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

**FORM 10-Q**

|**[X]**   | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the quarterly period ended March 31, 2006                                                                                                                                                       
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**[   ]** | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from _____________ to ___________

**Commission file number 000-1330039**

**AMERICAN BANCORP OF NEW JERSEY, INC.**(Exact name of registrant as specified in its charter)

|**New Jersey**(State or other jurisdiction
of incorporation or organization)                                                                                     | **55-0897507**(I.R.S. EmployerIdentification Number)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------
|**365 Broad Street, Bloomfield, New Jersey 07003**(Address of Principal Executive Offices)**(973) 748-3600**(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or 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 whether the registrant is a large accelerated filer, an accelerate filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act.  (Check one):

|Large accelerated filer [    ] | Accelerated filer [    ] | Non-accelerated filer [ X ]
|------------------------------ | ------------------------ | ---------------------------

As of May 10, 2006, there were 14,169,469 outstanding shares of the Registrant's Common Stock.

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**AMERICAN BANCORP OF NEW JERSEY, INC.**

**Table of Contents**

|**PART I - FINANCIAL INFORMATION (UNAUDITED)**
|----------------------------------------------
|                                              
|Item 1.                                       
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|                                              
|Item 2.                                       
|                                              
|Item 3.                                       
|                                              
|Item 4.                                       
|                                              
|**PART II - OTHER INFORMATION**               
|Item 1.                                       
|Item 2.                                       
|Item 3.                                       
|Item 4.                                       
|Item 5.                                       
|Item 6.                                       
|                                              
|**FORM 10-Q SIGNATURE PAGE**                  
|                                              
|**CERTIFICATIONS**                            



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**ITEM 1. FINANCIAL STATEMENTS**

**American Bancorp of New Jersey, Inc.
Statements of Financial Condition
(in thousands, except share data)
(unaudited)**

|                                                                                                  |                                                                                                                                                                       |                                 |                                            | **March 31,2006** | **September 30,2005**
|------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | ----------------- | ---------------------
|**ASSETS**                                                                                       
|Cash and cash equivalents                                                                        
|                                                                                                  | Cash and due from banks                                                                                                                                               | $    1,960                      | $    2,622                                
|                                                                                                  | Interest-bearing deposits                                                                                                                                             | 16,945                          | 105,851                                   
|                                                                                                  | Federal funds sold                                                                                                                                                    | -                               | 17,300                                    
|                                                                                                  |                                                                                                                                                                       | Total cash and cash equivalents | 18,905                                     | 125,773          
|                                                                                                 
|Securities available-for-sale                                                                     | 92,873                                                                                                                                                                | 62,337                         
|Securities held-to-maturity (fair value: March 31, 2006 -
  $11,661; September 30, 2005 - $7,694) | 11,887                                                                                                                                                                | 7,824                          
|Loans, net                                                                                        | 371,979                                                                                                                                                               | 341,006                        
|Loans held for sale                                                                               | 419                                                                                                                                                                   | 280                            
|Premises and equipment                                                                            | 4,266                                                                                                                                                                 | 4,131                          
|Federal Home Loan Bank stock, at cost                                                             | 3,121                                                                                                                                                                 | 3,119                          
|Cash surrender value of life insurance                                                            | 8,587                                                                                                                                                                 | 7,512                          
|Accrued interest receivable                                                                       | 1,869                                                                                                                                                                 | 1,468                          
|Other assets                                                                                      | 2,372                                                                                                                                                                 | 2,410                          
|                                                                                                  | Total assets                                                                                                                                                          | $ 516,278                       | $ 555,860                                 
|**LIABILITIES AND STOCKHOLDERS' EQUITY**                                                         
|Liabilities                                                                                      
|                                                                                                  | Deposits                                                                                                                                                             
|                                                                                                  |                                                                                                                                                                       | Noninterest-bearing             | $   27,001                                 | $   25,583       
|                                                                                                  |                                                                                                                                                                       | Interest-bearing                | 302,189                                    | 315,342          
|                                                                                                  |                                                                                                                                                                       |                                 | Total deposits                             | 329,190           | 340,925              
|                                                                                                  | Stock subscriptions received                                                                                                                                          | -                               | 115,201                                   
|                                                                                                  | Advance payments by borrowers for taxes and insurance                                                                                                                 | 2,580                           | 2,443                                     
|                                                                                                  | Federal Home Loan Bank borrowings                                                                                                                                     | 52,405                          | 53,734                                    
|                                                                                                  | Accrued interest payable and other liabilities                                                                                                                        | 3,473                           | 3,578                                     
|                                                                                                  | Common stock in ESOP subject to contingent repurchase obligation                                                                                                      | -                               | 473                                       
|                                                                                                  |                                                                                                                                                                       | Total liabilities               | 387,648                                    | 516,354          
|Stockholders' Equity                                                                             
|                                                                                                  | September 30, 2005 - preferred stock, $.10 par value, 5,000,000
  shares authorized March 31, 2006 - preferred stock, 
  $.10 par value, 10,000,000 shares authorized | -                               | -                                         
|                                                                                                  | September 30, 2005 - Common stock, $.10 par value,
  20,000,000 shares authorized; 5,554,500 shares issued and outstanding                                           
|                                                                                                  | March 31, 2006 - Common stock, $.10 par value,
  20,000,000 shares authorized; 14,169,469 shares issued and outstanding                                               | 1,417                           | 555                                       
|                                                                                                  | Additional paid-in capital                                                                                                                                            | 111,492                         | 17,242                                    
|                                                                                                  | Unearned ESOP shares                                                                                                                                                  | (8,774)                         | (1,064)                                   
|                                                                                                  | Unearned RSP shares                                                                                                                                                   | -                               | (1,212)                                   
|                                                                                                  | Retained earnings                                                                                                                                                     | 25,720                          | 25,417                                    
|                                                                                                  | Accumulated other comprehensive loss                                                                                                                                  | (1,225)                         | (959)                                     
|                                                                                                  | Amount reclassified on ESOP shares                                                                                                                                    | -                               | (473)                                     
|                                                                                                  |                                                                                                                                                                       | Total stockholders' equity      | 128,630                                    | 39,506           
|                                                                                                  |                                                                                                                                                                       |                                 | Total liabilities and stockholders' equity | $ 516,278         | $ 555,860            

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Income
(in thousands, except share data)
(unaudited)**

|                                                    |                                                    |                           |                               |                                 |           |         
|--------------------------------------------------- | -------------------------------------------------- | ------------------------- | ----------------------------- | ------------------------------- | --------- | --------
|                                                    |                                                    |                           | **Six Months EndedMarch 31,** | **Three Months EndedMarch 31,**
|                                                    |                                                    |                           | **2006**                      | **2005**                        | **2006**  | **2005**
|Interest and dividend income                       
|                                                    | Loan, including fees                               | $   9,538                 | $   8,483                     | $   4,847                       | $   4,345
|                                                    | Securities                                         | 1,909                     | 1,450                         | 1,132                           | 711      
|                                                    | Federal funds sold and other                       | 872                       | 61                            | 260                             | 33       
|                                                    |                                                    | Total interest income     | 12,319                        | 9,994                           | 6,239     | 5,089   
|                                                   
|Interest expense                                   
|                                                    | NOW and money market                               | 400                       | 206                           | 206                             | 108      
|                                                    | Savings                                            | 1,055                     | 1,108                         | 551                             | 532      
|                                                    | Certificates of deposit                            | 2,728                     | 1,705                         | 1,381                           | 896      
|                                                    | Federal Home Loan Bank advances                    | 1,291                     | 1,404                         | 635                             | 707      
|                                                    |                                                    | Total interest expense    | 5,474                         | 4,423                           | 2,773     | 2,243   
|                                                   
|Net interest income                                 | 6,845                                              | 5,571                     | 3,466                         | 2,846                          
|                                                   
|Provision for loan losses                           | 246                                                | 112                       | 159                           | 70                             
|                                                   
|Net interest income after provision for loan losses | 6,599                                              | 5,459                     | 3,307                         | 2,776                          
|                                                   
|Noninterest income                                 
|                                                    | Deposit service fees and charges                   | 366                       | 320                           | 183                             | 146      
|                                                    | Income from cash surrender value of life insurance | 155                       | 133                           | 80                              | 73       
|                                                    | Gain on sale of loans                              | 8                         | 1                             | 6                               | -        
|                                                    | Loss on sales of securities available-for-sale     | (271)                     | -                             | -                               | -        
|                                                    | Other                                              | 140                       | 83                            | 103                             | 71       
|                                                    |                                                    | Total noninterest income  | 398                           | 537                             | 372       | 290     
|                                                   
|Noninterest expense                                
|                                                    | Salaries and employee benefits                     | 3,087                     | 2,545                         | 1,689                           | 1,335    
|                                                    | Occupancy and equipment                            | 405                       | 409                           | 206                             | 204      
|                                                    | Data processing                                    | 315                       | 293                           | 157                             | 148      
|                                                    | Advertising                                        | 125                       | 140                           | 73                              | 76       
|                                                    | Professional and consulting                        | 255                       | 166                           | 137                             | 99       
|                                                    | Legal                                              | 108                       | 156                           | 23                              | 81       
|                                                    | Other                                              | 514                       | 402                           | 279                             | 211      
|                                                    |                                                    | Total noninterest expense | 4,809                         | 4,111                           | 2,564     | 2,154   
|                                                   
|Income before provision for income taxes            | 2,188                                              | 1,885                     | 1,115                         | 912                            
|Provision for income taxes                          | 837                                                | 691                       | 427                           | 328                            
|                                                   
|Net income                                          | $   1,351                                          | $   1,194                 | $     688                     | $     584                      
|                                                   
|Comprehensive income                                | $   1,085                                          | $     726                 | $     309                     | $     114                      
|                                                   
|Earnings per share:                                
|                                                    | Basic                                              | $    0.10                 | $    0.09                     | $    0.05                       | $    0.04
|                                                    | Diluted                                            | $    0.10                 | $    0.09                     | $    0.05                       | $    0.04
|                                                   

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Stockholders' Equity
Six months ended March 31, 2005
(in thousands)
(unaudited)**

|                                                                                                                       | CommonStock    | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedRSPShares | RetainedEarnings | AccumulatedOtherComprehensiveLoss | AmountReclassifiedOn ESOPShares | TotalEquity  | ComprehensiveIncome(Loss)
|---------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------ | ------------------ | ----------------- | ---------------- | --------------------------------- | ------------------------------- | ------------ | -------------------------
|Balance at September 30, 2004                                                                                          | $          555 | $         15,687         | $       (1,200)    | $           -     | $   24,806       | $                 (482)           | $             (52)              | $     39,314 |                          
|RSP stock grants                                                                                                       | -              | 1,332                    | -                  | (1,332)           | -                | -                                 | -                               | -            |                          
|RSP shares earned                                                                                                      | -              | -                        | -                  | 67                | -                | -                                 | -                               | 67           |                          
|ESOP shares earned                                                                                                     | -              | 47                       | 69                 | -                 | -                | -                                 | -                               | 116          |                          
|ESOP dividend proceeds                                                                                                 | -              | -                        | -                  | -                 | -                | -                                 | -                               | -            |                          
|Cash dividends paid - $0.75 per share                                                                                  | -              | -                        | -                  | -                 | (1,152)          | -                                 | -                               | (1,152)      |                          
|Reclassification due to change in fair value
  of common stock in ESOP subject  to 
  contingent repurchase obligation | -              | -                        | -                  | -                 | -                | -                                 | (260)                           | (260)        |                          
|                                                                                                                      
|Comprehensive income                                                                                                   |                |                          |                    |                   |                  |                                   |                                 |              |                          
|Net income                                                                                                             | -              | -                        | -                  | -                 | 1,194            | -                                 | -                               | 1,194        |                          
|Change in unrealized gain on securities
       available-for-sale,  net of taxes                                       | -              | -                        | -                  | -                 | -                | (468)                             | -                               | (468)        |                          
|Total comprehensive income                                                                                             |                |                          |                    |                   |                  |                                   |                                 |              | $        726             
|                                                                                                                      
|Balance at March 31, 2005                                                                                              | $         555  | $      17,066            | $     (1,131)      | $   (1,265)       | $     24,848     | $          (950)                  | $         (312)                 | $     38,811 |                          
|                                                                                                                       |                |                          |                    |                   |                  |                                   |                                 |              |                          

