ASB HOLDING COMPANY

                               2004 ANNUAL REPORT

<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                        <C>
Letter from the President and CEO.............................................................1

Selected Consolidated Financial and Other Data................................................2

Management's Discussion and Analysis of Financial Condition and Results of Operations.........4

Report of Independent Registered Public Accounting Firm......................................21

Consolidated Statements of Financial Condition...............................................22

Consolidated Statements of Income............................................................23

Consolidated Statements of Changes in Equity.................................................24

Consolidated Statements of Cash Flows........................................................25

Notes to Consolidated Financial Statements...................................................27

Directors and Officers.......................................................................47

Investor and Corporate Information...........................................................48

Office Locations.............................................................................49
</TABLE>



<PAGE>




                        LETTER FROM THE PRESIDENT AND CEO


To Our Stockholders and Customers:

         On behalf of the Board of  Directors,  officers  and  employees  of ASB
Holding Company and its wholly-owned subsidiary, American Savings Bank of NJ, it
is my privilege to present our 2004 Annual Report.

         Following the completion of our initial  public  offering on October 3,
2003 in which ASB Holding  Company sold 30% of its  outstanding  common stock to
the public at $10.00  per  share,  our  common  stock  began  trading on the OTC
Bulletin Board under the symbol "ASBH". I am proud to report that since our IPO,
shares of the company's  stock have  generally  traded in the range of $15.00 to
$17.00.

         During fiscal 2004, we continued to build on the success of our initial
public  offering.  Earnings from the investment of the stock offering  proceeds,
coupled with the balance  sheet growth  supported  by this  additional  capital,
helped us to achieve net income of $2.2 million for the year ended September 30,
2004.  This  represents an increase of 54.1% over the $1.4 million of net income
reported  for the prior year ended  September  30, 2003.  Additionally,  our net
interest rate spread and net interest  margin improved for fiscal 2004 by 14 and
16 basis points,  respectively,  as the level of market interest rates increased
from their historical lows and slowed the pace of loan refinancings.

         Because our initial public  offering was completed on October 3, 2003 -
after  the  end of our  2003  fiscal  year - total  assets  and  liabilities  at
September 30, 2003 included the $52.1 million of stock subscriptions received in
the   offering.   Of  these   subscriptions,   $36.8  million  was  returned  as
oversubscriptions  while  $15.3  million  became  new  capital  of the  company.
Excluding  the stock  subscriptions  received from total assets at September 30,
2003 and the capital  raised in the offering  from total assets at September 30,
2004, we experienced  actual asset growth of $34.7  million,  or 9.2% during the
year. Loans receivable, net increased 17.6% to approximately $309.0 million from
$262.8 million while deposits  increased 10.2% to  approximately  $322.7 million
from $292.8 million.

         As a result of our improved  earnings and our  commitment  to enhancing
stockholder  value,  the Board of Directors  declared a special cash dividend of
$0.75 per share to stockholders of record as of December 6, 2004. Payment of our
first cash dividend was an important  step in our evolution as a public  company
and we were pleased to distribute a portion of our earnings to our stockholders.

         I would like to sincerely  thank our officers,  directors and employees
for their  continued  commitment  and  dedication.  With their  support  and the
continued confidence of our investors, we look forward to future improvements in
growth and earnings.

                                           Sincerely,

                                           /s/Joseph Kliminski

                                           Joseph Kliminski
                                           President and Chief Executive Officer


                                       1
<PAGE>

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The  following  table  sets  forth  selected   consolidated  summary  historical
financial  information  concerning the financial position of ASB Holding Company
including its subsidiary, American Savings Bank of NJ, for the periods and dates
indicated.  The  financial  data is derived in part from,  and should be read in
conjunction with, the consolidated financial statements and related notes of ASB
Holding Company contained later in this annual report.

