UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                       ----------------------------------

                              Washington, DC 20549
                              --------------------

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


                                    FORM 10-Q

(Mark One)

  X        Quarterly report pursuant to section 13 or 15(d) of the
------     Securities Exchange Act of 1934

           For the quarterly period ended March 31, 2004

                                       OR

           Transition report pursuant to section 13 or 15(d) of the
-------    Securities Exchange Act of 1934


                         Commission file number 0-17353

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

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

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months (or for such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. YES  X   NO    .
                                                              ---     ---

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

         As of May 3, 2004 there were issued and outstanding 6,489,377 shares of
the registrant's Common Stock, par value $.10 per share.


<PAGE>

                    FMS FINANCIAL CORPORATION AND SUBSIDIARY

                          QUARTERLY REPORT ON FORM 10-Q

                                 MARCH 31, 2004

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                  <C>
PART I - Financial Information
------------------------------

         Item 1 - Financial Statements
                  Consolidated Statements of Financial Condition as of
                       March 31, 2004 (unaudited) and December 31, 2003....................................1

               Consolidated Statements of Operations (unaudited)
                       for the three months ended
                       March 31, 2004 and March 31, 2003...................................................2

               Consolidated  Statements of Cash Flows  (unaudited) for the three
                       months ended March 31, 2004 and March 31, 2003 3

               Consolidated  Statements  of  Changes  in  Stockholders'   Equity
                       (unaudited) for the three months ended March 31, 2004 and
                       March 31, 2003       ...............................................................4

               Notes to Consolidated Financial Statements..................................................5

         Item 2 - Management's Discussion and Analysis of
                       Financial Condition and Results of Operations..................................6 - 15

         Item 3 - Disclosure about Market Risk............................................................15

         Item 4 - Disclosure Controls and Procedures .....................................................15

PART II - Other Information
---------------------------

         Item 1 - Legal Proceedings.......................................................................16

         Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
                       Securities.........................................................................16

         Item 3 - Defaults Upon Senior Securities.........................................................16

         Item 4 - Submission of Matters to a Vote of Security Holders.....................................16

         Item 5 - Other Information.......................................................................16

         Item 6 - Exhibits and Reports on Form 8-K........................................................16
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
-----------------------------------------------------------------------------------------------------------------------
                                                                                     March 31, 2004  December 31, 2003
                                                                                               (Unaudited)
-----------------------------------------------------------------------------------------------------------------------
ASSETS
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                <C>
     Cash and amounts due from depository institutions                              $    37,520,003    $    41,022,232
     Interest-bearing deposits                                                               40,139            142,929
     Short term funds                                                                    40,480,644         31,169,476
                                                                                    ---------------    ---------------
           Total cash and cash equivalents                                               78,040,786         72,334,637
     Investment securities held to maturity                                             272,799,180        250,383,262
     Investment securities available for sale                                           164,143,355        149,230,862
     Loans, net                                                                         405,318,056        402,606,056
     Mortgage-backed securities held to maturity                                        273,498,495        294,915,606
     Accrued interest receivable                                                          5,657,938          5,203,748
     Federal Home Loan Bank stock                                                        11,750,120         11,809,620
     Real estate owned, net                                                                       0             48,294
     Office properties and equipment, net                                                31,319,000         31,429,069
     Deferred income taxes                                                                2,122,072          2,043,909
     Core deposit intangible                                                              3,129,186          3,308,238
     Prepaid expenses and other assets                                                    2,371,538          1,603,294
     FMS Statutory Trust 1 issue costs, net                                                 620,694            640,154

                                                                                    ---------------    ---------------
TOTAL ASSETS                                                                        $ 1,250,770,420    $ 1,225,556,749
                                                                                    ===============    ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------

Liabilities:
     Deposits                                                                       $   905,918,262    $   893,006,498
     Securities sold under agreements to repurchase                                     225,000,000        225,000,000
     Advances from the Federal Home Loan Bank                                            10,000,000         11,191,047
     FMS Statutory Trust 1 debentures                                                    25,774,000         25,774,000
     Advances by borrowers for taxes and insurance                                        2,296,911          2,142,499
     Accrued interest payable                                                             1,251,566          1,319,501
     Dividends payable                                                                      194,606            194,576
     Other liabilities                                                                   15,258,683          4,098,885
                                                                                    ---------------    ---------------
     Total liabilities                                                                1,185,694,028      1,162,727,006
                                                                                    ---------------    ---------------

Commitments and contingencies
Stockholders' Equity:
     Preferred stock - $.10 par value 5,000,000 shares authorized; none issued
     Common stock - $.10 par value 10,000,000 shares authorized; shares
           issued 7,976,059 and 7,975,059 and shares outstanding 6,486,877
           and 6,485,877 as of March 31, 2004 and December 31, 2003, respectively           797,606            797,506
     Paid-in capital in excess of par                                                     8,517,233          8,507,333
     Accumulated other comprehensive income - net of deferred income taxes                1,155,607            802,239
     Retained earnings                                                                   65,540,945         63,657,664
     Less:  Treasury stock (1,489,182 and 1,489,182 shares, at cost, as of
           March 31, 2004 and December 31, 2003, respectively)                          (10,934,999)       (10,934,999)
                                                                                    ---------------    ---------------
Total stockholders' equity                                                               65,076,392         62,829,743
                                                                                    ---------------    ---------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $ 1,250,770,420    $ 1,225,556,749
                                                                                    ===============    ===============
</TABLE>

See notes to consolidated financial statements

                                       1
<PAGE>

<TABLE>
<CAPTION>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------
                                                                  Three Months ended
                                                                       March 31,
                                                             -----------------------------
                                                                  2004            2003
------------------------------------------------------------------------------------------
                                                                    (Unaudited)
<S>                                                        <C>             <C>
INTEREST  INCOME:
Interest income on:
   Loans                                                     $  6,051,776    $  6,225,726
   Mortgage-backed securities                                   3,940,565       4,536,145
   Investments                                                  3,648,937       2,670,324
                                                             ------------    ------------
Total interest income                                          13,641,278      13,432,195
                                                             ------------    ------------
INTEREST EXPENSE:
Interest expense on:
   Deposits                                                     1,780,209       2,601,214
   Borrowings                                                   2,354,914       2,342,200
   Long-term debt                                                 303,798         331,567
                                                             ------------    ------------
Total interest expense                                          4,438,921       5,274,981
                                                             ------------    ------------