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Stockholders' Equity
Six months ended March 31, 2006
(in thousands)
(unaudited)**

|                                                                                                | CommonStock     | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedRSPShares | RetainedEarnings | AccumulatedOtherComprehensiveLoss | AmountReclassifiedOn ESOPShares | TotalEquity | ComprehensiveIncome(Loss)
|----------------------------------------------------------------------------------------------- | --------------- | ------------------------ | ------------------ | ----------------- | ---------------- | --------------------------------- | ------------------------------- | ----------- | -------------------------
|Balance at September 30, 2005                                                                   | $   555         | $ 17,242                 | $     (1,064)      | $     (1,212)     | $   25,417       | $   (959)                         | $          (473)                | $  39,506   |                          
|Transfer of Unearned RSP to
  APIC due to adoption of
  FAS 123R                                | -               | (1,212)                  | -                  | 1,212             | -                | -                                 | -                               | -           |                          
|Issuance and exchange of 
  common stock, net of 
  issuance costs                              | 862             | 96,661                   | (7,935)            | -                 | -                | -                                 | -                               | 89,588      |                          
|MHC capital infusion from 
  merger                                                             | -               | 98                       | -                  | -                 | -                | -                                 | -                               | 98          |                          
|RSP share purchases                                                                             | -               | (1,601)                  | -                  | -                 | -                | -                                 | -                               | (1,601)     |                          
|RSP shares earned                                                                               | -               | 131                      | -                  | -                 | -                | -                                 | -                               | 131         |                          
|Stock options earned                                                                            |                 | 126                      | -                  | -                 | -                | -                                 | -                               | 126         |                          
|ESOP shares earned                                                                              | -               | 47                       | 225                | -                 | -                | -                                 | -                               | 272         |                          
|Cash dividends paid - 
  $0.04 per share                                                        | -               | -                        | -                  | -                 | (1,048)          | -                                 | -                               | (1,048)     |                          
|Reclassification due to 
  elimination of
  repurchase obligation                               | -               | -                        | -                  | -                 | -                | -                                 | 473                             | 473         |                          
|                                                                                               
|Comprehensive income                                                                            |                 |                          |                    |                   |                  |                                   |                                 |             |                          
|Net income                                                                                      | -               | -                        | -                  | -                 | 1,351            | -                                 | -                               | 1,351       |                          
|Change in unrealized
       gain on securities
       available-for-sale,  net 
       of taxes | -               | -                        | -                  | -                 | -                | (266)                             | -                               | (266)       |                          
|Total  comprehensive
            income                                                         |                 |                          |                    |                   |                  |                                   |                                 |             | $       1,085            
|Balance at March 31, 2006                                                                       | $         1,417 | $    111,492             | $      (8,774)     | $     -           | $   25,720       | $      (1,225)                    | $         -                     | $  128,630  |                          
|                                                                                                |                 |                          |                    |                   |                  |                                   |                                 |             |                          

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Cash Flows
(in thousands)
(unaudited)**

|                                                 |                                                                                    |                                                    |                                    | **Six Months EndedMarch 31,**
|------------------------------------------------ | ---------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------- | -----------------------------
|                                                 |                                                                                    |                                                    |                                    | **2006**                     
|**Cash flows from operating activities**        
|                                                 | Net income                                                                         | $   1,351                                          | $   1,194                         
|                                                 | Adjustments to reconcile net income to net cash
  provided by operating activities
|                                                 |                                                                                    | Depreciation and amortization                      | 170                                | 180                          
|                                                 |                                                                                    | Net amortization of premiums and discounts         | (28)                               | 66                           
|                                                 |                                                                                    | Losses on sales of securities available-for-sale   | 271                                | -                            
|                                                 |                                                                                    | ESOP compensation expense                          | 272                                | 116                          
|                                                 |                                                                                    | RSP compensation expense                           | 131                                | 67                           
|                                                 |                                                                                    | SOP compensation expense                           | 126                                | -                            
|                                                 |                                                                                    | Provision for loan losses                          | 246                                | 112                          
|                                                 |                                                                                    | Increase in cash surrender value of life insurance | (155)                              | (133)                        
|                                                 |                                                                                    | Gain on sale of loans                              | (8)                                | (1)                          
|                                                 |                                                                                    | Proceeds from sales of loans                       | 2,999                              | 144                          
|                                                 |                                                                                    | Origination of loans held for sale                 | (3,130)                            | (444)                        
|                                                 |                                                                                    | Decrease (increase) in accrued interest receivable | (401)                              | (112)                        
|                                                 |                                                                                    | Decrease (increase) in other assets                | 255                                | (104)                        
|                                                 |                                                                                    | Change in deferred income taxes                    | (62)                               | (20)                         
|                                                 |                                                                                    | Increase (decrease) in other liabilities           | (105)                              | (15)                         
|                                                 |                                                                                    |                                                    | Net cash from operating activities | 1,932                        
|                                                
|**Cash flows from investing activities**        
|                                                 | Net increase in loans receivable                                                   | (31,219)                                           | (24,395)                          
|                                                 | Purchases of securities held-to-maturity                                           | (4,935)                                            | (6,227)                           
|                                                 | Principal paydowns on securities held-to-maturity                                  | 862                                                | 490                               
|                                                 | Purchases of securities available-for-sale                                         | (52,606)                                           | -                                 
|                                                 | Sales of securities available-for-sale                                             | 9,750                                              | -                                 
|                                                 | Calls of securities available-for-sale                                             | -                                                  | 2,000                             
|                                                 | Maturities of securities available-for-sale                                        | 2,000                                              | -                                 
|                                                 | Principal paydowns on securities available-for-sale                                | 9,666                                              | 10,725                            
|                                                 | Purchase of Federal Home Loan Bank stock                                           | (93)                                               | (1,828)                           
|                                                 | Redemption of Federal Home Loan Bank stock                                         | 91                                                 | 1,205                             
|                                                 | Purchase of bank-owned life insurance                                              | (920)                                              | (1,000)                           
|                                                 | Purchase of premises and equipment                                                 | (305)                                              | (329)                             
|                                                 |                                                                                    | Net cash from investing activities                 | (67,709)                           | (19,359)                     
|                                                
|****Cash from financing activities****          
|                                                 | Net increase (decrease)  in deposits                                               | (11,735)                                           | 5,327                             
|                                                 | Net change in advance payments by borrowers for taxes and insurance                | 137                                                | 169                               
|                                                 | Repayment of Federal Home Loan Bank of New York advances                           | (2,029)                                            | (1,028)                           
|                                                 | Net change in Federal Home Loan Bank of New York OLOC                              | 700                                                | 11,800                            
|                                                 | Net proceeds from stock issuance                                                   | 89,588                                             | -                                 
|                                                 | MHC capital infusion                                                               | 98                                                 | -                                 
|                                                 | RSP share purchases                                                                | (1,601)                                            | -                                 
|                                                 | Cash dividends paid                                                                | (1,048)                                            | (1,152)                           
|                                                 | Stock subscriptions refunded or applied                                            | (115,201)                                          | -                                 
|                                                 |                                                                                    | Net cash from financing activities                 | (41,091)                           | 15,116                       
|Net change in cash and cash equivalents          | (106,868)                                                                          | (3,193)                                           
|Cash and cash equivalents at beginning of period | 125,773                                                                            | 8,034                                             
|**Cash and cash equivalents at end of period**   | $   18,905                                                                         | $   4,841                                         

(Continued)



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**American Bancorp of New Jersey, Inc.
Statements of Cash Flows
(in thousands)
(unaudited)**

|                                                            |                                 |                                                                  |           | **Six Months EndedMarch 31,**
|----------------------------------------------------------- | ------------------------------- | ---------------------------------------------------------------- | --------- | -----------------------------
|                                                            |                                 |                                                                  |           | **2006**                     
|Supplemental cash flow information:                        
|                                                            | Cash paid during the period for
|                                                            |                                 | Interest                                                         | $   5,475 | $   4,422                    
|                                                            |                                 | Income taxes, net of refunds                                     | 981       | 910                          
|                                                           
|Supplemental disclosures of non-cash financing transaction:
|                                                            |                                 | Transfer of stock subscriptions received and deposits to capital | 89,588    | -                            

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Notes To Unaudited Financial Statements
(tables in thousands)**

Note 1 - Basis of Presentation

American Bancorp of New Jersey, Inc. (the "Company") is a New Jersey  chartered corporation
organized in May 2005 that was formed for the purpose of acquiring all of the capital stock of American
Bank of New Jersey (the "Bank"), which was previously owned by ASB Holding Company ("ASBH").
ASBH was a federally chartered corporation organized in June 2003 that was formed for the purpose of
acquiring all of the capital stock of American Bank of New Jersey, which was previously owned by
American Savings, MHC (the "MHC"), a federally chartered mutual holding company.  The Bank had
previously converted from a mutual to a stock savings bank in a mutual holding company
reorganization in 1999 in which no stock was sold to any person other than the MHC.

On October 3, 2003, ASBH completed a minority stock offering and sold 1,666,350 shares of
common stock in a subscription offering at $10 per share and received proceeds of $16,060,000 net of
offering costs of $603,000.  See Note 2 Minority Offering for further discussion.

After the sale of the stock in the minority offering, the MHC held 70%, or 3,888,150 shares, of the
outstanding stock of ASBH, with the remaining 30% or, 1,666,350 shares held by persons other than the
MHC.  ASBH held 100% of the Bank's outstanding common stock.

On October 5, 2005, the Company completed a second step conversion at which time ASB
Holding Company ceased to exist and American Bancorp of New Jersey, Inc. became the new holding
company for the Bank.  The Company currently holds 100% of the outstanding stock of American Bank
of New Jersey.  See Note 3 Second Step Conversion for further discussion.

The accompanying unaudited consolidated financial statements include the accounts of
American Bancorp of New Jersey, Inc. and its wholly owned subsidiaries, American Bank of New Jersey
and ASB Investment Corp. (the "Investment Corp.") as of March 31, 2006 and for the three and six
months ended March 31, 2006.  The consolidated financial statements as of September 30, 2005 and the
three and six months ended March 31, 2005 are those of ASB Holding Company, the Company's
predecessor.  Significant intercompany accounts and transactions have been eliminated in consolidation.
References in this Quarterly Report on Form 10-Q to the Company generally refer to the Company and
the Bank, unless the context indicates otherwise.  References to "we," "us," or "our" refer to the Bank or
Company, or both, as the context indicates.

The primary business of the Company is the ownership of the Bank and the Investment Corp.
The Bank provides a full range of banking services to individual and corporate customers in New Jersey.
The Bank is subject to competition from other financial institutions and to the regulations of certain
federal and state agencies and undergoes periodic examinations by those regulatory authorities.  The
Investment Corp. was organized for the purpose of selling insurance and investment products, including
annuities, to customers of the Bank and the general public, with initial activities limited to the sale of
fixed rate annuities.  The Investment Corp. has had limited activity to date.

The accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by accounting principles
generally accepted in the United States of America for complete financial statements.  These interim
statements should be read in conjunction with the consolidated financial statements and notes included
in the Annual Report on Form 10-K.  The September 30, 2005 balance sheet presented herein has been
derived from the audited financial statements included in the consolidated financial statements and
notes included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission,
but does not include all disclosures required by accounting principles generally accepted in the United
States of America.



---

To prepare financial statements in conformity with accounting principles generally accepted in
the United States of America, management makes estimates and assumptions based on available
information.  These estimates and assumptions affect the amounts reported in the financial statements
and the disclosures provided, and future results could differ.  The allowance for loan losses, prepayment
speeds on mortgage -backed securities, and status of contingencies are particularly subject to change.

Interim statements are subject to possible adjustment in connection with the annual audit of the
Company for the year ended September 30, 2006.  In the opinion of management of the Company, the
accompanying unaudited interim consolidated financial statements reflect all of the adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated
financial position and consolidated results of operations for the periods presented.

The results of operations for the six months ended March 31, 2006 are not necessarily indicative
of the results to be expected for the full year or any other period.

Note 2 - Minority Offering

On October 3, 2003, ASB Holding Company, the predecessor of American Bancorp of
New Jersey, Inc., completed a minority stock offering and sold 1,666,350 shares of common
stock in a subscription offering at $10 per share and received proceeds of $16,060,000 net of
offering costs of $603,000.  ASBH contributed $9,616,000 or approximately 60% of the net
proceeds to the Bank in the form of a capital contribution.  ASBH loaned $1,333,080 to the
Bank's employee stock ownership plan and the ESOP used those funds to acquire 133,308
shares of common stock at $10 per share.

After the sale of the stock, the MHC held 70%, or 3,888,150 shares, of the outstanding stock of
ASBH with the remaining 30% or, 1,666,350 shares, held by persons other than the MHC.  ASBH held
100% of the Bank's outstanding common stock.

Note 3 - Second Step Conversion

On October 5, 2005, the Company completed a second step conversion in which the
3,888,150 shares of ASB Holding Company held by American Savings, MHC were converted
and sold in a subscription offering.  Through this transaction, ASB Holding Company ceased to
exist and was supplanted by American Bancorp of New Jersey as the holding company for the
Bank.  A total of 9,918,750 shares of common stock were sold in the offering at $10 per share
through which the Company received proceeds of $97,524,302 net of offering costs of
$1,663,198.  The Company contributed $48,762,151 or approximately 50% of the net proceeds to
the Bank in the form of a capital contribution.  The Company loaned $7,935,000 to the Bank's
employee stock ownership plan and the ESOP used those funds to acquire 793,500 shares of
common stock at $10 per share.

As part of the conversion, the 1,666,350 outstanding shares of ASB Holding Company
were each exchanged for 2.55102 of the Company's shares.  This exchange resulted in an
additional 4,250,719 shares of American Bancorp of New Jersey, Inc. being issued for a total of
14,169,469 outstanding shares.