<TABLE>
<CAPTION>
                                                                    At September 30,
                                                          2004            2003          2002
                                                          ----            ----          ----
                                                                     (In thousands)
<S>                                                  <C>           <C>           <C>
SELECTED FINANCIAL DATA:
Total assets                                           $   424,944   $   427,066   $   334,879
Cash and cash equivalents                                    8,034        38,365        17,330
Loans receivable, net                                      308,970       262,844       208,374
Securities available-for-sale                               89,495       107,391        90,134
Securities held-to-maturity                                  2,794         2,839         6,970
Federal Home Loan Bank stock                                 2,890         3,150         2,200
Deposits                                                   322,716       292,826       264,587
Total borrowings                                            57,491        55,000        44,000
Total equity                                                39,314        22,339        21,872
</TABLE>

<TABLE>
<CAPTION>

                                                                      Years ended
                                                                      September 30,
                                                          2004            2003          2002
                                                          ----            ----          ----
                                                                     (In thousands)
<S>                                                  <C>           <C>           <C>
SELECTED OPERATING DATA:
Total interest income                                  $    18,204   $    17,476   $    17,578
Total interest expense                                       8,105         8,870         8,829
                                                       -----------   -----------   -----------
    Net interest income                                     10,099         8,606         8,749
Provision for loan losses                                      207           254           105
                                                       -----------   -----------   -----------
Net interest income after provision for loan losses          9,892         8,352         8,644
Noninterest income                                           1,298           718           595
Noninterest expense                                          7,657         6,862         6,274
                                                       -----------   -----------   -----------
Income before income taxes                                   3,533         2,208         2,965
Income tax provision                                         1,371           805         1,075
                                                       -----------   -----------   -----------
    Net income                                         $     2,162   $     1,403   $     1,890
                                                       ===========   ===========   ===========
</TABLE>

                                       2

<PAGE>

<TABLE>
<CAPTION>
                                                           At or for the year ended
                                                                  September 30,
                                                           2004        2003        2002
                                                           ----        ----        ----
<S>                                                    <C>         <C>         <C>
SELECTED FINANCIAL DATA*:
Performance Ratios:
   Return on average assets (1)                            0.54%       0.39%       0.63%
   Return on average equity (2)                            5.77        6.48        9.30
   Return on average equity excluding accumulated
     other comprehensive income (3)                        5.69        6.51        9.52
   Net interest rate spread (4)                            2.28        2.14        2.63
   Net interest margin (5)                                 2.60        2.44        3.00
   Operating (noninterest) expense to average
     total assets                                          1.92        1.89        2.09
   Efficiency ratio (6)                                   67.18       73.60       67.14
   Average interest-earning assets to average
     interest-bearing liabilities                        115.67      111.69      112.30

Capital Ratios:
   Equity to total assets at end of period                 9.25        5.23        6.53
   Average equity to average assets                        9.37        5.98        6.78

Asset Quality Ratios:
   Non-performing loans to total loans (7)                 0.17        0.20        0.27
   Non-performing assets to total assets (7)               0.12        0.12        0.17
   Net charge-offs to average loans outstanding            0.00        0.00        0.00
   Allowance for loan losses to non-performing
     loans (7)                                           304.05      265.18      195.96
   Allowance for loan losses to total loans                0.50        0.52        0.53

PER SHARE DATA:
Earnings per share:
   Basic and diluted                                   $   0.40    $   0.36    $   0.49
</TABLE>


*    Certain ratios were significantly  affected by stock subscriptions received
     totaling  $52.1  million at September  30, 2003 pending  completion  of the
     Company's initial public offering,  which closed on October 3, 2003. At the
     time of closing,  approximately $15.3 million became capital of the Company
     with the remainder returned on oversubscriptions.

