================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 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, 2002

                                       or

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

      For the transition period from _________________ to _________________

                        Commission File Number 000-26587


                         COMMUNITY BANCORP OF NEW JERSEY
             (Exact name of registrant as specified in its charter)

               New Jersey                                        22-3666589
     (State of other jurisdiction of                          (I.R.S. Employer
      incorporation or organization)                         Identification No.)

3535 Highway 9 North, Freehold, New Jersey                          07728
 (Address of principal executive offices)                         (Zip Code)

                                 (732) 863-9000
                (Issuer's telephone number, including area code)


--------------------------------------------------------------------------------
   (Former name, former address and former year, if changed since last report)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock,
                                                                no par value

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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_| We have a late filer. |X|

Issuer's revenues for its most recent fiscal year $17,752,000. The aggregate
market value of voting and non-voting equity held by non-affiliates was
$45,205,195.

As of March 4, 2003, there were 3,173,224 shares of common stock, no par value
per share outstanding.

================================================================================

<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

                    10-KSB Item                    Document Incorporated
                    -----------                    ---------------------

Item 9.   Directors and Executive Officers   Proxy Statement for 2003 Annual
          of the Company; Compliance with    Meeting of Shareholders to be
          Section 16(a) of the Exchange Act  filed no later than April 30, 2003.

Item 10.  Executive Compensation             Proxy Statement for 2003 Annual
                                             Meeting of Shareholders to be
                                             filed no later than April 30, 2003.

Item 11.  Security Ownership of Certain      Proxy Statement for 2003 Annual
          Beneficial Owners and Management   Meeting of Shareholders to be
                                             filed no later than April 30, 2003.

Item 12.  Certain Relationships and Related  Proxy Statement for 2003 Annual
          Transactions                       Meeting of Shareholders to be
                                             filed no later than April 30, 2003.


                                       2
<PAGE>


                                     PART I

                       ITEM 1. -- DESCRIPTION OF BUSINESS

General

      The Community Bancorp of New Jersey is a one-bank holding company
incorporated under the laws of New Jersey to serve as the holding company for
the Community Bank of New Jersey. We were organized at the direction of the
Board of Directors of the Bank for the purpose of acquiring all of the capital
stock of the Bank. We are registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended. Our only significant asset is our
investment in the Bank. Our main office is located at 3535 Highway 9 North,
Freehold, New Jersey.

      The Bank is a commercial bank formed under the laws of the State of New
Jersey in 1997. The Bank operates from its main office at 3535 Highway 9 North,
Freehold, New Jersey 07728, and seven branch offices located in Colts Neck,
Freehold, Howell, Matawan, Manalapan (2) and Shrewsbury, New Jersey.

      Our deposits are insured by the Bank Insurance Fund (BIF) of the Federal
Deposit Insurance Corporation (FDIC) up to applicable limits. The operations of
the Bank are subject to the supervision and regulation of the FDIC and the New
Jersey Department of Banking and Insurance (the Department). The principal
executive offices of the Bank are located at 3535 Highway 9 North, Freehold, New
Jersey 07728, and the telephone number is (732) 863-9000.

Business of the Bank

      The Bank conducts a traditional commercial banking business and offers
services including personal and business checking accounts and time deposits,
money market accounts and regular savings accounts. The Bank structures its
specific services and charges in a manner designed to attract the business of
(i) small and medium-sized businesses, and the owners and managers of these
entities; (ii) professionals and middle managers of locally-based corporations;
(iii) residential real-estate tract developers; and (iv) individuals residing,
working, and shopping in the Monmouth, Middlesex, and Ocean County, New Jersey
trade area serviced by the Bank. The Bank engages in a wide range of lending
activities and offers commercial, consumer, residential and non-residential
mortgage and construction loans. In addition, we are seeking to enhance our
non-interest income, primarily through strategic partnerships or agreements with
third party service providers.

Service Area

      Our service area primarily consists of the Monmouth, Middlesex, and Ocean
County, New Jersey market, although we make loans throughout New Jersey. The
Bank operates its main office in Freehold Township, New Jersey, and branch
offices in Colts Neck, Freehold Borough, Howell, Manalapan (2), Matawan and
Shrewsbury, New Jersey.

Competition

      The Bank operates in a highly competitive environment competing for
deposits and loans with commercial banks, thrifts, and other financial
institutions, many of which have greater financial resources than we do. Many
large financial institutions compete for business in the Bank's service area.
Certain of these institutions have significantly higher lending limits than we
do and provide services to their customers which the Bank does not offer.

      Management believes we are able to compete favorably with our competitors
because we provide responsive personalized services through our knowledge and
awareness of the Bank's service area, customers, and business.

Employees

      At December 31, 2002, the Bank employed 92 full-time employees and 23
part-time employees. None of these employees are covered by a collective
bargaining agreement and we believe that our employee relations are good.


                                       3
<PAGE>


Supervision and Regulation

      Bank holding companies and banks are extensively regulated under both
federal and state laws. These laws and regulations are intended to protect
depositors, not stockholders. To the extent that the following information
describes statutory and regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in the applicable law or regulation may have a material effect on our business
and prospects.


                         BANK HOLDING COMPANY REGULATION

General

      As a bank holding company registered under the Bank Holding Company Act of
1956, as amended, (the BHCA), we are subject to the regulation and supervision
of the Board of Governors of the Federal Reserve System (FRB). We are required
to file with the FRB annual reports and other information regarding our business
operations and those of our subsidiaries.

      The BHCA requires, among other things, the prior approval of the FRB in
any case where a bank holding company proposes to (i) acquire all or
substantially all of the assets of any other bank, (ii) acquire direct or
indirect ownership or control or more than 5% of the outstanding voting stock of
any bank (unless it owns a majority of such bank's voting shares) or (iii) merge
or consolidate with any other bank holding company. The FRB will not approve any
acquisition, merger, or consolidation that would have a substantially
anti-competitive effect, unless the anti-competitive impact of the proposed
transaction is clearly outweighed by a greater public interest in meeting the
convenience and needs of the community to be served. The FRB also considers
capital adequacy and other financial and managerial resources and future
prospects of the companies and the banks concerned, together with the
convenience and needs of the community to be served, when reviewing acquisitions
or mergers.

      In addition, the BHCA was amended through the Gramm-Leach-Bliley Financial
Modernization Act of 1999 (the GLBA). Under the terms of the GLBA, bank holding
companies whose subsidiary banks meet certain capital, management and Community
Reinvestment Act standards are permitted to engage in a substantially broader
range of non-banking activities than is permissible for bank holding companies
under the BHCA. These activities include certain insurance, securities and
merchant banking activities. In addition, the GLBA amendments to the BHCA remove
the requirement for advance regulatory approval for a variety of activities and
acquisitions by financial holding companies. As our business is currently
limited to banking activities, we have not elected to become a financial holding
company.

      There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by law and regulatory
policy that are designed to minimize potential loss to the depositors of such
depository institutions and the FDIC insurance funds in the event the depository
institution becomes in danger of default. Under a policy of the FRB with respect
to bank holding company operations, a bank holding company is required to serve
as a source of financial strength to its subsidiary depository institutions and
to commit resources to support such institutions in circumstances where it might
not do so absent such policy. The FRB also has the authority under the BHCA to
require a bank holding company to terminate any activity or to relinquish
control of a non-bank subsidiary upon the FRB's determination that such activity
or control constitutes a serious risk to the financial soundness and stability
of any bank subsidiary of the bank holding company.

Capital Adequacy Guidelines for Bank Holding Companies

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


                                       4
<PAGE>


      The risk-based guidelines apply on a consolidated basis to bank holding
companies with consolidated assets of $150 million or more. The minimum ratio of
total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least 4% of the total
capital is required to be "Tier I", consisting of common stockholders' equity,
certain preferred stock and certain hybrid instruments, less certain goodwill
items and other intangible assets. The remainder, "Tier II Capital", may consist
of (a) the allowance for loan losses of up to 1.25% of risk-weighted assets, (b)
excess of qualifying preferred stock, (c) non-qualifying hybrid capital
instruments, (d) debt, (e) mandatory convertible securities, and (f) qualifying
subordinated debt. Certain hybrid capital instruments, including specifically
trust preferred securities, may be included in Tier I capital up to a maximum of
25% of Tier I capital. In December 2002, the Company issued $5.0 million through
an offering of trust-preferred securities, all of which is counted as Tier I
Capital. Total capital is the sum of Tier I and Tier II capital less reciprocal
holdings of other banking organizations' capital instruments, investments in
unconsolidated subsidiaries and any other deductions as determined by the FRB
(determined on a case-by-case basis or as a matter of policy after formal
rule-making).

      Bank holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans are assigned to the 100% risk category, except
for performing first mortgage loans fully secured by residential property which
carry a 50% risk-weighting. Most investment securities (including, primarily,
general obligation claims of states or other political subdivisions of the
United States) are assigned to the 20% category, except for municipal or state
revenue bonds, which have a 50% risk-weight, and direct obligations of the U.S.
Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing financial obligations are given 100% risk-weighing. Transaction
related contingencies such as bid bonds, standby letters of credit backing
non-financial obligations, and undrawn commitments (including commercial credit
lines with an initial maturity of more than one year) have a 50% risk-weighing.
Short-term commercial letters of credit have a 20% risk-weighing and certain
short-term unconditionally cancelable commitments have a 0% risk-weighing.

      In addition to the risk-based capital guidelines, the FRB has adopted a
minimum Tier I capital (leverage) ratio, under which a bank holding company must
maintain a minimum level of Tier I capital to average total consolidated assets
of at least 3% in the case of a bank holding company that has the highest
regulatory examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain a leverage
ratio of at least 100 to 200 basis points above the stated minimum.

Bank Regulation

      As a New Jersey-chartered commercial bank, the Bank is subject to the
regulation, supervision, and control of the Department. As an FDIC-insured
institution, the Bank is subject to regulation, supervision and control of the
FDIC, an agency of the federal government. The regulations of the FDIC and the
Department impact virtually all activities of the Bank, including the minimum
level of capital the Bank must maintain, the ability of the Bank to pay
dividends, the ability of the Bank to expand through new branches or
acquisitions and various other matters. The FDIC also imposes a risk-based and
leverage capital requirement on the Bank. These requirements are substantially
similar to the capital requirements imposed by the FRB.

Insurance of Deposits

      The Bank's deposits are insured up to a maximum of $100,000 per depositor
under the BIF. The FDIC has established a risk-based insurance premium
assessment system under which the FDIC has developed a matrix that sets the
assessment premium for a particular institution in accordance with its capital
level and overall regulatory rating by the institutions' primary federal
regulator. Under the matrix that is currently in effect, the assessment rate
ranges from 0 to 27 basis points of assessed deposits. In addition to the
deposit insurance premium assessment, under the Deposit Insurance Funds Act of
1996 (the Deposit Act), BIF insured institutions like the Bank are required to
contribute to the debt service and principal repayment on bonds issued by the
Federal Finance Corporation (FICO) in the mid-1980s to fund a portion of the
thrift bailout. This assessment is currently set at 1.68 basis points of
assessed deposits per quarter.


                                       5
<PAGE>


Website Access to Company Information

      The Company's internet address on the world wide web is www.cbnj.com.
Services and product descriptions are available on this website. Access to our
annual report on Form 10-KSB, quarterly reports on Form 10-QSB and current
reports on Form 8-K is available through a link on our website to a third-party
provider, or from the NASDAQ and SEC website free of charge as soon as
reasonably practicable after these material are electronically filed with the
Securities and Exchange Commission.

Critical Accounting Policies, Judgments and Estimates

      The accounting and reporting policies of Community Bancorp of New Jersey
conform to accounting principles generally accepted in the United States of
America and general practices within the financial services industry. Critical
accounting policies, judgments and estimates relate to loans and the allowance
for loan losses. These policies significantly affect the determination of the
Company's financial position, results of operations and cash flows, and are
summarized in Note B (Summary of Significant Accounting Policies) of the Notes
to Consolidated Financial Statements and discussed in the section captioned
"Critical Accounting Policies, Judgments and Estimates" of Management's
Discussion and Analysis of Financial Condition and Results of Operations,
included in Items 6 and 7 of this Report, each of which is incorporated herein
by reference

                       ITEM 2. -- DESCRIPTION OF PROPERTY

      The Bank conducts its business through its main office located at 3535
Highway 9 North, Freehold, New Jersey, and its seven branch offices and its
operations center. The following table set forth certain information regarding
the Bank's properties as of December 31, 2002.

                                                               Date of lease
             Location                    Leased or owned         expiration
-----------------------------------      ---------------       -------------

24 Route 34 South, Colts Neck, NJ            Leased            May 2021
3535 Highway 9 North, Freehold, NJ           Owned             N/A
31 East Main Street, Freehold, NJ            Leased            August 2007
4502 Highway 9 South, Howell, NJ             Leased            August 2013
267 Main Street, Matawan, NJ                 Leased            February 2019
191 Route Nine South, Manalapan, NJ          Owned             N/A
120 Route 33, Manalapan, NJ                  Leased            July 2007
541 Sycamore Avenue, Shrewsbury, NJ          Leased            June 2011
3499 Route 9 North, Freehold, NJ             Leased            March 2004

                          ITEM 3. -- LEGAL PROCEEDINGS

      We are periodically a party 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. Management does 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

      No matters were submitted for a vote of the registrant's shareholders
during the fourth quarter of fiscal 2002.


                                       6
<PAGE>


                                     PART II

       ITEM 5. -- MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our common stock is traded on the NASDAQ SmallCap market under the symbol
CBNJ. The following table shows the high and low bid prices for the common stock
as reported on the Nasdaq SmallCap market for 2002 and 2001. These quotations
reflect inter-dealer prices, without retail market, mark-down, or commission and
may not represent actual transactions. These prices have been restated to
reflect our 5% stock dividends paid in 2002 and 2001 and the 3-for-2 stock split
effective in 2002.

                                               2002
                                       -------------------
                                        High         Low
                                       ------       ------

             1st  Quarter ...........  $15.87       $10.26
             2nd Quarter ............   16.67        12.50
             3rd Quarter ............   14.61        11.20
             4th Quarter ............   18.24        14.27

                                               2001
                                       -------------------
                                        High         Low
                                       ------       ------

             1st  Quarter ...........  $ 9.60       $ 8.62
             2nd Quarter ............   11.02         9.22
             3rd Quarter ............   11.11         9.21
             4th Quarter ............   10.86         9.08

      We have not paid cash dividends and do not anticipate paying cash
dividends in the foreseeable future as we use our retained earnings to augment
our capital and fund our future growth.

      In both 2002 and 2001, our Board of Directors declared a 5% stock dividend
on our common stock. In 2002, our Board declared a 3-for-2 stock split. Our
Board will consider the issuance of future stock dividends based upon our future
financial performance, capital standing and the market value of our stock.

      As of December 31, 2002, we had 406 shareholders of record.