---

The Company had stock subscriptions received totaling $115,201,806 at September 30,
2005 pending completion of the conversion and stock offering.  At the time of closing on
October 5, 2005, approximately $91,252,500, less offering expenses, became capital of the
Company with the remainder being returned on oversubscriptions.  The following table
summarizes the pro forma impact of the conversion and stock offering results on the
Company's September 30, 2005 balance sheet.

**Actual and Pro Forma Summary Consolidated Statement of Financial Condition
September 30, 2005**

|                                                                    | **Actual** | **Pro Forma**
|------------------------------------------------------------------- | ---------- | -------------
|**ASSETS**                                                         
|Cash and cash equivalents(1)                                        | $ 125,773  | $  92,166    
|Securities available-for-sale                                       | 62,337     | 62,337       
|Securities held-to-maturity                                         | 7,824      | 7,824        
|Loans held for sale                                                 | 280        | 280          
|Loans receivable, net of allowance for loan losses                  | 341,006    | 341,006      
|Premises and equipment                                              | 4,131      | 4,131        
|Federal Home Loan Bank stock, at cost                               | 3,119      | 3,119        
|Cash surrender value of life insurance                              | 7,512      | 7,512        
|Accrued interest receivable                                         | 1,468      | 1,468        
|Other assets                                                        | 2,410      | 1,797        
|Total assets                                                        | $ 555,860  | $ 521,640    
|**LIABILITIES AND EQUITY**                                         
|Deposits(2)                                                         | 340,925    | 331,167      
|Stock subscriptions received(3)                                     | 115,201    | -            
|Advance payments by borrowers for taxes and insurance               | 2,443      | 2,443        
|Federal Home Loan Bank advances                                     | 53,734     | 53,734       
|Accrued expenses and other liabilities                              | 3,578      | 4,629        
|Common stock in ESOP subject to contingent repurchase obligation(6) | 473        | -            
|Total liabilities                                                   | 516,354    | 391,973      
|Equity                                                             
|Common stock and additional paid in capital(4)                      | 17,797     | 115,420      
|Unearned ESOP shares(5)                                             | (1,064)    | (8,999)      
|Unearned RSP shares                                                 | (1,212)    | (1,212)      
|Retained earnings                                                   | 25,417     | 25,417       
|Accumulated other comprehensive loss                                | (959)      | (959)        
|Amount reclassified on ESOP shares(6)                               | (473)      | -            
|Total equity                                                        | 39,506     | 129,667      
|Total liabilities and equity                                        | $ 555,860  | $ 521,640    

|(1) | Pro forma balance reflects reduction of cash for funding the return of approximately $33.7 million in oversubscriptions.                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Pro forma balance reflects approximately $9.8 million of deposit balances withdrawn to purchase shares in the stock offering.                                                                                                                                                                                                                                           
|(3) | Pro forma balance reflects refund of $33.7 million of oversubscriptions plus the utilization of $81.5 million of subscriptions to
purchase shares in the stock offering.                                                                                                                                                                                                
|(4) | Pro forma balance reflects additional capital from deposits, subscriptions and ESOP purchases of $9.8 million, $81.5 million
and $7.9 million, respectively.  An additional $99,000 of capital was received through the merger of American Savings, MHC
into the Bank.  These additions to capital were offset by stock offering expenses of approximately $1.6 million.
|(5) | Pro forma balance reflects the addition of $7.9 million of unearned shares purchased by the ESOP during the stock offering.                                                                                                                                                                                                                                             
|(6) | Pro forma balance reflects the elimination of ESOP contingent repurchase obligation of $473,000.                                                                                                                                                                                                                                                                        



---

Note 4 - Earnings Per Share (EPS)

Amounts reported as basic earnings per share of common stock reflect earnings available to
common stockholders for the period divided by the weighted average number of common shares
outstanding during the period less unearned ESOP shares.  Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock (such as stock awards and options)
were exercised or converted into common stock or resulted in the issuance of common stock that then
shared in the earnings of the entity.  Diluted EPS is computed by dividing income by the weighted-average number of shares outstanding for the period plus common-equivalent shares computed using
the treasury stock method.

The factors used in the earnings per share computation follow.

|                                                                                | **Six Months EndedMarch 31,** | **Three Months EndedMarch 31,**
|------------------------------------------------------------------------------- | ----------------------------- | -------------------------------
|****                                                                            | **2006**                      | **2005**                       
|Basic                                                                          
|Net income                                                                      | $ 1,351                       | $ 1,194                        
|                                                                               
|Weighted average common shares
outstanding                                      | 13,141,302                    | 13,874,766                     
|                                                                               
|Basic earnings per common
share                                                 | $   0.10                      | $   0.09                       
|                                                                               
|Diluted                                                                         |                               |                                
|Net income                                                                      | $ 1,351                       | $ 1,194                        
|                                                                               
|Weighted average common shares
outstanding  for basic earnings per
common share | 13,141,302                    | 13,874,766                     
|                                                                               
|Add:  Dilutive effects of assumed
exercises of  stock options                   | 86,411                        | -                              
|                                                                               
|Add:  Dilutive effects of full vesting
of stock  awards                         | 33,855                        | -                              
|Average shares and dilutive
potential  common shares                            | 13,261,567                    | 13,874,766                     
|                                                                               
|Diluted earnings per common
share                                               | $   0.10                      | $   0.09                       

Note 5 - Employee Stock Ownership Plan

As part of the minority stock offering, the Bank established an ESOP for the benefit of
substantially all employees.  The ESOP borrowed $1,333,080 from ASBH and used those funds
to acquire 133,308 shares of ASBH stock at $10 per share.  As part of the second step conversion,
the ESOP borrowed $7,935,000 from the Company to acquire an additional 793,500 shares of the
Company's stock at $10 per share.  At the time of the closing of the second step conversion, the
unpaid balance of the first ESOP borrowing of approximately $1,064,000 was combined with
the balance of the second ESOP borrowing resulting in a total ESOP borrowing obligation of
approximately $8,999,000 to the Company.  Additionally, each of the 133,308 ASBH shares held
by the ESOP from the minority offering were exchanged for 2.55102 shares of the Company.



---

Shares issued to the ESOP are allocated to ESOP participants based on principal and
interest repayments made by the ESOP on the loan from the Company.  The loan is secured by
shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the
Bank's discretionary contributions to the ESOP and earnings on the ESOP's assets.  Principal
and interest payments are scheduled to occur over a twenty-year period.

At March 31, 2006, the ESOP held 1,133,571 shares of the Company's common stock and
81,933 of these shares had been allocated to the accounts maintained for participants.
Participants become eligible to receive payment of the vested benefits under the plan upon
retirement, disability or termination of employment.  Participants who elect to receive their
benefit payments in the form of American Bancorp of New Jersey, Inc. common stock may
require the Company to purchase the common stock distributed at fair value during two 60-day
periods.  The first purchase period begins on the date the benefit is paid and the second
purchase period begins on the first anniversary of the payment date.  At September 30, 2005,
this contingent repurchase obligation was reflected in the Company's financial statements as
"Common stock in ESOP subject to contingent repurchase obligation" and reduces stockholder's
equity by an amount that represents the fair value of all the shares of Company common stock
held by the ESOP, without regard to whether it is likely that the shares would be distributed or
that the recipients of the shares would be likely to exercise their right to require the Company
to purchase the shares.  At September 30, 2005, this contingent repurchase obligation reduced
stockholders' equity by $473,000.  On October 5, 2005, the Company completed its second step
offering (as discussed in Note 3 to the consolidated financial statements).  On October 6, 2005,
the Company began trading on Nasdaq which is considered to be an established market under
ERISA regulations.  As a result, effective October 6, 2005, the Company is no longer required to
establish a liability to reflect this repurchase obligation.  Consequently, at March 31, 2006, this
contingent repurchase obligation was no longer recorded as a reduction of stockholder's equity.

Note 6 - Other Stock-Based Compensation

At the annual meeting held on January 20, 2005, stockholders of ASBH approved the ASB
Holding Company 2005 Stock Option Plan ("SOP") and the American Bank of New Jersey 2005 Restricted
Stock Plan ("RSP").  272,171 shares of common stock were made available under the 2005 Stock Option
Plan.  On January 20, 2005, options to purchase 259,923 shares were awarded with the remaining 12,248
shares awarded on May 6, 2005.  In addition, 81,651 shares of common stock were made available under
the 2005 Restricted Stock Plan.  On January 20, 2005, 76,752 shares of restricted stock were awarded with
the remaining 4,899 shares awarded on May 6, 2005.

As of the closing of the Company's second step conversion on October 5, 2005, each of the ASBH
shares included in the 2005 Restricted Stock Plan and 2005 Stock Option Plan were exchanged for 2.55102
shares of American Bancorp of New Jersey, Inc.  Consequently, awarded shares under the 2005
Restricted Stock Plan and 2005 Stock Option Plan totaled 208,295 and 694,315, respectively, at that time.

Shares of common stock issuable pursuant to outstanding options under the 2005 Stock Option
Plan are considered outstanding for purposes of calculating earnings per share on a diluted basis.  The
Financial Accounting Standards Board has announced a change in the required accounting methods
applicable to stock options that became effective during the first quarter of fiscal 2006.  Under such
accounting requirements, the Company is now required to recognize compensation expense related to
stock options outstanding based upon the fair value of such awards at the date of grant over the period
that such awards are earned.  For the six months ended March 31, 2006, the Company recognized
approximately $126,000 of compensation expense relating to the 2005 Stock Option Plan.  The Company
recognized approximately $19,000 of income tax benefit resulting from this expense for that period.



---

For accounting purposes, the Company continues to recognize compensation expense for shares
of common stock awarded under the 2005 Restricted Stock Plan over the vesting period at the fair market
value of the shares on the date they are awarded.  For the six months ended March 31, 2006, the
Company recognized approximately $156,000 of compensation expense relating to the 2005 Restricted
Stock Plan.  The Company recognized approximately $62,000 of income tax benefit resulting from this
expense for that period.

During the six months ended March 31, 2006, 6,249 RSP shares and 19,094 SOP options that had
been previously awarded were forfeited by a participant due to the participant's discontinued
employment by the Bank.  The Company reversed approximately $6,400 of accrued RSP compensation
expense in the six months ended March 31, 2006 resulting from that forfeiture.  The Company may
consider awarding such shares and options at a later date.

As of March 31, 2006, there were approximately $949,000 and $1,038,000, respectively of total
unrecognized compensation costs related to nonvested stock options and nonvested restricted stock plan
shares.   Those costs are expected to be recognized over a weighted-average period of 3.8 years.

For the fiscal year ended September 30, 2005, employee compensation expense for stock options
granted in January and May of 2005 were reported using the intrinsic value method.  No stock-based
compensation cost was reflected in net income, as all options granted had an exercise price equal to or
greater than the market price of the underlying common stock at date of grant.  The table below
illustrates the effect on net income and basic and diluted earnings per share if expense was measured
using the fair value recognition provisions of FASB Statement No. 123, *Accounting for Stock-Based
Compensation*for the comparative three and six month periods ended March 31, 2005.

|                                            | **Six Months Ended
March 31, 2005** | **Three Months Ended
March 31, 2005**
|------------------------------------------- | ----------------------------------- | -------------------------------------
|Basic                                      
|Net Income                                  | $        1,194                      | $            584                     
|                                            |                                     |                                      
|Pro forma net income                        | 1,146                               | 536                                  
|                                            |                                     |                                      
|Weighted average common shares outstanding  | 13,874,766                          | 13,881,805                           
|                                            |                                     |                                      
|Basic earnings per common share             | $           0.09                    | $           0.04                     
|                                            |                                     |                                      
|Pro forma basic earnings per  common share  | $           0.08                    | $           0.04                     
|                                           
|Diluted                                     |                                     |                                      
|Diluted earnings per common share           | $           0.09                    | $           0.04                     
|                                            |                                     |                                      
|Pro forma diluted earnings per common
share | $           0.08                    | $           0.04                     
|                                            |                                     |                                      



---

The fair value of options granted and actual effects are computed using the Black-Scholes option
pricing model, using the following weighted-average assumptions as of the grant dates.

|                                                              | **January 20, 2005** | **May 6, 2005**
|------------------------------------------------------------- | -------------------- | ---------------
|**Options Awarded**                                           | ****                 |                
|                                                              |                      |                
|Risk free interest rate                                       | 3.67%                | 3.95%          
|                                                              |                      |                
|Expected option life                                          | 5.00                 | 5.00           
|                                                              |                      |                
|Expected stock price volatility                               | 22.00%               | 22.00%         
|                                                              |                      |                
|Dividend yield                                                | 0.00%                | 0.00%          
|                                                              |                      |                
|Weighted average fair value of options    granted during year | $ 4.75               | $ 5.00         

A summary of the activity in the Company's stock option plan for the six months ended March 31, 2006
is as follows.

|                                            | Shares   | WeightedAverageExercisePrice
|------------------------------------------- | -------- | ----------------------------
|Outstanding at beginning of period          | 694,315  | $       6.81                
|Granted                                     | -        | -                           
|Exercised                                   | -        | -                           
|Forfeited or expired                        | (19,094) | $       6.80                
|Outstanding at end of period                | 675,221  | $       6.81                
|Options exercisable at period end           | 128,790  | $       6.80                
|Weighted average remaining contractual life |          | 8.8 years                   

The aggregate intrinsic value of stock options outstanding and exercisable at March 31, 2006 was $530,615.