(1)  Net income divided by average total assets.
(2)  Net income divided by average total equity.
(3)  The  denominator,  average  equity,  excludes  the  FAS  115  market  value
     adjustment,  net of tax,  of  $(508,000),  $74,000,  and  $475,000  for the
     periods  ended  September 30, 2004,  September 30, 2003,  and September 30,
     2002. FAS 115 market value adjustments represent gains/losses that have not
     been recognized  through the income statement and are therefore excluded in
     this performance ratio.  Changes in interest rates may significantly impact
     the  market  value  adjustments  of  securities  and  therefore  may  cause
     significant  fluctuations  in ROE.  Because these market value  adjustments
     will only be realized if and when the  securities  are sold we believe this
     performance  ratio is more  meaningful  to disclose  excluding  the FAS 115
     market value adjustments.
(4)  Difference  between weighted average yield on  interest-earning  assets and
     weighted average cost of interest-bearing liabilities.
(5)  Net interest income as a percentage of average interest-earning assets.
(6)  Noninterest  expense  divided  by  the  sum  of  net  interest  income  and
     noninterest income.
(7)  Nonperforming  loans consist of nonaccrual  loans and loans greater than 90
     days delinquent and still accruing.

                                       3
<PAGE>

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  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;
demand for  financial  services in the  Company's  market area;  and  accounting
principles,  policies,  and guidelines.  These risks and uncertainties should be
considered in evaluating  forward-looking  statements, and undue reliance should
not be placed on such statements.

General

         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
interest-bearing  liabilities. It is a function of the average balances of loans
and investments versus deposits and borrowed funds outstanding in any one period
and the  yields  earned  on those  loans and  investments  and the cost of those
deposits and borrowed funds. Our  interest-earning  assets consist  primarily of
residential  mortgage  loans,  multi-family  and commercial real estate mortgage
loans,  residential  mortgage-related  securities  and U.S.  Agency  debentures.
Interest-bearing liabilities consist primarily of retail deposits and borrowings
from the Federal Home Loan Bank of New York.

         Declining  interest  rates in the two years  preceding our prior fiscal
year ending September 30, 2003 resulted in acceleration of asset prepayments due
primarily to mortgage  refinancing.  The negative impact on interest income from
earning assets refinancing to lower market interest rates was exacerbated during
that period by the  accelerated  amortization  of the  remaining  balance of net
deferred  origination  costs and net  premiums  relating  to such  assets.  This
reduction  in earning  asset yields was  partially  offset by a reduction in the
Company's  cost of retail  deposits.  However,  the  reduction in the  Company's
overall  cost of  liabilities  lagged that of its deposits due to its balance of
higher  costing,  long term,  fixed rate FHLB  borrowings  previously  drawn for
interest rate risk  management  purposes.  Together,  these factors  resulted in
reduction of the Company's net interest  margin and its net income  through that
period.

         During the Company's  current  fiscal year, the general level of market
interest rates increased from the historical lows of the prior year. One initial
impact of such increases has

                                       4

<PAGE>

been to slow the pace of loan refinancing thereby reducing the rate at which the
Company's earning assets prepay.  Slowing prepayments have, in turn, 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  has lagged the upward  movement in current market
interest rates and,  after  decreasing for thirteen  consecutive  quarters,  was
unchanged  for the  quarters  ended  March  31,  2004 and June 30,  2004  before
increasing  modestly for the quarter ended September 30, 2004. As a result,  the
Company is reporting 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.

         Our results of operations also depend on our provision for loan losses,
non-interest income, and non-interest expense. Non-performing loans continued to
shrink as a percentage of total assets during fiscal 2004. Consequently, current
year loss provisions result primarily from the overall growth in portfolio loans
with only $4,200 in additional  provisions  required for  specifically  impaired
loans.

         Non-interest  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. As a percentage of average assets,  annualized  non-interest income for
the past four quarters has ranged from 0.25% to 0.47% and averaged 0.32% for the
year ended  September  30, 2004.  Excluding  gains and losses on sales of loans,
securities,  and other real estate owned,  non-interest income increased 6 basis
points to 0.27% of average  assets for the  current  fiscal year  compared  with
0.21%  for  the  prior  fiscal  year.   Much  of  this  increase   results  from
comparatively  higher levels of recurring  deposit  service fees and charges.  A
lesser portion results from comparatively  higher loan prepayment fees which are
expected to diminish as such prepayments are expected to continue to slow.

