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 June 30, 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 August 11, 2006, there were 14,202,953 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)**

|                                                                                                 |                                                                                                                                                                                                                                                      |                                 |                                            | **June 30,2006** | **September 30,2005**
|------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | ---------------- | ---------------------
|**ASSETS**                                                                                      
|Cash and cash equivalents                                                                       
|                                                                                                 | Cash and due from banks                                                                                                                                                                                                                              | $    3,950                      | $    2,622                                
|                                                                                                 | Interest-bearing deposits                                                                                                                                                                                                                            | 1,403                           | 105,851                                   
|                                                                                                 | Federal funds sold                                                                                                                                                                                                                                   | 900                             | 17,300                                    
|                                                                                                 |                                                                                                                                                                                                                                                      | Total cash and cash equivalents | 6,253                                      | 125,773         
|                                                                                                
|Securities available-for-sale                                                                    | 84,549                                                                                                                                                                                                                                               | 62,337                         
|Securities held-to-maturity (fair value: June 30, 2006 -
  $10,940; September 30, 2005 - $7,694) | 11,205                                                                                                                                                                                                                                               | 7,824                          
|Loans, net                                                                                       | 384,230                                                                                                                                                                                                                                              | 341,006                        
|Loans held for sale                                                                              | 523                                                                                                                                                                                                                                                  | 280                            
|Premises and equipment                                                                           | 6,001                                                                                                                                                                                                                                                | 4,131                          
|Federal Home Loan Bank stock, at cost                                                            | 2,979                                                                                                                                                                                                                                                | 3,119                          
|Cash surrender value of life insurance                                                           | 8,666                                                                                                                                                                                                                                                | 7,512                          
|Accrued interest receivable                                                                      | 1,882                                                                                                                                                                                                                                                | 1,468                          
|Other assets                                                                                     | 2,728                                                                                                                                                                                                                                                | 2,410                          
|                                                                                                 | Total assets                                                                                                                                                                                                                                         | $ 509,016                       | $ 555,860                                 
|**LIABILITIES AND STOCKHOLDERS' EQUITY**                                                        
|Liabilities                                                                                     
|                                                                                                 | Deposits                                                                                                                                                                                                                                            
|                                                                                                 |                                                                                                                                                                                                                                                      | Noninterest-bearing             | $   24,400                                 | $   25,583      
|                                                                                                 |                                                                                                                                                                                                                                                      | Interest-bearing                | 302,317                                    | 315,342         
|                                                                                                 |                                                                                                                                                                                                                                                      |                                 | Total deposits                             | 326,717          | 340,925              
|                                                                                                
|                                                                                                 | Stock subscriptions received                                                                                                                                                                                                                         | -                               | 115,201                                   
|                                                                                                 | Advance payments by borrowers for taxes and insurance                                                                                                                                                                                                | 2,692                           | 2,443                                     
|                                                                                                 | Federal Home Loan Bank borrowings                                                                                                                                                                                                                    | 47,690                          | 53,734                                    
|                                                                                                 | Accrued interest payable and other liabilities                                                                                                                                                                                                       | 3,667                           | 3,578                                     
|                                                                                                 | Common stock in ESOP subject to contingent repurchase obligation                                                                                                                                                                                     | -                               | 473                                       
|                                                                                                 |                                                                                                                                                                                                                                                      | Total liabilities               | 380,766                                    | 516,354         
|                                                                                                
|Stockholders' Equity                                                                            
|                                                                                                 | September 30, 2005 - preferred stock, $.10 par value, 5,000,000
  shares authorized; June 30, 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;
  June 30, 2006 - common stock, $.10 par value, 20,000,000
  shares authorized; 14,527,953 shares issued and outstanding | 1,453                           | 555                                       
|                                                                                                 | Additional paid-in capital                                                                                                                                                                                                                           | 111,223                         | 17,242                                    
|                                                                                                 | Unearned ESOP shares                                                                                                                                                                                                                                 | (8,662)                         | (1,064)                                   
|                                                                                                 | Unearned RSP shares                                                                                                                                                                                                                                  | -                               | (1,212)                                   
|                                                                                                 | Retained earnings                                                                                                                                                                                                                                    | 25,645                          | 25,417                                    
|                                                                                                 | Accumulated other comprehensive loss                                                                                                                                                                                                                 | (1,409)                         | (959)                                     
|                                                                                                 | Amount reclassified on ESOP shares                                                                                                                                                                                                                   | -                               | (473)                                     
|                                                                                                 |                                                                                                                                                                                                                                                      | Total stockholders' equity      | 128,250                                    | 39,506          
|                                                                                                 |                                                                                                                                                                                                                                                      |                                 | Total liabilities and stockholders' equity | $ 509,016        | $ 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)**

|                                                    |                                                    |                           |                               |                                |           |         
|--------------------------------------------------- | -------------------------------------------------- | ------------------------- | ----------------------------- | ------------------------------ | --------- | --------
|                                                    |                                                    |                           | **Nine Months EndedJune 30,** | **Three Months EndedJune 30,**
|                                                    |                                                    |                           | **2006**                      | **2005**                       | **2006**  | **2005**
|Interest and dividend income                       
|                                                    | Loan, including fees                               | $  14,754                 | $  12,985                     | $   5,216                      | $   4,502
|                                                    | Securities                                         | 2,970                     | 2,121                         | 1,061                          | 671      
|                                                    | Federal funds sold and other                       | 1,027                     | 111                           | 155                            | 50       
|                                                    |                                                    | Total interest income     | 18,751                        | 15,217                         | 6,432     | 5,223   
|                                                   
|Interest expense                                   
|                                                    | NOW and money market                               | 592                       | 312                           | 192                            | 106      
|                                                    | Savings                                            | 1,692                     | 1,599                         | 637                            | 490      
|                                                    | Certificates of deposit                            | 4,272                     | 2,811                         | 1,545                          | 1,106    
|                                                    | Federal Home Loan Bank advances                    | 1,951                     | 2,181                         | 659                            | 777      
|                                                    |                                                    | Total interest expense    | 8,507                         | 6,903                          | 3,033     | 2,479   
|                                                   
|Net interest income                                 | 10,244                                             | 8,314                     | 3,399                         | 2,744                         
|                                                   
|Provision for loan losses                           | 355                                                | 105                       | 109                           | (6)                           
|                                                   
|Net interest income after provision for loan losses | 9,889                                              | 8,209                     | 3,290                         | 2,750                         
|                                                   
|Noninterest income                                 
|                                                    | Deposit service fees and charges                   | 533                       | 502                           | 167                            | 182      
|                                                    | Income from cash surrender value of life insurance | 234                       | 200                           | 79                             | 67       
|                                                    | Gain on sale of loans                              | 12                        | 5                             | 4                              | 3        
|                                                    | Loss on sales of securities available-for-sale     | (271)                     | (16)                          | -                              | (16)     
|                                                    | Other                                              | 196                       | 111                           | 56                             | 29       
|                                                    |                                                    | Total noninterest income  | 704                           | 802                            | 306       | 265     
|                                                   
|Noninterest expense                                
|                                                    | Salaries and employee benefits                     | 4,912                     | 4,368                         | 1,825                          | 1,823    
|                                                    | Occupancy and equipment                            | 683                       | 606                           | 279                            | 197      
|                                                    | Data processing                                    | 466                       | 471                           | 151                            | 177      
|                                                    | Advertising                                        | 222                       | 198                           | 97                             | 58       
|                                                    | Professional and consulting                        | 383                       | 217                           | 128                            | 51       
|                                                    | Legal                                              | 233                       | 187                           | 125                            | 31       
|                                                    | Other                                              | 769                       | 580                           | 254                            | 179      
|                                                    |                                                    | Total noninterest expense | 7,668                         | 6,627                          | 2,859     | 2,516   
|                                                   
|Income before provision for income taxes            | 2,925                                              | 2,384                     | 737                           | 499                           
|Provision for income taxes                          | 1,111                                              | 864                       | 273                           | 174                           
|                                                   
|Net income                                          | $   1,814                                          | $   1,520                 | $     464                     | $     325                     
|                                                   
|Comprehensive income (loss)                         | $   1,364                                          | $   1,329                 | $     (98)                    | $     602                     
|                                                   
|Earnings per share:                                
|                                                    | Basic                                              | $    0.14                 | $    0.11                     | $    0.04                      | $    0.02
|                                                    | Diluted                                            | $    0.14                 | $    0.11                     | $    0.04                      | $    0.02
|                                                   