---

A summary of the status of the Company's nonvested restricted stock plan shares as of March 31, 2006
and changes during the six months ended March 31, 2006 are as follows.

|                                 | Shares   | WeightedAverageGrant-DateFair Value
|-------------------------------- | -------- | -----------------------------------
|Nonvested at beginning of period | 208,295  | $       6.81                       
|Granted                          | -        | -                                  
|Vested                           | (37,908) | $       6.80                       
|Forfeited or expired             | (6,249)  | $       6.80                       
|Nonvested at end of period       | 164,138  | $       6.81                       



---

|**ITEM 2.** | **MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**
|----------- | ----------------------------------------------------------------------------------------

Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended.  The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 as amended and is including this statement for purposes of these
safe harbor provisions.  Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, and expectations of the Company, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar expressions.  The Company's ability to predict results or the actual effect of future
plans or strategies is inherently uncertain.  Factors that could have a material adverse affect on
the operations and future prospects of the Company and its wholly-owned subsidiaries
include, but are not limited to, changes in:  interest rates; general economic conditions;
legislative/regulatory provisions; monetary and fiscal policies of the U.S. Government,
including policies of the U.S. Treasury and the Federal Reserve Board; the quality or
composition of the loan or investment portfolios; demand for loan products; deposit flows;
competition; and demand for financial services in the Company's market area.  These risks and
uncertainties should be considered in evaluating forward-looking statements, and undue
reliance should not be placed on such statements.

**Critical Accounting Policies**

Various elements of our accounting policies, by their nature, are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments.  The following
is a description of our critical accounting policy and an explanation of the methods and
assumptions underlying its application.

**Allowance for Loan Losses.**  Our policy with respect to the methodologies used to determine the allowance for loan
losses is our most critical accounting policy.  This policy is important to the presentation of our
financial condition and results of operations, and it involves a higher degree of complexity and
requires management to make difficult and subjective judgments, which often require
assumptions or estimates about highly uncertain matters.  The use of different judgments,
assumptions, and estimates could result in material differences in our results of operations or
financial condition.

In evaluating the level of the allowance for loan losses, management considers the
Company's historical loss experience as well as various "environmental factors" including the
types of loans and the amount of loans in the loan portfolio, adverse situations that may affect
the borrower's ability to repay, estimated value of any underlying collateral, peer group
information, and prevailing economic conditions.  Large groups of smaller balance
homogeneous loans, such as residential real estate, small commercial real estate, and home
equity and consumer loans, are evaluated in the aggregate using historical loss factors and peer
group data adjusted for current economic conditions.  Large balance and/or more complex
loans, such as multi-family, commercial real estate and construction loans, are evaluated
individually for impairment.  This evaluation is inherently subjective, as it requires estimates
that are susceptible to significant revision, as more information becomes available or as
projected events change.

Management assesses the allowance for loan losses quarterly.  While management uses
available information to recognize losses on loans, future loan loss provisions may be necessary
based on changes



---

Application of the Bank's loan loss methodology outlined above results, in part, in
historical and environmental loss factors being applied to the outstanding balance of
homogeneous groups of loans to estimate probable credit losses.  For example, as a result of
continued loan growth, a part of the Bank's loan portfolio is considered "unseasoned," meaning
the loans were originated less than three years ago.  Generally, unseasoned loans demonstrate a
greater risk of credit losses than their seasoned counterparts.  Moreover, in many cases, these
unseasoned loans are obligations of borrowers with whom the Bank has had no prior payment
experience.  These risks are considered in the environmental factors used in the Bank's loss
provision calculations as described above.  Both historical and environmental loss factors are
reviewed and updated quarterly, where appropriate, as part of management's assessment of the
allowance for loan losses.

During the prior fiscal year, changes to environmental factors used in the Bank's loss
provision calculations generally reflected the Company's increased strategic focus on
commercial real estate and construction lending.  Environmental factors applied to the
outstanding balance of construction and commercial mortgages reflected increased balances of
unseasoned loans and concerns about potential  changes in real estate values.  However, the
impact of these increases were partially offset by reductions in environmental factors
attributable to the experience, ability, and depth of lending management and staff both of
which were enhanced during the prior fiscal year.  No significant changes to environmental
factors used in the Bank's loss provision calculations have been made during the first six
months of fiscal 2006.

Management generally expects provisions for loan losses to increase as a result of the net growth
in loans called for in the Company's business plan.  Specifically, our business strategy calls for increased
strategic emphasis in commercial real estate, construction and business lending.  The loss factors used in
the Bank's loan loss calculations are generally higher for such loans compared with those applied to one-to-four family mortgage loans.  Consequently, future net growth in commercial real estate, construction
and business loans may result in required loss provisions that exceed those recorded in prior years when
comparatively greater strategic emphasis had been placed on growing the 1-4 family mortgage loan
portfolio.

**Executive Summary**

The Company's results of operations depend primarily on its net interest income.  Net
interest income is the difference between the interest income we earn on our interest-earning
assets and the interest we pay on our interest-bearing liabilities.  It is a function of the average
balances of loans and investments versus deposits and borrowed funds outstanding in any one
period and the yields earned on those loans and investments and the cost of those deposits and
borrowed funds.  Our interest-earning assets consist primarily of residential mortgage loans,
multi-family and commercial real estate mortgage loans, residential mortgage-related
securities, and U.S. Agency debentures.  Interest-bearing liabilities consist primarily of retail
deposits and borrowings from the Federal Home Loan Bank of New York.

During the Company's fiscal year ended September 30, 2004, the general level of market
interest rates began to increase from the historical lows of the prior periods.  Such increases
slowed the pace of loan refinancing, thereby reducing the rate at which the Company's earning
assets prepaid.  Slowing prepayments resulted in a corresponding reduction in the amortization
of deferred costs and premiums



---

Through the first half of fiscal 2005, the Company continued to realize improvements in
its net interest margin as increases in earning asset yields continued to outpace those of its
interest bearing-liabilities.  However, that trend reversed in the latter half of 2005 when upward
pressure on the Company's cost of deposits resulted in an increase in the Company's cost of
interest-bearing liabilities greater than the increase in the yield of its interest-earning assets.
For the year ended September 30, 2005, the Company experienced a 16 basis point increase in
its yield on earning assets to 4.84% from 4.68% for year ended September 30, 2004.  This
increase was attributable to a 22 basis point increase in the yield on investment securities and a
207 basis point increase in the yield on interest-bearing deposits and other earning assets.
These increases were partially offset by a 7 basis point decline in the yield on loans.  Offsetting
this overall improvement in earning asset yields was a 15 basis point increase in the cost of
interest-bearing liabilities to 2.56% from 2.41%.  This increase resulted, in part, from a 26 basis
point increase in the cost of interest-bearing deposits.  This increase was partially offset by an
18 basis point decrease in the cost of borrowings resulting primarily from increased utilization
of overnight borrowings.  In total, the Company's net interest margin remained unchanged at
2.60% for fiscal 2005 and fiscal 2004.

During the first half of fiscal 2006, the Company's net interest spread declined to 1.90%
in comparison to 2.28% for fiscal 2005 as increases in the Company's cost of interest bearing
liabilities continued to outpace the increase in the Company's yield on earning assets.  This
decline was attributable, in part, to the Company maintaining a comparatively higher average
balance of investment securities and short term, liquid assets during the current period.  These
balances resulted from the initial receipt of capital from the Company's second step conversion
which were deployed into such assets throughout the quarter ended December 31, 2005.
Additionally, continued upward pressure on the cost of retail deposits resulted in increases in
interest expense which outpaced the increase in interest income resulting from improved yields
on loans.  The average cost of interest bearing deposits increased 59 basis points from 2.16% for
fiscal 2005 to 2.75% for the six months ended March 31, 2006.  For the same comparative
periods, yield on loans increased 6 basis points from 5.32% to 5.38%.

The factors resulting in the compression of the Company's net interest spread also
impacted the Company's net interest margin.  However, the effects of that compression were
more than offset by the impact of the additional capital raised in the Company's second-step
conversion.  As a result, the Company's net interest margin increased 15 basis points from
2.60% for fiscal 2005 to 2.75% for the six months ended March 31, 2006.

Our results of operations are also affected by our provision for loan losses.  Provisions
for specific nonperforming assets and historical losses based on net charge-offs continue to be
nominal due to a history of low charge-offs and the relative stability of nonperforming asset
balances.  Non-performing loans as a percentage of total assets have increased modestly to
0.32% of total assets at March 31, 2006 from 0.21% of total assets at September 30, 2005.
However, management did not perceive this increase in nonperforming assets to require
additional loan loss provisions.  Consequently, loan loss provisions in the current year continue
to be made primarily in connection with the overall growth in portfolio loans.

Our results of operations also depend on our noninterest income and noninterest
expense.  Noninterest income includes deposit service fees and charges, income on the cash
surrender value of life insurance, gains on sales of loans and securities, gains on sales of other
real estate owned and loan related



---

Gains and losses on sale of assets, excluded in the comparison above, typically result
from the Company selling long term, fixed rate mortgage loan originations into the secondary
market for interest rate risk management purposes.  Demand for such loans typically fluctuates
with market interest rates.  As interest rates rise, market demand for long term, fixed rate
mortgage loans diminishes in favor of hybrid ARMs which the Company retains in the
portfolio rather than selling into the secondary market.  Consequently, the gains and losses on
sale of loans reported by the Company will fluctuate with market conditions.  Additionally,
such gains and losses may also reflect the impact of infrequent investment security sales for
asset/liability management purposes.

Noninterest expense includes salaries and employee benefits, occupancy and equipment
expenses and other general and administrative expenses. Generally, certain operating costs
have increased since the Company's first public offering in the beginning of fiscal 2004.
Operating as a public entity resulted in comparatively higher legal, accounting and compliance
costs throughout fiscal 2004 and fiscal 2005 than had been recorded in earlier years.  This trend
is expected to continue as the Company incurs additional compliance costs associated with the
Sarbanes-Oxley Act of 2002.  Additionally, the Company is recording higher employee
compensation and benefit expense than it had in the years preceding its stock offerings.  Much
of this increase is attributable to the implementation of ESOP benefits resulting from the
Company's first and second step conversions that did not exist prior to fiscal 2004.
Additionally, benefit costs increased as the Company implemented the restricted stock and
stock option plans approved by shareholders during fiscal 2005.

In the aggregate, noninterest expense as a percentage of average assets totaled 1.87% for
the six months ended March 31, 2006, a decrease of 15 basis points from 2.02% for fiscal 2005.
As noted above, this decrease was largely attributable to the overall growth in average earning
assets which outpaced growth in noninterest expenses.

Notwithstanding the improvements in the noninterest expense ratio noted above,
management expects occupancy and equipment expense to increase in future periods as we
implement our de novo branching strategy to expand our branch office network.  Our current
plan is to open up to five de novo branches over approximately the next three to five years.  As
discussed in our financial statements, we have identified a number of specific sites for de novo
branches while we continue to evaluate and pursue additional retail branching opportunities.
Costs for land purchase and branch construction will impact earnings going forward.  The
expenses associated with opening new offices, in addition to the personnel and operating costs
that we will have once these offices are open, are expected to significantly increase noninterest
expenses.

The Company also expects compensation and occupancy expense to increase in future
periods as additional lending staff is added to support the Bank's loan growth and
diversification strategies.  Implementation of these strategies will likely result in the need to
augment the office space available for our lending and administrative operations in order to
add the personnel called for by our growth plans.

Finally, management expects the ongoing costs associated with the Sarbanes-Oxley Act
of 2002 to also grow as outsourced providers of internal audit and other related services are
utilized to augment management's compliance efforts.



---

In total, our annualized return on average assets increased 7 basis points to 0.53% for the
six months ended March 31, 2006 from 0.46% for fiscal 2005 while annualized return on average
equity decreased 317 basis points to 2.13% from 5.30% for the same comparative periods.  The
reduction in return on average equity reflects the increase in shareholder's equity resulting
from the closing of the Company's second step conversion during the quarter ended December
31, 2005.