         Gains and losses on sale of loans, which are 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.

         Non-interest expense generally includes salaries and employee benefits,
occupancy and equipment expenses and other general and administrative  expenses.
As a percentage of average assets,  annualized non-interest expense for the past
four  quarters  has ranged from 1.84% to 1.97% and  averaged  1.92% for the year
ended  September  30,  2004.  Excluding  borrowed  funds  prepayment  penalties,
non-interest  expense remained stable at 1.89% as a percentage of average assets
for both the  current  and prior  fiscal  year.  However,  the dollar  amount of
non-interest expense has increased  significantly during the current fiscal year
when compared with the Company's 2003 fiscal year. A portion of these  increases
results  from  the   Company's   operation  as  a  public   entity  and  include
comparatively higher legal, accounting and compliance costs.  Additionally,  the
Company is recording  higher employee  compensation  and benefit expense than it
had  in  the  prior  year.   Much  of  this  increase  is  attributable  to  the
implementation  of an employee  stock  ownership plan benefit that did not exist
prior to the  Company's  initial  public  offering.  Increases in occupancy  and
equipment  expenses and data  processing  expenses  represent a  combination  of
non-recurring  charges  associated with  information  technology  infrastructure
upgrades as well as additional, ongoing costs of enhancements to core processing
systems and other information technology support and

                                       5

<PAGE>

security  services.  Finally,  the Bank  continues  to  evaluate  the  costs and
benefits of incrementally  restructuring its portfolio of FHLB advances.  Such a
restructuring  transaction  took place  during the current  fiscal year when the
bank  recognized  a $125,000  penalty to prepay $3.0  million of fixed rate FHLB
advances  with a weighted  average cost of 6.28%.  In the current  interest rate
environment, such prepayments result in one time charges to earnings in the form
of FHLB prepayment penalties which, when replaced by lower cost funding,  lowers
the interest paid on borrowings thereby improving the bank's net interest spread
and margin and enhancing future earnings.

         In total, our return on average assets has increased 15 basis points to
0.54%  for the year  ended  September  30,  2004 from  0.39% for the year  ended
September 30, 2003. In a stable  interest rate  environment,  we expect that our
net interest  margin will  stabilize at the levels  reported  over the past four
quarters. However, 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
experienced   during  the  latter  half  of  the  Company's  2003  fiscal  year.
Conversely,  notwithstanding  the  earning  asset yield  improvement  during the
current  fiscal  year which  resulted  from  interest  rates  rising  from their
historical lows, continued increases in interest rates from current levels could
trigger  increases in the Company's cost of interest  bearing  liabilities  that
outpace that of its yield on earning assets causing  further net interest margin
compression.  This risk is particularly  noteworthy given the Bank's substantial
net growth in non-maturity  deposits over the past three years. Like many banks,
we were  successful in growing  deposits while interest rates decreased to their
historical  lows.  However,  our  ability to retain and grow such  deposits at a
reasonable  cost,  while a highly  competitive  marketplace  adjusts its pricing
strategies to an environment of rising  interest  rates, is only beginning to be
tested.

         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.

Critical Accounting Policies

         Note 1 to our  Consolidated  Financial  Statements  for the year  ended
September 30, 2004 contains a summary of our  significant  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 historical loss experience, the types of loans and the amount of loans
in the loan portfolio, adverse

                                       6

<PAGE>

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,  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  and commercial real estate 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  allowance for loan losses as of
September 30, 2004 was maintained at a level that represented  management's best
estimate of losses in the loan  portfolio to the extent they were both  probable
and reasonably estimable.

Business Strategy

         Our  business  strategy  has  been  to  operate  as a  well-capitalized
independent  financial  institution dedicated to providing convenient access and
quality service at competitive prices.  During recent years, we have experienced
significant growth, with total loans receivable, net growing from $208.4 million
at September 30, 2002 to $309.0 million at September 30, 2004 and total deposits
growing from $264.6 million at September 30, 2002 to $322.7 million at September
30, 2004.