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Stockholders' Equity
Nine months ended June 30, 2006
(in thousands)
(unaudited)**

|                                                                                                                  | CommonStock    | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedRSPShares | RetainedEarnings | AccumulatedOtherComprehensiveIncome (Loss) | AmountReclassifiedOn ESOPShares | TotalEquity  | ComprehensiveIncome(Loss)
|----------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------ | ------------------ | ----------------- | ---------------- | ------------------------------------------ | ------------------------------- | ------------ | -------------------------
|Balance at
  September 30, 2004                                                                                   | $          555 | $         15,687         | $       (1,200)    | $           -     | $   24,806       | $                 (482)                    | $             (52)              | $     39,314 |                          
|RSP stock grants                                                                                                  | -              | 1,419                    | -                  | (1,419)           | -                | -                                          | -                               | -            |                          
|RSP shares earned                                                                                                 | -              | -                        | -                  | 136               | -                | -                                          | -                               | 136          |                          
|ESOP shares earned                                                                                                | -              | 81                       | 103                | -                 | -                | -                                          | -                               | 184          |                          
|Cash dividends paid -
$0.84 per share                                                                             | -              | -                        | -                  | -                 | (1,303)          | -                                          | -                               | (1,303)      |                          
|Reclassification due to
change in fair value of
common stock in ESOP
subject  to contingent
repurchase obligation | -              | -                        | -                  | -                 | -                | -                                          | (375)                           | (375)        |                          
|                                                                                                                 
|Comprehensive income                                                                                              |                |                          |                    |                   |                  |                                            |                                 |              |                          
|Net income                                                                                                        | -              | -                        | -                  | -                 | 1,520            | -                                          | -                               | 1,520        |                          
|Change in unrealized gain
     (loss) on securities 
     available-for-sale, net of
     taxes                   | -              | -                        | -                  | -                 | -                | (191)                                      | -                               | (191)        |                          
|Total comprehensive
          income                                                                              |                |                          |                    |                   |                  |                                            |                                 |              | $        1,329           
|Balance at
  June 30, 2005                                                                                        | $         555  | $      17,187            | $     (1,097)      | $   (1,283)       | $     25,023     | $          (673)                           | $         (427)                 | $     39,285 |                          
|                                                                                                                  |                |                          |                    |                   |                  |                                            |                                 |              |                          

See accompanying notes to unaudited consolidated financial statements



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**American Bancorp of New Jersey, Inc.
Statements of Stockholders' Equity
Nine months ended June 30, 2006
(in thousands)
(unaudited)**

|                                                                                                       | CommonStock | AdditionalPaid-inCapital | UnearnedESOPShares | UnearnedRSPShares | RetainedEarnings | AccumulatedOtherComprehensiveLoss | AmountReclassifiedOn ESOPShares | TotalEquity | Compre-hensiveIncome(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                                                                    | -           | 99                       | -                  | -                 | -                | -                                 | -                               | 99          |                           
|RSP stock grants                                                                                       | 36          | (36)                     |                    |                   |                  |                                   |                                 |             |                           
|RSP share purchases                                                                                    | -           | (2,254)                  | -                  | -                 | -                | -                                 | -                               | (2,254)     |                           
|RSP shares earned                                                                                      | -           | 393                      | -                  |                   | -                | -                                 | -                               | 393         |                           
|Stock options earned                                                                                   | -           | 246                      | -                  | -                 | -                | -                                 | -                               | 246         |                           
|ESOP shares earned                                                                                     | -           | 84                       | 337                | -                 | -                | -                                 | -                               | 421         |                           
|Cash dividends paid - 
  $0.04 per share                                                               | -           | -                        | -                  | -                 | (1,586)          | -                                 | -                               | (1,586)     |                           
|Reclassification due to 
  elimination of
  repurchase obligation                                      | -           | -                        | -                  | -                 | -                | -                                 | 473                             | 473         |                           
|                                                                                                      
|Comprehensive income                                                                                   |             |                          |                    |                   |                  |                                   |                                 |             |                           
|Net income                                                                                             | -           | -                        | -                  | -                 | 1,814            | -                                 | -                               | 1,814       |                           
|Change in unrealized
       gain (loss) on securities
       available-for-sale,  net 
       of taxes | -           | -                        | -                  | -                 | -                | (450)                             | -                               | (450)       |                           
|Total  comprehensive
            income                                                                |             |                          |                    |                   |                  |                                   |                                 |             | $       1,364             
|Balance at
  June 30, 2006                                                                             | $     1,453 | $    111,223             | $      (8,662)     | $         -       | $   25,645       | $      (1,409)                    | $         -                     | $  128,250  |                           
|                                                                                                       |             |                          |                    |                   |                  |                                   |                                 |             |                           

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)**

|                                                 |                                                                                    |                                                    |                                    | **Nine Months EndedJune 30,**
|------------------------------------------------ | ---------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------- | -----------------------------
|                                                 |                                                                                    |                                                    |                                    | **2006**                     
|**Cash flows from operating activities**        
|                                                 | Net income                                                                         | $   1,814                                          | $   1,520                         
|                                                 | Adjustments to reconcile net income to net cash
  provided by operating activities
|                                                 |                                                                                    | Depreciation and amortization                      | 253                                | 267                          
|                                                 |                                                                                    | Net amortization of premiums and discounts         | (65)                               | 93                           
|                                                 |                                                                                    | Losses on sales of securities available-for-sale   | 271                                | 16                           
|                                                 |                                                                                    | ESOP compensation expense                          | 421                                | 184                          
|                                                 |                                                                                    | RSP compensation expense                           | 393                                | 136                          
|                                                 |                                                                                    | SOP compensation expense                           | 246                                | -                            
|                                                 |                                                                                    | Provision for loan losses                          | 355                                | 105                          
|                                                 |                                                                                    | Increase in cash surrender value of life insurance | (234)                              | (200)                        
|                                                 |                                                                                    | Gain on sale of loans                              | 12                                 | 5                            
|                                                 |                                                                                    | Proceeds from sales of loans                       | 3,961                              | 1,008                        
|                                                 |                                                                                    | Origination of loans held for sale                 | (4,216)                            | (1,678)                      
|                                                 |                                                                                    | Decrease (increase) in accrued interest receivable | (414)                              | (135)                        
|                                                 |                                                                                    | Decrease (increase) in other assets                | 265                                | (147)                        
|                                                 |                                                                                    | Change in deferred income taxes                    | (329)                              | (240)                        
|                                                 |                                                                                    | Increase (decrease) in other liabilities           | 88                                 | 437                          
|                                                 |                                                                                    |                                                    | Net cash from operating activities | 2,821                        
|                                                
|**Cash flows from investing activities**        
|                                                 | Net increase in loans receivable                                                   | (43,579)                                           | (30,001)                          
|                                                 | Purchases of securities held-to-maturity                                           | (4,935)                                            | (6,227)                           
|                                                 | Principal paydowns on securities held-to-maturity                                  | 1,535                                              | 762                               
|                                                 | Purchases of securities available-for-sale                                         | (52,606)                                           | -                                 
|                                                 | Sales of securities available-for-sale                                             | 9,750                                              | 1,984                             
|                                                 | Calls of securities available-for-sale                                             | -                                                  | 2,000                             
|                                                 | Maturities of securities available-for-sale                                        | 5,000                                              | -                                 
|                                                 | Principal paydowns on securities available-for-sale                                | 14,754                                             | 16,449                            
|                                                 | Purchase of Federal Home Loan Bank stock                                           | (1,383)                                            | (2,524)                           
|                                                 | Redemption of Federal Home Loan Bank stock                                         | 1,523                                              | 2,111                             
|                                                 | Purchase of bank-owned life insurance                                              | (920)                                              | (1,000)                           
|                                                 | Purchase of premises and equipment                                                 | (2,123)                                            | (490)                             
|                                                 |                                                                                    | Net cash from investing activities                 | (72,984)                           | (16,936)                     
|                                                
|****Cash from financing activities****          
|                                                 | Net increase (decrease)  in deposits                                               | (14,208)                                           | 8,675                             
|                                                 | Net change in advance payments by borrowers for taxes and insurance                | 249                                                | 288                               
|                                                 | Repayment of Federal Home Loan Bank of New York advances                           | (6,044)                                            | (16,042)                          
|                                                 | Federal Home Loan Bank of New York advances                                        | -                                                  | 15,000                            
|                                                 | Net change in Federal Home Loan Bank of New York OLOC                              | -                                                  | 9,600                             
|                                                 | Net proceeds from stock issuance                                                   | 89,588                                             | -                                 
|                                                 | MHC capital infusion                                                               | 99                                                 | -                                 
|                                                 | RSP share purchases                                                                | (2,254)                                            | -                                 
|                                                 | Cash dividends paid                                                                | (1,586)                                            | (1,303)                           
|                                                 | Stock subscriptions refunded or applied                                            | (115,201)                                          | -                                 
|                                                 |                                                                                    | Net cash from financing activities                 | (49,357)                           | 16,218                       
|Net change in cash and cash equivalents          | (119,520)                                                                          | 653                                               
|Cash and cash equivalents at beginning of period | 125,773                                                                            | 8,034                                             
|**Cash and cash equivalents at end of period**   | $   6,253                                                                          | $   8,687                                         