NET INTEREST INCOME                                             9,202,357       8,157,214
PROVISION FOR LOAN LOSSES                                          75,000          60,000
                                                             ------------    ------------
NET INTEREST INCOME AFTER PROVISION
    FOR LOAN LOSSES                                             9,127,357       8,097,214
                                                             ------------    ------------
OTHER INCOME (EXPENSE):
   Loan service charges and other fees                             29,244          23,814
   Gain on sale of investment securities                          100,056               0
   Gain on sale of real estate held for development, net                0         600,780
   Loss on disposal of fixed assets                                     0        (141,151)
   Real estate owned operations, net                               (1,263)         (6,830)
   Service charges on accounts                                  1,204,240       1,071,897
   Other income                                                    29,136          23,382
                                                             ------------    ------------
Total other income                                              1,361,413       1,571,892
                                                             ------------    ------------
OPERATING EXPENSES:
   Salaries and employee benefits                               4,125,632       3,823,402
   Occupancy and equipment                                      1,379,656       1,328,515
   Purchased services                                             696,722         674,025
   Federal deposit insurance premiums                              32,265          32,196
   Professional fees                                              165,783         177,716
   Advertising                                                    111,963         115,611
   Amortization of core deposit intangible                        179,052               0
   Other                                                          337,184         482,161
                                                             ------------    ------------

Total operating expenses                                        7,028,257       6,633,626
                                                             ------------    ------------

INCOME BEFORE INCOME TAXES                                      3,460,513       3,035,480

INCOME TAXES                                                    1,382,626       1,195,557
                                                             ------------    ------------

NET INCOME                                                   $  2,077,887    $  1,839,923
                                                             ============    ============

BASIC EARNINGS PER COMMON SHARE                              $       0.32    $       0.28
                                                             ============    ============
DILUTED EARNINGS PER COMMON SHARE                            $       0.32    $       0.28
                                                             ============    ============

Dividends declared per common share                          $       0.03    $       0.03
                                                             ============    ============

Weighted average common shares outstanding                      6,486,325       6,463,811

Potential dilutive effect of the exercise of stock options         41,033          40,116
                                                             ------------    ------------

Adjusted weighted average common shares outstanding             6,527,358       6,503,927
                                                             ============    ============
</TABLE>

See notes to consoldiated financial statements.

                                       2
<PAGE>

<TABLE>
<CAPTION>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
------------------------------------------------------------------------------------------------------
                                                                            Three Months ended
                                                                                 March 31,
                                                                       -------------------------------
                                                                             2004              2003
------------------------------------------------------------------------------------------------------
<S>                                                                  <C>              <C>
OPERATING ACTIVITIES:
Net income                                                             $   2,077,887    $   1,839,923
Adjustments to reconcile net income to
net cash provided by operating activities:
  Provision for loan losses                                                   75,000           60,000
  Amortization and Depreciation                                            1,981,879          985,554
Realized (gains) and losses on:
  Sale of loans                                                                   (1)             (29)
  Disposal and sale of fixed assets                                                0          141,151
  Sale of investment securities                                             (100,056)               0
  Sale of real estate owned                                                     (654)               0
  Sale of real estate held for development, net                                    0         (600,780)
Decrease in accrued interest receivable                                     (454,190)        (316,366)
Increase in prepaid expenses and other assets                               (768,244)        (648,221)
Decrease in accrued interest payable                                         (67,935)         (47,333)
Increase in other liabilities                                                924,806          797,843
Provision for deferred income taxes                                          (78,163)         850,606
                                                                       -------------    -------------
  Net cash provided by operating activities                                3,590,329        3,062,348
                                                                       -------------    -------------
INVESTING ACTIVITIES:
Proceeds from sale of:
  Education loans                                                             15,301           42,641
  Real estate held for development                                                 0          688,706
  Real estate owned                                                           48,948                0
  Property and equipment                                                           0          176,555
Principal collected and proceeds from maturities of investment
  securities held to maturity                                             32,485,161       35,533,268
Proceeds from maturities of investment securities available for sale      16,577,021       16,372,159
Principal collected on mortgage-backed securities held to maturity        20,763,373       48,033,512
Principal collected on loans, net                                         25,135,645       23,504,023
Loans originated or acquired, net                                        (27,955,402)     (36,263,074)
Purchase of investment securities and mortgage-backed securities
  held to maturity                                                       (50,184,757)    (111,591,237)
Purchase of investment securities and mortgage-backed securities
  available for sale                                                     (26,138,938)     (38,645,883)
Redemption of Federal Home Loan Bank stock                                    59,500          252,100
Purchase of office property and equipment                                   (380,585)      (2,515,827)
Net cash received from deposit purchase, net                                       0       16,539,246
                                                                       -------------    -------------
  Net cash used by investing activities                                   (9,574,733)     (47,873,811)
                                                                       -------------    -------------
FINANCING ACTIVITIES:
Net increase in demand deposits and savings accounts                      21,486,365       24,065,072
Net decrease in time deposits                                             (8,574,601)      (2,334,248)
Net decrease in FHLB advances                                             (1,191,047)         (41,056)
Increase in advances from borrowers for taxes and insurance                  154,412          237,570
Dividends paid on common stock                                              (194,576)        (193,914)
Net proceeds from issuance of common stock                                    10,000                0
                                                                       -------------    -------------
  Net cash provided by financing activities                               11,690,553       21,733,424
                                                                       -------------    -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           5,706,149      (23,078,039)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            72,334,637       88,410,346
                                                                       -------------    -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                               $  78,040,786    $  65,332,307
                                                                       =============    =============
Supplemental Disclosures:
  Cash paid for:
   Interest on deposits, advances, and other borrowings                $   4,506,856    $   5,322,314
   Income taxes                                                            1,050,000          867,500
  Non-cash investing and financing activities:
   Dividends declared and not paid at year end                               194,606          193,914
   Non-monetary transfers from loans to real estate owned
     through foreclosure                                                           0          209,575
   Investments purchased and not yet settled                              10,000,000                0
</TABLE>

See notes to consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
FMS FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
----------------------------------------------------------------------------------------------------------------------