         American  Savings Bank of NJ's current  strategy  seeks to continue the
growth of the last several years.  The highlights of the Bank's growth  strategy
include  increasing  its  volume of loan  originations  and the size of its loan
portfolio while expanding the branch office network over the next several years.
American  Savings  Bank of NJ intends to  continue  its  current  mix of deposit
products while placing greater  strategic effort toward  expanding  multi-family
and  commercial  real estate  mortgage  lending to augment its  traditional  1-4
family  mortgage  lending  business.  Toward  that end,  the Bank  expanded  its
commercial loan  origination  and processing  staff to three full time employees
during fiscal 2004 while bolstering  marketing efforts directed toward growth in
such loans.

Comparison of Financial Condition at September 30, 2004 and September 30, 2003

         Our total assets decreased by $2.1 million, or 0.50%, to $424.9 million
at September 30, 2004 from $427.1  million at September  30, 2003.  The decrease
reflected a reduction  in short term liquid  assets  resulting  from  refunds of
stock  oversubscriptions  in connection  with the October 3, 2003 closing of the
Company's  stock  offering and a decrease in  securities.  These  decreases were
partially  offset by an increase in loans.  Loans  receivable,  net increased by
$46.1  million,  or 17.5%,  to $309.0  million at September 30, 2004 from $262.8
million at September 30, 2003. Our increase in loans resulted from a high volume
of one-to-four  family mortgage loan  originations  reflecting  continued strong
demand by  borrowers  seeking  to take  advantage  of  historically  low  market
interest  rates  in the  earlier  part of the year  coupled  with  slowing  loan
prepayments  in the latter part of the year resulting from interest rates rising
from those historical lows.

                                       7

<PAGE>

         The following  table  compares the  composition  of the Company's  loan
portfolio  by loan type as a percentage  of total  assets at September  30, 2004
with that of September 30, 2003.  Amounts  reported  exclude  allowance for loan
losses and net deferred origination costs.

<TABLE>
<CAPTION>
                                    September 30, 2004                     September 30, 2003
                                    ------------------                     ------------------
                                                      (Dollars in thousands)
                                                      ----------------------
                                                   Percent of                             Percent of
                                                   ----------                             ----------
Type of Loans                     Amount          Total Assets           Amount           Total Assets
-------------                     ------          ------------           ------           ------------
<S>                          <C>                    <C>          <C>                       <C>
Construction                   $     3,075              0.72%        $       450               0.11%
1/1 and 3/3 ARMs                     1,800              0.42%              1,383               0.32%
3/1 and 5/1 ARMs                    89,694             21.11%             46,357              10.85%
5/5 and 10/10 ARMs                  24,619              5.79%             16,892               3.96%
7/1 and 10/1 ARMs                    1,675              0.40%              2,462               0.58%
15 year fixed or less              112,238             26.41%            108,587              25.43%
Greater than 15 year fixed          64,702             15.23%             76,005              17.80%
Home equity lines of credit         10,666              2.51%              8,893               2.08%
Consumer                               746              0.18%                780               0.18%
Commercial                             398              0.09%              1,610               0.37%
                               -----------             -----         -----------              -----

Total                          $   309,613             72.86%        $   263,419              61.68%
                               ===========             =====         ===========              =====
</TABLE>

          Securities classified as  available-for-sale  decreased $17.9 million,
or 16.7%,  to $89.5  million  at  September  30,  2004 from  $107.4  million  at
September  30, 2003 as the  Company  continued  to reinvest  cash flows from its
investment  securities portfolio into loans. Cash and cash equivalents decreased
by $30.4  million,  or 79.2%,  to $8.0 million at September  30, 2004 from $38.4
million  at  September  30,  2003  to  provide  funding  for  refunds  of  stock
oversubscriptions in connection with the Company's stock offering.