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)**

|                                                            |                                 |                                                                  |           | **Nine Months EndedJune 30,**
|----------------------------------------------------------- | ------------------------------- | ---------------------------------------------------------------- | --------- | -----------------------------
|                                                            |                                 |                                                                  |           | **2006**                     
|Supplemental cash flow information:                        
|                                                            | Cash paid during the period for
|                                                            |                                 | Interest                                                         | $   8,516 | $   6,908                    
|                                                            |                                 | Income taxes, net of refunds                                     | 1,494     | 1,277                        
|                                                           
|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 June 30, 2006 and for the three and nine months
ended June 30, 2006.  The consolidated financial statements as of September 30, 2005 and the three and
nine months ended June 30, 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

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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 nine months ended June 30, 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
ESOP which 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 held by public shareholders 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.

|                                                                                | **Nine Months EndedJune 30,** | **Three Months EndedJune 30,**
|------------------------------------------------------------------------------- | ----------------------------- | ------------------------------
|****                                                                            | **2006**                      | **2005**                      
|Basic                                                                          
|Net income                                                                      | $        1,814                | $        1,520                
|                                                                               
|Weighted average common shares
outstanding                                      | 13,090,242                    | 13,883,360                    
|                                                                               
|Basic earnings per common
share                                                 | $         0.14                | $         0.11                
|                                                                               
|Diluted                                                                        
|Net income                                                                      | $       1,814                 | $       1,520                 
|                                                                               
|Weighted average common shares
outstanding  for basic earnings per
common share | 13,090,242                    | 13,883,360                    
|                                                                               
|Add:  Dilutive effects of assumed
exercises of  stock options                   | 96,721                        | 13,089                        
|                                                                               
|Add:  Dilutive effects of full vesting
of stock  awards                         | 33,742                        | 2,551                         
|                                                                               
|Average shares and dilutive
potential  common shares                            | 13,220,705                    | 13,899,000                    
|                                                                               
|Diluted earnings per common share                                               | $         0.14                | $         0.11                

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

---

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 June 30, 2006, the ESOP held 1,132,046  shares of the Company's common stock and
80,408 of these shares had been allocated to the accounts maintained for participants.  The
reported number of total shares and allocated shares held by the ESOP each reflect the
cumulative distribution of 1,525 allocated shares to participants in accordance with the plan.
The original number of ESOP plan shares totaled 1,133,571 of which 81,933 have been allocated
through June 30, 2006.  Participants become eligible to receive payment of the vested benefits
under the plan upon retirement, disability or termination of employment.  Prior to the completion of the second step conversion, participants who elected to receive their benefit payments in the form of ASB Holding Company common stock could require ASBH to purchase the common stock distributed at fair
value during two 60-day periods.  The first purchase period began on the date the benefit was
paid and the second purchase period began 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 reduced 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 was 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 June 30, 2006, this contingent repurchase obligation was no longer
recorded as a reduction of stockholders' 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 and the American Bank of New Jersey 2005 Restricted Stock
Plan.  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.

At the annual meeting held on May 23, 2006, stockholders of ABNJ approved the American
Bancorp of New Jersey, Inc. 2006 Equity Incentive Plan.  Under this plan,  722,633 options on shares of
common stock and 358,484 restricted shares of common stock were made available.  All options and
restricted shares relating to this plan were awarded on May 23, 2006.  As of that date,  358,484 shares of

---

Shares of common stock issuable pursuant to outstanding options under the 2005 Stock Option Plan and
2006 Equity Incentive Plan are considered outstanding for purposes of calculating earnings per share on
a diluted basis.  The Financial Accounting Standards Board 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 nine months ended June 30, 2006, the
Company recognized approximately $246,000 of compensation expense relating stock options awarded
through the 2005 Stock Option Plan and 2006 Equity Incentive Plan ("SOP" options).  The Company
recognized approximately $56,000  of income tax benefit resulting from this expense for that period.

For accounting purposes, the Company continues to recognize compensation expense for
restricted shares of common stock awarded under the 2005 Restricted Stock Plan and 2006 Equity
Incentive Plan over the vesting period at the fair market value of the shares on the date they are
awarded.  For the nine months ended June 30, 2006, the Company recognized approximately $362,000 of
compensation expense relating to restricted stock plan shares awarded through the 2005 Restricted Stock
Plan and 2006 Equity Incentive Plan ("RSP" shares).  The Company recognized approximately $145,000
of income tax benefit resulting from this expense for that period.

During the nine months ended June 30, 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 nine months ended June 30, 2006 resulting from that forfeiture.  The Company may
consider awarding such shares and options at a later date.

As of June 30, 2006, there were approximately $2.4 million and $5.0 million, 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 4.3 and 4.6 years
respectively.

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 nine month periods ended June 30, 2005.



---

|                                            | **Nine Months Ended
June 30, 2005** | **Three Months
Ended
June 30, 2005**
|------------------------------------------- | ----------------------------------- | ------------------------------------
|Basic                                      
|Net Income                                  | $         1,520                     | $            325                    
|                                           
|Pro forma net income                        | 1,353                               | 269                                 
|                                           
|Weighted average common shares outstanding  | 13,883,360                          | 13,900,393                          
|                                           
|Basic earnings per common share             | $           0.11                    | $           0.02                    
|                                           
|Pro forma basic earnings per  common share  | $           0.10                    | $           0.02                    
|                                           
|Diluted                                    
|Diluted earnings per common share           | $           0.11                    | $           0.02                    
|                                           
|Pro forma diluted earnings per common
share | $           0.10                    | $           0.02                    

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** | **May 23, 2006**
|------------------------------------------------------------ | -------------------- | --------------- | ----------------
|**Options Awarded**                                          | ****                 |                 |                 
|                                                             |                      |                 |                 
|Risk free interest rate                                      | 3.67%                | 3.95%           | 4.91%           
|                                                            
|Expected option life                                         | 5.00                 | 5.00            | 5.00            
|                                                            
|Expected stock price volatility                              | 22.00%               | 22.00%          | 11.00%          
|                                                            
|Dividend yield                                               | 0.00%                | 0.00%           | 1.39%           
|                                                            
|Weighted average fair value of options granted during
  year | $      4.75          | $      5.00     | $      2.11     



---

A summary of the activity in the Company's stock option plans for the nine months ended June 30, 2006 is as follows.

|                                              | Shares    | WeightedAverageExercisePrice
|--------------------------------------------- | --------- | ----------------------------
|Outstanding at
  beginning of period          | 694,315   | $       6.81                
|Granted                                       | 722,633   | 11.49                       
|Exercised                                     | -         | -                           
|Forfeited or expired                          | (19,094)  | $       6.80                
|Outstanding at
  end of period                | 1,397,854 | $       9.23                
|                                             
|Options exercisable
  at end of period        | 135,036   | $       6.81                
|Weighted average remaining
  contractual life |           | 8.6 years                   

The aggregate intrinsic value of stock options outstanding and exercisable at June 30, 2006 was
approximately $686,000.