                                                             Accumulated                                    Total
                        Common shares   Common   Paid-in    comprehensive     Retained     Treasury      Stockholders'
                         outstanding     stock   capital     income (loss)    earnings       stock          Equity
----------------------------------------------------------------------------------------------------------------------
<S>                       <C>        <C>      <C>           <C>           <C>           <C>            <C>
Balances at
  December 31, 2002         6,463,811  $794,981 $ 8,279,525   $ 1,216,053   $ 58,233,840  $(10,886,580)  $57,637,819
Net Income                                                                     1,839,923                   1,839,923
Other comprehensive
  income
    Unrealized loss
    on securities
    available for
    sale, net of
    taxes of $100,116                                            (154,843)                                  (154,843)
                                                                                                         -------------
Total comprehensive
  income                                                                                                   1,685,080
                                                                                                         -------------

Dividends declared
  ($.03)                                                                        (193,915)                   (193,915)
Exercise of stock
  options

----------------------------------------------------------------------------------------------------------------------
Balances at March 31, 2003  6,463,811  $794,981 $ 8,279,525   $ 1,061,210   $ 59,879,848  $(10,886,580)  $59,128,984
----------------------------------------------------------------------------------------------------------------------

Balances at
  December 31, 2003         6,485,877  $797,506 $ 8,507,333   $   802,239   $ 63,657,664  $(10,934,999)  $62,829,743
Net Income                                                                     2,077,887                   2,077,887
Other comprehensive
  income
    Unrealized gain
    on securities
    available for
    sale, net of
    taxes of $234,994                                             353,368                                    353,368
                                                                                                         -----------
Total comprehensive
  income                                                                                                   2,431,255
                                                                                                         -----------

Dividends declared
  ($.03)                                                                        (194,606)                   (194,606)
Exercise of stock
  options                       1,000       100       9,900                                                   10,000

----------------------------------------------------------------------------------------------------------------------
Balances at March 31, 2004  6,486,877  $797,606 $ 8,517,233   $ 1,155,607   $ 65,540,945  $(10,934,999)  $65,076,392
----------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>

FMS FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED MARCH 31, 2004 (UNAUDITED).

1-GENERAL
In the opinion of management,  the accompanying unaudited consolidated financial
statements  of  FMS  Financial  Corporation  (the  "Corporation")   contain  all
adjustments,  consisting  of normal  recurring  accruals,  necessary  for a fair
presentation of its financial condition,  results of operations,  cash flows and
changes in stockholders' equity for the periods and dates indicated. The results
of  operations  for the three  months  ended March 31, 2004 are not  necessarily
indicative  of the  operating  results  for the full  fiscal  year or any  other
interim period.

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q, and therefore, do not include
all  information  and  notes  necessary  for a fair  presentation  of  financial
condition, results of operations and statements of cash flows in conformity with
generally  accepted  accounting  principles.  These statements should be read in
conjunction  with the  consolidated  statements  and  related  notes  which  are
incorporated  by reference to the  Corporation's  Annual Report on Form 10-K for
the fiscal year ended  December  31,  2003.  The 2003  comparative  Statement of
Financial  Condition  was derived  from the audited  financial  statements.  The
consolidated   financial   statements   include  the   Corporation's   principle
subsidiary, Farmers & Mechanics Bank (the "Bank").

2-LONG-TERM DEBT
Long-Term  Debt at March 31,  2004 and  December  31,  2003  consisted  of $25.8
million of FMS  Statutory  Trust 1  debentures.  The interest  rate resets every
three months to LIBOR plus 360 basis points and will not exceed  11.00%  through
March 2007. As of March 31, 2004 and 2003 the interest rate was 4.71% and 4.89%,
respectively. The proceeds were used for the paydown in August 2002 of the $10.0
million subordinated debentures,  expansion of the Bank's operations and general
corporate purposes.

3-REGULATORY CAPITAL REQUIREMENTS
The Bank is considered "well  capitalized" by OTS regulations at March 31, 2004.
The  Bank's  regulatory  tangible  and tier 1 (core)  capital  ratios  are $75.6
million or 6.08% of total bank assets and $79.7 million or 16.37% for risk-based
capital. FMS's consolidated capital ratio at March 31, 2004 totaled 5.20%.

4-STOCK OPTIONS
The  Corporation  maintains an incentive stock option plan. As permitted by SFAS
No. 148 "Accounting for Stock-Based  Compensation-Transition and Disclosure" the
Corporation  will continue to use the intrinsic  value method of accounting  for
stock options.  No options have been granted during the three months ended March
31, 2004 and 2003.

                                       5
<PAGE>

ITEM 2: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS  FOR THE  THREE  MONTHS  ENDED  MARCH  31,  2004.  The  following
discussion and analysis should be read with our financial statements and related
notes included elsewhere in this report on Form 10-Q. FMS Financial  Corporation
(the "Corporation") may from time to time make written or oral  "forward-looking
statements,"  including statements  contained in the Corporation's  filings with
the Securities and Exchange Commission  (including this quarterly report on Form
10-Q and the  exhibits  thereto),  in its reports to  stockholders  and in other
communications  by  the  Corporation,  which  are  made  in  good  faith  by the
Corporation  pursuant to the "safe harbor"  provisions of the Private Securities
Litigation  Reform Act of 1995.  The  discussion and analysis in this report may
contain  "forward-looking  statements"  within the meaning of Section 21A of the
Securities and Exchange Act of 1934.

These  forward-looking  statements  involve  risk  and  uncertainties,  such  as
statements of the Corporation's plans, objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Corporation's  control).  The cautionary statements made
in this  report  should  be  read as  applying  to all  related  forward-looking
statements  wherever they appear in this report.  The following  factors,  among
others, could cause the Corporation's financial performance to differ materially
from the plans, objectives,  expectations, estimates and intentions expressed in
such  forward-looking  statements:  the strength of the United States economy in
general  and the  strength  of the  local  economies  in which  the  Corporation
conducts operations;  the effects of, and changes in, trade, monetary and fiscal
policies and laws, including interest rate policies of the board of governors of
the federal  reserve  system,  inflation,  interest  rate,  market and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the  Corporation  and the perceived  overall value of these products
and services by users,  including the features,  pricing and quality compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Corporation's  products and services;
the success of the  Corporation in gaining  regulatory  approval of its products
and services,  when required;  the impact of changes in financial  services laws
and  regulations  (including  laws  concerning  taxes,  banking,  securities and
insurance);  technological changes;  acquisitions;  changes in consumer spending
and saving  habits;  and the success of the  Corporation  at managing  the risks
involved in the  foregoing.  Such risks and  uncertainities  could cause  actual
results  to differ  materially  from any  future  performance suggested  in this
report. The Corporation cautions that the foregoing list of important factors is
not exclusive.  The Corporation undertakes no obligation to release publicly the
results of any revisions to these  forward-looking  statements to reflect events
or  circumstances  arising  after the date of this report.  This caution is made
under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995.