Our net interest margin may be adversely affected in either a rising or falling rate
environment.  A decrease in interest rates could trigger another wave of loan refinancing that
could result in the margin compression previously experienced.  Conversely, further increases
in interest rates from current levels could trigger increases in the Bank's cost of interest-bearing
liabilities that continue to outpace its yield on earning assets causing further net interest spread
compression.  Such compression occurred during the six months ended March 31, 2006 when
our net interest spread shrank 38 basis point to 1.90% from 2.28% for the fiscal year ended
September 30, 2005.  As noted earlier, this decline was attributable, in part, to the Company
maintaining a comparatively higher average balance of investment securities and short term,
liquid assets during the first half of fiscal 2006 than during fiscal 2005.  These balances resulted
from the initial receipt of capital proceeds from the Company's second step conversion which
were deployed into such assets throughout the quarter ended December 31, 2005.  Higher
average balances of these assets limited the increase in the yield on earning assets to 12 basis
points from 4.84% for fiscal 2005 to 4.96% for the six months ended March 2006.

The increase in yield on earning assets was offset by a 50 basis point increase in the cost
of interest-bearing liabilities from 2.56% for fiscal 2005 to 3.06% for the six months ended March
31, 2006.  This increased cost was attributable, in large part, to overall increases in market
interest rates and the resulting increases in the Company's cost of retail deposits which
continue to be subject to significant upward pressure due to highly competitive market pricing
for deposits.

The risk of disintermediation of our deposits into higher cost accounts continues to be
noteworthy given the Bank's substantial net growth in non-maturity deposits during the prior
three years.  Like many banks, we were successful in growing deposits while interest rates
decreased to their historical lows.  However, our ability to retain such deposits at a reasonable
cost, while a highly competitive marketplace adjusts its pricing strategies to an environment of
rising interest rates, continues to be rigorously tested.

Finally, our results of operations may also be affected significantly by other economic
and competitive conditions in our market area as well as changes in applicable laws,
regulations or governmental policies.  Furthermore, because our lending activity is
concentrated in loans secured by real estate located in northern New Jersey, downturns in the
regional economy encompassing New Jersey could have a negative impact on our earnings.

**Comparison of Financial Condition at March 31, 2006 and September 30, 2005**

Our total assets decreased by $39.6 million, or 7.1%, to $516.3 million at March 31, 2006
from $555.9 million at September 30, 2005.  The decrease reflected reductions in cash and cash
equivalents, partially offset by increases in securities available for sale, securities held to
maturity and loans receivable, net.

At September 30, 2005, the Bank's total assets were inflated by $115.2 million of stock
subscriptions held pending the closing of the Company's second step conversion.  To better
reflect the allocation of the Company's interest-earning assets and interest-costing liabilities, the
September 30, 2005 information presented in the tables below utilizes the pro forma balance of
total assets discussed in Note 3 of the financial statements in percentage of total assets
calculations.



---

Cash and cash equivalents decreased by $106.9 million, or 85.0%, to $18.9 million at
March 31, 2006 from $125.8 million at September 30, 2005.  The decrease in cash and cash
equivalents was largely attributable to the investment of capital proceeds received following
the closing of the Company's second step conversion into loans receivable, net, securities
available-for-sale and securities held-to-maturity.  Additionally, the Company refunded $33.7
million of oversubscriptions upon closing the second step conversion.

Securities classified as available-for-sale increased $30.5 million, or 49.0%, to $92.9
million at March 31, 2006 from $62.3 million at September 30, 2005.  Additionally, securities
held to maturity increased $4.1 million, or 51.9% to $11.9 million at March 31, 2006 from $7.8
million at September 30, 2005.  The net growth in investments reflects the purchase of $57.5
million of securities during the quarter ended December 31, 2005 funded by a portion of the net
proceeds received in the Company's second step conversion and the proceeds of a mutual fund
sale.  The sale comprised the Company's entire investment in a mutual fund whose underlying
assets consisted primarily of adjustable rate and other shorter duration mortgage-related
securities.

The securities purchased comprised a combination of fixed and adjustable rate MBS,
fixed rate CMOs and fixed rate, non-callable U.S. agency debentures.  Securities were selected
to complement the short average life and stable cash flow characteristics of the Company's
existing securities portfolio.  The Company expects to continue utilizing these cash flows, as
well as a portion of the remaining balance of cash and cash equivalents noted above, to fund its
projected growth in commercial real estate and business loans.

The following table compares the composition of the Company's investment securities
portfolio by security type as a percentage of total assets at March 31, 2006 and September 30,
2005.  Amounts reported exclude unrealized gains and losses on the available for sale portfolio.

|                             | March 31, 2006         | September 30, 2005     
|---------------------------- | ---------------------- | -----------------------
|Type of Securities           | Amount                 | Percent of Total Assets
|                             | (Dollars in thousands)
|                             |                        |                        
|Fixed rate MBS               | $ 16,224               | 3.14%                  
|ARM MBS                      | 28,221                 | 5.47                   
|Fixed rate CMO               | 37,795                 | 7.31                   
|Floating rate CMO            | 2,558                  | 0.50                   
|ARM mutual fund              | -                      | -                      
|Fixed rate agency debentures | 21,917                 | 4.25                   
|Total                        | $ 106,715              | 20.67%                 

Assuming no change in interest rates, the estimated average life of the investment securities
portfolio, excluding the ARM mutual fund, was 2.17 years and 2.26 years at March 31, 2006 and
September 30, 2005, respectively.  Assuming a hypothetical immediate and permanent increase in
interest rates of 300 basis points, the estimated average life of the portfolio extends to 2.54 years and 2.67
years at March 31, 2006 and September 30, 2005, respectively.

Loans receivable, net increased by $31.0 million, or 9.1%, to $372.0 million at March 31, 2006 from
$341.0 million at September 30, 2005.  The growth was comprised of net increases in multi-family,
commercial real estate and construction loans totaling $14.7 million coupled with net increases in
commercial and business loans totaling $3.9 million.  Together, net growth in these loan balances totaled



---

The following two tables compare the composition of the Company's loan portfolio by loan type
as a percentage of total assets at March 31, 2006 with that of September 30, 2005.  Amounts reported
exclude allowance for loan losses and net deferred origination costs.

The table below generally defines loan type by loan maturity and/or repricing characteristics:

|                            | March 31, 2006         | September  30, 2005   
|--------------------------- | ---------------------- | ----------------------
|Type of Loans               | Amount                 | Percent ofTotal Assets
|                            | (Dollars in thousands)
|                            |                        |                       
|Construction                | $ 7,919                | 1.53%                 
|1/1 and 3/3 ARMs            | 5,303                  | 1.03                  
|3/1 and 5/1 ARMs            | 129,469                | 25.09                 
|5/5 and 10/10 ARMs          | 41,091                 | 7.96                  
|7/1 and 10/1 ARMs           | 1,703                  | 0.33                  
|15 year fixed or less       | 109,616                | 21.23                 
|Greater than 15 year fixed  | 56,500                 | 10.94                 
|Home equity lines of credit | 16,225                 | 3.14                  
|Consumer                    | 722                    | 0.14                  
|Commercial                  | 4,653                  | 0.90                  
|                            |                        |                       
|Total                       | $ 373,201              | 72.29%                

The table below generally defines loan type by collateral or purpose:

|                            | March 31, 2006         | September  30, 2005   
|--------------------------- | ---------------------- | ----------------------
|Type of Loans               | Amount                 | Percent ofTotal Assets
|                            | (Dollars in thousands)
|                            |                        |                       
|Construction                | $ 7,919                | 1.53%                 
|1-4 family mortgage         | 277,166                | 53.70                 
|Multifamily (5+) mortgage   | 31,976                 | 6.19                  
|Nonresidential mortgage     | 34,540                 | 6.69                  
|Home equity lines of credit | 16,225                 | 3.14                  
|Consumer                    | 722                    | 0.14                  
|Commercial                  | 4,653                  | 0.90                  
|                            |                        |                       
|Total                       | $ 373,201              | 72.29%                

Total deposits decreased by $11.7 million, or 3.4%, to $329.2 million at March 31, 2006
from $340.9 million at September 30, 2005.  This decrease was primarily attributable to $9.8
million of deposit balances withdrawn to purchase shares in the Company's stock offering.  The
remaining $1.9 million of net deposit withdrawals were primarily attributable to aggressive
deposit competition in the markets served by the Company.  In total, savings deposits declined
$11.7 million, or 9.5% while certificates of deposit increased



---

The following table compares the composition of the Company's deposit portfolio by category as
a percentage of total assets at March 31, 2006 with that of September 30, 2005.

|                        | March 31, 2006         | September 30, 2005    
|----------------------- | ---------------------- | ----------------------
|Deposit category        | Amount                 | Percent ofTotal Assets
|                        | (Dollars in thousands)
|                        |                        |                       
|Money market checking   | $ 24,228               | 4.69%                 
|Other checking          | 40,273                 | 7.80                  
|Money market savings    | 17,787                 | 3.45                  
|Other savings           | 93,754                 | 18.16                 
|Certificates of deposit | 153,148                | 29.66                 
|Total                   | $ 329,190              | 63.76%                

FHLB advances decreased $1.3 million, or 2.5%, to $52.4 million at March 31, 2006 due to
scheduled principal repayments of advance amortization and maturities.

The following table compares the composition of the Company's borrowing portfolio by
remaining term to maturity as a percentage of total assets at March 31, 2006 with that of September 30,
2005.  Scheduled principal payments on amortizing borrowings are reported as maturities.

|                     | March 31, 2006         | September 30, 2005    
|-------------------- | ---------------------- | ----------------------
|Remaining Term       | Amount                 | Percent ofTotal Assets
|                     | (Dollars in thousands)
|                     |                        |                       
|Overnight            | $ 700                  | 0.14%                 
|One year or less     | 9,061                  | 1.76                  
|One to two years     | 6,064                  | 1.17                  
|Two to three years   | 14,067                 | 2.72                  
|Three to four years  | 7,513                  | 1.46                  
|Four to five years   | 6,000                  | 1.16                  
|More than five years | 9,000                  | 1.74                  
|                     |                        |                       
|Total                | $ 52,405               | 10.15%                

Equity increased $89.1 million, or 225.6% to $128.6 million at March 31, 2006 from $39.5 million
at September 30, 2005.  The increase was primarily due to capital proceeds of $89.6 million resulting from
the Company's closing of its second step conversion.  The increase also reflects net income of $1.4 million
for the six months ended March 31, 2006, offset by dividends paid of approximately $1.0 million.
Further, the amount reclassified on ESOP shares decreased $473,000 to $0.  On October 5, 2005, the
Company completed its second step offering (as discussed in Note 3 to the consolidated financial
statements).  On October 6, 2005, the Company began trading on Nasdaq which is considered to be an
established market under ERISA regulations.  As a result, effective October 6, 2005, the Company is no
longer required to establish a liability to reflect this repurchase obligation.



---

**Comparison of Operating Results for the Three Months Ended March 31, 2005 and March 31, 2005**

**General.**  Net income for the three months ended March 31, 2006 was $688,000, an increase of
$104,000, or 17.8% from the three months ended March 31, 2005.  The increase in net income resulted
from an increase in net interest income and non-interest income offset by an increase in noninterest
expense, the provision for loan losses and the provision for income taxes.

**Interest Income.**  Total interest income increased 22.6% or $1.1 million to $6.2 million for the
three months ended March 31, 2006 from $5.1 million for the three months ended March 31, 2005.  For
those same comparative quarters, the average yield on interest-earning assets increased 19 basis points to
5.04% from 4.85% while the average balance of interest-earning assets increased $75.0 million or 17.9% to
$494.8 million from $419.8 million.

Interest income on loans increased $502,000 or 11.6%, to $4.8 million for the three months ended
March 31, 2006 from $4.3 million for the same quarter in 2005.  This increase was due, in part, to a $35.9
million increase in the average balance of loans receivable to $360.4 million for the quarter ended March
31, 2006 from $324.4 million for the quarter ended March 31, 2005.  In addition, the average yield on
loans increased 2 basis points to 5.38% from 5.36% for those same comparative periods.  The increase in
the average balance of loans receivable was the result of loan originations exceeding repayments due to
strong borrower demand and a growing strategic emphasis on commercial real estate lending.

The rise in interest income on loans was augmented by higher interest income on securities,
which increased $421,000 or 59.2% to $1.1 million for the three months ended March 31, 2006 from
$711,000 for the same three months in 2005.  The increase was due in part, to a 90 basis point increase in
the average yield on securities which grew to 4.11% from 3.21% for the same comparative periods.  The
impact on interest income attributable to this increase was further enhanced by a $21.5 million increase in
the average balance of investment securities to $110.1 million for the three months ended March 31, 2006
from $88.5 million for the same 2005 period.  The increase in yield primarily resulted from purchases of
investment securities with the proceeds of the Company's second step conversion and, to a lesser extent,
on slowing prepayments which reduced net premium amortization and higher yields on adjustable rate
securities which have repriced upward in accordance with the general movement of market interest
rates.

Further, interest income on federal funds sold and other interest-bearing deposits increased
$227,000 to $260,000 for the three months ended March 31, 2006 from $33,000 for the same period in 2005.
This increase was due, in part, to an increase of $17.5 million in the average balance of these assets to
$24.3 million for the three months ended March 31, 2006 from $6.9 million for the three months ended
March 31, 2005.  The impact on interest income attributable to this growth was further augmented by a
237 basis point rise in the average yield on these assets which increased to 4.27% from 1.90% due largely
to increases in market interest rates.