A summary of the status of the Company's nonvested restricted stock plan shares as of June 30, 2006 and
changes during the nine months ended June 30, 2006 are as follows.

|                                   | Shares   | WeightedAverageGrant-DateFair Value
|---------------------------------- | -------- | -----------------------------------
|Nonvested at
  beginning of period | 208,295  | $       6.81                       
|Granted                            | 358,484  | $     11.49                        
|Vested                             | (40,404) | $       6.81                       
|Forfeited or expired               | (6,249)  | $       6.80                       
|Nonvested at
  end of period       | 520,126  | $     10.04                        



---

**ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS 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 in economic conditions.  In addition, regulatory agencies, as an integral part
of their examination process, periodically review the allowance for loan losses and may require
the Bank to recognize additional provisions based on their judgment of information available to
them at the time of their examination.  The



---

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 nine
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.

**Recent Accounting Pronouncements**

In July 2006, the FASB released Interpretation No. 48, "Accounting for Uncertainty in Income Taxes."
This Interpretation revises the recognition tests for tax positions taken in tax returns such that a tax benefit
is recorded only when it is more likely than not that the tax position will be allowed upon examination by
taxing authorities.  The amount of such a tax benefit to record is the largest amount that is more likely than not to be allowed.   Any reduction in deferred tax assets or increase in tax liabilities upon adoption will correspondingly reduce retained earnings.  The Company has not yet determined the effect of adopting this Interpretation, which is effective for it on October 1, 2007.

**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



---

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 thereby increasing the Company's earning asset yields.  The
Company's cost of interest-bearing liabilities lagged the upward movement in current market
interest rates.  After decreasing for thirteen consecutive quarters, the Company's cost of
interest-bearing liabilities remained unchanged for the quarters ended March 31, 2004 and June
30, 2004 before increasing modestly in the final quarter of the fiscal year ended September 30,
2004.  As a result, the Company reported a 16 basis point improvement in its net interest
margin to 2.60% for the year ended September 30, 2004 from 2.44% for the year ended
September 30, 2003.

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 nine months of fiscal 2006, the Company's net interest spread declined
to 1.87% 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 72 basis
points from 2.16% for fiscal 2005 to 2.88% for the nine months ended June 30, 2006.  For the
same comparative periods, yield on loans increased 11 basis points from 5.32% to 5.43%.

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 16 basis points from
2.60% for fiscal 2005 to 2.76% for the nine months ended June 30, 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
0.40% of total assets at June 30, 2006 from



---

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 fees and charges.  Excluding gains and losses on sale of
assets, annualized noninterest income as a percentage of average assets totaled 0.25% for the
nine months ended June 30, 2006 - a reduction of 2 basis points from 0.27% from fiscal 2005.
This decrease is primarily attributable to overall growth in average earning assets outpacing
that of fee income from deposits and loans.   Such growth resulted from the closing of the
Company's second step conversion.

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, data processing 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 has continued 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.  A
portion of this increase is attributable to additional personnel costs associated with the
Company's increased strategic focus on commercial lending.  This increase is also attributable,
in part, 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 have also
increased as the Company implemented the restricted stock and stock option plans approved
by shareholders during both fiscal 2005 and fiscal 2006.

In the aggregate, noninterest expense as a percentage of average assets totaled 1.99% for
the nine months ended June 30, 2006, a decrease of 3 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 purchases or leases and branch construction costs 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
continue to be utilized to augment management's compliance efforts.

In total, our annualized return on average assets increased 1 basis point to 0.47% for the
nine months ended June 30, 2006 from 0.46% for fiscal 2005 while annualized return on average
equity decreased 340 basis points to 1.90% 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 nine months ended June 30, 2006 when
our net interest spread shrank 41 basis points to 1.87% 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 nine months of fiscal 2006 than during fiscal 2005.  These balances
resulted from the 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 21
basis points from 4.84% for fiscal 2005 to 5.05% for the nine months ended June 30, 2006.

The increase in yield on earning assets was offset by a 62 basis point increase in the cost
of interest-bearing liabilities from 2.56% for fiscal 2005 to 3.18% for the nine months ended June
30, 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 June 30, 2006 and September 30, 2005**

Our total assets decreased by $46.8 million, or 8.4%, to $509.0 million at June 30, 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 $119.5 million, or 95.0%, to $6.3 million at June
30, 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 $22.2 million, or 35.6%, to $84.5
million at June 30, 2006 from $62.3 million at September 30, 2005.  Additionally, securities held
to maturity increased $3.4 million, or 43.2% to $11.2 million at June 30, 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.  During past two quarters, the Company utilized these cash flows
and a substantial portion of the balance of cash and cash equivalents noted above to fund its
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 June 30, 2006 and September 30, 2005.
Amounts reported exclude unrealized gains and losses on the available for sale portfolio.

|                             | June 30, 2006          | September 30, 2005     
|---------------------------- | ---------------------- | -----------------------
|Type of Securities           | Amount                 | Percent of Total Assets
|                             | (Dollars in thousands)
|                            
|Fixed rate MBS               | $ 15,358               | 3.02%                  
|ARM MBS                      | 25,852                 | 5.08                   
|Fixed rate CMO               | 35,348                 | 6.94                   
|Floating rate CMO            | 2,474                  | 0.49                   
|ARM mutual fund              | -                      | -                      
|Fixed rate agency debentures | 18,959                 | 3.72                   
|                            
|Total                        | $	97,991               | 19.25%                 

Assuming no change in interest rates, the estimated average life of the investment securities
portfolio, excluding the ARM mutual fund, was 2.26 years at both June 30, 2006 and September 30, 2005.
Assuming a hypothetical immediate and permanent increase in interest rates of 300 basis points, the

---

Loans receivable, net increased by $43.2 million, or 12.7%, to $384.2 million at June 30, 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 $22.0 million coupled with net increases in
commercial and business loans totaling $4.8 million.  Together, net growth in these loan balances totaled
44.3% or $26.8 million for the nine months ended June 30, 2006 and comprised approximately 62% of the
Company's net increase in loans receivable for the year.  The remaining net growth in loans included
increases in one-to-four family mortgages, including home equity loans and home equity lines of credit,
totaling $16.7 million.  Growth in loans receivable, net was partially offset by net increases to the allowance for loan losses totaling $355,000.  This
growth included increases in prime-based, floating rate home equity lines of credit which grew
approximately $4.6 million or 34.1% from $13.5 million to $18.0 million for the first nine months of fiscal
2006.

The following two tables compare the composition of the Company's loan portfolio by loan type
as a percentage of total assets at June 30, 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:

|                           | June 30, 2006          | September  30, 2005   
|-------------------------- | ---------------------- | ----------------------
|Type of Loans              | Amount                 | Percent ofTotal Assets
|                           | (Dollars in thousands)
|Construction               | $  11,250              | 2.21%                 
|1/1 and 3/3 ARMs           | 4,833                  | 0.95                  
|3/1 and 5/1 ARMs           | 134,116                | 26.35                 
|5/5 and 10/10 ARMs         | 43,895                 | 8.62                  
|7/1 and 10/1 ARMs          | 1,697                  | 0.33                  
|15 year fixed or less      | 109,535                | 21.52                 
|Greater than 15 year fixed | 55,785                 | 10.96                 
|HELOC                      | 18,170                 | 3.57                  
|Consumer                   | 797                    | 0.16                  
|Commercial                 | 5,585                  | 1.10                  
|                          
|Total                      | $	385,663              | 75.77%                



---

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

|                          | June 30, 2006          | September  30, 2005   
|------------------------- | ---------------------- | ----------------------
|Type of Loans             | Amount                 | Percent ofTotal Assets
|                          | (Dollars in thousands)
|Construction              | $   11,250             | 2.21%                 
|1-4 family mortgage       | 279,578                | 54.92                 
|Multifamily (5+) mortgage | 32,656                 | 6.42                  
|Nonresidential mortgage   | 37,815                 | 7.43                  
|1-4 family HELOC          | 17,982                 | 3.53                  
|Consumer                  | 797                    | 0.16                  
|Commercial                | 5,585                  | 1.10                  
|                         
|Total                     | $	385,663              | 75.77%                

****

Total deposits decreased by $14.2 million, or 4.2%, to $326.7 million at June 30, 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 $4.4 million of net deposit withdrawals were primarily attributable to aggressive
deposit competition in the markets served by the Company.  In total, savings deposits declined
$13.1 million, or 10.7% while certificates of deposit increased $5.4 million or 3.6%.  Checking
deposits, including demand, NOW and money market checking accounts, decreased $6.5
million or 10.0% to $58.3 million.