                                       6
<PAGE>
FINANCIAL CONDITION

Total Assets - at March 31, 2004 were $1.3 billion as compared with total assets
at December 31, 2003 of $1.2 billion.

Investment  Securities  Held to  Maturity -  increased  $22.4  million to $272.8
million at March 31, 2004 from $250.4 million at December 31, 2003 primarily due
to  purchases  of  $39.0  million  in  U.S.  Agency  Notes,   $15.0  million  in
collateralized mortgage obligations (CMO's) and $1.1 million in Municipal Bonds,
partially  offset by principal  paydowns of $13.4 million in CMO's, the maturity
of $1.9 million in  Municipal  Bonds and calls of $17.2  million in U.S.  Agency
Notes  during the period.  Investment  securities  held to maturity at March 31,
2004 consisted of $250.0  million in fixed rate  securities and $22.8 million in
adjustable rate securities.  A comparison of cost and approximate  market values
of investment  securities held to maturity as of March 31, 2004 and December 31,
2003 follows:

<TABLE>
<CAPTION>
                                               March 31, 2004                                December 31, 2003
------------------------------------------------------------------------------------   ------------------------------
                                             Gross         Gross        Estimated                         Estimated
                            Amortized     Unrealized     Unrealized       Market           Amortized        Market
                              Cost           Gains         Losses          Value              Cost          Value
------------------------------------------------------------------------------------   ------------------------------
<S>                     <C>             <C>           <C>            <C>               <C>             <C>
U. S. Agency Notes        $ 93,922,398    $  357,664    $       (9)    $ 94,280,053      $ 72,256,272    $ 72,994,187
CMO's                      177,212,992     2,349,781      (334,905)     179,227,868       175,727,450     175,279,820
Municipal bonds              1,663,790         6,292                      1,670,082         2,399,540       2,404,563
------------------------------------------------------------------------------------   ------------------------------
Total                     $272,799,180    $2,713,737    $ (334,914)    $275,178,003      $250,383,262    $250,678,570
====================================================================================   ==============================
</TABLE>

Investment  Securities  Available  for Sale - increased  $14.9 million to $164.1
million at March 31, 2004 from $149.2 million at December 31, 2003. The increase
is the result of purchases of $21.0 million of U.S.  Agency Notes,  $5.0 million
of  mortgage-backed  securities  (MBS's)  and $5.0  million of CMO's,  partially
offset by principal  paydowns of $8.8 million of CMO's and MBS's,  sales of $5.3
million,  calls of U.S. Agency Notes of $2.5 million and $588 thousand in market
adjustments  at  March  31,  2004.  Investment  securities  available  for  sale
consisted  of $163.7  million  in fixed rate  securities  and $400  thousand  in
adjustable  rate  securities  at  March  31,  2004.  A  comparison  of cost  and
approximate  market  values of  investment  securities  available for sale as of
March 31, 2004 and December 31, 2003 follows:

<TABLE>
<CAPTION>
                                             March 31, 2004                           December 31, 2003
------------------------------------------------------------------------------------------------------------
                                          Gross        Gross        Estimated                     Estimated
                          Amortized     Unrealized   Unrealized       Market       Amortized        Market
                            Cost          Gains        Losses         Value           Cost          Value
------------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>          <C>           <C>            <C>            <C>
U. S. Agency Notes      $ 31,798,920   $   27,487   $  (37,727)   $ 31,788,680   $ 13,100,525   $ 13,188,525
CMO's                     49,174,688      425,570      (74,937)     49,525,321     48,250,773     48,419,522
MBS's                     81,260,914    1,637,756      (69,316)     82,829,354     86,559,090     87,622,815
                        ---------------------------------------------------------- -------------------------
Total                   $162,234,522   $2,090,813   $ (181,980)   $164,143,355   $147,910,388   $149,230,862
=============================================================================== ============================
</TABLE>
                                       7
<PAGE>

Loans,  net - increased  $2.7  million to $405.3  million at March 31, 2004 from
$402.6  million at December 31, 2003.  This increase was primarily the result of
$28.0  million of loans  originated,  partially  offset by  approximately  $25.1
million of principal  collected on loans during the three months ended March 31,
2004.  The following  table shows loans  receivable  by major  categories at the
dates indicated.

                                      March 31,            December 31,
                                        2004                   2003
-----------------------------------------------------------------------

Mortgage Loans                    $  280,151,111         $  280,663,785
Construction Loans                       469,232              1,324,699
Commercial Construction                7,119,337              5,993,838
Consumer Loans                         3,114,966              3,186,549
Commercial Real Estate               105,910,580            104,352,118
Commercial Business                   13,687,151             12,180,496
-----------------------------------------------------------------------

Subtotal                             410,452,377            407,701,485
Less:
     Deferred loan fees                  650,124                687,877
     Allowance for
      loan losses                      4,484,197              4,407,552
-----------------------------------------------------------------------
Total loans, net                  $  405,318,056         $  402,606,056
-----------------------------------------------------------------------

At March 31, 2004,  the recorded  investment in loans for which  impairment  has
been recognized in accordance with SFAS Nos. 114 and 118 totaled $2.2 million of
which  $985  thousand  related  to loans  that were  individually  measured  for
impairment with a valuation allowance of $414 thousand and $1.2 million of loans
that were collectively measured for impairment with a valuation allowance of $28
thousand.  The Bank had $4.5 million in total  reserves for loan losses at March
31, 2004,  representing  approximately 202% of non-performing  loans and 1.1% of
total loans.  For the three months  ended March 31, 2004,  the average  recorded
investment in impaired loans was approximately $2.2 million. The Bank recognized
$28  thousand of interest  income on impaired  loans for the three  months ended
March 31, 2004, all of which was recognized on the cash basis.