                 ITEM 6. -- MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                              RESULTS OF OPERATIONS

                          Year ended December 31, 2002

                              OVERVIEW AND STRATEGY

      Community Bancorp of New Jersey is a one bank holding company incorporated
under the laws of New Jersey to serve as the holding company for the Community
Bank of New Jersey. The Company acquired all the capital stock of the Bank in
July 1999. The Bank commenced operations in 1997 with the goal of providing
first class banking services through a locally headquartered financial
institution, offering customers direct access to senior officers and decision
makers. We seek to serve individuals, professionals, small businesses, and real
estate developers in our Monmouth, Middlesex, and Ocean County, New Jersey,
trade area, whom we believe are not adequately served by larger regional and
multi-state financial institutions. Since it commenced operations in 1997, the
Company has increased its asset base at a rapid pace. Our assets have grown from
$34.8 million at December 31, 1997 to $332.2 million at December 31, 2002, a
compound annual growth rate of 57.0%. This growth has come both through our
success in penetrating our original market in the Freehold, New Jersey area, and
through expansion into other market areas in New Jersey. We opened our


                                       7
<PAGE>


second office in downtown Freehold, New Jersey, in September 1997, our third
office in Howell, New Jersey, in November 1998, our fourth office in Matawan,
New Jersey in February 1999, our fifth office in Manalapan, New Jersey in
November 1999, our sixth office in Colts Neck, New Jersey in July 2001, our
seventh office in Shrewsbury, New Jersey in October 2001 and our eighth office
in Millhurst, New Jersey in November 2002.

      This financial review presents management's discussion and analysis of
financial condition and results of operations. It should be read in conjunction
with the consolidated condensed financial statements and the accompanying notes
included elsewhere herein.

              CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

      The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America (US GAAP) and
predominant practices within the banking industry. 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 amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.

      The principal estimate that is particularly susceptible to significant
change in the near term relates to the allowance for loan losses. The evaluation
of the adequacy of the allowance for loan losses includes an analysis of the
individual loans and overall risk characteristics and size of the different loan
portfolios, and takes into consideration current economic and market conditions,
the capability of specific borrowers to pay specific loan obligations, as well
as current loan collateral values. However, actual losses on specific loans,
which also are encompassed in the analysis, may vary from estimated losses.

      The allowance for loan loss is maintained at an amount management deems
adequate to cover estimated losses. In determining the level to be maintained,
management evaluates many factors, including current economic trends, industry
experience, historical loss experience, industry loan concentrations, the
borrowers' ability to repay and repayment performance, and estimated collateral
values. In the opinion of management, the present allowance is adequate to
absorb reasonable, foreseeable loan losses. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions or any of the other factors
used in management's determination. In addition, various regulatory agencies, as
an integral part of their examination process, periodically review the Company's
allowance for losses on loans. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about information
available to them at the time of their examination. Future increases to our
allowance for possible loan losses, whether due to unexpected changes in
economic conditions or otherwise, would adversely affect our future results of
operations.

      The Company recognizes deferred tax assets and liabilities for the future
tax effects of temporary differences, net operating loss carryforwards and tax
credits. Deferred tax assets are subject to management's judgment based upon
available evidence that future realization is more likely than not. In the event
management determines the inability to realize all or part of net deferred tax
assets in the future, a direct charge to income tax expense may be required to
reduce the recorded value of the net deferred tax asset to the expected
realizable amount.

Results of Operations

      Our results of operations depend primarily on our net interest income,
which is the difference between the sum of interest we earn on our
interest-earning assets and loan origination fees and the interest we pay on
deposits and borrowed funds used to support our interest-earning assets. In
addition, the Bank earns fee income, primarily through service fees on deposit
accounts and non-interest related service fees on loans. Net interest spread is
the difference between the weighted average rate earned on interest earning
assets and the weighted average rate paid on interest bearing liabilities. Net
interest margin is a function of the difference between the weighted average
rate earned on interest-earning assets and the weighted average rate paid on
interest-bearing liabilities, as well as the average level of interest-earning
assets as compared with that of interest-bearing liabilities. Net income is also
affected by the amount of non-interest income and operating expenses.


                                       8
<PAGE>


Net Income

      For the year ended December 31, 2002, net income increased to $2.0 million
or $0.64 per share for basic and $0.61 per share for diluted earnings, compared
to net income of $1.5 million or $0.48 per share for basic and $0.47 per share
for diluted shares for the same period in 2001.

      The increase in net income was primarily due to a $2.1 million, or 24.4%
increase in net interest income and a 35.7% increase in non-interest income,
partially offset by an increase in the provision for loan losses and higher
non-interest expense and higher income tax expense. The improvement in net
income is attributable to our continued rapid growth. The results for the year
ended December 31, 2002 were also positively affected as the Company realized
$554 thousand in gains on sales of investment securities compared to no realized
gains on sales of investment securities during the year ended December 31, 2001.

Net Interest Income

      For the year ended December 31, 2002, we recognized net interest income of
$10.7 million as compared to $8.6 million for the year ended December 31, 2001.
The increase in net interest income was largely due to an increase in the
average balance of interest earning assets, which increased $73.5 million, or
38.6%, to $263.7 million from $190.2 million. The increase reflects an increase
in average loans outstanding of $30.8 million, or 22.2% and an increase in
average investment securities of $52.9 million, or 129.0% over the 2001 period.

      Primarily as a result of the increase in the average balance of
interest-earning assets, our interest income increased to $15.9 million for the
year ended December 31, 2002, from $14.2 million for the year ended December 31,
2001. The improvement in interest income was primarily due to volume-related
increases in income from the loan portfolio of $2.5 million and volume-related
increases in income of $2.9 million in the investment securities portfolio,
partially offset by volume-related decreases in income of $471 thousand in
Federal funds sold. In addition to the net volume-related increases, rate
related decreases amounting to $3.3 million resulted as the average yield on our
interest-earning assets decreased to 6.02% for the year ended December 31, 2002
from 7.45% for the year ended December 31, 2001.

      Total interest expense decreased 7.1% to $5.2 million for the 2002 period
from $5.6 million for the 2001 period. This decrease in interest expense is
primarily related to a decrease in average yield paid on interest-bearing
liabilities of 139 basis points to 2.48% for the 2002 period compared to 3.87%
for the 2001 period. The savings from the decline in rates was partially offset
by an increase in the average balance of interest-bearing liabilities, which
increased $66.1 million to $210.6 million for the 2002 period compared to $144.5
million for the 2001 period. Volume-related increases in interest expense
accounted for $2.4 million of increased expense and were offset by rate
reductions amounting to $2.8 million in reduced expense. The volume related
increases in interest-bearing liabilities and expense-rate reductions were the
result of marketing and pricing decisions made by management in response to the
need for cost effective sources of funds, primarily to fund loan growth and
investment securities purchases. These strategies were implemented by our ALCO
Committee as the Federal Reserve Bank reduced the target funds rate to 1.25% by
December 31, 2002.

      The net interest margin was 4.04% in 2002 compared to 4.51% in 2001. The
decline resulted primarily from timely implementation of asset/liability
management strategies which leveraged the balance sheet during the 2002 period,
resulting in reduced net interest margin percentage offset by increased net
interest income.

      The following table reflects, for the periods presented, the components of
our net interest income, setting forth: (1) average assets, liabilities, and
stockholders' equity, (2) interest income earned on interest-earning assets and
interest expenses paid on interest-bearing liabilities, (3) average yields
earned on interest-earning assets and average rates paid on interest-bearing
liabilities, (4) our net interest spread (i.e., the average yield on
interest-earnings assets less the average rate on interest-bearing liabilities)
and (5) our yield on interest-earning assets. Rates are computed on a taxable
equivalent basis.


                                       9
<PAGE>


<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                          ----------------------------------------------------------------------------------------
                                                      2002                          2001                          2000
                                          ----------------------------  ----------------------------  ----------------------------
                                                               Average                       Average                       Average
                                                     Interest   rates              Interest   rates             Interest    rates
                                          Average    income/   earned/  Average    income/   earned/  Average    income/   earned/
                                          balance    expense    paid    balance    expense    paid    balance    expense    paid
                                          -------    --------  -------  -------    --------  -------  -------   --------   -------
                                                                     (In thousands, except percentage)
<S>                                       <C>        <C>        <C>     <C>        <C>        <C>     <C>        <C>        <C>
Assets

Interest-earning assets
  Loans (net of unearned
  income) (1)                             $169,260   $12,098    7.15%   $138,522   $11,388    8.22%   $ 97,685   $ 8,454    8.65%
Investment securities                       93,885     3,768    4.01      41,000     2,278    5.56      32,102     1,994    6.21
Federal funds sold                             601        12    2.00      10,717       499    4.66      13,166       832    6.32
                                          --------   -------            --------   -------            --------   -------

    Total interest-earning assets          263,746    15,878    6.02     190,239    14,165    7.45     142,953    11,280    7.89
                                          --------   -------            --------   -------            --------   -------

Non-interest-earning assets                 18,404                        14,775                        11,365
Allowance for possible loan losses          (2,248)                       (1,799)                       (1,363)

    Total assets                          $279,902                      $203,215                      $152,955
                                          ========                      ========                      ========

Liabilities and Stockholders' Equity

Interest-bearing liabilities
  NOW deposits                            $ 21,020   $   214    1.02    $ 19,578   $   260    1.33%   $ 15,524   $   270    1.74%
  Savings deposits                          82,329     1,610    1.96      50,972     1,461    2.87      44,263     1,891    4.27
  Money market deposits                      7,278       158    2.17       6,482       217    3.35       6,079       292    4.80
  Time deposits                             90,738     3,075    3.39      66,425     3,623    5.45      40,277     2,493    6.19
  Trust preferred securities                   178         8    4.76        --        --      --          --        --      --
  Borrowed funds                             9,015       160    1.77       1,063        30    2.82        --        --      --
                                          --------   -------            --------   -------            --------   -------

    Total interest-bearing liabilities     210,558     5,225    2.48     144,520     5,591    3.87     106,143     4,946    4.66
                                          --------   -------            --------   -------            --------   -------

Non-interest bearing liabilities
  Demand deposits                           46,050                        36,296                        26,486
  Other liabilities                          1,000                         2,118                         1,644
                                          --------                      --------                      --------

     Total non-interest bearing
     liabilities                            47,050                        38,414                        28,130

  Stockholders' equity                      22,294                        20,281                        18,682
                                          --------                      --------                      --------

    Total liabilities and
    stockholders' equity                  $279,902                      $203,215                      $152,955
                                          ========                      ========                      ========

Net interest spread (2)                                         3.54                          3.58                          3.23

Net interest margin (3)                                         4.04                          4.51                          4.43

Net interest income                                  $10,653                       $ 8,574                       $ 6,334
                                                     =======                       =======                       =======
</TABLE>

(1)   Included in interest income on loans are rate related loan fees.

(2)   The interest rate spread is the difference between the weighted-average
      yield on average interest-earning assets and the weighted-average cost of
      average interest-bearing liabilities.

(3)   The interest rate margin is calculated by dividing net interest income by
      average interest-earning assets.


                                       10
<PAGE>


      The following table presents by category the major factors that
contributed to the changes in net interest income for the periods indicated
below. Amounts have been computed on a fully tax-equivalent basis.

<TABLE>
<CAPTION>
                                Year ended December 31, 2002     Year ended December 31, 2001
                                    vs. December 31, 2001            vs. December 31, 2000
                                -----------------------------    -----------------------------
                                            Increase (decrease) due to change in
                                --------------------------------------------------------------
                                Average    Average               Average    Average
                                volume      rate        Net      volume      rate        Net
                                -------    -------    -------    -------    -------    -------
                                                            (In thousands)
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
Interest income
   Loans                        $ 2,527    $(1,817)   $   710    $ 3,534    $  (600)   $ 2,934
   Investment securities          2,938     (1,448)     1,490        553       (269)       284
   Federal funds sold              (471)       (16)      (487)      (155)      (178)      (333)
                                -------    -------    -------    -------    -------    -------

       Total interest income      4,994     (3,281)     1,713      3,932     (1,047)     2,885
                                -------    -------    -------    -------    -------    -------

Interest expense
   NOW deposits                      19        (65)       (46)        71        (81)       (10)
   Savings deposits                 899       (750)       149        287       (717)      (430)
   Money market                      27        (86)       (59)        19        (94)       (75)
   Time deposits                  1,326     (1,874)      (548)     1,618       (488)     1,130
   Trust preferred securities      --            8          8       --         --         --
   Borrowed funds                   141        (11)       130         30       --           30
                                -------    -------    -------    -------    -------    -------

       Total interest expense     2,412     (2,778)      (366)     2,025     (1,380)       645
                                -------    -------    -------    -------    -------    -------

       Net interest income      $ 2,582    $  (503)   $ 2,079    $ 1,907    $   333    $ 2,240
                                =======    =======    =======    =======    =======    =======
</TABLE>

Provision for Loan Losses

      The provision we recorded for the year ended December 31, 2002 was $893
thousand compared to $386 thousand for the year ended December 31, 2001. The
provision is the result of our review of several factors, including loan
charge-offs of $451 thousand during the period ended December 31, 2002 compared
to $6 thousand for the same prior year period. In addition, the increased
provision reflects increased loan balances and management's assessment of
economic conditions, credit quality and other risk factors inherent in the loan
portfolio. We had no non-performing assets at the end of each of 2002 and 2001.
The allowance for loan losses totaled $2.4 million, or 1.31% of total loans at
December 31, 2002, compared to $2.0 million, or 1.33% of total loans, at
December 31, 2001.

Non-Interest Income

      Non-interest income amounted to $1.9 million for the year ended December
31, 2002, compared to $1.4 million for the year ended December 31, 2001, an
increase of $446 thousand, or 31.2%. The increase was primarily attributable to
gains on sales of investment securities of $554 thousand compared to no such
gains during the prior year. In addition, the Company also had an increase in
service fees on deposits of $33 thousand, or 8.2%, an increase in other fees and
commissions of $217 thousand, or 78.3%. These increases were partially offset by
a decrease in loan servicing fees of $358 thousand, or 47.8%. The growth in
service fees on deposits and other fees and commissions reflects the growth in
transaction account deposits and activity. The decrease in non-interest fee
income on loans was attributable to a decrease in loan participations and the
fees and commissions generated on those transactions. The gains on sales of
investment securities resulted from the implementation of asset/liability
management strategies intended to shorten the duration of our investment
securities portfolio.


                                       11
<PAGE>


Non-Interest Expense

      Non-interest expense amounted to $8.5 million for the year ended December
31, 2002, compared to $7.3 million for the year ended December 31, 2001, an
increase of $1.2 million, or 16.4%. The increase was due primarily to increases
in employment expenses as well as increases in occupancy expenses, equipment
expenses and other costs generally attributable to our growth. Of this increase,
employment costs increased $612 thousand, or 18.0%, and reflected increases in
the number of employees from 95 full-time equivalents at December 31, 2001 to
104 full-time equivalents at December 31, 2002. The increase in personnel is
attributable to the acquisition of additional support personnel required due to
our growth and the opening of one new branch office in 2002 and the full year
expenses associated with the opening of two new offices during the last half of
2001.

      Occupancy expenses increased $401 thousand, or 32.6%, to $1.6 million for
the year ended December 31, 2002. The increase was attributable to the opening
of three new branch offices since the second half of 2001, which resulted in
increased lease expense and increased maintenance costs. In addition, the
Company recognized increased depreciation costs associated with new facilities
and purchases of computer processing equipment.

      Other operating expenses increased $180 thousand, or 6.8% to $2.8 million
for the year ended December 31, 2002 from $2.6 million for the year ended
December 31, 2001. The increase was attributable to increased other expenses
resulting from our continued growth, as costs of data processing services
amounted to $904 thousand, an increase of $165 thousand; professional fees
amounted to $448 thousand, an increase of $124 thousand; marketing and
advertising costs amounted to $470 thousand, an increase of $53 thousand;
stationery, communications and office costs amounted to $317 thousand, an
increase of $50 thousand; and all other expenses amounted to $460 thousand, an
increase of $109 thousand. These increases were partially offset by a decrease
in stationery and printing costs of $107 thousand to $213 thousand and a
decrease in systems conversion costs of $214 thousand to $3 thousand. These
decreases resulted from the successful systems conversions which were completed
during 2001.