At June 30, 2006, the Bank held approximately $20.0 million of municipal deposits.  These deposits included one relationship totaling
approximately $12.9 million of which a significant portion relates to capital
improvement projects currently underway.  The Bank expects these funds to be withdrawn
during the remainder of the calendar year due, in part, to disbursements being made by the
municipality to fund the completion of such projects.

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

|                        | June 30, 2006          | September  30, 2005   
|----------------------- | ---------------------- | ----------------------
|Deposit Category        | Amount                 | Percent ofTotal Assets
|                        | (Dollars in thousands)
|Money market checking   | $  22,368              | 4.39%                 
|Other checking          | 35,964                 | 7.07                  
|Money market savings    | 15,648                 | 3.07                  
|Other savings           | 94,478                 | 18.56                 
|Certificates of deposit | 158,258                | 31.10                 
|Total                   | $	326,717              | 64.19%                



---

FHLB advances decreased $6.0 million, or 11.2%, to $47.7 million at June 30, 2006 due to
maturities and scheduled principal repayments of amortizing advances.

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

|                     | June 30, 2006          | September  30, 2005   
|-------------------- | ---------------------- | ----------------------
|Remaining Term       | Amount                 | Percent ofTotal Assets
|                     | (Dollars in thousands)
|Overnight            | $        -             | -%                    
|One year or less     | 8,061                  | 1.58                  
|One to two years     | 8,064                  | 1.58                  
|Two to three years   | 11,565                 | 2.28                  
|Three to four years  | 6,000                  | 1.18                  
|Four to five years   | 6,000                  | 1.18                  
|More than five years | 8,000                  | 1.57                  
|Total                | $	47,690               | 9.37%                 

Equity increased $88.7 million, or 224.6% to $128.2 million at June 30, 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 $1.8 million
for the nine months ended June 30, 2006, offset by dividends paid of approximately $1.6 million and
increases to accumulated other comprehensive loss of $450,000.  Further, the amount reclassified on
ESOP shares decreased from $473,000 to $0.  On October 6, 2005, the
Company began trading on Nasdaq which is considered to be an established market under ERISA
regulations.  As a result, the Company is no longer required to establish a
liability to reflect this repurchase obligation.

******Comparison of Operating Results for the Three Months Ended June 30, 2006 and June 30, 2005**

**General.**  Net income for the three months ended June 30, 2006 was $464,000, an
increase of $139,000, or 42.8% from the three months ended June 30, 2005.  The increase in net
income resulted from an increase in net interest income and non-interest income partially offset by an
increase in noninterest expense, the provision for loan losses and the provision for income
taxes.

**Interest Income.**  Total interest income increased 23.1% or $1.2 million to $6.4 million
for the three months ended June 30, 2006 from $5.2 million for the three months ended June 30,
2005.  For those same comparative quarters, the average yield on interest-earning assets
increased 33 basis points to 5.24% from 4.91% while the average balance of interest-earning
assets increased $65.6 million or 15.4% to $491.1 million from $425.6 million.

Interest income on loans increased $715,000 or 15.9%, to $5.2 million for the three
months ended June 30, 2006 from $4.5 million for the same quarter in 2005.  This increase was
due, in part, to a $40.8 million increase in the average balance of loans receivable to $378.0
million for the quarter ended June 30, 2006 from $337.2 million for the quarter ended June 30,
2005.  In addition, the average yield on loans increased 18 basis points to 5.52% from 5.34% 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 $390,000 or 58.1% to $1.1 million for the three months ended June
30, 2006 from $671,000 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 4.19% from 3.29% for the
same comparative periods.  The impact on interest income attributable to this increase was
further enhanced by a $19.6 million increase in the average balance of investment securities to
$101.3 million for the three months ended June 30, 2006 from $81.6 million for the same period in 2005.  The increase in yield primarily resulted from purchases of investment securities with
the proceeds of the Company's second step conversion and higher yields on adjustable rate
securities which have repriced upward in accordance with the general movement of market
interest rates.

Further, interest and dividend income on federal funds sold, other interest-bearing
deposits and FHLB stock increased $105,000 to $155,000 for the three months ended June 30,
2006 from $50,000 for the same period in 2005.  This increase was due, in part, to an increase of
$5.1 million in the average balance of these assets to $11.8 million for the three months ended
June 30, 2006 from $6.7 million for the three months ended June 30, 2005.  The impact on
interest income attributable to this growth was further augmented by a 223 basis point rise in
the average yield on these assets which increased to 5.23% from 3.00% due largely to increases
in market interest rates.

**Interest Expense.**  Total interest expense increased by $553,000 or 22.3% to $3.0 million
for the three months ended June 30, 2006 from $2.5 million for the same three months in fiscal
2005.  For those same comparative periods, the average cost of interest-bearing liabilities
increased 76 basis points from 2.67% to 3.43%, while the average balance of interest-bearing
liabilities declined $18.4 million or 4.9% to $353.7 million for the three months ended June 30,
2006 from $372.1 million for the same quarter in fiscal 2005.

Interest expense on deposits increased $670,000 or 39.3% to $2.4 million for the quarter
ended June 30, 2006 from $1.7 million for the quarter ended June 30, 2005.  This increase was
due, in part, to an 90 basis point increase in the average cost of interest-bearing deposits to
3.16% for the quarter ended June 30, 2006 from 2.26% for the same quarter in fiscal 2005.  The
components of this increase include a 90 basis point increase in the average cost of certificates
of deposit, a 93 basis point increase in the average cost of interest-bearing checking accounts
and a 74 basis point increase in the average cost of savings accounts.  The increase in the
average cost was partly offset by a decline of $1.5 million in the average balance of interest-bearing deposits for those same comparative periods.  The components of this net decrease for
the comparative periods include an increase of $11.7 million in the average balance of
certificates of deposit, a $14.9 million decrease in the average balance of savings accounts and a
$1.7 million increase in the average balance of interest-bearing checking accounts.  In large part, the reduction in the average balance savings was due to the net disintermediation of higher rate savings accounts into certificates of deposit at current market rates.

Interest expense on FHLB advances decreased $118,000 to $659,000 for the three months
ended June 30, 2006 from $777,000 for the same period in fiscal 2005.  This decrease was due, in
part, to a $16.9 million decrease in the average balance to $53.2 million for the three months
ended June 30, 2006 from $59.2 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 52 basis point
increase in the average cost of advances from 4.43% for the three months ended June 30, 2005 to
4.95% for the same period in fiscal 2006.  The higher average cost for the current quarter was
primarily due to higher costs for the overnight repricing line of credit borrowings in the quarter
ended June 30, 2006 compared with that held during the earlier comparative quarter.
Additionally, the maturity of lower costing term advances in the more recent quarter have
resulted in comparatively higher costs for the remaining portfolio of fixed-rate term advances.



---

**Net Interest Income.**  Net interest income increased by $655,000 or 23.9%, to $3.4 million
for the three months ended June 30, 2006 from $2.7 million for the three months ended June 30,
2005.  The Company's net interest rate spread declined 43 basis points from 2.24% to 1.81% for
the same comparative periods, while the net interest margin increased 19 basis points from
2.58% to 2.77%.

**Provision for Loan Losses.**Using the allowance methodology described earlier, the provision
for loan losses totaled $109,000 for the three months ended June 30, 2006 representing an increase of
$115,000 over the same three months in 2005.  The Company's net loan loss provision for the earlier
comparative quarter reflected the reversal of a previously recorded loss provision of $42,000.
Consequently, the Company recorded a negative loss provision of $6,000 for that quarter.  After
adjusting for the reversal in the earlier period, the increase in loan loss provision is generally attributable
to the comparatively higher net growth in our commercial loan portfolio.  Specifically, each comparative
three month provision, 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 June 30, 2006,
outstanding loan balances, excluding the allowance for loan loss, increased 3.3% or $12.5 million to
$386.8 million from $374.3 million at March 31, 2006.  The growth comprised 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 $4.0 million and a net increase in commercial loans totaling $930,000.
Additional components of the net change in loan balances included net increases in one-to-four family
mortgages totaling $2.4 million  coupled with increases in home equity loans of $1.8 million.