As of March 31, 2004 the Bank had outstanding loan commitments of $21.5 million,
of which  $11.4  million  represented  variable  rate  loans and  $10.1  million
represented fixed rate loans. The Bank intends to fund these commitments through
scheduled  amortization  of loans  and  mortgage-backed  securities,  additional
borrowings,  and if necessary,  the sale of investment  securities available for
sale.

                                       8
<PAGE>
Non-Performing  Assets - The following  table sets forth  information  regarding
non-accrual  loans,  troubled debt  restructured and real estate owned assets by
the Bank.

                                                   March 31,   December 31,
                                                     2004         2003
                                                  ----------    ----------

Loans accounted for on a non-accrual basis:
Mortgage loans:
    One-to-four family                            $  983,064    $  507,317
    Commercial real estate                         1,032,349     1,188,504
    Consumer and other                                   812             -
                                                  ----------    ----------
        Total non-accrual loans                   $2,016,225    $1,695,821
                                                  ----------    ----------

    Troubled debt restructuring                   $1,014,980    $1,027,054
    Real estate owned, net                                 -        48,294
    Other non-performing assets                            -             -
                                                  ----------    ----------
    Total non-performing assets, net              $3,031,205    $2,771,169
                                                  ----------    ----------


    Total non-accrual loans to net loans                0.50%         0.42%
                                                  ==========    ==========
    Total non-accrual loans to total assets             0.16%         0.14%
                                                  ==========    ==========
    Total non-performing assets to total assets         0.24%         0.23%
                                                  ==========    ==========


Mortgage-Backed  Securities Held to Maturity - decreased $21.4 million to $273.5
million at March 31, 2004 from $294.9 million at December 31, 2003. The decrease
is the result of principal paydowns of $20.8 million. Mortgage-backed securities
at March 31, 2004 consisted of $250.6 million in fixed rate securities and $22.9
million  in  adjustable  rate  securities.  Mortgage-backed  securities  held to
maturity at March 31, 2004 and December 31, 2003 are summarized below:

<TABLE>
<CAPTION>
                                  March 31, 2004                                   December 31, 2003
------------------------------------------------------------------------  ---------------------------------
                                Gross         Gross
             Amortized       Unrealized     Unrealized       Estimated          Amortized        Estimated
                Cost            Gains         Losses       Market Value            Cost        Market Value
-------- ---------------------------------------------------------------  ---------------------------------
<S>     <C>              <C>            <C>             <C>               <C>              <C>
GNMA     $   11,995,088   $    624,772   $      (397)    $   12,619,463    $   13,948,013   $   14,684,540

FNMA        180,106,374      4,418,290       (30,231)       184,494,433       194,437,708      197,881,404

FHLMC        81,397,033      1,424,999      (103,347)        82,718,685        86,529,885       87,076,088

-------- ---------------------------------------------------------------  ---------------------------------
Total    $  273,498,495   $  6,468,061   $  (133,975)    $  279,832,581    $  294,915,606   $  299,642,032
======== ===============================================================  =================================
</TABLE>
                                       9
<PAGE>

Deposits -  increased  $12.9  million to $905.9  million at March 31,  2004 from
$893.0 million at December 31, 2003.  Checking accounts  increased $8.6 million,
non-interest  bearing  checking  accounts  increased  $7.4 million,  and savings
accounts increased $5.3 million for the three months ended March 31, 2004. These
increases were partially offset by a decrease in certificate of deposit accounts
of $8.6 million during this period. Interest credited to depositors accounts for
the three months ended March 31, 2004  amounted to $1.3  million.  The following
table sets forth certain information concerning deposits at the dates indicated.

<TABLE>
<CAPTION>

                                         March 31, 2004                                  December 31, 2003
---------------------------------------------------------------------------------------------------------------------
                                             Percent         Weighted                        Percent       Weighted
                                             of Total        Average                         of Total       Average
                             Amount          Deposits          Rate           Amount         Deposits        Rate
---------------------------------------------------------------------------------------------------------------------
<S>                      <C>               <C>             <C>            <C>              <C>            <C>
Non-interest checking       $165,010,048      18.21%          0.00%          $157,637,346     17.65%         0.00%
Checking accounts            195,138,158      21.54%          0.55%           186,572,464     20.89%         0.55%
Savings accounts             193,569,457      21.37%          0.56%           188,235,776     21.08%         0.69%
Money market accounts        132,942,303      14.68%          0.65%           132,728,015     14.87%         0.78%
Certificates                 219,258,296      24.20%          1.89%           227,832,897     25.51%         2.40%
---------------------------------------------------------------------------------------------------------------------
   Total Deposits           $905,918,262     100.00%          0.81%          $893,006,498    100.00%         1.01%
=====================================================================================================================

</TABLE>

Borrowings - at March 31, 2004 amounted to $235.0 million.  Borrowings consisted
of $225.0  million in securities  sold under the agreement to repurchase  with a
weighted  average  interest rate of 4.08% and $10.0 million in Federal Home Loan
Bank Advances with a weighted  average  interest rate of 1.12%.  At December 31,
2003, borrowings consisted of $225.0 million in securities sold under agreements
to repurchase with a weighted average rate of 4.08% and $11.2 million in Federal
Home Loan Bank Advances with a weighted average interest rate of 1.56%.

Long-term  debt - at March 31, 2004 and  December  31, 2003  consisted  of $25.8
million of FMS  Statutory  Trust 1  debentures.  The interest  rate resets every
three months to LIBOR plus 360 basis points and will not exceed  11.00%  through
March 2007.  At March 31, 2004 and 2003 the  interest  rate was 4.71% and 4.89%,
respectively.

RESULTS OF OPERATIONS

General
The earnings of the Corporation  depend primarily upon the level of net interest
income,  which is the difference between interest earned on its interest-earning
assets such as loans and investments,  and the interest paid on interest-bearing
liabilities,   such  as  deposits  including   non-interest  checking  accounts,
long-term  debts  and  borrowings.  Net  interest  income is a  function  of the
interest rate spread, which is the difference between the weighted average yield
earned  on  interest-earning  assets  and  the  weighted  average  rate  paid on
interest-bearing liabilities, as well as the average balance of interest-earning
assets as compared to interest-bearing  liabilities. Net income is also affected
by  non-interest  income,  such as  gains  (losses)  on the  sale of  loans  and
investments,  provision for loan losses and real estate owned,  service  charges
and other fees, and operating  expenses,  such as: salaries,  employee benefits,
deposit insurance  premiums,  depreciation,  occupancy and equipment expense and
purchased services expense.