      We anticipate that the expense of our expanding bank branch office system,
combined with increased expenses associated with our expanding lending
activities, as well as increased costs associated with our ongoing efforts to
penetrate our target markets, will continue to increase non-interest expense
next year.

Income Tax Expenses

      We recognized $1.2 million and $844 thousand in income tax expense for the
years ended December 31, 2002 and 2001, respectively. The effective tax rate for
the year ended December 31, 2002 was 36.5% compared to 35.8% for the year ended
December 31, 2001.

Financial Condition

      At December 31, 2002, our total assets were $332.2 million, an increase of
$86.6 million, or 35.3% over total 2001 year end assets of $245.6 million. At
December 31, 2002, our net loans were $180.6 million, an increase of $35.0
million, or 24.0% from the $145.6 million reported at December 31, 2001.
Investment securities increased to $131.7 million at December 31, 2002, from
$80.7 million at December 31, 2001, an increased of $51.0 million or 63.2%. At
December 31, 2002 and December 31, 2001, we had no Federal Funds sold.

Loan Portfolio

      At December 31, 2002 our total loans were $183.0 million, an increase of
$35.4 million, or 24.0%, over our total loans of $147.6 million at December 31,
2001. Our loan portfolio consists primarily of loans secured by real estate,
and, to a lesser extent, commercial, construction, and consumer loans.

      Our loans are granted primarily to businesses and individuals located in
Monmouth, Middlesex, and Ocean Counties, New Jersey. We have not made loans to
borrowers outside of the United States of America. We believe that our strategy
of customer service, competitive rate structures, and selective marketing have
enabled us to gain market entry to local loans. Bank mergers have also
contributed to our efforts to attract borrowers.


                                       12
<PAGE>


      Within the portfolio, commercial mortgage loans remained the largest
component, constituting 51.4% of the total portfolio. These loans increased by
$19.8 million, or 26.7%. Our commercial and industrial loans also declined
during 2002, with year end balances declining by $8.7 million to 13.3 million,
or 7.3% of our total portfolio, from $22.0 million or 14.9% or our total
portfolio.

      The following table sets forth the classification of our loans by major
category, net of unearned discounts and deferred loan fees for the periods
indicated below.

<TABLE>
<CAPTION>
                                                                             December 31,
                                 ---------------------------------------------------------------------------------------------------
                                       2002                 2001                 2000                1999                1998
                                 -----------------    -----------------    -----------------   -----------------   -----------------
                                 Amount    Percent    Amount    Percent    Amount    Percent   Amount    Percent   Amount    Percent
                                 ------    -------    ------    -------    ------    -------   ------    -------   ------    -------
                                                                 (In thousands, except for percentages)

<S>                             <C>         <C>      <C>         <C>      <C>         <C>      <C>        <C>      <C>        <C>
Commercial and industrial       $ 46,998     25.7%   $ 25,736     17.4%   $ 24,865     20.4%   $15,137     18.3%   $ 8,514     18.7%
Real estate - non-residential
     properties                   94,067     51.4      74,258     50.3      56,849     46.6     38,814     47.0     19,413     42.5
Residential properties             5,829      3.2       6,970      4.7       7,867      6.4      7,254      8.8      6,941     15.2
Construction                      13,295      7.3      21,962     14.9      17,046     14.0      8,895     10.7      3,582      7.9
Consumer                          22,193     12.1      18,559     12.6      14,275     11.7     12,476     15.1      6,376     14.0
Other                                585      0.3         118      0.1       1,064      0.9         56      0.1        803      1.7
                                --------    -----    --------    -----    --------    -----    -------    -----    -------    -----

     Total loans                $182,967    100.0%   $147,603    100.0%   $121,966    100.0%   $82,632    100.0%   $45,629    100.0%
                                ========    =====    ========    =====    ========    =====    =======    =====    =======    =====
</TABLE>

      The following table sets forth the aggregate maturities of loans net of
unearned discounts and deferred loan fees, in specified categories and the
amount of such loans which have fixed and variable rates at December 31, 2002.

                              Within 1    1 to 5      After 5
                                year       years       years       Total
                              --------    -------     -------     -------

Commercial and industrial     $36,034     $ 8,445     $ 2,519     $46,998
Construction                   12,851         144         300      13,295
                              -------     -------     -------     -------

    Total                     $48,885     $ 8,589     $ 2,819     $60,293
                              =======     =======     =======     =======

Fixed rate loans                                                  $19,153
Variable rate loans                                                41,140
                                                                  -------

    Total                                                         $60,293
                                                                  =======

Asset Quality

      Our loans are our principal earning assets. Inherent in the lending
function is the risk of the borrower's inability to repay its loan under its
existing terms. Risk elements in a loan portfolio include non-accrual loans,
past due and restructured loans, potential problem loans, loan concentrations
and other real estate owned, acquired through foreclosure or a deed in lieu of
foreclosure.

      Non-performing assets include loans that are not accruing interest
(non-accruing loans) as a result of principal or interest being in default for a
period of 90 days or more and other real estate owned. We had no loans past due
90 days or more at any of the years ended December 31, 1998 though 2002,
although during the course of 2002, we charged off $452 thousand in
non-performing loans. When a loan is classified as non-accrual, interest
accruals cease and all past due interest, including interest applicable to prior
years, is reversed and charged against current income. Until the loan becomes
current, any payments received from the borrower are applied to outstanding
principal until such time as management determines that the financial condition
of the borrower and other factors merit recognition of such payments as
interest.


                                       13
<PAGE>


      At year end for each of the years 1998 through 2002, we had no
non-performing assets, although during the course of 2002, we charged off $452
thousand in non-performing loans. We maintain a risk rating system for grading
all non-consumer credit facilities. The purpose of the system is to detect
changes in loan quality for individual credits and for homogenous pools of loans
in the portfolio. All such credits are assigned a numerical rating in accordance
with criteria established in ten categories ranging from #1-Excellent to
#10-Loss. Definitions for categories #6-Special Mention Loans, #7-Substandard,
#8-Doubtful, #9-Specific Reserve, and #10-Loss are consistent with those
established by federal regulatory agencies. The initial rating is assigned at
inception and reviewed annually when financial statements are received and at
other times when deterioration in a relationship is detected. An independent
outsourced loan review function tests these ratings in its normal course and
resolves any rating differences. Any loan, including unrated consumer credits,
may be assigned to a watch list of credits, identified by management as credits
warranting special attention for a variety of reasons which might bear on
ultimate collectibility.

      In addition to our internal rating system, our federal regulators provide
for the classification of certain loans into substandard, doubtful or loss
categories. A loan is classified as substandard when it is inadequately
protected by the current value and paying capacity of the obligor or of the
collateral pledged, if any. Loans so classified have a well-defined weakness or
weaknesses that jeopardize the liquidation of the debt. They are characterized
by the distinct possibility that we will sustain some loss if the deficiencies
are not corrected.

      A loan is classified as doubtful when it has all the weaknesses inherent
in one classified as substandard with the added characteristics that the
weaknesses make collection or liquidation in full, on the basis of currently
existing factors, conditions, and values, highly questionable and improbable.

      A loan is classified as loss when it is considered uncollectible and of
such little value that the asset's continuance as an asset on the balance sheet
is not warranted.

      As of December 31, 2002, $356 thousand in loans were classified as
substandard, $82 thousand in loans were classified as doubtful, and no loans
were classified as loss. As of December 31, 2001, 2000, 1999 and 1998, no loans
were classified as substantial, doubtful or loss.

Allowance for Loan Losses

      We attempt to maintain an allowance for loan losses at a sufficient level
to provide for potential losses in the loan portfolio. Loan losses are charged
directly to the allowance when they occur and any recovery is credited to the
allowance. Risks within the loan portfolio are analyzed on a continuous basis by
our officers, by outside independent loan review auditors, our Directors Loan
Committee, and the Board of Directors. A risk system, consisting of multiple
grading categories, is utilized as an analytical tool to assess risk and set
appropriate reserves. Along with the risk system, management further evaluates
risk characteristics of the loan portfolio under current economic conditions and
considers such factors as the financial condition of the borrower, past and
expected loss experience, and other factors management feels deserve recognition
in establishing an appropriate reserve. These estimates are reviewed at least
monthly, and, as adjustments become necessary, they are realized in the periods
in which they become known. During 2002, $452 thousand in loans were charged
directly to the allowance when the loss was identified. Additions to the
allowance are made by provisions charged to expense and the allowance is reduced
by net charge-offs (i.e., loans judged to be uncollectible and charged against
the reserve, less any recoveries on such loans). Although management attempts to
maintain the allowance at a level deemed adequate, future additions to the
allowance may be necessary based upon changes in market conditions. In addition,
various regulatory agencies periodically review our allowance for loan losses.
These agencies may require us to take additional provisions based on their
judgments about information available to them at the time of their examination.

      Our allowance for possible loan losses totaled $2.4 million at December
31, 2002, or 1.31% of total loans outstanding. We had no non-performing loans or
loans past due 90 days or more at December 31, 2002 and 2001.


                                       14
<PAGE>


      The following is a summary of the reconciliation of the allowance for loan
losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                           ---------------------------------------------------
                                                            2002       2001       2000       1999       1998
                                                           -------    -------    -------    -------    -------
                                                                    (In thousands, except percentages)

<S>                                                        <C>        <C>        <C>        <C>        <C>
Balance at beginning of period                             $ 1,964    $ 1,584    $ 1,237    $   914    $   250
Charge-offs - commercial                                      (444)      --         --         --         --
Charge-offs - consumer                                          (8)        (6)        (1)        (2)      --
Recoveries - consumer                                            1       --         --         --         --
                                                           -------    -------    -------    -------    -------
    Net charge-offs                                           (451)        (6)        (1)        (2)      --
Provision charged to expense                                   893        386        348        325        664
                                                           -------    -------    -------    -------    -------

Balance of allowance at end of period                      $ 2,406    $ 1,964    $ 1,584    $ 1,237    $   914
                                                           =======    =======    =======    =======    =======

Ratio of net charge-offs to average loans outstanding         0.27%      --  %      --  %      --  %       N/A
                                                           =======    =======    =======    =======    =======

Balance of allowance at period-end as a percent of loans
    at period end                                             1.31%      1.33%      1.30%      1.50%      2.04%
                                                           =======    =======    =======    =======    =======
</TABLE>

      The following table sets forth, for each of the Bank's major lending
areas, the amount of the Bank's allowance for loan losses attributable to such
category, and the percentage of total loans represented by such category, as of
the periods indicated. The allocation of the allowance for loan losses to the
respective loan classifications is not necessarily indicative of future losses
or future allocations.

<TABLE>
<CAPTION>
                                                                        December 31,
                        ------------------------------------------------------------------------------------------------------------
                                2002                  2001                  2000                  1999                  1998
                        -------------------- ---------------------  --------------------  --------------------  --------------------
                        Allocation  % of all  Allocation  % of all  Allocation  % of all  Allocation  % of all  Allocation  % of all
                          amount     loans      amount     loans      amount     loans      amount     loans      amount     loans
                        ----------  --------  ----------  --------  ----------  --------  ----------  --------  ----------  --------
                                                  (In thousands, except percentages)

<S>                       <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>
Balance applicable to

  Commercial loans        $  548       25.7%    $  346       17.4%    $  281       20.4%    $  185       18.3%    $   96       18.7%

  Real estate non-
    Residential
    properties             1,128       51.4        996       50.3        641       46.6        628       47.0        309       42.5

  Residential
    properties                31        3.2         65        4.7         39        6.4         36        8.8         35       15.2

  Construction               344        7.3        295       14.9        377       14.0        178       10.7         72        7.9

  Consumer loans             296       12.1        234       12.6        128       11.7        113       15.1         55       14.0

  Other                        3        0.3          2        0.1         27        0.9         14        0.1         16        1.7
                          ------     ------     ------     ------     ------     ------     ------     ------     ------     ------
  Subtotal                 2,350      100.0      1,938      100.0      1,493      100.0      1,154      100.0        583      100.0

  Unallocated reserves        56       --           26       --           91       --           83       --          331       --
                          ------     ------     ------     ------     ------     ------     ------     ------     ------     ------
     Total                $2,406      100.0%    $1,964      100.0%    $1,584      100.0%    $1,237      100.0%    $  914      100.0%
                          ======     ======     ======     ======     ======     ======     ======     ======     ======     ======
</TABLE>

Investment Securities

      We maintain an investment portfolio to fund increased loans or decreased
deposits and other liquidity needs and to provide an additional source of
interest income. The portfolio is composed of obligations of U.S. Government and
agencies, government sponsored entities, and a limited amount of corporate debt
securities.


                                       15
<PAGE>


      We follow Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. Under SFAS No.
115, securities are classified as securities held to maturity based on
management's intent and our ability to hold them to maturity. Such securities
are stated at cost, adjusted for unamortized purchase premiums and discounts.
Securities not classified as securities held to maturity or trading securities
are classified as securities available for sale, and are stated at fair value.
Unrealized gains and losses on securities available for sale are excluded from
results of operations, and are reported as a separate component of stockholders'
equity, net of taxes. Securities classified as available for sale include
securities that may be sold in response to changes in interest rates, changes in
prepayment risks, the need to increase regulatory capital, or other similar
requirements. The Bank has no trading securities.

      Management determines the appropriate classification at the time of
purchase. At December 31, 2002, we classified $131.7 million, or 100%, of our
investment portfolio as available-for-sale. These available-for-sale securities
had a cost basis of $130.6 million. The fair value adjustment at December 31,
2002 required us to increase the carrying value of these investment securities
by $1.1 million, decrease the deferred tax benefit by $421 thousand, and
increase stockholders' equity by $688 thousand. Securities with a cost of $173.3
million were purchased for the available-for-sale account during 2002.

      Total investment securities at December 31, 2002 were $131.7 million, an
increase of $51.0 million, or 63.2% over total investment securities of $80.7
million at December 31, 2001. The increase during 2002 resulted as we utilized
our liquidity in excess of loan demand to fund additional purchases of
investment securities. This strategy developed from our analysis of several
economic scenarios, including reduced loan growth and deposit repricing
opportunities. We maintain an investment portfolio of short duration in order to
fund projected increased loan volume and to provide for other liquidity uses as
needed, and secondarily as an additional source of interest income.

      The amortized cost and fair value of our investment securities are as
follows (in thousands):

<TABLE>
<CAPTION>
                                             December 31, 2002        December 31, 2001       December 31, 2000
                                           ---------------------    --------------------    --------------------
                                           Amortized     Fair       Amortized    Fair       Amortized    Fair
                                             Cost        value        cost       value        cost       value
                                           ---------    --------    ---------   --------    ---------   --------

<S>                                         <C>         <C>         <C>         <C>         <C>         <C>
Investment securities available-for-sale
   U.S. Government and agency
      securities                            $128,937    $130,046    $ 64,569    $ 64,959    $ 33,798    $ 33,842
   Corporate debt securities and other         1,630       1,630         480         480         264         264
                                            --------    --------    --------    --------    --------    --------
                                            $130,567    $131,676    $ 65,049    $ 65,439    $ 34,062    $ 34,106
                                            ========    ========    ========    ========    ========    ========

Investment securities held-to-maturity
   U.S. Government and agency
      securities                            $   --      $   --      $ 14,275    $ 14,136    $  9,998    $  9,955
   Corporate debt securities and other          --          --         1,035       1,081         500         514
                                            --------    --------    --------    --------    --------    --------
                                            $   --      $   --      $ 15,310    $ 15,217    $ 10,498    $ 10,469
                                            ========    ========    ========    ========    ========    ========
</TABLE>

      The amortized cost and fair value of our investment securities at December
31, 2002, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties (in
thousands).