By comparison, for the three months ended June 30, 2005, total loan balances, excluding
the allowance for loan loss, grew $6.0 million or 1.8%.  The growth was primarily comprised of
net increases in one-to-four family mortgages totaling $4.0 million, increases in multi-family
and commercial real estate loans totaling $2.6 million, and increases in home equity loans,
consumer loans and commercial loans  totaling $718,000 offset by a decline in disbursed
balances of construction loans totaling $1.3 million.

In total, the allowance for loan losses as a percentage of gross loans outstanding
increased 3 basis point to 0.52% at June 30, 2006 from 0.49% at June 30, 2005.  These ratios
reflect allowance for loan loss balances of $2.0 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 $41,000 from $265,000 for the
quarter ended June 30, 2005 to $306,000 for the quarter ended June 30, 2006.  This improvement
was due, in part, to comparatively higher income from cash surrender value of life insurance of
approximately $12,000 reflecting higher policy balances held by the Company and increases in
policy yields attributable to increases in market interest rates.  Additionally, the Company
recognized a $27,000 nonrefundable deposit as income which had previously been held in
escrow pending legal resolution of a disputed claim to that deposit.  Specifically, the deposit
related to an REO property sold in a prior period for which an earlier potential buyer did not
fulfill its purchase obligations.  The quarter ended June 30, 2005 also reflected a loss on sale of
an investment security of approximately $16,000 for which no equivalent loss was incurred in
the current quarter.  Finally, for the same comparative periods, income from deposit service
fees and charges was reduced by approximately $15,000 due primarily to reduced levels of
annuity sales and related fee income.

**Noninterest Expense.**  Noninterest expense increased $343,000 from $2.5 million for the
quarter ended June 30, 2005 to $2.9 million for the quarter ended June 30, 2006.  This net
increase was generally attributable to comparatively higher occupancy and equipment,
advertising, legal, professional and consulting fees and general and administrative expenses
partially offset by decreases in data processing costs.



---

For the quarter ended June 30, 2006, the Company reported a nominal increase in
salaries and employee benefits.  Such expenses totaled approximately $1.8 million for the
quarters ended June 30, 2006 and June 30, 2005.  This nominal increase comprised a number of
substantially offsetting variances within several components of salaries and employee benefits.
Salaries and wages including payroll taxes, increased $177,000 due, in large part, to commercial
lending staffing additions coupled with overall annual increases in employee compensation.
These increases were partly offset by net reversals of prior expense accruals totaling $79,000
relating to adjustments in staff bonus and management incentive plan compensation.  Such
accrual adjustments reflect the Company's performance for the nine months ended June 30,
2006.

Retirement and stock benefit plan costs increased $292,000.  This increase was due, in
part, to an $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 $206,000 and $119,000,
respectively, for the three months ended June 30, 2006.  By comparison, such expenses during
the same period in 2005 totaled $69,000 and were limited to restricted stock plan expenses as
the Company had not yet adopted FAS 123R.  Together, these factors contributed $256,000 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.

Medical and other insurance benefit premiums, net of employee co-payments, increased
approximately $20,000 while other employee expenses increased approximately $21,000
resulting primarily from comparatively greater costs associated with employee training and
personnel procurement expenses.

Finally, offsetting these net increases in salaries and employee benefits in the quarter
ended June 30, 2006 was a net decrease in director compensation expense of $432,000 due
largely to costs recognized in the earlier comparative period relating to changes in the
Company's director retirement plan for which no comparable costs were incurred in the more
recent quarter.

Occupancy and equipment expense increased $81,000 to $278,000 for the three months
ended June 30, 2006 as compared to $197,000 for the same three months in fiscal 2005.  This
increase was attributable, in large part, to the recognition of approximately $90,000 of deposit
branch acquisition costs in the more recent quarter relating to sites for which the Bank and/or
Seller were unable to fulfill the conditional terms of the sales contract.  Such expenses would
have been capitalized into the depreciable cost of the branch had they come to fruition.
Notwithstanding these challenges, the Company continues to pursue its deposit branch growth
strategy.  Toward that end, the Bank is currently in the process of constructing a full service
branch located along Bloomfield Avenue in Verona, New Jersey and has recently received the
requisite municipal approvals needed to construct a full service branch on a site in Clifton, New
Jersey.

Offsetting other increases in noninterest expense were data processing costs which
decreased $27,000 to $150,000 for the three months ended June 30, 2006 from $177,000 for the
same three months in fiscal 2005.  This reduction was primarily attributable to costs recognized
in the earlier period relating to enhancements to the Bank's internet banking service for which
no comparable costs were incurred in the more recent quarter.

Increases in noninterest expense for those same comparative periods also included
increases in advertising and marketing expenses of $39,000 attributable to costs associated with
enhanced corporate and lending marketing programs.



---

Legal expenses for the quarter ended June 30, 2006 were $94,000 higher than those
recorded for the same quarter in 2005.   This comparative increase in legal expenses was
attributable, in large part, to the Company's annual meeting held in May, 2006 and matters
addressed by shareholders at that time.  Additionally, professional and consulting fees
increased $77,000 to $128,000 for the quarter ended June 30, 2006 from $51,000 for the same
quarter in 2005.  In large part, these increases were attributable to audit and 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.

Finally, the Company reported increases to other noninterest expenses of $76,000.  This
increase in costs was attributable, in part, to comparatively higher administrative and
document rendering and distribution costs associated with the Company's annual meeting.
Other general and administrative cost increases were incurred in support of  the Company's
commercial lending initiatives.

**Provision for Income Taxes**.  The provision for income taxes increased $99,000 for the
three months ended June 30, 2006 from the same period in fiscal 2005.  The effective tax rate
was 37.0% and 34.9% for the three months ended June 30, 2006 and 2005, respectively.  The
increase in the effective tax rate was attributable, in part, 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 comparatively higher non-deductible expenses
associated with the ESOP while also recognizing non-deductible expenses relating to incentive
stock options due to the adoption of FAS 123R in the current fiscal year.  Such non-deductible
expenses also increased the Company's reported effective income tax rate.

**Comparison of Operating Results for the Nine Months Ended June 30, 2006 and June 30, 2005**

**General.**  Net income for the nine months ended June 30, 2006 was $1.8 million, an
increase of $294,000, or 19.3% from the nine months ended June 30, 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 23.2% or $3.5 million to $18.8 million
for the nine months ended June 30, 2006 from $15.2 million for the nine months ended June 30,
2005.  For those same comparative quarters, the average yield on interest-earning assets
increased 22 basis points to 5.05% from 4.83% while the average balance of interest-earning
assets increased $75.6 million or 18.0% to $495.2 million from $419.7 million.

Interest income on loans increased $1.8 million or 13.6%, to $14.8 million for the nine
months ended June 30, 2006 from $13.0 million for the same period in 2005.  This increase was
due, in part, to a $37.7 million increase in the average balance of loans receivable to $362.5
million for the nine months ended June 30, 2006 from $324.7 million for the nine months ended
June 30, 2005.  In addition, the average yield on loans increased 10 basis points to 5.43% from
5.33% for those same comparative periods.  The increase in the average balance of loans
receivable was the result of loan originations exceeding



---

The rise in interest income on loans was augmented by higher interest income on
securities, which increased $849,000 or 40.0% to $3.0 million for the nine months ended June 30,
2006 from $2.1 million for the same nine months in 2005.  The increase was due in part, to a 80
basis point increase in the average yield on securities which grew to 4.02% from 3.22% for the
same comparative periods.  The impact on interest income attributable to this increase was
further augmented by a $10.5 million increase in the average balance of investment securities to
$98.5 million for the nine months ended June 30, 2006 from $88.0 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 higher yields on adjustable rate
securities which have repriced upward in accordance with the general movement of market
interest rates.