The Corporation recorded net income for the three months ended March 31, 2004 of
$2.1 million, or $.32 diluted earnings per share as compared to $1.8 million, or
$.28 diluted earnings per share for the comparable period in 2003.

                                       10
<PAGE>

Interest Rate Spread

The Bank's  interest  income is affected by the  difference  or  "interest  rate
spread" between yields received by the Bank on its  interest-earning  assets and
the  interest  rates  paid  by  the  Bank  on its  interest-bearing  liabilities
including non-interest checking accounts. Net interest income is affected by (i)
the spread between the yield earned on interest-earning  assets and the interest
rates paid on interest-bearing  savings deposits including non-interest checking
accounts  and  borrowings   (liabilities)  and  (ii)  the  relative  amounts  of
interest-earning assets versus interest-bearing liabilities. The Bank's interest
rate spread varies over time because money fund accounts and other flexible rate
accounts  have  become  significant  sources of savings  deposits.  Income  from
investment  securities and  mortgage-backed  securities  depends upon the amount
invested during the period and the yields earned on such  securities.  The yield
on loans receivable  changes  principally as a result of existing  mortgage loan
repayments,  adjustable rate loan adjustments,  sales and the interest rates and
volume of new  mortgage  loans.  The  average  yields  and rates are  derived by
dividing income or expense by the average balance of interest-earning  assets or
interest-bearing liabilities, respectively, for the periods presented.

The following table sets forth certain information relating to the Corporation's
average balance sheet and reflects the average yield on assets and average rates
paid on liabilities for the periods indicated. Such yields and rates are derived
by dividing income or expense by the average balance of interest-earning  assets
or interest-bearing liabilities, respectively, for the periods presented:


<TABLE>
<CAPTION>
                                                            Three Months Ended March 31,
-----------------------------------------------------------------------------------------------------------------
                                                  2004                                       2003
-----------------------------------------------------------------------------------------------------------------
                                       Average               Average          Average                   Average
                                       Balance  Interest    Yield/Rate        Balance      Interest    Yield/Rate
                                   ------------------------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                              <C>          <C>            <C>        <C>              <C>            <C>
Interest-earning assets:
    Loans receivable               $   408,995  $  6,052       5.92%      $   376,046      $  6,226       6.62%
    Interest-bearing deposits           41,206       105       1.02%           46,127           156       1.35%
    Mortgage-backed securities         361,008     3,941       4.37%          391,788         4,536       4.63%
    Investment securities              318,363     3,543       4.45%          227,107         2,514       4.43%
                                   -----------------------------------------------------------------------------
Total interest-earning
        assets                       1,129,572    13,641       4.83%        1,041,068        13,432       5.16%
                                   -----------------------------------------------------------------------------

Interest-bearing liabilities:
    Checking deposits                  342,684       256       0.30%          288,712           282       0.39%
    Savings deposits                   189,026       260       0.55%          167,152           419       1.00%
    Money market deposits              131,104       213       0.65%          126,227           343       1.09%
    Certificates of deposits           222,907     1,051       1.89%          221,978         1,557       2.81%
    Borrowings                         235,545     2,355       4.00%          236,223         2,342       3.97%
    Long-Term Debt                      25,774       304       4.72%           25,774           332       5.15%
                                   -----------------------------------------------------------------------------
Total interest-bearing
        liabilities                $ 1,147,040     4,439       1.55%      $ 1,066,066         5,275       1.98%
                                   ===========----------------------------===========---------------------------
Net interest income                             $  9,202                                   $  8,157
                                                ========                                   ========
Interest rate spread                                           3.28%                                      3.18%
                                                               =====                                     ======
Net yield on average
  interest-earning assets                                      3.26%                                      3.13%
                                                               =====                                     ======
Ratio of average
  interest-earning assets
  to average interest-bearing
  liabilities                                                 98.48%                                     97.66%
                                                              ======                                     ======
</TABLE>
                                       11
<PAGE>

Rate/Volume Analysis

The following  table describes the extent to which changes in interest rates and
changes in volume of interest-earning  assets and  interest-bearing  liabilities
have affected the Bank's interest income and interest expense during the periods
indicated.  For each category of  interest-earning  assets and  interest-bearing
liabilities,  information is provided on changes  attributable to (i) changes in
rate,  (ii)  changes in volume and (iii)  total  changes in rate and volume (the
combined  effect of changes in both volume and rate, not separately  identified,
has been allocated to rate). A higher level of non-performing  loans affects the
changes in both volume and rate.

                                       Three Months Ended March 31,
                                              2004 vs. 2003
                                  Increase (Decrease) due to Change in:
                                  -------------------------------------
                                            Rate Volume Total
                                             (In Thousands)
                                      -----------------------------
Interest income:
    Loans receivable                  $  (720)   $   546    $  (174)
    Interest-bearing deposits             (34)       (17)       (51)
    Mortgage-backed securities           (239)      (356)      (595)
    Investment securities                  19      1,010      1,029
                                      -----------------------------

    Total change - interest income       (974)     1,183        209
                                      -----------------------------
Interest expense:
    Checking deposits                     (79)        53        (26)
    Savings deposits                     (214)        55       (159)
    Money market deposits                (143)        13       (130)
    Certificates of deposits             (513)         7       (506)
    Borrowings                             20         (7)        13
    Long-Term Debt                        (28)         -        (28)
                                      -----------------------------
    Total change - interest expense      (957)       121       (836)
                                      -----------------------------

Net change in net interest income     $   (17)   $ 1,062    $ 1,045
                                      =============================



                                       12

<PAGE>


Net  Interest  Income - for the three  months  ended March 31, 2004 totaled $9.2
million. Net interest income for the three months ended March 31, 2004 increased
$1.0 million compared to the same period in 2003 due primarily to an increase in
interest income on investment  securities of $1.0 million coupled with decreases
in interest  expense on all deposit products of $821 thousand and long term debt
of  $28  thousand,   partially   offset  by  decreases  in  interest  income  on
mortgage-backed securities of $595 thousand and interest income on loans of $174
thousand.