                                                  Available-for-sale
                                               ------------------------
                                               Amortized         Fair
                                                 cost            value
                                               ---------       --------

Due in one year or less                        $   --          $   --
Due after one year through five years           129,437         130,546
Due after five years through ten years             --              --
Due after ten years                               1,130           1,130
                                               --------        --------
                                               $130,567        $131,676
                                               ========        ========


                                       16
<PAGE>


Deposits

     Our total deposits at December 31, 2002, were $291.6 million, an increase
of $70.5 million, or 31.9% over total deposits of $221.1 million at December 31,
2001. Deposits are our primary source of funds. The growth in deposits during
this period was primarily due to the expansion and maturation of our branch
system, as well as a significant increase in the amount of time deposits
reflecting promotional activities at our branches. These promotions were
targeted to retain maturing deposits and to gain market penetration. Time
deposits represented 39.1% of our total deposits last year and they increased to
39.6% of our total deposits at December 31, 2002.

     We seek to emphasize relationships with commercial customers and seek to
obtain transactional accounts, which are frequently kept in non-interest bearing
deposits. During our startup phase, we emphasized the origination of savings
deposits, which equaled $92.5 million at December 31, 2002, by offering rates
higher than our peer group institutions. As we have established ourselves within
our trade area, we have managed our rates to more closely match the market,
resulting in our total cost of deposits of 2.04% for 2002. Our primary savings
product is the stepped rate savings account. The interest rate is based upon the
amount on deposit, and the deposit amount can be changed. We may modify the
interest rate amount paid without notice, and the depositor may withdraw their
funds on demand. We market this product as an alternative to time deposits and
believe it has resulted in a higher rate of core deposits and lower cost of
funds than our peer group institutions.

     The following table sets forth the average amounts of various types of
deposits at the periods indicated.

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                 --------------------------------------------------------------
                                        2002                  2001                  2000
                                 ------------------    ------------------    ------------------
                                 Average    Average    Average    Average    Average    Average
                                 balance     cost      balance     cost      balance     cost
                                 -------    -------    --------   -------    -------    -------
                                              (In thousands, except percentages)

<S>                              <C>          <C>      <C>          <C>      <C>          <C>
Non-interest-bearing demand      $ 46,050     --  %    $ 36,296     --  %    $ 26,486     --  %
Interest-bearing demand (NOW)      21,020     1.02       19,578     1.33       15,524     1.74
Savings deposits                   82,329     1.96       50,972     2.87       44,263     4.27
Money Market Deposits               7,278     2.17        6,482     3.35        6,079     4.80
Time deposits                      90,738     3.39       66,425     5.45       40,277     6.19
                                 --------     ----     --------     ----     --------     ----
    Total                        $247,415     2.04%    $179,753     3.09%    $132,629     3.73%
                                 ========     ====     ========     ====     ========     ====
</TABLE>

      The following table summarizes the maturity distribution of certificates
of deposits as of December 31, 2002.

                                                           Time CD's
                                                       $100,000 and over
                                                     --------------------
                                                      Amount     Percent
                                                     --------   ---------
                                             (In thousands, except percentages)

Due in three months or less                           $14,937      38.7%
Due over three months through six months                5,604      14.5
Due over six months through twelve months              11,827      30.6
Due over one year through three years                   6,236      16.2
                                                      -------     -----
   Total certificates of deposit                      $38,604     100.0%
                                                      =======     =====

Interest Rate Risk Management

      Interest rate risk management involves managing the extent to which
interest-sensitive assets and interest-sensitive liabilities are matched.
Interest rate sensitivity is the relationship between market interest rates and
earnings volatility due to the repricing characteristics of assets and
liabilities. Our net income is affected by changes in the level of market
interest rates. In order to maintain consistent earnings performance, we seek to
manage, to the extent possible, the repricing characteristics of our assets and
liabilities. The ratio between assets and liabilities repricing in specific time

                                       17
<PAGE>


intervals is referred to as an interest rate sensitivity gap. Interest rate
sensitivity gaps can be managed to take advantage of the slope of the yield
curve as well as forecasted changes in the level of interest rate changes.

      One of our major objectives when managing the rate sensitivity of our
assets and liabilities is to stabilize net interest income. The management of
and authority to assume interest rate risk is the responsibility of the
Asset/Liability Committee (ALCO), which is comprised of senior management and
Board members. We have instituted policies and practices of measuring and
reporting interest rate risk exposure, particularly regarding the treatment of
non-contractual assets and liabilities. In addition, we annually review our
interest rate risk policy, which includes limits on the impact to earnings from
shifts in interest rates.

      To manage our interest sensitivity position, an asset/liability model
called "gap analysis" is used to monitor the difference in the volume of our
interest sensitive assets and liabilities that mature or reprice within given
periods. A positive gap (asset sensitive) indicates that more assets reprice
during a given period compared to liabilities, while a negative gap (liability
sensitive) has the opposite effect. We employ computerized net interest income
simulation modeling to assist in quantifying interest rate risk exposure. This
process measures and quantifies the impact on net interest income through
varying interest rate changes and balance sheet compositions. The use of this
model assists the ALCO to gauge the effects of the interest rate changes on
interest sensitive assets and liabilities in order to determine what impact
these rate changes will have upon the net interest spread.

      At December 31, 2002, we maintained a one year negative cumulative gap of
2.68% of total assets, or $8.9 million, which was within our Board of Directors
approved guidelines.

<TABLE>
<CAPTION>
                                           Interest sensitivity gap at December 31, 2002
                                  ----------------------------------------------------------------
                                              Mature or repricing in (1)
                                  ---------------------------------------------------      Non-
                                  3 months      3 through     1 through       Over       interest
                                  or less       12 months      3 years       3 years      bearing       Total
                                  --------      ---------     ---------     ---------    ---------    ---------
<S>                               <C>           <C>           <C>           <C>          <C>          <C>
Assets
   Investment securities
      available-for-sale (2)      $  23,512     $  61,380     $  25,900     $  19,775    $    --      $ 130,567
   Loans                             61,557         7,057        21,728        92,867         --        183,209
   Valuation reserves (2)              --            --            --            --         (1,539)      (1,539)
   Non-interest earning assets         --            --            --            --         19,982       19,982
                                  ---------     ---------     ---------     ---------    ---------    ---------
      Total assets                $  85,069     $  68,437     $  47,628     $ 112,642    $  18,443    $ 332,219
                                  =========     =========     =========     =========    =========    =========

Liabilities and stockholders'
      equity
   NOW accounts                   $   5,864     $    --       $  17,591     $    --      $    --      $  23,455
   Money market accounts              4,126          --           4,126          --           --          8,252
   Savings deposits                  46,266          --          46,266          --           --         92,532
   CD's $100,000 and over            14,937        17,431         6,236          --           --         38,604
   CD's under $100,000               19,826        37,452        19,537          --           --         76,815
   Short-term borrowings             11,500          --            --            --           --         11,500
   Trust preferred                    5,000          --            --            --           --          5,000
   Non-interest bearing
      deposits                         --            --            --            --         51,971       51,971
   Other liabilities                   --            --            --            --            492          492
   Stockholders' equity                --            --            --            --         23,598       23,598
                                  ---------     ---------     ---------     ---------    ---------    ---------
      Total liabilities and
         stockholders' equity     $ 107,519     $  54,883     $  93,756     $    --      $  76,061    $ 332,219
                                  =========     =========     =========     =========    =========    =========

Interest rate sensitivity gap     $ (22,450)    $  13,554     $ (46,128)    $ 112,642    $ (57,618)

Cumulative gap                    $ (22,450)    $  (8,896)    $ (55,024)    $  57,618    $    --

Cumulative gap to total assets        (6.76)%       (2.68)%      (16.56)%       17.34%
</TABLE>


                                       18
<PAGE>


(1)   The following are the assumptions that were used to prepare the gap
      analysis:

      a.    Investment securities are included at amortized cost in the period
            in which they mature at stated maturity, except for government
            agency securities with coupon rates of 3.99% and above and with call
            provisions of one year or less, which are stated as maturing at the
            call date.

      b.    Loans are spread through the maturity buckets based on the earlier
            of their actual maturity date or the date of their first potential
            rate adjustment.

      c.    Non-maturing NOW accounts, money market accounts and savings
            deposits typically change rates more slowly than maturing balances.
            The rate change speed of these accounts compared to the economic
            rate change, has been adjusted based upon the Company's experience.

      d.    Certificates of deposits are spread through the maturity buckets
            based on their actual maturity date.

(2)   Valuation reserves include allowance for loan losses, FASB No. 91 deferred
      fees and the investment securities available-for-sale mark-to-market
      adjustment.

Liquidity

      Our liquidity is a measure of our ability to fund loans, withdrawals or
maturities of deposits, and other cash outflows in a cost-effective manner. Our
principal sources of liquidity are deposits, scheduled amortization and
prepayments of loan principal, maturities of investment securities, access to
purchased funds, and funds provided by operations. While scheduled loan payments
and maturing investments are relatively predictable sources of funds, deposit
flows, loan prepayments and callable investment securities are greatly
influenced by general interest rates, economic conditions and competition.

      Liquid assets (consisting of cash, federal funds sold and investment
securities classified as available-for-sale) comprised 42.5% and 30.4% of our
total assets at December 31, 2002 and 2001, respectively.

      Should liquidity needs arise to fund new loan demand, we have the
capability to sell our available-for-sale securities, and to purchase federal
funds as alternative sources of liquidity. We have established credit lines with
other financial institutions to purchase up to $11.0 million in federal funds
and may borrow funds at the Federal Reserve discount window, subject to our
ability to supply collateral. During 2000, we became a member of the Federal
Home Loan Bank of New York and have an overnight borrowing line of $12.2 million
and a term borrowing line of an additional $12.2 million. Subject to certain
requirements, these lines may be increased by 100%. In addition, subject to
certain requirements, we may also obtain longer term advances of up to 25% of
our assets. As of December 31, 2002, we have $11.5 million in overnight
borrowings.

      Management believes that our current sources of funds provide adequate
liquidity for our current cash flow needs.

Short-Term Borrowings

      Short-term borrowings consists of overnight federal funds purchased and
short-term advances from the Federal Home Loan Bank of New York, which generally
have maturities of less than one month. The details of these categories are
presented below:

                                                       Year ended December 31,
                                                         2002          2001
                                                       --------      ---------

Federal funds purchased and short-term advances
    Balance at year-end                                $ 11,500      $  1,600
    Average during the year                               9,015         1,063
    Maximum month-end balance                            15,700         2,500
    Weighted average rate during the year                  1.77%         2.82%
    Rate at December 31                                    1.35%         1.85%



                                       19
<PAGE>

Guaranteed Preferred Beneficial Interest in the Company's Subordinated Debt

      The Company issued $5.0 million of trust preferred securities to a pooled
investment vehicle sponsored by Bear, Stearns & Co., Inc. on December 20, 2002.
These securities have a floating interest rate equal to three month LIBOR plus
335 basis points, which resets quarterly. The initial interest rate is 4.76%.
The variable interest rate is capped at 12.5% though January 7, 2008. The
securities mature on January 7, 2033, and may be called at par by the Company
any time after January 7, 2008. The securities were placed in a private
transaction exempted from registration under the Securities Act of 1933, as
amended.

      Although the subordinated debentures are treated as debt of the Company,
they currently qualify as Tier I Capital investments, subject to the 25%
limitation under risk-based capital guidelines of the Federal Reserve. The
portion of the Trust Preferred Securities that exceeds this limitation qualifies
as Tier II capital of the Company. At December 31, 2002 the $5.0 million of the
Trust Preferred Securities qualified for treatment as Tier I capital.

Contractual Obligations and Other Commitments

      The following table sets forth contractual obligations and other
commitments representing required and potential cash outflows as of December 31,
2002:

<TABLE>
<CAPTION>
                                                                        One to      Four to      After
                                                           Less than     three       five        five
                                                 Total     one year      years       years       years
                                                --------   ---------    --------    --------    --------
                                                                 (dollars in thousands)

<S>                                             <C>         <C>         <C>         <C>         <C>
Minimum annual rentals on noncancellable
   operating leases                             $  8,848    $    375    $    974    $  1,039    $  6,460
Remaining contractual maturities of time
   deposits                                      115,419      89,646      25,773        --          --
Loan commitments                                  35,785      24,352        --          --        11,433
Short-term borrowed funds                         11,500      11,500        --          --          --
Guaranteed preferred beneficial interests in
   Company's subordinated debentures               5,000        --          --          --         5,000
Standby letters of credit                          4,042       4,042        --          --          --
                                                --------    --------    --------    --------    --------
      Total                                     $180,594    $129,915    $ 26,747    $  1,039    $ 22,893
                                                ========    ========    ========    ========    ========
</TABLE>

The Company had no capital leases at December 31, 2002.

Capital

      A significant measure of the strength of a financial institution is its
capital base. Our federal regulators have classified and defined capital into
the following components: (1) Tier I capital, which includes common stock,
qualifying preferred stock, and certain hybrid capital instruments, such as
trust preferred securities, and (2) Tier II capital, which includes a portion of
the allowance for possible loan losses, certain qualifying long-term debt and
preferred stock and hybrid capital instruments which do not qualify for Tier I
capital. Minimum capital levels are regulated by risk-based capital adequacy
guidelines which require a financial institution to maintain capital as a
percent of its assets and certain off-balance sheet items adjusted for
predefined credit risk factors (risk-adjusted assets). A financial institution
is required to maintain, at a minimum, Tier I capital as a percentage of
risk-adjusted assets of 4.0% and combined Tier I and Tier II capital as a
percentage of risk-adjusted assets of 8.0%.

      In addition to the risk-based guidelines, the federal regulators require
that a financial institution which meets the regulators' highest performance and
operation standards maintain a minimum leverage ratio (Tier I capital as a
percentage of tangible assets) of 3.0%. For those institutions with higher
levels of risk or that are experiencing or anticipating significant growth, the
minimum leverage ratio will be proportionately increased by 100 to 200 basis
points. Minimum leverage ratios for the Company are evaluated through the
ongoing regulatory examination process.


                                       20
<PAGE>


      The following table sets forth certain capital performance ratios for the
Company.

                                         2002       2001       2000
                                         ----       ----       ----

Capital performance
    Return on average assets             0.72%      0.74%      0.75%
    Return on average equity             9.06%      7.45%      6.17%

      The following table summarizes our risk-based and leverage ratios at
December 31, 2002, as well as the required minimum regulatory capital ratios.