**Interest Expense.**  Total interest expense increased by $530,000 or 23.6% to $2.8 million for the
three months ended March 31, 2006 from $2.2 million for the same three months in fiscal 2005.  For those
same comparative periods, the average cost of interest-bearing liabilities increased 69 basis points from
2.44% to 3.13%, while the average balance of interest-bearing liabilities declined $13.1 million or 3.6% to
$354.1 million for the three months ended March 31, 2006 from $367.2 million for the same quarter in
fiscal 2005.

Interest expense on deposits increased $602,000 or 39.2% to $2.1 million for the quarter ended
March 31, 2006 from $1.5 million for the quarter ended March 31, 2005.  This increase was due, in part, to
an 82 basis point increase in the average cost of interest-bearing deposits to 2.84% for the quarter ended
March 31, 2006 from 2.02% for the same quarter in fiscal 2005.  The components of this increase include
an 83 basis point increase in the average cost of certificates of deposit, a 96 basis point increase in the
average

---

Interest expense on FHLB advances decreased $72,000 to $635,000 for the three months ended
March 31, 2006 from $707,000 for the same period in fiscal 2005.  This decrease was due, in part, to a
$10.9 million decrease in the average balance to $52.7 million for the three months ended March 31, 2006
from $63.7 million for the same three months in fiscal 2005.  The impact on expense attributable to this
decrease in average balance was partly offset by a 38 basis point increase in the average cost of advances
from 4.45% for the three months ended March 31, 2005 to 4.83% for the same period in fiscal 2006.  The
higher average cost for the current quarter is primarily due to the lower average balance of overnight
repricing line of credit borrowings compared with that held during the earlier comparative quarter.  The
cost of such overnight borrowings during that earlier quarter was significantly less than that of the
remaining portfolio of fixed-rate term advances.

**Net Interest Income.**  Net interest income increased by $620,000 or 21.8%, to $3.5 million for the
three months ended March 31, 2006 from $2.8 million for the three months ended March 31, 2005.  The
net interest rate spread declined 50 basis points from 2.41% to 1.91% for the same comparative periods,
while the net interest margin increased 9 basis points from 2.71% to 2.80%.

**Provision for Loan Losses.**Using the allowance methodology described earlier, the provision
for loan losses totaled $159,000 for the three months ended March 31, 2006 representing an increase of
$89,000 over the same three months in 2005.  The comparative three month provisions generally resulted
from the incremental growth in the outstanding balance of the loans on which historical and
environmental loss factors are applied.  For the three months ended March 31, 2006, loans receivable, net
increased 5.0% to $372.0 million from $354.2 million at December 31, 2005.  Total gross loan balances,
excluding loans held for sale, net deferred loan costs and the allowance for loan loss, grew $17.9 million.
The growth was comprised of a net increase in the disbursed balances of construction loans of $3.3
million, net increases in multi-family and commercial real estate loans totaling $6.0 million and a net
increase in commercial loans totaling $2.8 million.  Additional components of the net change in gross
loan balances included net increases in one-to-four family mortgages totaling $6.0 million coupled with
increases in home equity loans of $329,000.

By comparison, loan growth for the three months ended March 31, 2005 totaled $14.8 million or
$3.1 million less than the same comparative period this year.  The growth in this prior comparative
period was comprised of an increase in one-to-four family mortgages totaling $10.2 million, an increase
of $3.7 million in multi-family and commercial real estate loans, an increase of $218,000 in commercial
loans, an increase of $16,000 in home equity loans and by net increases in the disbursed balances of
construction loans totaling $949,000, offset by a decrease in consumer loans totaling $18,000.

In total, the allowance for loan losses as a percentage of gross loans outstanding increased 1 basis
point to 0.51% at March 31, 2006 from 0.50% at March 31, 2005.  These ratios reflect allowance for loan
loss balances of $1.9 million and $1.7 million, respectively.  The level of the allowance is based on
estimates and the ultimate losses may vary from those estimates.

**Noninterest Income.**  Noninterest income increased $82,000 to $372,000 for the three months
ended March 31, 2006 compared to $290,000 for the same period in 2005.  This increase was primarily
attributable to increases in deposit service fees, loan related fee income and improvement in income from
cash surrender value of life insurance.  Deposit service fees and charges increased $37,000 while

---

**Noninterest Expense.**  Noninterest expense increased $410,000, or 19.0% to $2.6 million for the
three months ended March 31, 2006 from $2.2 million for the three months ended March 31, 2005.  This
increase was attributable to higher expenses for salaries and benefits, occupancy and equipment, data
processing, professional and consulting fees, and other noninterest expenses, partially offset by decreases
in advertising and legal fees.

Salaries and employee benefits increased $354,000 or 26.5% to $1.7 million for the three months
ended March 31, 2006 as compared to $1.3 million for the same period in 2005.  Salaries and wages
including bonus and payroll taxes, increased $189,000 or 20.3% due, in large part, to executive and
lending staffing additions coupled with overall annual increases in employee compensation.  Retirement
and stock benefit plan costs increased $113,000.  This increase was due, in large part, to a $83,000 increase
in ESOP expenses attributable to increased plan benefits arising from the Company's second step
conversion (See Note 5 Employee Stock Ownership Plan) coupled with overall increases in ABNJ share
value.  Additionally, the Company recorded restricted stock plan and stock option benefit plan expenses
of $71,000 and $63,000, respectively, for the three months ended March 31, 2006.  By comparison, such
expenses during the same period in 2005 totaled $66,000 and were limited to restricted stock plan
expenses as the Company had not yet adopted FAS 123R.  Together, these factors contributed $68,000 to
the comparative increase in retirement and stock benefit plan costs.  These benefit cost increases were
partly offset by a decrease in profit sharing expense of $44,000 resulting from the absence of such
expense in the current fiscal year due to the Company's discontinuation of that plan.  Further, medical
and other insurance benefit premiums, net of employee co-payments, increased $15,000 or 14.0%.
Finally, various employee expenses increased $38,000 resulting primarily from comparatively greater
costs associated with employee training and personnel procurement expenses.

Occupancy and equipment expense increased $2,000 to $206,000 for the three months ended
March 31, 2006 as compared to $204,000 for the same three months in fiscal 2005.  This decrease was
primarily attributable to a $5,000 decrease in equipment and computer depreciation expense, offset by
higher expenses for utilities expense.  For the same comparative periods, data processing costs increased
$9,000 from $148,000 to $157,000 primarily due to upcoming enhancements to the Company's internet
banking systems.

Legal fees decreased $58,000 to $23,000 for the three months ended March 31, 2006 from $81,000
for the three months ended March 31, 2005.  This decrease was due, in part, to the recording of legal
expenses in the earlier comparative quarter which related to matters including those addressed at the
Company's annual meeting held in January 2005.  Offsetting this decrease were increases in professional
and consulting fees, including auditing and accounting expenses, which increased $38,000 to $137,000 for
those same comparative periods.  In large part, these increases were attributable to consulting costs
incurred by the Company relating to compliance with the Sarbanes Oxley Act of 2002 and the
outsourcing of other internal audit-related services.

Advertising expenses decreased $3,000 or 4.0% to $73,000 for the three months ended March 31,
2006 from $76,000 for the three months ended March 31, 2005, due to lower expenses for agency fees
offset, in part, by higher expenses for print ads, promotions, and other marketing initiatives.  Finally,
other noninterest expenses increased $68,000 for the same comparative six months periods due, in large
part, to increases in net loan processing charges and other general and administrative expenses.



---

**Provision for Income Taxes**.  The provision for income taxes increased $99,000 for the three
months ended March 31, 2006 from the same period in fiscal 2005.  The effective tax rate was 38.3% and
36.0% for the three months ended March 31, 2006 and 2005, respectively.  The increase in the effective tax
rate was primarily attributable to the decline in the average balance of investment securities held by the
Bank's investment subsidiary, American Savings Investment Corporation ("ASIC").  ASIC is a wholly
owned New Jersey investment subsidiary formed in August 2004 by American Bank of New Jersey.  The
purpose of this subsidiary is to invest in stocks, bonds, notes and all types of equity, mortgages,
debentures and other investment securities.  Interest income from this subsidiary is taxed by the state of
New Jersey at an effective rate lower than the statutory corporate state income tax rate.

Throughout fiscal 2006, cash flows from ASIC continued to be utilized by the Bank to fund loan
growth.  This resulted in comparatively lower net income recorded by the investment subsidiary offset
by greater net income recorded by the Bank resulting in the increase in the Company's effective income
tax rate.

Additionally, the Company recorded non-deductible expenses associated with incentive stock
options issued under the 2005 Stock Option Plan which increased the Company's effective income tax
rate.

**Comparison of Operating Results for the Six Months Ended March 31, 2006 and March 31, 2005**

**General.**  Net income for the six months ended March 31, 2006 was $1.4 million, an increase of
$157,000, or 13.2% from the six months ended March 31, 2005.  The increase in net income resulted from
an increase in net interest income partially offset by a decrease in non-interest income coupled with
increases in noninterest expense, the provision for loan losses and the provision for income taxes.

**Interest Income.**  Total interest income increased 23.3% or $2.3 million to $12.3 million for the six
months ended March 31, 2006 from $10.0 million for the six months ended March 31, 2005.  For those
same comparative quarters, the average yield on interest-earning assets increased 16 basis points to
4.96% from 4.80% while the average balance of interest-earning assets increased $80.5 million or 19.3% to
$497.2 million from $416.7 million.

Interest income on loans increased $1.1 million or 12.4%, to $9.5 million for the six months ended
March 31, 2006 from $8.5 million for the same period in 2005.  This increase was due, in part, to a $36.2
million increase in the average balance of loans receivable to $354.7 million for the six months ended
March 31, 2006 from $318.5 million for the six months ended March 31, 2005.  In addition, the average
yield on loans increased 5 basis points to 5.38% from 5.33% for those same comparative periods.  The
increase in the average balance of loans receivable was the result of loan originations exceeding
repayments due to strong borrower demand and a growing strategic emphasis on commercial real estate
lending.

The rise in interest income on loans was augmented by higher interest income on securities,
which increased $459,000 or 31.7% to $1.9 million for the six months ended March 31, 2006 from $1.4
million for the same six months in 2005.  The increase was due in part, to a 76 basis point increase in the
average yield on securities which grew to 3.94% from 3.18% for the same comparative periods.  The
impact on interest income attributable to this increase was further augmented by a $5.9 million increase
in the average balance of investment securities to $97.0 million for the six months ended March 31, 2006
from $91.1 million for the same 2005 period.  The increase in yield primarily resulted from purchases of
investment securities with the proceeds of the Company's second step conversion and, to a lesser extent,
on slowing prepayments which reduced net premium amortization and higher yields on adjustable rate
securities which have repriced upward in accordance with the general movement of market interest
rates.



---

Further, interest income on federal funds sold and other interest-bearing deposits increased
$811,000 to $872,000 for the six months ended March 31, 2006 from $61,000 for the same period in 2005.
This increase was due, in part, to an increase of $38.4 million in the average balance of these assets to
$45.5 million for the six months ended March 31, 2006 from $7.1 million for the six months ended March
31, 2005.  The impact on interest income attributable to this growth was further augmented by a 211 basis
point rise in the average yield on these assets which increased to 3.83% from 1.72%.

**Interest Expense.**  Total interest expense increased by $1.1 million or 23.8% to $5.5 million for the
six months ended March 31, 2006 from $4.4 million for the same six months in fiscal 2005.  For those
same comparative periods, the average cost of interest-bearing liabilities increased 63 basis points from
2.43% to 3.06%, while the average balance of interest-bearing liabilities decreased $5.8 million or 1.6% to
$357.8 million for the six months ended March 31, 2006 from $363.6 million for the same six months in
fiscal 2005.

Interest expense on deposits increased $1.2 million or 38.6% to $4.2 million for the six months
ended March 31, 2006 from $3.0 million for the same period in fiscal 2005.  This increase was due, in part,
to a $2.8 million increase in the average balance of interest-bearing deposits to $304.6 million for the six
months ended March 31, 2006 from $301.8 million for the same period in fiscal 2005.  The components of
this net increase for the comparative periods include an increase of $28.9 million in the average balance
of certificates of deposit and a $1.4 million increase in the average balance of interest-bearing checking
accounts partially offset by a $27.6 million decrease in the average balance of savings accounts.

The impact on interest expense attributable to the net growth in these average balances was
exacerbated by a 75 basis point increase in the average cost of interest-bearing deposits to 2.75% for the
six months ended March 31, 2006 from 2.00% for the same period in fiscal 2005.  The components of this
increase include an 82 basis point increase in the average cost of certificates of deposit, a 94 basis point
increase in the average cost of interest-bearing checking accounts and a 29 basis point increase in the
average cost of savings accounts.