Interest income on investment  securities increased $1.0 million to $3.5 million
for the three  months ended March 31, 2004 from $2.5 million for the same period
in 2003. The average balance of investment securities increased $91.3 million to
$318.4 million for the three months ended March 31, 2004 from $227.1 million for
the same period in 2003,  which resulted in a volume increase in interest income
of $1.0 million. The increase in the average volume during this period is due to
purchases of $411.4 million, partially offset by investment calls and maturities
of $104.8 million and principal paydowns of $222.5 million since March 31, 2003.
The average yield of the investment  portfolio increased 2 basis points to 4.45%
for the  quarter  ended  March 31,  2004 from 4.43% for the same period in 2003,
which  resulted  in an interest  income  increase  of $19  thousand  due to rate
changes.

Interest  expense on time deposits  decreased  $506 thousand to $1.1 million for
the three  months  ended March 31, 2004 from $1.6 million for the same period in
2003.  The average rate on time deposits  decreased 92 basis points to 1.89% for
the quarter  ended March 31, 2004 from 2.81% for the same period in 2003,  which
resulted in a decrease in interest expense of $513 thousand. The average balance
of time deposits  increased $929 thousand to $222.9 million for the three months
ended  March 31, 2004 from  $222.0  million  for the same period in 2003,  which
resulted in a volume increase in interest expense of $7 thousand.

Interest  expense on checking  deposits  decreased $26 thousand to $256 thousand
for the three months ended March 31, 2004 from $282 thousand for the same period
in 2003. The average rate on checking deposits decreased 9 basis points to 0.30%
for the  quarter  ended  March 31,  2004 from 0.39% for the same period in 2003,
which  resulted in a decrease in interest  expense of $79 thousand.  The average
balance of checking  deposits  increased  $54 million to $342.7  million for the
three  months  ended March 31,  2004 from $288.7  million for the same period in
2003, which resulted in a volume increase in interest expense of $53 thousand.

Interest  expense on savings  deposits  decreased $159 thousand to $260 thousand
for the three months ended March 31, 2004 from $419 thousand for the same period
in 2003. The average rate on savings deposits decreased 45 basis points to 0.55%
for the  quarter  ended  March 31,  2004 from 1.00% for the same period in 2003,
which  resulted in a rate  decrease in interest  expense of $214  thousand.  The
average  balance of savings  deposits  increased $21.9 million to $189.0 million
for the quarter ended March 31, 2004 from $167.2  million for the same period in
2003, which resulted in an increase in interest expense of $55 thousand.

Interest  expense on money  market  deposits  decreased  $130  thousand  to $213
thousand for the three  months  ended March 31, 2004 from $343  thousand for the
same period in 2003.  The average  rate on money  market  deposits  decreased 44
basis  points to 0.65% for the  quarter  ended March 31, 2004 from 1.09% for the
same period in 2003,  which  resulted in a decrease in interest  expense of $143
thousand. The average balance of money market deposits increased $4.9 million to
$131.1 million for the three months ended March 31, 2004 from $126.2 million for
the same period in 2003, which resulted in a volume increase in interest expense
of $13 thousand.

Interest  expense on long term debt  decreased $28 thousand to $304 thousand for
the three months ended March 31, 2004 from $332  thousand for the same period in
2003.  The average rate  decreased 43 basis points to 4.72% for the three months
ended  March 31,  2004 from  5.15% for the same  period in 2003,  which  lowered
interest expense on long-term debt $28 thousand due to rate changes.


                                       13


<PAGE>

Interest income on mortgage-backed securities ("MBS") decreased by $595 thousand
to $3.9  million for the three months ended March 31, 2004 from $4.5 million for
the same period in 2003. The average balance of MBS's decreased $30.8 million to
$361.0 million for the three months ended March 31, 2004 from $391.8 million for
the same period in 2003, which resulted in an interest income volume decrease of
$356 thosand.  The decrease in the average balance during this period was due to
principal paydowns of $175.7 million,  partially offset by purchases of MBS's of
$132.0  million  from the first  quarter of 2003.  The average  yield of the MBS
portfolio  decreased  26 basis  points to 4.37% for the quarter  ended March 31,
2004 from  4.63% for the same  period in 2003,  which  resulted  in an  interest
income decrease of $239 thousand due to changes in rates.

Interest  income on loans  decreased $174 thousand to $6.1 million for the three
months ended March 31, 2004 from $6.2  million for the same period in 2003.  The
average  rate on loans  decreased  70 basis points to 5.92% for the three months
ended March 31, 2004 from 6.62% for the same period in 2003, which resulted in a
decrease in interest  income of $720 thousand due to rate  changes.  The average
balance of the loan portfolio  increased $33.0 million to $409.0 million for the
three  months  ended March 31,  2004 from $376.0  million for the same period in
2003,  which resulted in a volume  increase in interest income of $546 thousand.
The increase in the average balance is principally  due to loan  originations of
$171.0  million since the first quarter of 2003,  partially  offset by principal
collected on loans of $139.3 million during this period.

Interest  expense on  borrowings  increased $13 thousand to $2.4 million for the
three months ended March 31, 2004 from $2.3 million for the same period in 2003.
The average  rate paid on  borrowings  increased 3 basis points to 4.00% for the
quarter  ended  March 31,  2004 from  3.97% for the same  period in 2003,  which
resulted in an increase in interest expense of $20 thousand due to rate changes.
The average  balance of borrowings  decreased $678 thousand to $235.5 million at
March 31, 2004 from $236.2  million for the same period in 2003,  which resulted
in a volume decrease in interest expense of $7 thousand.