<TABLE>
<CAPTION>
                                                                                                       To be well-
                                                                                                    capitalized under
                                                                              For capital           prompt corrective
                                                        Actual             adequacy purposes        action provisions
                                                 -------------------      -------------------      -------------------
                                                  Amount      Ratio        Amount      Ratio        Amount      Ratio
                                                 --------    -------      --------    -------      --------    -------

<S>                                              <C>          <C>         <C>      <C>             <C>      <C>
As of December 31, 2002

     Total capital (to risk-weighted assets)
        Community Bancorp of New Jersey          $30,316      13.68%      $17,605  >/=  8.00%          N/A        N/A
        Community Bank of New Jersey              25,322      11.51        17,593  >/=  8.00       $21,991  >/= 10.00%

     Tier I capital (to risk-weighted assets)
        Community Bancorp of New Jersey           27,910      12.68         8,803  >/=  4.00%          N/A        N/A
        Community Bank of New Jersey              22,916      10.42         8,796  >/=  4.00        13,195  >/=  6.00

     Tier I capital (to average assets)
        Community Bancorp of New Jersey           27,910       8.75         9,564  >/=  3.00%          N/A        N/A
        Community Bank of New Jersey              22,916       7.19         9,564  >/=  4.00        15,941  >/=  5.00

As of December 31, 2001

     Total capital (to risk-weighted assets)
        Community Bancorp of New Jersey          $22,859      13.39%      $13,654  >/=  8.00%          N/A        N/A
        Community Bank of New Jersey              22,864      13.40        13,654  >/=  8.00       $17,067  >/= 10.00%

     Tier I capital (to risk-weighted assets)
        Community Bancorp of New Jersey           20,895      12.24         6,827  >/=  4.00%          N/A        N/A
        Community Bank of New Jersey              20,900      12.25         6,827  >/=  4.00        10,240  >/=  6.00

     Tier I capital (to average assets)
        Community Bancorp of New Jersey           20,895       9.17         6,836  >/=  3.00%          N/A        N/A
        Community Bank of New Jersey              20,900       9.17         6,836  >/=  3.00        11,394  >/=  5.00
</TABLE>

Impact of Inflation and Changing Prices

      Our financial statements and notes thereto, presented elsewhere herein,
have been prepared in accordance with accounting principles generally accepted
in the United States of America, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact of inflation is reflected in the increased cost of
the Company's operations. Unlike most industrial companies, nearly all our
assets and liabilities are monetary. As a result, interest rates have a greater
impact on our performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.


                                       21
<PAGE>


Recent Accounting Pronouncements

      On January 1, 2002 the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 retains the existing
requirements to recognize and measure the impairment of long-lived assets to be
held and used or to be disposed of by sale. However, SFAS No. 144 makes changes
to the scope and certain measurement requirements of existing accounting
guidance. SFAS No. 144 also changes the requirements relating to reporting the
effects of a disposal or discontinuation of a segment of a business. The
adoption of this statement did not have an impact on the financial condition or
results of operations of the Company.

      SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, amends the disclosure and certain transition provisions of SFAS 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. For entities that use the intrinsic value
method under Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, to account for employee stock compensation for any
period presented, their accounting policies note should include certain
disclosures. The expanded annual disclosure requirements and the transition
provisions are effective for fiscal years ending after December 15, 2002. The
new interim period disclosures are required in financial statements for interim
periods beginning after December 15, 2002. The expanded annual disclosures are
provided in the 2002 financial statements.

                         ITEM 7. -- FINANCIAL STATEMENTS

      The information required by this item is filed herewith.

            ITEM 8. -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

      None.

               ITEM 9. -- DIRECTORS AND EXECUTIVE OFFICERS OF THE
                    REGISTRANT; COMPLIANCE WITH SECTION 16(a)

      Information concerning directors and executive officers is included in the
definitive Proxy Statement for the Company's 2003 Annual Meeting under the
captions "ELECTION OF DIRECTORS" and information concerning compliance with
Section 16(a) of the Exchange Act is included under the caption "COMPLIANCE WITH
SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934," each of which is
incorporated herein by reference. It is expected that such Proxy Statement will
be filed with the Securities and Exchange Commission no later than April 30,
2003.

      The following table sets forth certain information about each of our
executive officers who are not also a director.

                                                    Principal occupation
Name, age and position        Officer since        during past five years
----------------------        -------------     ----------------------------

Robert Babin, 50                  1999          Chief Information Officer of
Senior Vice President and                       the Bank; formerly Vice
Chief Information Officer                       President Information
                                                Technology at Lockport
                                                Savings Bank and Amboy
                                                National Bank

Michael Bis, 54                   1999          Chief Financial Officer of the
Senior Vice President and                       Bank; formerly Controller
Chief Financial Officer                         of Carnegie Bank N.A.


                                       22
<PAGE>


                       ITEM 10. -- EXECUTIVE COMPENSATION

      Information concerning executive compensation is included in the
definitive Proxy Statement for the Company's 2003 Annual Meeting under the
captions "EXECUTIVE COMPENSATION AND ALL OTHER COMPENSATION" and "COMPENSATION
OF DIRECTORS", which is incorporated by reference herein. It is expected that
such Proxy Statement will be filed with the Securities and Exchange Commission
no later than April 30, 2003.

         ITEM 11. -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                   MANAGEMENT AND RELATED STOCKHOLDER MATTERS

      Information concerning security ownership of certain beneficial owners and
management is included in the definitive Proxy statement for the Company's 2003
Annual Meeting under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT," which is incorporated herein by reference. It is
expected that such Proxy statement will be filed with the Securities and
Exchange Commission no later than April 30, 2003.

      The following tale sets forth information with respect to the Company's
equity compensation plans as of the end of the most recently completed fiscal
year.

<TABLE>
<CAPTION>
                                                       (1)             (1)              (1)
                                                                                     Number of
                                                                                    securities
                                                                                     remaining
                                                    Number of                      available for
                                                  securities to     Weighted-     future issuance
                                                    be issued        average       under equity
                                                      upon          exercise       compensation
                                                   exercise of      price of           plans
                                                   outstanding     outstanding      (excluding
                                                    options,        options,        securities
                                                    warrants        warrants       reflected in
                                                   and rights      and rights       column (a))
                   Plan category                       (a)             (b)              (c)
----------------------------------------------    -------------    -----------    --------------

<S>                                                  <C>              <C>             <C>
Equity compensation plans approved by security
   holders                                           559,771          $8.16           74,237

Equity compensation plans not approved by
   security holders                                     --             --               --

(1) Adjusted for stock dividends and stock split.
</TABLE>

           ITEM 12. -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information concerning certain relationships and related transactions is
included in the definitive Proxy Statement for the Company's 2003 Annual Meeting
under the caption "INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS",
which is incorporated herein by reference. It is expected that such Proxy
statement will be filed with the Securities and Exchange Commission no later
than April 30, 2003.


                                       23
<PAGE>


                ITEM 13. -- EXHIBITS LIST AND REPORTS ON FORM 8-K

      (a)   Exhibits

      Exhibit number                          Description of Exhibits
      --------------                          -----------------------

           10               Change in control agreement with James A. Kinghorn
                            dated July 11, 2002

           21               Subsidiaries of the Registrant

           23               Consent of Grant Thornton LLP

           99               Certification pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002

      (b)   Reports on Form 8-K

            (i)   None

                       ITEM 14. -- CONTROLS AND PROCEDURES

      The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer, Chief Lending Officer, Chief Information Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14(c). Based upon that evaluation, the Chief Executive Officer, Chief
Lending Officer, Chief Information Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's SEC filings.

      Since the date of the most recent evaluation of the Company's internal
controls, there have been no significant changes in such internal controls or in
other factors that could significantly affect such internal controls.


                                       24
<PAGE>


                                   SIGNATURES

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

                                   COMMUNITY BANCORP OF NEW JERSEY


                                   By: /s/ Robert D. O'Donnell
                                       -----------------------------------------
                                           Robert D. O'Donnell
      Dated: March 13, 2003                President and Chief Executive Officer

      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
Registrant and in the capacities and on the dates indicated.

     NAME                          TITLE                              DATE
     ----                          -----                              ----

/s/    Robert D. O'Donnell
   ----------------------------
     Robert D. O'Donnell           Director, President and
                                     Chief Executive Officer      March 13, 2003

/s/    Michael Bis
   ----------------------------
     Michael Bis                   Chief Financial Officer        March 13, 2003

/s/    Howard M. Schoor
   ----------------------------
    Howard M. Schoor               Chairman of the Board          March 13, 2003

/s/    Eli Kramer
   ----------------------------
     Eli Kramer                    Vice Chairman of the Board     March 13, 2003

/s/    Charles P. Kaempffer
   ----------------------------
     Charles P. Kaempffer, CPA     Vice Chairman of the Board     March 13, 2003

/s/    Morris Kaplan
   ----------------------------
     Morris Kaplan                 Director                       March 13, 2003

/s/    Robert M. Kaye
   ----------------------------
     Robert M. Kaye                Director                       March 13, 2003

/s/    William J. Mehr
   ----------------------------
     William J. Mehr, Esq.         Director                       March 13, 2003

/s/    Arnold G. Silverman
   ----------------------------
     Arnold G. Silverman           Director                       March 13, 2003

/s/    Lewis Wetstein
   ----------------------------
    Lewis Wetstein, M.D.           Director                       March 13, 2003

/s/    James A. Kinghorn
   ----------------------------
    James A. Kinghorn              Director and Executive
                                    Vice President                March 13, 2003


                                       25
<PAGE>


                                  CERTIFICATION

I, Robert D. O'Donnell, President & CEO of Community Bancorp of New Jersey,
certify that:

1.    I have reviewed this annual report on Form 10-KSB of Community Bancorp of
      New Jersey;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: March 13, 2003                    /s/ Robert D. O'Donnell
                                           -------------------------------------
                                            Robert D. O'Donnell, President & CEO


                                       26
<PAGE>


                                  CERTIFICATION

I, Michael Bis, Senior Vice President & CFO of Community Bancorp of New Jersey,
certify that:

1.    I have reviewed this annual report on Form 10-KSB of Community Bancorp of
      New Jersey;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent functions):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: March 13, 2003                /s/ Michael Bis
                                       -----------------------------------------
                                        Michael Bis, Senior Vice President & CFO


                                       27
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

                           Consolidated Balance Sheets

                      (In thousands, except per share data)

                                                              December 31,
                                                         ----------------------
          ASSETS                                            2002         2001
                                                         ---------    ---------

    Cash and due from banks                              $   9,424    $   9,342

    Investment securities available-for-sale               131,676       65,439
    Investment securities held-to-maturity (fair
       value of $15,217 at December 31, 2001                  --         15,310

    Loans receivable                                       182,967      147,603
    Less allowance for loan losses                          (2,406)      (1,964)
                                                         ---------    ---------

          Net loans receivable                             180,561      145,639

    Premises and equipment, net                              6,280        6,335
    Accrued interest receivable                              2,193        1,457
    Other assets                                             2,085        2,116
                                                         ---------    ---------

          Total assets                                   $ 332,219    $ 245,638
                                                         =========    =========

          LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
    Deposits
       Non-interest bearing - demand                     $  51,971    $  43,539
       Interest bearing - NOW                               23,455       24,741
       Savings and money market                            100,784       66,466
       Certificates of deposit, under $100,000              76,815       47,894
       Certificates of deposit, $100,000 and over           38,604       38,488
                                                         ---------    ---------

          Total deposits                                   291,629      221,128

    Short-term borrowings                                   11,500        1,600
    Accrued interest payable                                    38        1,334
    Other liabilities                                          454          433
    Guaranteed preferred, beneficial interest in the
       Company's subordinated debt                           5,000         --
                                                         ---------    ---------

          Total liabilities                                308,621      224,495
                                                         ---------    ---------

STOCKHOLDERS' EQUITY
    Common stock - authorized, 10,000,000 shares of
       no par value; issued and outstanding, net of
       treasury shares, 3,172,945 and 2,014,729 shares
       at December 31, 2002 and 2001, respectively          25,512       23,147
    Accumulated deficit                                     (2,239)      (1,889)
    Accumulated other comprehensive income                     688          248
    Treasury stock, 22,357 shares, at cost                    (363)        (363)
                                                         ---------    ---------

          Total stockholders' equity                        23,598       21,143
                                                         ---------    ---------

          Total liabilities and stockholders' equity     $ 332,219    $ 245,638
                                                         =========    =========

The accompanying notes are an integral part of these statements.


                                       28
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

                        Consolidated Statements of Income

                      (In thousands, except per share data)

                                                         Year ended December 31,
                                                         -----------------------
                                                             2002        2001
                                                           -------     -------
INTEREST INCOME
    Loans, including fees                                  $12,098     $11,388
    Federal funds sold                                          12         499
    Investment securities                                    3,768       2,278
                                                           -------     -------

      Total interest income                                 15,878      14,165

INTEREST EXPENSE
    Deposits                                                 5,057       5,561
    Short-term borrowings                                      160          30
    Long-term borrowings                                         8        --
                                                           -------     -------

      Total interest expense                                 5,225       5,591
                                                           -------     -------

      Net interest income                                   10,653       8,574

PROVISION FOR LOAN LOSSES                                      893         386
                                                           -------     -------

      Net interest income after provision for loan losses    9,760       8,188
                                                           -------     -------

NON-INTEREST INCOME
    Service charges on deposit accounts                        435         402
    Other loan servicing fees                                  391         749
    Gains on sales of investment securities                    554        --
    Other income                                               494         277
                                                           -------     -------

      Total non-interest income                              1,874       1,428
                                                           -------     -------

NON-INTEREST EXPENSE
    Salaries and employee benefits                           4,009       3,397
    Occupancy expense                                        1,630       1,229
    Other operating expenses                                 2,815       2,635
                                                           -------     -------

      Total non-interest expense                             8,454       7,261
                                                           -------     -------

      Income before income taxes                             3,180       2,355

Income tax expense                                           1,160         844
                                                           -------     -------

      Net income                                           $ 2,020     $ 1,511
                                                           =======     =======

Per share data
    Net income - basic                                     $  0.64     $  0.48
                                                           =======     =======
    Net income - diluted                                   $  0.61     $  0.47
                                                           =======     =======

The accompanying notes are an integral part of these statements.


                                       29
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

            Consolidated Statement of Changes in Stockholders' Equity

                     Years ended December 31, 2002 and 2001

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                      Accumulated
                                                                                        other
                                                              Common    Accumulated  comprehensive   Treasury
                                                              Stock       deficit       income         stock        Total
                                                             --------   -----------  -------------   ---------     --------

<S>                                                          <C>          <C>           <C>          <C>           <C>
Balance at January 1, 2001                                   $ 21,663     $ (1,913)     $     28     $   (363)     $ 19,415

    5% stock dividend (95,772 shares)                           1,484       (1,484)         --           --            --
    Cash in lieu of fractional shares                            --             (3)         --           --              (3)
    Net income                                                   --          1,511          --           --           1,511
    Accumulated other comprehensive income, net of
       reclassification adjustments and taxes                    --           --             220         --             220

          Total comprehensive income                             --           --            --           --           1,731
                                                             --------     --------      --------     --------      --------

Balance at December 31, 2001                                   23,147       (1,889)          248         (363)       21,143

    5% stock dividend (100,508 shares)                          2,362       (2,362)         --           --            --
    Stock split issued - 3 for 2 (1,057,429 shares)              --           --            --           --            --
    Cash in lieu of fractional shares for stock dividend
       and stock split                                           --             (8)         --           --              (8)
    Options exercised (279 shares)                                  3         --            --           --               3
    Net income                                                   --          2,020          --           --           2,020
    Accumulated other comprehensive income, net of
       reclassification adjustments and taxes                    --           --             440         --             440
          Total comprehensive income                             --           --            --           --           2,460
                                                             --------     --------      --------     --------      --------

Balance at December 31, 2002                                 $ 25,512     $ (2,239)     $    688     $   (363)     $ 23,598
                                                             ========     ========      ========     ========      ========
</TABLE>

The accompanying notes are an integral part of this statement.