Interest expense on FHLB advances decreased $113,000 to $1.3 million for the six months ended
March 31, 2006 from $1.4 million for the same period in fiscal 2005.  This decrease was due, in part, to an
$8.6 million decrease in the average balance to $53.2 million for the six months ended March 31, 2006
from $61.8 million for the same six months in fiscal 2005.  The impact on expense attributable to this
decrease in average balance was partly offset by a 32 basis point increase in the average cost of advances
from 4.54% for the six months ended March 31, 2005 to 4.85% for the same period in fiscal 2006.  The
higher average cost for the current period was primarily due to the lower average balance of overnight
repricing line of credit borrowings compared with that held during the earlier comparative period.  The
cost of such overnight borrowings during that earlier period was significantly less than that of the
remaining portfolio of fixed-rate term advances.

**Net Interest Income.**  Net interest income increased by $1.2 million or 22.9%, to $6.8 million for
the six months ended March 31, 2006 from $5.6 million for the six months ended March 31, 2005.  The net
interest rate spread declined 46 basis points from 2.36% to 1.90% for the same comparative periods, while
the net interest margin increased 8 basis points from 2.67% to 2.75%.

**Provision for Loan Losses.**Using the allowance methodology described earlier, the provision
for loan losses totaled $246,000 for the six months March 31, 2006 representing an increase of $134,000
over the same six months in 2005.  The comparative six month provisions generally resulted from the
incremental growth in the outstanding balance of the loans on which historical and environmental loss
factors are applied.  For the six months ended March 31, 2006, loans receivable, net increased 9.1% to
$372.0 million from $341.0 million at September 30, 2005.  Total gross loan balances, excluding loans held
for sale, net deferred loan costs and the allowance for loan loss, grew $31.2 million or 9.1%.  The growth

---

By comparison, loan growth for the six months ended March 31, 2005 totaled $24.4 million or
$6.8 million less than the same comparative period this year.  The growth in this prior comparative
period was comprised of an increase in one-to-four family mortgages totaling $10.6 million, an increase
of $12.3 million in multi-family and commercial real estate loans, an increase of $265,000 in commercial
loans, an increase of $707,000 in home equity loans and by net increases in the disbursed balances of
construction loans totaling $838,000, offset by a decrease in consumer loans totaling $45,000.

In total, the allowance for loan losses as a percentage of gross loans outstanding increased 1 basis
point to 0.51% at March 31, 2006 from 0.50% at March 31, 2005.  These ratios reflect allowance for loan
loss balances of $1.9 million and $1.7 million, respectively.  The level of the allowance is based on
estimates and the ultimate losses may vary from those estimates.

**Noninterest Income.**  Noninterest income decreased $139,000 to $398,000 for the six months
ended March 31, 2006 compared to $537,000 for the same period in 2005.  This reduction was primarily
attributable to a $271,000 loss on sale of an underperforming investment security during the prior
quarter ended December 31, 2005.  Excluding that loss, comparative noninterest income for the six
months ended March 31, 2006 would have increased by $132,000 due largely to increases in deposit
service fees, loan related fee income and improvement in income from cash surrender value of life
insurance.  Deposit service fees and charges increased $46,000 while income from cash surrender value
of life insurance increased by $22,000 reflecting higher policy balances held by the Company.  In
addition, gain on sale of held-for-sale loans increased $7,000 and other noninterest income increased by
$57,000 resulting primarily from collection of comparatively higher loan prepayment penalties.

**Noninterest Expense.**  Noninterest expense increased $698,000, or 17.0% to $4.8 million for the
six months ended March 31, 2006 from $4.1 million for the six months ended March 31, 2005.  This
increase was attributable to higher expenses for salaries and benefits, data processing, professional and
consulting fees, and other noninterest expenses, partially offset by decreases in occupancy and
equipment, advertising and legal fees.

Salaries and employee benefits increased $542,000 or 21.3% to $3.1 million for the six months
ended March 31, 2006 as compared to $2.5 million for the same period in 2005.  Salaries and wages
including bonus and payroll taxes, increased $281,000 or 15.4% due, in part, to executive and lending
staffing additions coupled with overall annual increases in employee compensation.  Retirement and
stock benefit plan costs increased $170,000.  This increase was due in large part to a $157,000 increase in
ESOP expenses attributable to increased plan benefits arising from the Company's second step
conversion (See Note 5 Employee Stock Ownership Plan).  Additionally, the Company recorded
restricted stock plan and stock option benefit plan expenses of $156,000 and $126,000, respectively, for
the six months ended March 31, 2006.  By comparison, such expenses during the same period in 2005
totaled $66,000.  This amount included only three months of RSP expenses reflecting plan approval by
shareholders in January 2005 and no expenses associated with stock option plans as the Company had
not yet adopted FAS 123R.  Together, these factors contributed $215,000 to the comparative increase in
retirement and stock benefit plan costs.  These benefit cost increases were partly offset by a decrease in
profit sharing expense of $219,000 resulting from the absence of such expense in the current fiscal year
due to the Company's discontinuation of that plan.  Further, medical and other insurance benefit
premiums, net of employee co-payments, increased $26,000 or 12.1%.  Finally, various employee
expenses increased $66,000 resulting

---

Occupancy and equipment expense decreased $4,000 to $405,000 for the six months ended March
31, 2006 as compared to $409,000 for the same six months in fiscal 2005.  This decrease was primarily
attributable to a $10,000 decrease in computer depreciation expense, offset by higher expenses for
utilities expense.  For the same comparative periods, data processing costs increased $22,000 from
$293,000 to $315,000 primarily due to upcoming enhancements to the Company's internet banking
systems.

Legal fees decreased $48,000 to $108,000 for the six months ended March 31, 2006 from $156,000
for the six months ended March 31, 2005.  This decrease was due, in part, to the recording of legal
expenses in the earlier comparative period which related to matters including those addressed at the
Company's annual meeting held in January 2005.  Offsetting this decrease were increases in professional
and consulting fees, including auditing and accounting expenses, which increased $89,000 to $255,000 for
those same comparative periods.  In large part, these increases were attributable to consulting costs
incurred by the Company relating to compliance with the Sarbanes Oxley Act of 2002 and the
outsourcing of other internal audit-related services.

Advertising expenses decreased $15,000 or 10.7% to $125,000 for the six months ended March 31,
2006 from $140,000 for the six months ended March 31, 2005, due to lower expenses for agency fees
offset, in part, by higher expenses for print ads, promotions, and other marketing initiatives.  Finally,
other noninterest expenses increased $112,000 for the same comparative six months periods due, in large
part, to increases in net loan processing charges and other general and administrative expenses.

**Provision for Income Taxes**.  The provision for income taxes increased $146,000 for the six
months ended March 31, 2006 from the same period in fiscal 2005.  The effective tax rate was 38.3% and
36.7% for the six months ended March 31, 2006 and 2005, respectively.  The increase in the effective tax
rate was primarily attributable to the decline in the average balance of investment securities held by the
Bank's investment subsidiary, American Savings Investment Corporation ("ASIC").  ASIC is a wholly
owned New Jersey investment subsidiary formed in August 2004 by American Bank of New Jersey.  The
purpose of this subsidiary is to invest in stocks, bonds, notes and all types of equity, mortgages,
debentures and other investment securities.  Interest income from this subsidiary is taxed by the state of
New Jersey at an effective rate lower than the statutory corporate state income tax rate.

Throughout fiscal 2006, cash flows from ASIC were utilized by the Bank to fund loan growth.
This resulted in comparatively lower net income recorded by the investment subsidiary offset by greater
net income recorded by the Bank resulting in the increase in the Company's effective income tax rate.

Additionally, the Company recorded non-deductible expenses associated with incentive stock
options issued under the 2005 Stock Option Plan which increased the Company's effective income tax
rate.

**Liquidity and Commitments**

We are required to have enough investments that qualify as liquid assets in order to maintain
sufficient liquidity to ensure a safe and sound operation.  Liquidity may increase or decrease depending
upon the availability of funds and comparative yields on investments in relation to the return on loans.
Historically, we have maintained liquid assets above levels believed to be adequate to meet the
requirements of normal operations, including potential deposit outflows.  Cash flow projections are
regularly reviewed and updated to assure that adequate liquidity is maintained.



---

The Bank's short term liquidity, represented by cash and cash equivalents, is a product of its
operating, investing and financing activities.  The Bank's primary sources of funds are deposits,
amortization, prepayments and maturities of outstanding loans and mortgage-backed securities,
maturities of investment securities and other short-term investments and funds provided from
operations.  While scheduled payments from the amortization of loans and mortgage-backed securities
and maturing investment securities and short-term investments are relatively predictable sources of
funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic
conditions, and competition.  In addition, the Bank invests excess funds in short-term interest-earning
assets, which provide liquidity to meet lending requirements.  The Bank also generates cash through
borrowings.  The Bank utilizes Federal Home Loan Bank advances to leverage its capital base and
provide funds for its lending and investment activities, and to enhance its interest rate risk management.

Liquidity management is both a daily and long-term function of business management.  Excess
liquidity is generally invested in short-term investments such as overnight deposits or U.S. Agency
securities.  On a longer-term basis, the Bank maintains a strategy of investing in various loan products
and in securities collateralized by loans.  The Bank uses its sources of funds primarily to meet its ongoing
commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan
commitments and to maintain its portfolio of mortgage-backed securities and investment securities.  At
March 31, 2006, the total approved loan origination commitments outstanding amounted to $17.3
million.  At the same date, unused lines of credit were $19.9 million and construction loans in process
were $10.7 million.

Certificates of deposit scheduled to mature in one year or less at March 31, 2006, totaled $108.9
million.  Management's policy is to maintain deposit rates at levels that are competitive with other local
financial institutions.  Based on the competitive rates and on historical experience, management believes
that a significant portion of maturing deposits will remain with the Bank.  Additionally, at March 31,
2006 the Bank has $9.8 million of borrowings from the Federal Home Loan Bank of New York ("FHLB")
maturing in one year or less.  Repayment of such advances increases the Bank's unused borrowing
capacity from the FHLB which, at March 31, 2006 totaled $67.0 million.  In calculating our borrowing
capacity, the Bank utilizes the Federal Home Loan Bank's guideline, which generally limits advances
secured by residential mortgage collateral to 25% of the Bank's total assets.

The following tables disclose our contractual obligations and commercial commitments as of
March 31, 2006.  Scheduled principal payments on amortizing borrowings are reported as maturities.

|                                   | Total          | Less Than1 Year | 1-3 Years | 4-5 Years | After5 Years
|---------------------------------- | -------------- | --------------- | --------- | --------- | ------------
|                                   | (In thousands)
|Time Deposits                      | $ 153,148      | $ 108,929       | $ 29,224  | $ 4,827   | $ 10,168    
|Federal Home Loan Bank advances(1) | 52,405         | 9,761           | 20,130    | 13,514    | 9,000       
|Total                              | $ 205,553      | $ 118,690       | $ 49,354  | $ 18,341  | $ 19,168    

|(1) | At March 31, 2006, the total collateralized borrowing limit was $119.4 million of which we had
$52.4 million outstanding.
|--- | -------------------------------------------------------------------------------------------------------------------------



---

|                                   | TotalAmountsCommitted | Less Than1 Year | 1-3 Years | 4-5 Years | Over5 Years
|---------------------------------- | --------------------- | --------------- | --------- | --------- | -----------
|                                   | (In thousands)       
|Lines of credit(1)                 | $ 19,862              | $ 2,415         | $ 914     | $ 575     | $ 15,958   
|Construction loans in process      | 10,687                | 350             | 10,337    | -         | -          
|Other commitments to extend credit | 17,336                | 17,336          | -         | -         | -          
|Total                              | $ 47,885              | $ 20,101        | $ 11,251  | $ 575     | $ 15,958   

|(1) | Represents amounts committed to customers.
|--- | ------------------------------------------

In addition to the above commitments, the Company has financial obligations regarding
outstanding contracts for sale relating to future branch sites.  As of March 31, 2006, the Bank has paid
deposits totaling $417,500 on sale contracts for future branch locations.  Upon closing, the Bank is
committed to disbursing an additional $4,957,500 to fulfill its obligations under these contracts.  These
commitments are contingent upon the fulfillment of certain conditions outlined in the sale contracts.

**Capital**

Consistent with its goals to operate a sound and profitable financial organization, American
Bank of New Jersey actively seeks to maintain a "well capitalized" institution in accordance with
regulatory standards.  The Bank's total equity was $80.7 million at March 31, 2006, or 16.89% of total
assets on that date.  As of March 31, 2006, the Bank exceeded all capital requirements of the Office of
Thrift Supervision.  The Bank's regulatory capital ratios at March 31, 2006 were as follows: core capital
17.08%; Tier I risk-based capital, 29.92%; and total risk-based capital, 30.58%.  The regulatory capital
requirements to be considered well capitalized are 5.0%, 6.0% and 10.0%, respectively.

**Impact of Inflation**

The consolidated financial statements presented herein have been prepared in accordance with
accounting principles generally accepted in the United States of America.  These principles require the
measurement of financial position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature.  As a result, interest rates have a more
significant impact on our performance than the effects of general levels of inflation.  Interest rates,
however, do not necessarily move in the same direction or with the same magnitude as the price of
goods and services, since such prices are affected by inflation.  In a period of rapidly rising interest rates,
the liquidity and maturity structure of our assets and liabilities are critical to the maintenance of
acceptable performance levels.

