Dated:  March 17, 2004
-----------------------------------
Gerald DeFelicis, Director

/s/ John J. Donnelly, IV                  Dated:  March 17, 2004
-----------------------------------
John J. Donnelly, IV, Director

/s/ Eduardo F. Enriquez                   Dated:  March 17, 2004
-----------------------------------
Eduardo F. Enriquez, Director

/s/ Michael C. Haydinger                  Dated:  March 17, 2004
-----------------------------------
Michael C. Haydinger, Director



                                       83
<PAGE>

/s/ Harrison Melstein                     Dated:  March 17, 2004
-----------------------------------
Harrison Melstein, Director

/s/ Stanley H. Molotsky                   Dated:  March 17, 2004
-----------------------------------
Stanley H. Molotsky, Director

/s/ Robert C. Faix                        Dated:  March 17, 2004
-----------------------------------
Robert C. Faix, Senior Vice President,
Chief Financial Officer and Cashier
(Principal Financial and
Accounting Officer)



                                       84

<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                      DESCRIPTION OF EXHIBITS
-------                     -----------------------
<S>       <C>
  3.1     Amended and Restated Articles of Incorporation of 1st
          Colonial Bancorp, Inc. (Incorporated by reference to Exhibit
          3.1 to 1st Colonial Bancorp, Inc.'s Quarterly Report on Form
          10-QSB for the Quarter ended June 30, 2003)
  3.2     Bylaws of 1st Colonial Bancorp, Inc. (Incorporated by
          reference from Exhibit 3.2 to Registration Statement No.
          333-84114 on Form S-4)
  4.1     Form of certificate evidencing shares of 1st Colonial
          Bancorp, Inc. 1st Colonial Bancorp, Inc.'s Common Stock
          (Incorporated by reference to Exhibit 4.1 to 1st Colonial
          Bancorp, Inc.'s Registration Statement No. 333-84114 on Form
          S-4)
 10.1     1st Colonial Bancorp, Inc. Employee Stock Option Plan.
          (Incorporated by reference from Exhibit 10.9 to 1st Colonial
          Bancorp, Inc.'s Quarterly Report on Form 10-QSB for the
          Quarter ended June 30, 2003)
 10.2     1st Colonial Bancorp, Inc. Stock Option Plan for
          Non-Employee Directors. (Incorporated by reference from
          Exhibit 10.10 to 1st Colonial Bancorp, Inc.'s Quarterly
          Report on Form 10-QSB for the Quarter ended June 30, 2003)
 10.3     Employment Agreement dated as of June 29, 2000, between 1st
          Colonial National Bank and Gerard M. Banmiller.
          (Incorporated by reference from Exhibit 10.3 to 1st Colonial
          Bancorp, Inc.'s Registration Statement No. 333-84114 on Form
          S-4)
 10.4     Employment Agreement dated as of June 29, 2000, between 1st
          Colonial National Bank and James E. Strangfeld.
          (Incorporated by reference from Exhibit 10.4 to 1st Colonial
          Bancorp, Inc.'s Registration Statement No. 333-84114 on Form
          S-4)
 10.5     Employment Agreement dated as of May 9, 2001, between 1st
          Colonial National Bank and Robert C. Faix. (Incorporated by
          reference from Exhibit 10.5 to 1st Colonial Bancorp, Inc.'s
          Registration Statement No. 333-84114 on Form S-4)
 10.6     Lease Agreement dated October 1, 1999 between 1st Colonial
          National Bank and First States Partners No. 203, LLC.
          (Incorporated by reference from Exhibit 10.6 to 1st Colonial
          Bancorp, Inc.'s Registration Statement No. 333-84114 on Form
          S-4)
 10.7     Data Processing Services Agreement dated December 23, 1999
          between Intercept Group (successor to SLMsoft.com Inc.) and
          1st Colonial National Bank. (Incorporated by reference from
          Exhibit 10.7 to 1st Colonial Bancorp, Inc.'s Registration
          Statement No. 333-84114 on Form S-4)
 10.8     Warrant Agreement dated December 16, 2002 between 1st
          Colonial Bancorp, Inc. and StockTrans, Inc.(Incorporated by
          reference from Exhibit 10.8 to 1st Colonial Bancorp, Inc.'s
          Registration Statement No. 333-92310 on Form SB-2)
 10.9     Enterprise License and Services Agreement dated as of
          October 16, 2003 between 1st Colonial National Bank and S1,
          Inc. (Incorporated by reference to Exhibit 10.9 to 1st Colonial
          Bancorp, Inc.'s Registration Statement No. 333-113779).
 11.1     Not required because clearly determinable from prospectus.
 21.1     Subsidiaries of the Registrant
 23.1     Consent of KPMG LLP
</Table>

---------------

* To be filed by amendment.