                                       30
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

                      Consolidated Statements of Cash Flows

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   Year ended December 31,
                                                                   -----------------------
                                                                      2002          2001
                                                                   ---------     ---------
<S>                                                                <C>           <C>
OPERATING ACTIVITIES
  Net income                                                       $   2,020     $   1,511
  Adjustments to reconcile net income to net cash provided
        by operating activities
     Depreciation and amortization                                       879           656
     Provision for loan losses                                           893           386
     Accretion of investment discount                                    (34)          (86)
     Amortization of investment premium                                  669            24
     Gains on sales of investment securities                            (554)         --
     Loss on disposal of equipment                                      --              98
     (Increase) decrease in accrued interest receivable                 (736)           40
     (Increase) decrease in other assets                                (120)          201
     Decrease in accrued interest payable                             (1,296)         (157)
     Increase (decrease) in other liabilities                             21          (198)
                                                                   ---------     ---------

            Net cash provided by operating activities                  1,742         2,475
                                                                   ---------     ---------

INVESTING ACTIVITIES
  Purchases of investment securities held-to-maturity                   --         (14,810)
  Purchases of investment securities available-for-sale             (173,296)     (102,577)
  Sales of investment securities available-for-sale                   15,704          --
  Net increase in loans receivable                                   (35,815)      (25,643)
  Proceeds from maturities and calls of investment securities        107,303        81,650
  Purchase of bank owned life insurance                                 --          (1,500)
  Purchases of premises and equipment                                   (824)       (2,087)
                                                                   ---------     ---------

            Net cash used in investing activities                    (86,928)      (64,967)
                                                                   ---------     ---------

FINANCING ACTIVITIES
  Increase in short-term borrowings                                    9,900         1,600
  Proceeds from exercise of stock options                                  3          --
  Stock dividends - cash paid in lieu of fractional shares                (8)           (3)
  Proceeds from issuance of guaranteed preferred beneficial
     interest in the Company's subordinated debt                       4,872          --
  Net increase in demand deposits and savings accounts                41,464        30,701
  Net increase in certificates of deposits                            29,037        29,912
                                                                   ---------     ---------

            Net cash provided by financing activities                 85,268        62,210
                                                                   ---------     ---------

            Net increase (decrease) in cash and cash equivalents          82          (282)

Cash and cash equivalents, beginning of period                         9,342         9,624
                                                                   ---------     ---------

Cash and cash equivalents, end of period                           $   9,424     $   9,342
                                                                   =========     =========

Supplemental disclosures of cash flow information
  Cash paid for interest                                           $   6,521     $   5,748
                                                                   =========     =========

  Cash paid for income taxes                                       $   1,379     $     981
                                                                   =========     =========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       31
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

                   Notes to Consolidated Financial Statements

                           December 31, 2002 and 2001

NOTE A - ORGANIZATION

      Community Bancorp of New Jersey (the Company) is a one-bank holding
      company incorporated under the laws of New Jersey to serve as the holding
      company for the Community Bank of New Jersey (the Bank). The Company is a
      registered bank holding company under the Bank Holding Company Act of
      1956, as amended. The Bank is a New Jersey state-chartered banking
      institution and a member of the Federal Reserve System and Federal Home
      Loan Bank of New York.

      The Bank provides banking services to small and medium-sized businesses,
      professionals, and individual consumers in the area of central New Jersey.
      Additionally, the Company competes with other banking and financial
      institutions in its market communities, including financial institutions
      with resources substantially greater than its own. Commercial banks,
      credit unions, and money market funds actively compete for savings and
      time deposits and for similar types of loans. Such institutions, as well
      as consumer finance and insurance companies, may be considered competitors
      of the Company with respect to one or more of the services it provides.

      The Company and Bank are subject to regulations of certain state and
      federal agencies and, accordingly, they are periodically examined by those
      regulatory authorities. As a consequence of the extensive regulation of
      commercial banking activities, the Company's and Bank's businesses are
      susceptible to being affected by state and federal legislation and
      regulations.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      1. Basis of Financial Statement Presentation

      The accounting and reporting policies of the Company conform to accounting
      principles generally accepted in the United States of America and
      predominant practices within the banking industry. The financial
      statements include the accounts of the Company and its wholly owned
      subsidiary, the Bank. All intercompany balances and transactions have been
      eliminated in the financial statements.

      In preparing the financial statements, management is required 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 balance sheet and the reported amounts of revenues and
      expenses during the reporting periods. Therefore, actual results could
      differ from those estimates.

      The estimate and the evaluation of the adequacy of the allowance for loan
      losses includes an analysis of the individual loans and overall risk
      characteristics and size of the different loan portfolios, and takes into
      consideration current economic and market conditions, the capability of
      specific borrowers to pay specific loan obligations, as well as current
      loan collateral values. However, actual losses on specific loans, which
      also are encompassed in the analysis, may vary from estimated losses.

      2. Segment Reporting

      Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
      about Segments of an Enterprise and Related Information, establishes
      standards for the way business enterprises report information about
      operating segments in annual financial statements. The Bank has one
      operating segment, and accordingly, one reportable segment, "Community
      Banking". All of the Bank's activities are interrelated, and each activity
      is dependent and

                                   (Continued)


                                       32
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      assessed based on how each of the activities of the Bank supports the
      other. For example, commercial lending is dependent upon the ability of
      the Bank to fund itself with retail deposits and other borrowings and to
      manage interest rate and credit risk. This situation is also similar for
      consumer and residential and commercial mortgage lending. All significant
      operating decisions are based upon analysis of the Bank as one operating
      segment or unit.

      3. Cash and Cash Equivalents

      Cash and cash equivalents include cash on hand, amounts due from banks,
      and federal funds sold with maturities of three months or less.

      4. Investment Securities

      The Company accounts for its investment securities in accordance with SFAS
      No. 115, Accounting for Certain Investments in Debt and Equity Securities.
      This standard requires, among other things, that debt and equity
      securities classified as available-for-sale be reported at fair value,
      with unrealized gains and losses excluded from earnings and reported as a
      separate component, net of income taxes. The net effect of unrealized
      gains or losses, caused by marking an available-for-sale portfolio to
      market, could cause fluctuations in the level of undivided profits and
      equity-related financial ratios as market interest rates cause the fair
      value of fixed-rate securities to fluctuate.

      Investment and mortgage-backed securities, which the Company has the
      ability and intent to hold to maturity, are held for investment purposes
      and carried at cost, adjusted for amortization of premium and accretion of
      discount over the terms of the maturity in a manner which approximates the
      interest method. At the time of purchase, the Company makes a
      determination as to whether or not it will hold the investment securities
      to maturity based upon an evaluation of the probability of the occurrence
      of future events. Gains or losses on the sales of securities
      available-for-sale are recognized upon realization utilizing the specific
      identification method.

      SFAS No. 133 which was amended by SFAS No. 138, Accounting for Certain
      Derivative Instruments and Certain Hedging Activities, requires that
      entities recognize all derivatives as either assets or liabilities in the
      statement of financial condition and measure those instruments at fair
      value. The Company adopted SFAS No. 133 effective January 1, 2001 and the
      impact was immaterial to the financial statements taken as a whole.

      SFAS No. 119, Disclosure About Derivative Financial Instruments and Fair
      Value of Financial Instruments, required disclosures about financial
      instruments, which are defined as futures, forwards, swap and option
      contracts and other financial instruments with similar characteristics.
      On-balance-sheet receivables and payables are excluded from this
      definition. The Company did not hold any derivative financial instruments
      as defined by SFAS No. 119 at December 31, 2002 or 2001.

      5. Loans Receivable and Allowance for Loan Losses

      Loans receivable that management has the intent and ability to hold for
      the foreseeable future or until maturity or pay-off are reported at their
      outstanding principal, adjusted for any charge-offs, the allowance for
      loan losses, and any deferred fees or costs on originated loans. Interest
      on loans is accrued and credited to operations based upon the principal
      amounts outstanding. The allowance for loan losses is maintained at an
      amount management deems adequate to cover estimated losses. In determining
      the level to be maintained, management evaluates many factors,

                                   (Continued)


                                       33
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      including current economic trends, industry experience, historical loss
      experience, industry loan concentrations, the borrowers' ability to repay
      and repayment performance, and estimated collateral values. In the opinion
      of management, the present allowance is adequate to absorb reasonable,
      foreseeable loan losses. While management uses available information to
      recognize losses on loans, future additions to the allowance may be
      necessary based on changes in economic conditions or any of the other
      factors used in management's determination. In addition, various
      regulatory agencies, as an integral part of their examination process,
      periodically review the Company's allowance for losses on loans. Such
      agencies may require the Company to recognize additions to the allowance
      based on their judgments about information available to them at the time
      of their examination.

      Loans are placed on non-accrual when a loan is specifically determined to
      be impaired or when principal or interest is delinquent for 90 days or
      more. Any unpaid interest previously accrued on those loans is reversed
      from income. Interest income generally is not recognized on specific
      impaired loans unless the likelihood of further loss is remote. Interest
      payments received on such loans are applied as a reduction of the loan
      principal balance. Interest income on other non-accrual loans is
      recognized only to the extent of interest payments received. The Company
      had no non-accrual loans as of December 31, 2002 or 2001.

      The Company accounts for its impaired loans in accordance with SFAS No.
      114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS
      No 118, Accounting by Creditors for Impairment of a Loan - Income
      Recognition and Disclosures. This standard requires that a creditor
      measure impairment based on the present value of expected future cash
      flows discounted at the loan's effective interest rate, except that as a
      practical expedient, a creditor may measure impairment based on a loan's
      observable market price, or the fair value of the collateral if the loan
      is collateral dependent. Regardless of the measurement method, a creditor
      must measure impairment based on the fair value of the collateral when the
      creditor determines that foreclosure is probable. The Company had no loans
      that would be defined as impaired at December 31, 2002 or 2001.

      6. Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities

      The Bank accounts for its transfers and servicing assets in accordance
      with SFAS No. 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities, which revised the accounting
      and reporting for transfers and servicing of financial assets and
      extinguishments of liabilities. SFAS No. 140 was effective for transfers
      and servicing of financial assets and extinguishments of liabilities
      occurring after March 31, 2001.

      7. Premises and Equipment

      Premises and equipment are stated at cost less accumulated depreciation
      and amortization. Depreciation and amortization are charged to operations
      on a straight-line basis over the estimated useful lives of the assets.

      On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
      Impairment or Disposal of Long-Lived Assets. SFAS No. 144 retains the
      existing requirements to recognize and measure the impairment of
      long-lived assets to be held and used or to be disposed of by sale.
      However, SFAS No. 144 makes changes to the scope and certain measurement
      requirements of existing accounting guidance. SFAS No. 144 also changes
      the requirements relating to reporting the effects of a disposal or
      discontinuation of a segment of a business. The adoption of this statement
      did not have an impact on the financial condition or results of operations
      of the Company.

                                   (Continued)


                                       34
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      8. Income Taxes

      Under the liability method, deferred tax assets and liabilities are
      determined based on the difference between the financial statement and tax
      basis of assets and liabilities, as measured by the enacted tax rates,
      which will be in effect when these differences reverse. The primary
      temporary differences are allowance for loan loss recognition and net
      unrealized gains on investment securities available-for-sale.

      9. Earnings Per Share

      The Company follows the provisions of SFAS No. 128, Earnings Per Share.
      Basic EPS excludes dilution and is computed by dividing income available
      to common shareholders by the weighted average common shares outstanding
      during the period. Diluted EPS takes into account the potential dilution
      that could occur if securities or other contracts to issue common stock
      were exercised and converted into common stock. EPS is computed based on
      the weighted average number of shares of common stock outstanding.

      10. Advertising Costs

      The Company expenses advertising costs as incurred.

      11. Comprehensive Income

      The Company followed SFAS No. 130, Reporting Comprehensive Income.
      Comprehensive income consists of net income or loss for the current period
      and income, expenses, gains, and losses that bypass the income statement
      and are reported directly in a separate component of equity.

      The income tax effects allocated to comprehensive income at December 31,
      are as follows (in thousands):

                                                               2002
                                                     -------------------------
                                                     Before     Tax      Net
                                                      Tax    (expense)  of tax
                                                     amount   benefit   amount
                                                     ------  ---------  ------

Unrealized gains on securities
   Unrealized holding gains arising during period    $1,273   $ (490)   $  783

Less reclassification
   Adjustment for gain realized in net income           554     (211)      343
                                                     ------   ------    ------

Other comprehensive income, net                      $  719   $ (279)   $  440
                                                     ======   ======    ======

                                   (Continued)


                                       35
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

                                                                2001
                                                     ---------------------------
                                                     Before      Tax       Net
                                                      Tax     (expense)   of tax
                                                     amount    benefit    amount
                                                     ------   ---------   ------
Unrealized gains on securities
   Unrealized holding gains arising during period    $ 346     $(126)     $ 220

Less reclassification
   Adjustment for gain realized in net income         --        --         --
                                                     -----     -----      -----

Other comprehensive income, net                      $ 346     $(126)     $ 220
                                                     =====     =====      =====

      12. Stock-Based Compensation

      The Company accounts for stock options under SFAS No. 123, Accounting for
      Stock-Based Compensation, as amended by SFAS No. 148, Accounting for
      Stock-Based Compensation - Transition and Disclosure, which contains a
      fair value-based method for valuing stock-based compensation that entities
      may use, which measures compensation cost at the grant date based on the
      fair value of the award. Compensation is then recognized over the service
      period, which is usually the vesting period. Alternatively, SFAS No. 123
      permits entities to continue accounting for employee stock options and
      similar equity instruments under APB Opinion No. 25, Accounting for Stock
      Issued to Employees. Entities that continue to account for stock options
      using APB Opinion No. 25 are required to make pro forma disclosures of net
      income and earnings per share, as if the fair value-based method of
      accounting defined in SFAS No. 123 had been applied.

      At December 31, 2002, the Company had six stock-based compensation plans,
      which are more fully described in note L. The Company accounts for these
      plans under the recognition and measurement principles of APB Opinion No.
      25, Accounting for Stock Issued to Employees, and related interpretations.
      Stock-based employee compensation costs are not reflected in net income,
      as all options granted under the 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
      SFAS No. 123, to stock-based employee compensation (in thousands, except
      per share amounts).

                                                             December 31,
                                                           2002        2001
                                                        ---------   ---------

Net income, as reported                                 $   2,020   $   1,511
Less stock-based compensation costs determined
   under fair value based method for all awards               179         443
                                                        ---------   ---------
Net income, pro forma                                       1,841       1,068

Earnings per share - basic as reported                  $    0.64   $    0.48
Earnings per share - basic proforma                          0.58        0.34

Earnings per share - diluted as reported                $    0.61   $    0.47
Earnings per share - diluted proforma                        0.55        0.33

                                   (Continued)


                                       36
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      The fair value of each option grant is estimated on the date of grant
      using the Black-Scholes options-pricing model with the following
      weighted-average assumptions used for grants in 2002 and 2001, dividend
      yield of -0-% for both years; expected volatility of 25% in both years;
      risk-free interest rate of 3.81% in 2002 and 5.65% in 2001; and expected
      lives of five years in 2002 and 2001.

      13. Reclassification

      Certain reclassifications have been made to the 2001 financial statements
      to conform to the 2002 presentation.