The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of
noninterest expense.  Such expense items as employee compensation, employee benefits and occupancy
and equipment costs may be subject to increases as a result of inflation.  An additional effect of inflation
is the possible increase in the dollar value of the collateral securing loans that we have made.  We are
unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar
value due to inflation.

---

|**ITEM 3.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
|----------- | --------------------------------------------------------------

**Qualitative Analysis.**  Because the income on the majority of our assets and the cost of the
majority of our liabilities are sensitive to changes in interest rates, a significant form of market risk for us
is interest rate risk, or changes in interest rates.  Notwithstanding the unpredictability of future interest
rates, we expect that changes in interest rates may have a significant, adverse impact on our net interest
income.

Our ability to make a profit largely depends on our net interest income, which could be
negatively affected by changes in interest rates.  Net interest income is the difference between:

| | • | The interest income we earn on our interest-earning assets such as loans and securities;
and           
| | - | -------------------------------------------------------------------------------------------------------
| | • | The interest expense we pay on our interest-bearing liabilities such as deposits and
amounts we borrow.

The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a
contractual period of time.  We, like many savings institutions, have liabilities that generally have shorter
contractual maturities than our assets.  This imbalance can create significant earnings volatility, because
market interest rates change over time.  In a period of rising interest rates, the interest income earned on
our assets may not increase as rapidly as the interest paid on our liabilities.  In a period of declining
interest rates the interest income earned on our assets may decrease more rapidly, due to accelerated
prepayments, than the interest paid on our liabilities.

In addition, changes in interest rates can affect the average lives of loans and mortgage-backed
and related securities.  For example, a reduction in interest rates results in increased prepayments of
loans and mortgage-backed and related securities, as borrowers refinance their debt in order to reduce
their borrowing cost.  This causes reinvestment risk, because we are generally not able to reinvest
prepayments at rates that are comparable to the rates we previously earned on the prepaid loans or
securities.  By contrast, increases in interest rates reduce the incentive for borrowers to refinance their
debt.  In such cases, prepayments on loans and mortgage-backed and related securities may decrease
thereby extending the average lives of such assets and reducing the cash flows that are available to be
reinvested by the Company at higher interest rates.  At March 31, 2006, 74.3% of our loan portfolio was
comprised of one- to four-family mortgage loans, which experienced very high prepayment rates during
recent years.

Tables presenting the composition and allocation of the Company's interest-earning assets and
interest-costing liabilities from an interest rate risk perspective are presented in the preceding section of
this report titled "Comparison of Financial Condition at March 31, 2006 and September 30, 2005."  These
tables present the Company's investment securities, loans, deposits, and borrowings by categories that
reflect the contractual repricing characteristics of the underlying assets or liabilities.  Presented as a
percentage of total assets, the comparative data presents changes in the repricing characteristics of the
Company's balance sheet - an important component of interest rate risk.

Our net interest rate spread is the difference between the yields we receive on our interest-earning assets and the rates we pay on our interest-costing liabilities.  Through the first half of fiscal
2005, the Company continued to realize improvements in its net interest spread as increases in earning
asset yields continued to outpace increases in the cost of its interest bearing-liabilities.  However, that
trend reversed in the latter half of 2005 when upward pressure on the Company's cost of deposits
resulted in greater increases in the Company's cost of interest-bearing liabilities than those of its interest
earning assets.  The trend of net interest spread compression continued in the six months ended March
31, 2006 during which our net interest spread decreased to 1.90% from 2.28% for the year ended
September 30, 2005.



---

In large part, this net interest rate spread compression resulted from an increase in the
Company's cost of interest-bearing liabilities which outpaced the increase in the Company's yield on
earning assets.  This decline was attributable, in part, to the Company maintaining a comparatively
higher average balance of shorter duration investment securities and short term, liquid assets during the
current fiscal year.  These balances resulted from the initial receipt of capital proceeds from the
Company's second step conversion which were deployed into higher yielding investment securities
throughout the quarter ended December 31, 2005.  Additionally, continued upward pressure on the cost
of retail deposits resulted in increases in interest expense which outpaced the increase in interest income
resulting from improved yields on loans.

Depending upon the movement of market interest rates, our earnings may continue to be
impacted by an "earnings squeeze" in the future.  For example, we are vulnerable to an increase in
interest rates because the majority of our loan portfolio consists of longer-term, fixed rate loans and
recently originated hybrid ARMs that are fixed rate for an initial period of time.  At March 31, 2006,
excluding allowance for loan losses and net deferred origination costs and including loans held for sale,
loans totaled $373.2 million comprising 72.3% of total assets.  Of those loans, fixed rate mortgages totaled
$166.1 million or 32.2% of total assets while hybrid ARMs, including 3/1, 5/1, 7/1, and 10/1 ARMs
totaled $177.6 million or 34.4% of total assets.  In an increasing rate environment, our cost of funds may
increase more rapidly than the interest earned on our loan portfolio and investment securities portfolio
because our primary source of funds is deposits with substantially shorter maturities than the maturities
on our loans and investment securities.  Having interest-bearing liabilities that reprice more frequently
than interest-earning assets will be detrimental during periods of rising interest rates and could cause
our net interest rate spread to shrink because the increase in the rates we would earn on our securities
and loan portfolios would be less than the increase in the rates we would pay on deposits and
borrowings.  This could cause a decrease in our earnings and an "earnings squeeze" just as the decrease
in interest rates in prior periods had impacted our earnings.

The Board of Directors has established an Asset/Liability Management Committee, comprised of
the Bank's Chief Executive Officer, the Bank's President and Chief Operating Officer, the Bank's
Executive Vice President and Corporate Secretary, the Bank's Senior Vice President and Chief Financial
Officer, the Bank's Senior Vice President and Chief Lending Officer and the Bank's Vice President and
Controller, which is responsible for monitoring interest rate risk.  The committee conducts regular,
informal meetings, generally on a weekly basis, to address the day-to-day management of the assets and
liabilities of the Bank, including review of the Bank's short term liquidity position; loan and deposit
pricing and production volumes and alternative funding sources; current investments; average lives,
durations and repricing frequencies of loans and securities; and a variety of other asset and liability
management topics.  The committee meets quarterly to formally review such matters.  The results of the
committee's quarterly review are reported to the full Board, which makes adjustments to the Bank's
interest rate risk policy and strategies, as it considers necessary and appropriate.

To reduce the effect of interest rate changes on net interest income, we may utilize various
strategies aimed at improving the matching of interest-earning asset maturities to interest-bearing
liability maturities.  The strategies may include:

| | (1) | Originate and retain loans with adjustable rate features and fixed rate loans with shorter
maturities including commercial real estate, construction and business loans;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Originate longer-term, fixed rate loans eligible for sale in the secondary market and, if
warranted, sell such loans;                                                   
| | (3) | Lengthen the maturities of our liabilities through utilization of Federal Home Loan Bank
advances;                                                                      



---

| | (4) | Attract low cost checking and transaction accounts which tend to be less interest rate
sensitive; and                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Purchase short to intermediate term securities and maintain a securities portfolio that
provides a stable cash flow, thereby providing investable funds in varying interest rate
cycles.

**Quantitative Aspects of Market Risk.**  The following table presents American Bank of New
Jersey's net portfolio value as of December 31, 2005, the latest date for which information is available.
The net portfolio value was calculated by the Office of Thrift Supervision, based on information provided
by the Bank.

|Net Portfolio Value    | Net Portfolio Valueas % of Present Value of Assets |          | BoardEstablished Limits
|---------------------- | -------------------------------------------------- | -------- | -----------------------
|Changes inRates(1)     | $ Amount                                           | $ Change | % Change               
|(Dollars in thousands)
|+300 bp                | 69,344                                             | -20,099  | -22%                   
|+200 bp                | 76,579                                             | -12,863  | -14%                   
|+100 bp                | 83,361                                             | -6,081   | -7%                    
|0 bp                   | 89,442                                             |          |                        
|-100 bp                | 93,480                                             | 4,038    | +5%                    
|-200 bp                | 93,812                                             | 4,370    | +5%                    

(1)    The -300bp scenario is not shown due to the low prevailing interest rate environment.

Future interest rates or their effect on net portfolio value or net interest income are not
predictable.  Computations of prospective effects of hypothetical interest rate changes are based on
numerous assumptions, including relative levels of market interest rates, prepayments, and deposit run-offs, and should not be relied upon as indicative of actual results.  Certain shortcomings are inherent in
this type of computation.  Although certain assets and liabilities may have similar maturity or periods of
repricing, they may react at different times and in different degrees to changes in the market interest
rates.  The interest rate on certain types of assets and liabilities such as demand deposits and savings
accounts, may fluctuate in advance of changes in market interest rates, while rates on other types of
assets and liabilities may lag behind changes in market interest rates.  Certain assets such as adjustable
rate mortgages generally have features, which restrict changes in interest rates on a short-term basis and
over the life of the asset.  In the event of a change in interest rates, prepayments and early withdrawal
levels could deviate significantly from those assumed in making calculations set forth above.
Additionally, an increased credit risk may result as the ability of many borrowers to service their debt
may decrease in the event of an interest rate increase.

Notwithstanding the discussion above, the qualitative interest rate analysis findings presented
herein indicate that further increases in interest rates would continue to adversely affect our net interest
margin and earnings.  Management is continuing to evaluate and implement a variety of strategies to
manage the earnings risks presented by the continued upward movement in interest rates and flattening
of the yield curve.  The most significant of these are the Company's lending diversification and growth
strategies complemented by strategies focused on growing core deposits.  Such deposit strategies
highlight both retail branch expansion as well as enhancing business banking products and services.



---

Additionally, the Company expects to continue the sale of longer-term, fixed rate conforming
loan originations into the secondary market while evaluating greater use of the secondary markets for
selling other conforming and non-conforming 1-4 family mortgage loan originations.  For the quarter
ended March 31, 2006, we sold a total of $1.9 million of loans to the Federal National Mortgage
Association which resulted in gains on sales of mortgage loans held for sale of $6,000.  Because we offer
borrowers the option to lock in their interest rate prior to closing their mortgage loans, we may be
exposed to market risk on the loans we sell into the secondary market.  Once a loan's rate is locked, the
price at which we can sell the loan will vary with movements in market interest rates.  To manage that
risk, we may take forward commitments to sell loans at a fixed price.  At March 31, 2006, the Bank had
two outstanding contracts to sell long term, fixed rate mortgage loans totaling $694,000 to the Federal
National Mortgage Association.  Loans sold under contracts drawn in the future may generate additional
gains or losses on sale of mortgage loans in subsequent periods.

Finally, during fiscal 2004 we recognized a $125,000 penalty to prepay $3.0 million of fixed rate
FHLB advances with a weighted average cost of 6.28%.  Although no such prepayments were transacted
in fiscal 2005 or during the six months ended March 31, 2006 we may evaluate the costs and benefits of
further prepayments, which may result in additional one-time charges to earnings in the form of FHLB
prepayment penalties to further improve the Bank's net interest spread and margin and enhance future
earnings.



---

|**ITEM 4.** | **CONTROLS AND PROCEDURES**
|----------- | ---------------------------

| | (a) | Evaluation of disclosure controls and procedures: An evaluation of the Company's disclosure
controls and procedures (as defined in Section 13(a)-15(e) of the Securities Exchange Act of 1934
("the Act") was carried out under the supervision and with the participation of the Company's
Chief Executive Officer, Chief Financial Officer and several other members of the Company's
senior management.  Based on such evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and procedures in
effect as of the end of the period covered by this quarterly report are effective in ensuring that
the information required to be disclosed by the Company in the reports it files or submits under
the Act is (i) accumulated and communicated to the Company's management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded,
processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Changes in internal controls: In the quarter ended March 31, 2006, there was no change in the
Company's internal control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



---

**PART II - - OTHER INFORMATION**

**ITEM 1.   LEGAL PROCEEDINGS**

At March 31, 2006, the Company and its subsidiaries were not involved in any pending
proceedings other than the legal proceedings occurring in the ordinary course of business.  Such legal
proceedings in the aggregate are believed by management to be immaterial to the Company's financial
condition and results of operations.

**ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None

**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**

None

**ITEM 5.  OTHER INFORMATION**

None

**ITEM 6.  EXHIBITS**

| | (a) | Exhibits
| | --- | --------
|
| |     | 10.2    
| |     | 10.3    
| |     | 10.6    
|
| |     | 31.1    
| |     | 31.2    
|
| |     | 32      



---

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                       | American Bancorp of New Jersey, Inc.
       (Registrant)                       
|---------------------- | -------------------------------------------------------------------------------
|Date:     May 15, 2006 | /s/ Joseph KliminskiJoseph KliminskiChief Executive Officer                    
|Date:     May 15, 2006 | /s/ Eric B. HeyerEric B. HeyerSenior Vice President and Chief Financial Officer



---