Critical Accounting  Estimate-Provision  for Loan Losses - A critical accounting
estimate is the provision for loan losses. The provision  increased $15 thousand
to $75  thousand for the three months ended March 31, 2004 from $60 thousand for
the same  period  in 2003.  At March  31,  2004 the  allowance  for loan  losses
amounted to $4.5 million  compared to $4.4  million at December  31,  2003.  The
determination  of the allowance  level for loan losses is based on  management's
analysis  of the risk  characteristics  of  various  types of  loans,  levels of
classified loans, previous loan loss experience, the estimated fair market value
of the underlying collateral and current economic conditions.  Additionally, the
mix within the Bank's  portfolio  continues to change as the Bank offers a wider
variety of products.  Within the loan portfolio, a change is also occurring as a
shift is made from lower  yielding  loans (i.e.,  one-to-four  family  loans) to
higher  yielding  loans  (i.e.,  commercial  real estate  mortgages,  commercial
construction,  consumer and  commercial  business  loans).  These types of loans
contain a higher degree of risk. The Bank will continue to monitor its allowance
for loan  losses  and make  future  adjustments  to the  allowance  through  the
provision  for loan losses as changing  conditions  dictate.  Although  the Bank
maintains  its  allowance  for loan  losses at a level that it  considers  to be
adequate to provide for the inherent risk of loss in its loan  portfolio,  there
can be no assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods due
to the higher  degree of credit risk which  might  result from the change in the
mix of the loan portfolio or changes in economic conditions.  Most of the Bank's
lending  activity  is  with  customers   located  within  southern  New  Jersey.
Generally,  the loans are secured by real  estate  consisting  of  single-family
residential  properties.  While this represents a concentration  of credit risk,
the credit losses arising from this type of lending  compare  favorably with the
Bank's  credit  loss  experience  on its  portfolio  as a  whole.  The  ultimate
repayment of these loans is dependent to a certain  degree on the local  economy
and real estate market.

                                       14

<PAGE>

Other  Income - for the three month period ended March 31, 2004 was $1.4 million
compared to $1.6 million for the same period in 2003.  The decrease from 2003 is
due to the $601 thousand gain on sale of real estate held for  development  sold
in  January  2003,  partially  offset  by a $100  thousand  gain on the  sale of
investment securities during the quarter ended March 31, 2004.

Operating  Expenses - for the three month  period  ended March 31, 2004  totaled
$7.0 million  compared to $6.6 million for the same period in 2003. The increase
in operating expenses was due to an increase in salaries and benefits, occupancy
and equipment and amortization of core deposit intangible.

Salaries and Employee Benefits - for the three month period ended March 31, 2004
were $4.1  million  compared to $3.8  million  for the same period in 2003.  The
increase was primarily due to annual compensation increases and additional staff
in one new branch  opened  since the first  quarter of 2003.  Average  full time
equivalent  employees at March 31, 2004 were 512 as compared to 503 at March 31,
2003.

Occupancy  and  Equipment-  for the three month period ended March 31, 2004 were
$1.4 million compared to $1.3 million for the same period in 2003. This increase
is due to additional depreciation and occupancy expense on the new branch office
opened since the first quarter of 2003.

Amortization of core deposit intangible - for the three month period ended March
31, 2004 totaled $179  thousand.  The increase is due to the five year write-off
of the  premiums  paid to acquire two  existing  bank  branches in Florence  and
Tabernacle, NJ in 2003.

ITEM 3:  DISCLOSURE ABOUT MARKET RISK

There were no significant changes for the three months ended March 31, 2004 from
the  information  presented in the annual report on Form 10-K for the year ended
December 31, 2003.

ITEM 4:  DISCLOSURE CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.
    ------------------------------------------------
Based  on  their  evaluation  of  the  Corporation's   disclosure  controls  and
procedures  (as defined in Rule 13a-15(e)  under the Securities  Exchange Act of
1934 (the "Exchange Act")),  the Corporation's  principal  executive officer and
principal  financial  officer  have  concluded  that as of the end of the period
covered  by this  Quarterly  Report on Form 10-Q such  disclosure  controls  and
procedures are effective to ensure that information  required to be disclosed by
the  Corporation  in reports that it files or submits  under the Exchange Act is
recorded,  processed,  summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

(b) Changes in internal  controls over financial  reporting.
    --------------------------------------------------------
During  the  quarter  under  report,  there was no  change in the  Corporation's
internal control over financial  reporting that has materially  affected,  or is
reasonably likely to materially affect, the Corporation's  internal control over
financial reporting.

                                       15
<PAGE>

PART II.     OTHER INFORMATION
             -----------------

     Item 1: Legal Proceedings
     ------- -----------------

             None


     Item 2: Changes in  Securities,  Use of Proceeds  and Issuer  Purchases of
     ------- ------------------------------------------------------------------
             Equity Securities
             -----------------

             None


     Item 3: Defaults Upon Senior Securities
     ------- -------------------------------

             None


     Item 4: Submission of Matters to Vote of Security of Holders
     ------- ----------------------------------------------------

               The Annual  Meeting of  Stockholders  of the  Company was held on
               April 29, 2004 and the following matters were presented:

               The Election of Directors: Roy D. Yates, George J. Barber and and
               Dominic W. Flamini  were  re-elected  as  directors  for terms of
               three years  ending 2007 and until their  successors  are elected
               and qualified.  Mr. Yates received  5,829,209  votes in favor and
               129,738 votes were withheld;  Mr. Barber received 5,822,723 votes
               in favor  and 136,224  votes were  withheld; Mr Flamini  received
               5,904,595 votes in favor and 54,352 were withheld.

               Ratification of the appointment of PricewaterhouseCoopers LLP the
               Company's    auditors   for   the   2004   fiscal   year:   Price
               WaterhouseCoopers LLP was ratified as the Company's auditors with
               5,916,696 votes for, 27,595 votes against and 14,656 abstentions.

     Item 5: Other Information
     ------- -----------------

             None

     Item 6: Exhibits and Reports on Form 8-K
     ------- --------------------------------

               (a)  31   Certifications   pursuant   to   Section   302  of  the
                         Sarbances-Oxley Act of 2002.

               (b)  32   Certification   pursuant   to   Section   906   of  the
                         Sarbanes-Oxley Act of 2002.

               (c)  The Company filed a Form 8-K on April 29, 2004 reporting the
                    Company's  earnings  for the three  months  ended  March 31,
                    2004.

                                       16
<PAGE>

                                S I G N A T U R E

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

FMS FINANCIAL CORPORATION




Date: May 12, 2004                         /s/Craig W. Yates
                                           -------------------------------------
                                           Craig W. Yates
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)



Date: May 12, 2004                         /s/Channing L. Smith
                                           -------------------------------------
                                           Channing L. Smith
                                           Vice President and
                                           Chief Financial Officer
                                           (Principal Financial Officer)