NOTE C - INVESTMENT SECURITIES

      The following tables present the book values, fair values and gross
      unrealized gains and losses of the Company's investment securities
      portfolio as of December 31, 2002 and 2001 (in thousands):

<TABLE>
<CAPTION>
                                                        December 31, 2002
                                          ---------------------------------------------
                                                        Gross       Gross
                                          Amortized   unrealized  unrealized     Fair
                                             Cost       gains       losses       value
                                          ---------   ----------  ----------   --------

<S>                                        <C>         <C>         <C>         <C>
Investment securities available-for-sale
   U.S. Government and agency securities   $128,937       1,109        --       130,046
   Corporate debt securities and other        1,630        --          --         1,630
                                           --------    --------    --------    --------

                                           $130,567    $  1,109    $   --      $131,676
                                           ========    ========    ========    ========

<CAPTION>
                                                        December 31, 2001
                                          ---------------------------------------------
                                                        Gross       Gross
                                          Amortized   unrealized  unrealized     Fair
                                             Cost       gains       losses       value
                                          ---------   ----------  ----------   --------

<S>                                        <C>         <C>         <C>         <C>
Investment securities available-for-sale
   U.S. Government and agency securities   $ 64,569         510        (120)     64,959
   Corporate debt securities and other          480        --          --           480
                                           --------    --------    --------    --------

                                           $ 65,049    $    510    $   (120)   $ 65,439
                                           ========    ========    ========    ========

Investment securities held-to-maturity
   U.S. Government and agency securities   $ 14,275    $      6    $   (145)   $ 14,136
   Corporate debt securities and other        1,035          46        --         1,081
                                           --------    --------    --------    --------

                                           $ 15,310    $     52    $   (145)   $ 15,217
                                           ========    ========    ========    ========
</TABLE>

      The amortized cost and fair value of the Company's investment securities
      at December 31, 2002, by contractual maturity, are shown below. Expected
      maturities will differ from contractual maturities because borrowers may
      have the right to call or prepay obligations with or without call or
      prepayment penalties (in thousands).

                                   (Continued)


                                       37
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE C - INVESTMENT SECURITIES - Continued

                                                    Available-for-sale
                                                 -----------------------
                                                 Amortized        Fair
                                                    cost          value
                                                 ---------       -------

Due in one year or less                          $    --        $    --
Due after one year through five years              129,437        130,546
Due after five years through ten years                --             --
Due after ten years                                  1,130          1,130
                                                 ---------      ---------

                                                 $ 130,567      $ 131,676
                                                 =========      =========

      A portion of the Company's U.S. Government and agency securities, totaling
      approximately $1,300,000 at December 31, 2002 and 2001, was pledged as
      collateral to secure deposits as required or permitted by law.

      Proceeds from the sales of investment securities during 2002 were
      approximately $15,704,000. Gross gains realized on those sales were
      approximately $554,000. There were no sales of investment securities
      during 2001 and 2000.

NOTE D - LOANS RECEIVABLE

      Major loan classifications at December 31 are as follows (in thousands):

                                                    2002           2001
                                                 ---------      ---------

Consumer loans                                   $  22,195      $  18,562
Residential mortgages                                5,832          6,980
Commercial and industrial loans                     46,998         25,736
Construction loans                                  13,295         21,962
Commercial mortgages                                94,304         74,470
Other                                                  585            118
                                                 ---------      ---------
                                                   183,209        147,828

Less
   Unearned discounts and deferred loan fees          (242)          (225)
   Allowance for loan losses                        (2,406)        (1,964)
                                                 ---------      ---------

                                                 $ 180,561      $ 145,639
                                                 =========      =========

      The Company had no non-accrual loans or loans that would be defined as
      impaired at December 31, 2002 or 2001.

      The Company defines non-performing assets to include loans past due 90
      days or more, impaired loans and other real estate owned. The Company had
      no non-performing assets at December 31, 2002 or 2001. There were no loans
      to directors or executive officers at or during the periods ended December
      31, 2002 or 2001.

                                   (Continued)


                                       38
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE D - LOANS RECEIVABLE - Continued

      Changes in the allowance for loan losses is as follows (in thousands):

                                        2002          2001
                                      -------       -------

Balance, beginning of year            $ 1,964       $ 1,584
Provision charged to expenses             893           386
Loans charged-off, net                   (451)           (6)
                                      -------       -------

Balance, end of period                $ 2,406       $ 1,964
                                      =======       =======

NOTE E - PREMISES AND EQUIPMENT

      Premises and equipment at December 31 are as follows (in thousands):

                                                Estimated
                                               useful lives     2002      2001
                                               ------------   -------   -------

Land                                             Indefinite   $   443   $   443
Buildings and leasehold improvements           10 - 39 years    4,573     4,369
Furniture, fixtures and equipment               3 -  7 years    1,598     1,350
Computer equipment and software                 3 -  5 years    1,754     1,501
Construction in progress                          -               170        68
                                                              -------   -------
                                                                8,538     7,731
Less accumulated depreciation and amortization                 (2,258)   (1,396)
                                                              -------   -------

                                                              $ 6,280   $ 6,335
                                                              =======   =======

      Depreciation and amortization charged to operations amounted to
      approximately $879,000 and $656,000 for year ended December 31, 2002 and
      2001, respectively.

NOTE F - DEPOSITS

      At December 31, 2002, the scheduled maturities of certificates of deposit
      are summarized as follows (in thousands):

2003                           $  89,646
2004                              25,773
                               ---------
                               $ 115,419
                               =========

      Interest expense on deposits is as follows (in thousands):

                                 2002         2001
                                ------       ------

Savings                         $1,610       $1,461
NOW and money market               372          477
Time deposits                    3,075        3,623
                                ------       ------
                                $5,057       $5,561
                                ======       ======


                                       39
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE G - EQUITY TRANSACTIONS

      The Company paid shareholders a 5% stock dividend in 2002 and a 5% stock
      dividend in 2001. Weighted average shares outstanding and earnings per
      share were retroactively adjusted to reflect the stock dividends.

      On August 28, 2002, the Company's Board of Directors declared a
      three-for-two stock split payable September 20, 2002 to shareholders of
      record as of September 10, 2002. Weighted average shares outstanding and
      earnings per share were retroactively adjusted to reflect the stock split.

NOTE H - DEBT

      1. Short-Term Borrowings

      Short-term borrowings consist of overnight federal funds purchased and
      short-term advances from the Federal Home Loan Bank of New York, which
      generally have maturities of less than one month. The details of these
      categories are presented below:

                                                       Year ended December 31,
                                                       -----------------------
                                                          2002         2001
                                                       ---------     ---------
                                                            (in thousands)

Federal funds purchased and short-term advances
   Balance at year-end                                  $11,500      $ 1,600
   Average during the year                                9,015        1,063
   Maximum month-end balance                             15,700        2,500
   Weighted average rate during the year                   1.77%        2.82%
   Rate at December 31                                     1.35         1.85

      2. Guaranteed Preferred Beneficial Interest in the Company's Subordinated
      Debt

      The Company issued $5.0 million of trust preferred securities to a pooled
      investment vehicle sponsored by Bear, Stearns & Co., Inc. on December 20,
      2002. These securities have a floating interest rate equal to three month
      LIBOR plus 335 basis points, which resets quarterly. The initial interest
      rate is 4.76%. The variable interest rate is capped at 12.5% through
      January 7, 2008. The securities mature on January 7, 2033, and may be
      called at par by the Company any time after January 7, 2008. The
      securities were placed in a private transaction exempted from registration
      under the Securities Act of 1933, as amended.

      Although the subordinated debentures are treated as debt of the Company,
      they currently qualify as Tier I capital investments, subject to the 25%
      limitation under risk-based capital guidelines of the Federal Reserve. The
      portion of the Trust Preferred Securities that exceeds this limitation
      qualifies as Tier II capital of the Company. At December 31, 2002 the $5.0
      million of Trust Preferred Securities qualified for treatment as Tier I
      capital.


                                       40
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE I - INCOME TAXES

      The components of the provision for income taxes (benefit) are as follows
      (in thousands):

                                                               2002       2001
                                                             -------    -------

Current
   Federal                                                   $   975    $   893
   State                                                         178         70
                                                             -------    -------

                                                               1,153        963
                                                             -------    -------

Deferred
   Federal provision (benefit)                                     6       (114)
   State provision (benefit)                                       1         (5)
                                                             -------    -------

                                                                   7       (119)
                                                             -------    -------

                                                             $ 1,160    $   844
                                                             =======    =======

      A reconciliation between the reported income tax expense and the amount
      computed by multiplying income before income tax by the Federal statutory
      income tax rate is as follows (in thousands):

                                                               2002       2001
                                                             -------    -------

   Expected statutory income tax expense                     $ 1,081    $   801
   Increase (decrease) in taxes resulting from:
      State taxes on income                                      117         44
      Other, net                                                 (38)        (1)
                                                             -------    -------

   Total income tax provision                                $ 1,160    $   844
                                                             =======    =======

Net deferred tax assets consist of the following
(in thousands):

                                                                2002       2001
                                                             -------    -------

   Allowance for loan loss                                   $   648    $   631
   Organizational and start-up costs                            --           12
   Unrealized gains on investment securities
      available-for-sale                                        (421)      (142)
   Other                                                         (63)       (51)
                                                             -------    -------

      Net deferred tax asset, included in other assets       $   164    $   450
                                                             =======    =======

      Management believes that it is more likely than not that the deferred tax
      assets will be realized; therefore, no valuation allowance was recorded
      for deferred tax assets at December 31, 2002.


                                       41
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE J - OTHER EXPENSES

      Other expenses consist of the following (in thousands):

                                                            2002           2001
                                                           ------         ------

Communications and office expense                          $  317         $  267
Stationery and printing                                       213            320
Data processing                                               904            739
Systems conversion costs                                        3            217
Professional fees                                             448            324
Marketing and advertising                                     470            417
Stockholder expense                                            50             49
Directors' fees                                                77             58
Other                                                         333            244
                                                           ------         ------

                                                           $2,815         $2,635
                                                           ======         ======

NOTE K - EARNINGS PER SHARE

      The following table illustrates the required disclosure of the
      reconciliation of the numerators and denominators of the basic and diluted
      earnings per share (EPS) computations (in thousands, except per share
      data). Weighted-average shares for 2002 and 2001 have been retroactively
      adjusted to reflect the 5% stock dividend in 2002, the 5% stock dividend
      in 2001 and the 3-for-2 stock split in 2002.

                                                  Year ended December 31, 2002
                                                 -------------------------------
                                                            Weighted-
                                                             average   Per share
                                                  Income     shares     amount
                                                 --------   ---------  ---------

Basic EPS
   Net income available to common stockholders   $ 2,020    3,172,687    $0.64

Effect of dilutive securities
   Options                                          --        152,575    (0.03)
                                                 -------    ---------    -----

Diluted EPS
   Net income available to common stockholders
       plus assumed conversion                   $ 2,020    3,325,262    $0.61
                                                 =======    =========    =====

      756 options to purchase shares of common stock with exercise prices of
      $16.50 per share were not included in the computation of 2002 diluted EPS
      because the exercise price was greater than the average market price of
      the common stock.

                                   (Continued)


                                       42
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE K - EARNINGS PER SHARE - Continued

                                                  Year ended December 31, 2001
                                                 -------------------------------
                                                            Weighted-
                                                             average   Per share
                                                  Income     shares     amount
                                                 --------   ---------  ---------

Basic EPS
   Net income available to common stockholders   $ 1,511    3,173,198    $0.48

Effect of dilutive securities
   Options                                          --         63,664    (0.01)
                                                 -------    ---------    -----

Diluted EPS
   Net income available to common stockholders
       plus assumed conversion                   $ 1,511    3,236,862    $0.47
                                                 =======    =========    =====

      24,340 options to purchase shares of common stock with exercise prices
      ranging from $9.43 to $10.35 per share were not included in the
      computation of 2001 diluted EPS because the exercise price was greater
      than the average market price of the common stock.

NOTE L - STOCK OPTIONS

      Under the Company's 1997 Stock Option Plan for Non-Employee Directors (the
      1997 Stock Option Plan for Non-Employee Directors), options to purchase
      80,484 common stock shares may be issued. Each of the nine non-employee
      directors were automatically granted 8,943 common stock options
      exercisable at $6.43 per share (110% of market value on date of grant, as
      adjusted for subsequent stock dividends and stock splits) in July 1997.
      The options vest one-third each year. The option may be exercised up to 10
      years after the grant. At December 31, 2002, 77,503 options were granted
      under this plan.

      Under the Company's 1997 Stock Option Plan (the 1997 Stock Option Plan),
      options to purchase 104,074 common stock shares may be issued. Options to
      purchase 76,608 common stock shares were granted to nine non-employee
      directors at $6.43 per share (110% of market value on date of grant, as
      adjusted for subsequent stock dividends and stock splits) in July 1997, in
      varying amounts to each non-employee director. Additionally, 26,829
      options were granted to the President at $8.25 per share in May 1999, as
      adjusted for subsequent stock dividends and stock splits. The options vest
      one-third each year. The options may be exercised up to 10 years after the
      grant. At December 31, 2002, 103,437 options were granted under this plan.

      Under the Company's 1997 Employee Stock Option Plan (the 1997 Employee
      Stock Option Plan), options to purchase 89,427 common stock shares may be
      issued. The plan is designed to reserve options for employees of the
      Company. The discretion of the board is very broad in determining to whom,
      how many, and at what price options may be issued. Under the Plan,
      employees may be awarded either incentive stock options, which must have
      an exercise price of no less than 100% of the fair market value of the
      common stock on the date of grant, or non-qualified options, which may
      have an exercise price to be determined by the Board of Directors at
      grant, but not less than 85% of the fair market value of the common stock
      on the date of grant. The options under this plan vest from 3 to 5 years.
      At December 31, 2002, 85,830 options were granted under this plan.

                                   (Continued)


                                       43
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE L - STOCK OPTIONS - Continued

      Under the 1998 Stock Option Plan (the 1998 Stock Option Plan) options to
      purchase up to 89,427 shares of common stock may be issued to members of
      management. The Board adopted this stock option plan in connection with
      the retention of the President and Chief Executive Officer of the Company.
      Under the terms of the President's employment, he is entitled to receive
      options to purchase 134,140 shares of common stock. The options under this
      plan vest from 3 to 5 years. At December 31, 2002, 69,713 options were
      granted under this plan.

      The Board of Directors approved and received shareholder approval in April
      2000 for the 2000 Director Stock Option Plan (the 2000 Director Stock
      Option Plan), pursuant to which options to purchase 149,046 common stock
      shares may be issued. Options to purchase 149,046 common stock have been
      granted to eight non-employee directors at $7.94 per share (110% of market
      value on date of grant, as adjusted for subsequent stock dividends and
      stock splits) in varying amounts to each non-employee director. The
      options vest over a two year period. The options may be exercised up to
      ten years after the grant. At December 31, 2002, 149,046 options were
      granted under this plan.

      The Board of Directors approved and received shareholder approval in April
      2000 for the 2000 Employee Stock Option Plan (the 2000 Employee Stock
      Option Plan). Options to purchase 121,551 shares of the common stock will
      be reserved for issuance under this Plan. Options to purchase 50,530
      common stock shares have been granted to key employees, including 23,713
      to the President at prices ranging from $7.56 to $11.33. The options under
      this plan vest from two to five years. The options may be exercised up to
      ten years after grant. At December 31, 2002, 74,243 options were granted
      under this plan.

      A summary of the status of the Company's stock option plans as of December
      31, 2002, and the change during the years then ended is represented below.