Further, interest and dividend income on federal funds sold, other interest-bearing
deposits and FHLB stock increased $916,000 to $1,027,000 for the nine months ended June 30,
2006 from $111,000 for the same period in 2005.  This increase was due, in part, to an increase of
$27.3 million in the average balance of these assets to $34.3 million for the nine months ended
June 30, 2006 from $6.9 million for the nine months ended June 30, 2005.  The impact on interest
income attributable to this growth was further augmented by a 186 basis point rise in the
average yield on these assets which increased to 3.99% from 2.13%.

**Interest Expense.**  Total interest expense increased by $1.6 million or 23.2% to $8.5
million for the nine months ended June 30, 2006 from $6.9 million for the same nine months in
fiscal 2005.  For those same comparative periods, the average cost of interest-bearing liabilities
increased 67 basis points from 2.51% to 3.18%, while the average balance of interest-bearing
liabilities decreased $10.0 million or 2.7% to $356.4 million for the nine months ended June 30,
2006 from $366.4 million for the same nine months in fiscal 2005.

Interest expense on deposits increased $1.9 million or 38.8% to $6.6 million for the nine
months ended June 30, 2006 from $4.7 million for the same period in fiscal 2005.  This increase
was due, in part, to a $1.4 million increase in the average balance of interest-bearing deposits to
$303.2 million for the nine months ended June 30, 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 $23.2 million in the average balance of certificates of deposit and a $1.5 million
increase in the average balance of interest-bearing checking accounts partially offset by a $23.3
million decrease in the average balance of savings accounts.  In large part, the reduction in the average balance savings was due to the net disintermediation of higher rate savings accounts into certificates of deposit at current market rates.

The impact on interest expense attributable to the net growth in these average balances
was exacerbated by a 79 basis point increase in the average cost of interest-bearing deposits to
2.88% for the nine months ended June 30, 2006 from 2.09% for the same period in fiscal 2005.
The components of this increase include an 83 basis point increase in the average cost of
certificates of deposit, a 95 basis point increase in the average cost of interest-bearing checking
accounts and a 44 basis point increase in the average cost of savings accounts.

Interest expense on FHLB advances decreased $231,000 to $2.0 million for the nine
months ended June 30, 2006 from $2.2 million for the same period in fiscal 2005.  This decrease
was due, in part, to an $11.4 million decrease in the average balance to $53.2 million for the nine
months ended June 30, 2006 from $64.6 million for the same nine months in fiscal 2005.  The
impact on expense attributable to this decrease in average balance was partly offset by a 39
basis point increase in the average cost of advances from 4.50% for the nine months ended June
30, 2005 to 4.89% for the same period in fiscal 2006.  The



---

**Net Interest Income.**  Net interest income increased by $1.9 million or 23.2%, to $10.2
million for the nine months ended June 30, 2006 from $8.3 million for the nine months ended
June 30, 2005.  The net interest rate spread declined 45 basis points from 2.32% to 1.87% for the
same comparative periods, while the net interest margin increased 12 basis points from 2.64%
to 2.76%.

**Provision for Loan Losses.**Using the allowance methodology described earlier, the provision
for loan losses totaled $355,000 for the nine months ended June 30, 2006 representing an increase of
$250,000 over the same nine months in 2005.  The Company's net loan loss provision for the earlier
comparative period reflected the reversal of a previously recorded loss provision of $42,000.  After
adjusting for the reversal in that earlier period, the increase in loan loss provision is generally
attributable to the comparatively higher net growth in our commercial loan portfolio.  Specifically, each
comparative nine month provision resulted from the incremental growth in the outstanding balance of
the loans on which historical and environmental loss factors are applied.  For the nine months ended
June 30, 2006, outstanding loan balances, excluding the allowance for loan loss, increased 12.8% or $43.8
million to $386.8 million from $342.9 million at September 30, 2005.  The growth comprised a net increase
in the disbursed balances of construction loans of $10.1 million, net increases in multi-family and
commercial real estate loans totaling $11.9 million and a net increase in commercial loans totaling $4.8
million.  Additional components of the net change in gross loan balances included net increases in one-to-four family mortgages totaling $12.3 million coupled with increases in home equity loans of $4.6
million.

By comparison, for the nine months ended June 30, 2005, total gross loan balances,
excluding the allowance for loan loss, grew $30.7 million or 9.9%.  The growth was primarily
comprised of net increases in one-to-four family mortgages totaling $14.7 million, increases in
home equity and commercial loans totaling $1.7 million and increases in multi-family and
commercial real estate loans totaling $14.8 million, offset by a decline in consumer loans
totaling $21,000 and the disbursed balances of construction loans totaling $500,000.

In total, the allowance for loan losses as a percentage of gross loans outstanding
increased 3 basis points to 0.52% at June 30, 2006 from 0.49% at June 30, 2005.  These ratios
reflect allowance for loan loss balances of $2.0 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 $98,000 to $704,000 for the nine
months ended June 30, 2006 compared to $802,000 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 current nine month period compared with a similar loss on sale of $16,000 during
the earlier nine month period in fiscal 2005.  This net $255,000 variance was offset, in part, by
increases to other noninterest income categories.  Deposit service fees and charges increased
$31,000 due primarily to increased receipts of deposit account service charges offset by reduced
levels of fee income from annuity sales.  The Company also recorded comparatively higher
income from cash surrender value of life insurance of approximately $34,000 reflecting higher
policy balances held by the Company and increases in policy yields attributable to increases in
market interest rates.   In addition, gain on sale of held-for-sale loans increased $7,000 and other
noninterest income increased by $85,000.  The increases in noninterest income resulted
primarily from collection of comparatively higher loan prepayment penalties and the Company
recognizing a $27,000 nonrefundable deposit as income in the current nine month period.  The
deposit related to an



---

**Noninterest Expense.**  Noninterest expense increased $1.1 million, or 15.7% to $7.7
million for the nine months ended June 30, 2006 from $6.6 million for the nine months ended
June 30, 2005.  This increase was attributable to higher expenses for salaries and benefits,
occupancy and equipment, advertising, legal, professional and consulting fees, and other
noninterest expenses, partially offset by decreases in data processing expenses.

Salaries and employee benefits increased $544,000 or 12.4% to $4.9 million for the nine
months ended June 30, 2006 as compared to $4.4 million for the same period in 2005.  Salaries
and wages including bonus and payroll taxes, increased $364,000 due, in part, to executive and
commercial lending staffing additions coupled with overall annual increases in employee
compensation.

Retirement and stock benefit plan costs increased $445,000.  This increase was due in
large part to a $241,000 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 $362,000 and $245,000, respectively, for the nine months ended March 31, 2006.  By
comparison, such expenses during the same period in 2005 totaled $136,000.  This amount
included only six 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 $471,000 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 $262,000 resulting from the absence of such expense in the
current fiscal year due to the Company's discontinuation of that plan.

Medical and other insurance benefit premiums, net of employee co-payments, increased
approximately $48,000 while other employee expenses increased approximately $88,000
resulting primarily from comparatively greater costs associated with employee training and
personnel procurement expenses.

Finally, offsetting these net increases in salaries and employee benefits for the nine
months ended June 30, 2006 was a net decrease in director compensation expense of $398,000
due largely to costs recognized in the earlier comparative period relating to changes in the
Company's director retirement plan for which no comparable costs were incurred in the more
recent period.

Occupancy and equipment expense increased $77,000 to $683,000 for the nine months
ended June 30, 2006 as compared to $606,000 for the same nine months in fiscal 2005 while data
processing costs decreased by approximately $5,000.  The increase in occupancy and equipment
costs was attributable, in large part, to the recognition of approximately $90,000 of deposit
branch acquisition costs in the more recent period relating to sites for which the Bank and/or
Seller were unable to fulfill the conditional terms of the sales contract.  Such expenses would
have been capitalized into the depreciable cost of the branch had they come to fruition.
Notwithstanding these challenges, the Company continues to pursue its deposit branch growth
strategy.  Toward that end, the Bank is currently in the process of constructing a full service
branch located along Bloomfield Avenue in Verona, New Jersey and has recently received the
requisite municipal approvals needed to construct a full service branch on a site in Clifton, New
Jersey.