                                             2002                   2001
                                     --------------------   --------------------
                                                Weighted-              Weighted-
                                                 average                average
                                                exercise               exercise
                                      Shares      price      Shares      price
                                     --------   ---------   --------   ---------

Outstanding, beginning of year        517,027     $ 7.92     496,709    $ 7.83
Granted                                67,125      10.89      20,318     10.35
Cancelled/forfeited                   (24,381)     10.35        --
                                     --------               --------

Outstanding, end of year              559,771       8.16     517,027      7.92
                                     ========               ========

Weighted-average fair value of
   options granted during the year                $ 4.89                $ 3.49
                                                  ======                ======

                                   (Continued)


                                       44
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE L - STOCK OPTIONS - Continued

      The following table summarizes information about nonqualified options
      outstanding at December 31, 2002:

<TABLE>
<CAPTION>
                                  Options outstanding                Options exercisable
                     -----------------------------------------   --------------------------
                                       Weighted-
                         Number         average      Weighted-       Number       Weighted-
                     outstanding at    remaining      average    outstanding at    average
    Range of          December 31,    contractual    exercise     December 31,    exercise
 exercise prices         2002            life          price          2002          price
-----------------    --------------   -----------    ---------   --------------   ---------

<C>                      <C>           <C>            <C>            <C>            <C>
$  6.43 - $  9.43        427,415       6.3 years      $  7.52        377,285        $7.39
$  9.65 - $10.35         129,356       7.6 years      $  9.94         63,446        $9.87
$16.50                     3,000       10 years       $  16.5           --          $  --
                        --------                                    --------
                         559,771                                     440,731
                        ========                                    ========
</TABLE>

NOTE M - COMMITMENTS

      Lease Commitments

      The Company leases several banking facilities under noncancelable
      operating lease agreements expiring through 2024. At the end of the lease
      terms, the leases are renewable at the then fair rental value for periods
      of 5 to 20 years. Rent expense was $313,000 and $193,000 for the years
      ended December 31, 2002 and 2001, respectively.

      The approximate minimum rental commitments under operating leases at
      December 31, 2002, are as follows (in thousands):

2003                                 $   375
2004                                     457
2005                                     517
2006                                     526
2007                                     513
Thereafter                             6,460
                                     -------

                                     $ 8,848
                                     =======

NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
         CREDIT RISK

      The Company is a party to financial instruments with off-balance-sheet
      risk in the normal course of business to meet the financing needs of its
      customers. These financial instruments include commitments to extend
      credit and standby letters of credit. Those instruments involve, to
      varying degrees, elements of credit and interest rate risk in excess of
      the amount recognized in the financial statements. The Company's exposure
      to credit loss in the event of non-performance by the other party to the
      financial instrument for commitments to extend credit and standby letters
      of credit is represented by the contractual amount of those instruments.
      The Company uses the same credit policies in making commitments and
      conditional obligations as it does for on-balance-sheet instruments.

                                   (Continued)


                                       45
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF
         CREDIT RISK - Continued

      The Company had the following approximate off-balance-sheet financial
      instruments whose contract amounts represent credit risk (in thousands):

                                                         2002         2001
                                                       -------      -------

Commitments to extend credit                           $35,785      $31,355
Letters of credit - standby and performance              4,042        3,344
                                                       -------      -------

                                                       $39,827      $34,699
                                                       =======      =======

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require payment of a fee. Since many of the commitments
      are expected to expire without being drawn upon, the total commitment
      amounts do not necessarily represent future cash requirements. The Company
      evaluates each customer's creditworthiness on a case-by-case-basis. The
      amount of collateral obtained, if deemed necessary by the Company upon
      extension of credit, is based on management's credit evaluation of the
      customer. Collateral held varies but may include guarantees, personal or
      commercial real estate, accounts receivable, inventory, and equipment.

      Standby letters of credit are conditional commitments issued by the
      Company to guarantee the performance of a customer to a third party. Those
      guarantees are primarily issued to support contracts entered into by
      customers. Most guarantees extend for one year. The credit risk involved
      in issuing letters of credit is essentially the same as that involved in
      extending loan facilities to customers.

      Substantially all of the Company's loans are secured by real estate in New
      Jersey. Accordingly, the Company's primary concentration of credit risk is
      related to the real estate market in New Jersey, and the ultimate
      collectibility of this portion of the Company's loan portfolio is
      susceptible to changes in economic conditions in that area.

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS

      SFAS No. 107 requires disclosure of the estimated fair value of an
      entity's assets and liabilities considered to be financial instruments.
      For the Company, as for most financial institutions, the majority of its
      assets and liabilities are considered financial instruments. However, many
      such instruments lack an available trading market, as characterized by a
      willing buyer and seller engaging in an exchange transaction. Also, it is
      the Company's general practice and intent to hold its financial
      instruments to maturity and not to engage in trading or sales activities,
      except for certain loans. Therefore, the Company had to use significant
      estimations and present value calculations to prepare this disclosure.

      Changes in the assumptions or methodologies used to estimate fair values
      may materially affect the estimated amounts. Also, management is concerned
      that there may not be reasonable comparability between institutions due to
      the wide range of permitted assumptions and methodologies in the absence
      of active markets. This lack of uniformity gives rise to a high degree of
      subjectivity in estimating financial instrument fair values.

                                   (Continued)


                                       46
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

      Estimated fair values have been determined by the Company using the best
      available data and an estimation methodology suitable for each category of
      financial instruments. The estimation methodologies used, the estimated
      fair values, and recorded book balances at December 31, 2002 and 2001, are
      outlined below.

      For cash and cash equivalents, including cash and due from banks and
      federal funds sold the recorded book values of $9,424,000 and $9,342,000
      as of December 31, 2002 and 2001, respectively, approximate fair values.
      The estimated fair values of investment securities are based on quoted
      market prices, if available. Estimated fair values are based on quoted
      market prices of comparable instruments if quoted market prices are not
      available.

      The net loan portfolio at December 31, 2002 and 2001, has been valued
      using a present value discounted cash flow where market prices were not
      available. The discount rate used in these calculations is the estimated
      current market rate adjusted for credit risk. The carrying value of
      accrued interest approximates fair value.

      The estimated fair values of demand deposits (i.e., interest- and
      non-interest bearing checking accounts, savings, and certain types of
      money market accounts) are, by definition, equal to the amount payable on
      demand at the reporting date (i.e., their carrying amounts). The fair
      values of certificates of deposit are estimated using a discounted cash
      flow calculation that applies interest rates currently being offered to a
      schedule of aggregated expected monthly time deposit maturities. Based
      upon the current time deposit maturities, the carrying value approximates
      its fair value. The carrying amount of accrued interest payable
      approximates its fair value.

<TABLE>
<CAPTION>
                                                     2002                   2001
                                            ---------------------   ---------------------
                                            Carrying   Estimated    Carrying   Estimated
                                             amount    fair value    amount    fair value
                                            --------   ----------   --------   ----------
                                                              (in thousands)

<S>                                         <C>         <C>         <C>         <C>
Investment securities available-for-sale    $131,676    $131,676    $ 65,439    $ 65,439
Investment securities held-to-maturity          --          --        15,310      15,217
Loans receivable                             182,967     184,749     147,603     149,650
Certificates of deposits                     115,419     115,419      86,382      86,382
</TABLE>

      The fair value of commitments to extend credit is estimated based on the
      amount of unamortized deferred loan commitment fees. The fair value of
      letters of credit is based on the amount of unearned fees plus the
      estimated cost to terminate the letters of credit. Fair values of
      unrecognized financial instruments including commitments to extend credit
      and the fair value of letters of credit are considered immaterial.

NOTE P - REGULATORY MATTERS

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

                                   (Continued)


                                       47
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE P - REGULATORY MATTERS - Continued

      Quantitative measures established by regulations to ensure capital
      adequacy require the Company and the Bank to maintain minimum amounts and
      ratios (set forth in the following table) of total and Tier I capital (as
      defined in the regulations) to risk-weighted assets, and of Tier I capital
      to average assets. Management believes, as of December 31, 2002, that the
      Company and the Bank meet all capital adequacy requirements to which they
      are subject.

      As of December 31, 2002, the Bank met all regulatory requirements for
      classification 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, core risk-based and core leverage
      ratios as set forth in the table. There are no conditions or events that
      management believes have changed the institution's category.

      The Company and the Bank's actual capital amounts and ratios are also
      presented in the following table (in thousands, except percentages).

<TABLE>
<CAPTION>
                                                                                               To be well-
                                                                                            capitalized under
                                                                        For capital         prompt corrective
                                                    Actual           adequacy purposes      action provisions
                                               -----------------   --------------------    -------------------
                                                Amount    Ratio     Amount       Ratio      Amount      Ratio
                                               -------   -------   --------     -------    --------    -------
                                                                  (Dollars in thousands)

<S>                                            <C>        <C>       <C>      <C>           <C>      <C>
As of December 31, 2002
   Total capital (to risk-weighted assets)
      Community Bancorp of New Jersey          $30,316    13.68%    $17,605  >/=  8.00%        N/A        N/A
      Community Bank of New Jersey              25,322    11.51      17,593  >/=  8.00     $21,991  >/= 10.00%

   Tier I capital (to risk-weighted assets)
      Community Bancorp of New Jersey           27,910    12.68       8,803  >/=  4.00         N/A        N/A
      Community Bank of New Jersey              22,916    10.42       8,796  >/=  4.00      13,195  >/=  6.00

   Tier I capital (to average assets)
      Community Bancorp of New Jersey           27,910     8.75       9,564  >/=  3.00         N/A        N/A
      Community Bank of New Jersey              22,916     7.19       9,564  >/=  3.00      15,941  >/=  5.00

As of December 31, 2001
   Total capital (to risk-weighted assets)
      Community Bancorp of New Jersey          $22,859    13.39%    $13,654  >/=  8.00%        N/A        N/A
   Community Bank of New Jersey                 22,864    13.40      13,654  >/=  8.00     $17,067  >/= 10.00%

   Tier I capital (to risk-weighted assets)
      Community Bancorp of New Jersey           20,895    12.24       6,827  >/=  4.00         N/A        N/A
      Community Bank of New Jersey              20,900    12.25       6,827  >/=  4.00      10,240  >/=  6.00

   Tier I capital (to average assets)
      Community Bancorp of New Jersey           20,895     9.17       6,836  >/=  3.00         N/A        N/A
      Community Bank of New Jersey              20,900     9.17       6,836  >/=  3.00      11,394  >/=  5.00

</TABLE>


                                       48
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE Q - PARENT COMPANY FINANCIAL INFORMATION

      The condensed financial information for Community Bancorp of New Jersey,
      parent company only, has been presented as follows (in thousands):

                                  BALANCE SHEET

                                                               December 31,
                                                           -------------------
                                                             2002       2001
                                                           --------   --------

ASSETS

   Cash                                                    $ 4,872     $  --
   Investment in subsidiary                                 23,605      21,148
   Other assets                                                163        --
                                                           -------     -------

       Total assets                                        $28,640     $21,148
                                                           =======     =======

LIABILITIES AND STOCKHOLDERS' EQUITY

   Guaranteed preferred beneficial interest in the
     Company's subordinated debt                           $ 5,000     $  --
   Other liabilities                                            42           5
   Stockholders' equity                                     23,598      21,143
                                                           -------     -------

       Total liabilities and stockholders' equity          $28,640     $21,148
                                                           =======     =======

                             STATEMENT OF OPERATIONS

                                                        Year ended December 31,
                                                        -----------------------
                                                           2002        2001
                                                        ----------   ----------

Interest income                                           $     3    $  --
Services fee from subsidiary                                  193        129
Interest expense on subordinated debt                          (8)      --
Other operating expenses                                     (185)      (129)
                                                          -------    -------

    Income before undistributed income from subsidiary          3       --

Equity in undistributed income of subsidiary                2,017      1,511
                                                          -------    -------

    Net income                                            $ 2,020    $ 1,511
                                                          =======    =======

                                   (Continued)


                                       49
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE Q - PARENT COMPANY FINANCIAL INFORMATION - Continued

                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                Year ended December 31,
                                                                                -----------------------
                                                                                  2002           2001
                                                                                --------       --------

<S>                                                                              <C>           <C>
Cash flows from operating activities
   Net income                                                                    $ 2,020       $ 1,511
   Adjustments to reconcile net income to net cash provided by operations
      Equity in undistributed earnings of subsidiary                              (2,017)       (1,511)
      Net (increase) decrease in other assets                                       (163)          119
      Net increase (decrease) in other liabilities                                    37          (117)
                                                                                 -------       -------

          Net cash (used in) provided by operating activities                       (123)            2
                                                                                 -------       -------

   Cash flows from financing activities
      Proceeds from issuance of long-term debt                                     5,000          --
      Stock dividends and stock split - cash paid in lieu of fractional shares        (8)           (3)
      Effect of treasury stock and option transactions                              --            --
      Issuance of common stock                                                         3          --
                                                                                 -------       -------

          Net cash used in financing activities                                    4,995            (3)

          Net increase (decrease) in cash and cash equivalents                     4,872            (1)
                                                                                 -------       -------

   Cash and cash equivalents at beginning of period                                 --               1
                                                                                 -------       -------

   Cash and cash equivalents at end of year                                      $ 4,872       $  --
                                                                                 =======       =======

</TABLE>


                                       50
<PAGE>


                         COMMUNITY BANCORP OF NEW JERSEY

             Notes to Consolidated Financial Statements - Continued

                           December 31, 2002 and 2001

NOTE R - SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

      The following summarizes the consolidated results of operations during
      2002 and 2001, on a quarterly basis, for Community Bancorp of New Jersey
      (in thousands except per share data):

<TABLE>
<CAPTION>
                                                                    2002
                                                    -------------------------------------
                                                    Fourth     Third    Second     First
                                                    quarter   quarter   quarter   quarter
                                                    -------   -------   -------   -------

<S>                                                 <C>       <C>       <C>       <C>
Interest income                                     $4,158    $4,109    $3,855    $3,756
Interest expense                                     1,393     1,325     1,227     1,280
                                                    ------    ------    ------    ------

   Net interest income                               2,765     2,784     2,628     2,476

Provision for loan losses                               53       155       595        90
                                                    ------    ------    ------    ------

   Net interest after provisions for loan losses     2,712     2,629     2,033     2,386

Non-interest income                                    333       292       309       386
Gain on sales of investment securities                --         554      --        --
Non-interest expense                                 2,118     2,302     2,107     1,927
                                                    ------    ------    ------    ------

   Income before income taxes                          927     1,173       235       845

Income taxes                                           339       445        84       292
                                                    ------    ------    ------    ------

   Net income                                       $  588    $  728    $  151    $  553
                                                    ======    ======    ======    ======

Net income per share
   Basic                                            $ 0.19    $ 0.23    $ 0.05    $ 0.17
   Diluted                                          $ 0.18    $ 0.22    $ 0.05    $ 0.16

<CAPTION>
                                                                    2001
                                                    -------------------------------------
                                                    Fourth     Third    Second     First
                                                    quarter   quarter   quarter   quarter
                                                    -------   -------   -------   -------

<S>                                                 <C>       <C>       <C>       <C>
Interest income                                     $3,658    $3,633    $3,405    $3,469
Interest expense                                     1,325     1,363     1,371     1,532
                                                    ------    ------    ------    ------

   Net interest income                               2,333     2,270     2,034     1,937

Provision for loan losses                               45        95       100       146
                                                    ------    ------    ------    ------

   Net interest after provisions for loan losses     2,288     2,175     1,934     1,791

Non-interest income                                    405       289       376       358
Non-interest expense                                 1,994     1,876     1,768     1,623
                                                    ------    ------    ------    ------

   Income before income taxes                          699       588       542       526

Income taxes                                           243       214       195       192
                                                    ------    ------    ------    ------

   Net income                                       $  456    $  374    $  347    $  334
                                                    ======    ======    ======    ======

Net income per share
   Basic                                            $ 0.14    $ 0.12    $ 0.11    $ 0.11
   Diluted                                          $ 0.14    $ 0.12    $ 0.11    $ 0.10
</TABLE>


                                       51
<PAGE>


               Report of Independent Certified Public Accountants

Board of Directors and Stockholders
Community Bancorp of New Jersey

      We have audited the consolidated balance sheets of Community Bancorp of
New Jersey as of December 31, 2002 and 2001, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. 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 audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Community
Bancorp of New Jersey as of December 31, 2002 and 2001, and the consolidated
results of its consolidated operations and consolidated cash flows for the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.


Philadelphia, Pennsylvania
January 15, 2003


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