Increases in noninterest expense also included increases in advertising and marketing
expenses of approximately $24,000 attributable to costs associated with enhanced corporate and
lending marketing programs including higher expenses for print ads, promotions, and other
marketing initiatives.



---

Legal expenses for the nine months ended June 30, 2006 were $46,000 higher than those
recorded for the same period in 2005.   This comparative increase in legal expenses was
attributable, in large part, to the Company's annual meeting held in May, 2006 and matters
addressed by shareholders at that time.  Additionally, professional and consulting fees
increased $166,000 to $383,000 for the nine months ended June 30, 2006 from $217,000 for the
same period in 2005.  In large part, these increases were attributable to audit and 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.

Finally, the Company reported increases to other noninterest expenses of $188,000.  This
increase is attributable, in part, to comparatively higher general and administrative costs
resulting from operating as a comparatively larger and fully public company.  Such increases in
costs include those relating to document rendering and distribution costs associated with the
Company's annual meeting.  Other general and administrative cost increases were incurred in
support of the Company's commercial lending initiatives.

**Provision for Income Taxes**.  The provision for income taxes increased $247,000 for the
nine months ended June 30, 2006 from the same period in fiscal 2005.  The effective tax rate was
38.0% and 36.2% for the nine months ended June 30, 2006 and 2005, respectively.  The increase
in the effective tax rate was attributable, in part, 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 comparatively higher non-deductible expenses
associated with the ESOP while also recognizing non-deductible expenses relating to incentive
stock options due to the adoption of FAS 123R in the current fiscal year.  Such non-deductible
expenses also increased the Company's reported 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 June 30, 2006, the total approved loan
origination commitments outstanding amounted to $33.2 million.  At the same date, unused
lines of credit were $22.9 million and construction loans in process were $11.6 million.

Certificates of deposit scheduled to mature in one year or less at June 30, 2006, totaled
$119.9 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 June 30, 2006 the Bank has $8.1 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 June
30, 2006 totaled $71.4 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 June 30, 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                        | $	158,258      | $	119,936       | $	24,000  | $	4,283   | $	10,039    
|Federal Home Loan Bank
  advances(1) | 47,690         | 8,062           | 19,628    | 12,000    | 8,000       
|Total                                | $	205,948      | $	127,998       | $	43,628  | $	16,283  | $	18,039    

|_____________
|-------------
|(1)          

|                                      | TotalAmountsCommitted | Less Than1 Year | 1-3 Years | 4-5 Years | Over5 Years
|------------------------------------- | --------------------- | --------------- | --------- | --------- | -----------
|                                      | (In thousands)       
|Lines of credit(1)                    | $	22,877              | $	2,419         | $	557     | $	575     | $	19,326   
|Land lease                            | 2,407                 | 35              | 277       | 277       | 1,818      
|Construction loans in
   process      | 11,556                | 1,316           | 10,240    | -         | -          
|Other commitments to
   extend credit | 33,235                | 33,235          | -         | -         | -          
|Total                                 | $	70,705              | $	37,005        | $	11,074  | $	852     | $	21,144   

|_____________
|-------------
|(1)          

In addition to the above commitments, the Company has financial obligations regarding outstanding
contracts for purchase and leases relating to branch sites.  As of June 30, 2006, the Bank has paid a deposit
totaling $147,500 on a purchase contract for a future branch location.  Upon closing, the Bank is committed
to disbursing an additional $1,327,500 to fulfill its obligations under this contract.  This commitment is
contingent upon the fulfillment of certain conditions outlined in the purchase contract.

As noted in the table above, the Bank has entered into a land lease agreement through which it is committed to pay $2,407,079 over a 15 year term.  This commitment relates to the relocation of the Bank's Bloomfield branch site.  Such relocation will significantly upgrade and modernize the Bloomfield branch facility supporting the Company's deposit growth and customer service enhancement objectives.  The relocation will also support expansion of the administrative and lending office space within the Company's existing headquarters facility where the branch is currently located.  This commitment is contingent upon the fulfillment of certain conditions outlined in the lease contract.

---

**Capital**

Consistent with its goals to operate a sound and profitable financial organization, American
Bank of New Jersey actively seeks to maintain its classification as a "well capitalized" institution in
accordance with regulatory standards.  The Bank's total equity was $80.6 million at June 30, 2006, or
16.93% of total assets on that date.  As of June 30, 2006, the Bank exceeded all capital requirements of the
Office of Thrift Supervision.  The Bank's regulatory capital ratios at June 30, 2006 were as follows: core
capital 17.14%; Tier I risk-based capital, 28.87%; and total risk-based capital, 29.55%.  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;
> andThe 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 June 30, 2006, 72.5% 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 set forth in the preceding section of
this report titled "Comparison of Financial Condition at June 30, 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.  Shown 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 nine months ended June
30, 2006 during which our net interest spread decreased to 1.81% 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 lower yielding, 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 June 30, 2006,
excluding allowance for loan losses and net deferred origination costs and including loans held for sale,
loans totaled $385.7 million comprising 75.8% of total assets.  Of those loans, fixed rate mortgages totaled
$165.3 million or 32.5% of total assets while hybrid ARMs, including 3/1, 5/1, 7/1, and 10/1 ARMs
totaled $184.7 million or 36.3% 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 which is responsible for monitoring interest rate risk.  The committee comprises
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.  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 1-4 family mortgage loans eligible for sale in the secondary market and, if
warranted, sell such loans on either a servicing retained or servicing released basis;
| | (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 March 31, 2006, 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 | NetPortfolioValueRatio 
|(Dollars in thousands)
|+300 bp                | 70,353              | -19,958                                            | -22%     | 15.45%                 
|+200 bp                | 77,398              | -12,913                                            | -14%     | 16.62%                 
|+100 bp                | 84,125              | -6,186                                             | -7%      | 17.68%                 
|0 bp                   | 90,311              |                                                    |          | 18.58%                 
|-100 bp                | 95,512              | 5,201                                              | +6%      | 19.28%                 
|-200 bp                | 97,246              | 6,935                                              | +8%      | 19.38%                 

|_____________
|-------------
|(1)          

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 June 30, 2006, we sold a total of $700,000 of loans to the Federal National Mortgage Association
which resulted in gains on sales of mortgage loans held for sale of $4,000.  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 June 30, 2006, the Bank had seven
outstanding contracts to sell long term, fixed rate mortgage loans totaling $2.2 million 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 nine months ended June 30, 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.



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**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 June 30, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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**PART II - - OTHER INFORMATION**

**ITEM 1.   LEGAL PROCEEDINGS**

At June 30, 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**

At the Company's Annual Stockholder's Meeting (the Meeting) held on May 23, 2006, all the nominees for director proposed by the Company were elected.  The votes cast for each nominee were as follows:

|                 | For        | Withheld 
|---------------- | ---------- | ---------
|                
|H. Joseph North  | 12,957,832 | 783,301  
|W. George Parker | 12,725,609 | 1,015,524

Directors whose terms of office as a director continued after the meeting are: Robert A. Gaccione, , Joseph Kliminski, Fred G. Kowal, Stanley Obal, Vincent Rospond and James H. Ward, III.

At the Meeting, the shareholders also approved the American Bancorp of New Jersey, Inc. 2006 Equity Incentive Plan.  The votes cast for and against and the number of abstentions and broker non-votes were as follows:

|For       | Against   | Abstain | Broker Non-Vote
|--------- | --------- | ------- | ---------------
|         
|8,045,251 | 1,536,478 | 36,317  | 4,123,087      

At the Meeting, the shareholders also ratified the appointment of Crowe Chizek and Company LLC as independent auditors for the fiscal year ending September 30, 2006.  The votes cast for and against and the number of abstentions were as follows:

|For        | Against | Abstain
|---------- | ------- | -------
|          
|13,029,486 | 519,232 | 192,415

**ITEM 5.  OTHER INFORMATION**

None



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**ITEM 6.  EXHIBITS**

| | (a) | Exhibits
| | --- | --------
| |     | 31.1    
| |     | 31.2    
| |     | 32      



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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:     August 14, 2006 | /s/ Joseph KliminskiJoseph KliminskiChief Executive Officer                    
|Date:    August 14, 2006  | /s/ Eric B. HeyerEric B. HeyerSenior Vice President and Chief Financial Officer



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