         The  following   table  compares  the   composition  of  the  Company's
investment securities portfolio by security type as a percentage of total assets
at September 30, 2004 with that of September 30, 2003.  Amounts reported exclude
unrealized gains and losses on the available-for-sale portfolio.

<TABLE>
<CAPTION>
                                                   September 30, 2004                     September 30, 2003
                                                   ------------------                     ------------------
                                                                   (Dollars in thousands)
                                                                   ----------------------
                                                                Percent of                             Percent of
                                                                ----------                             ----------
Type of Securities                             Amount          Total Assets           Amount           Total Assets
------------------                             ------          ------------           ------           ------------
<S>                                      <C>                      <C>          <C>                       <C>
Fixed rate MBS                              $    15,923              3.75%        $    15,401               3.61%
ARM MBS                                           8,755              2.06%              4,893               1.15%
Fixed rate CMO                                   43,982             10.36%             66,373              15.54%
Floating rate CMO                                   435              0.10%                699               0.16%
ARM mutual fund                                  10,000              2.35%             10,000               2.34%
Fixed rate agency debentures                     13,997              3.29%             13,538               3.17%
                                            -----------             -----         -----------              -----
Total                                       $    93,092             21.91%        $   110,904              25.97%
                                            ===========             =====         ===========              =====
</TABLE>

         Assuming no change in interest rates, the estimated average life of the
investment securities  portfolio,  excluding the ARM mutual fund, was 2.23 years
and 2.80 years at  September  30, 2004 and  September  30,  2003,  respectively.
Assuming a  hypothetical  immediate and permanent  increase in interest rates of
300 basis points,  the estimated  average life of the portfolio  extends to 3.12
years and 3.72 years at September 30, 2004 and September 30, 2003, respectively.

         Total deposits increased by $29.9 million,  or 10.2%, to $322.7 million
at September 30, 2004 from $292.8  million at September  30, 2003.  The increase
was primarily due to an increase in money market checking and savings  deposits,
partially  offset by a decline in  certificates  of

                                       8

<PAGE>

deposit.  Savings  accounts  increased $15.7 million or 12.3% to $143.4 million.
Certificates  of deposit  decreased by $3.7 million,  or 3.0% to $118.0 million.
Checking  deposits,  including demand,  NOW and money market checking  accounts,
increased  $17.9  million  or  41.2% to $61.3  million,  primarily  due to a new
municipal deposit relationship established during the current year. The increase
in savings accounts is primarily due to a new statement  savings account product
which  became  available  during  the fourth  quarter of 2003.  A portion of the
growth in these  accounts  resulted  from  funds  being  transferred  from other
existing accounts such as maturing certificates of deposit.

         The following table compares the  composition of the Company's  deposit
portfolio by category as a percentage of total assets at September 30, 2004 with
that of September 30, 2003.

<TABLE>
<CAPTION>
                                    September 30, 2004                     September 30, 2003
                                    ------------------                     ------------------
                                                     (Dollars in thousands)
                                                     ----------------------
                                                  Percent of                             Percent of
                                                  ----------                             ----------
Deposit category                 Amount           Total Assets          Amount           Total Assets
----------------                 ------           ------------          ------           ------------
<S>                         <C>                      <C>           <C>                      <C>
Money market checking         $    25,834              6.08%         $    10,442              2.45%
Other checking                     35,461              8.34%              32,955              7.72%
Money market savings               44,880             10.56%              55,498             13.00%
Other savings                      98,521             23.18%              72,222             16.91%
Certificates of deposit           118,020             27.78%             121,709             28.49%
                              -----------             -----          -----------             -----
Total                         $   322,716             75.94%         $   292,826             68.57%
                              ===========             =====          ===========             =====
</TABLE>

         FHLB  advances  increased  $2.5  million,  or 4.5%, to $57.5 million at
September 30, 2004 from $55.0 million at September 30, 2003. The net increase of
$2.5 million was  comprised of a $2.7 million  increase in an overnight  line of
credit and an additional  $6.8 million drawn on term advances  which  includes a
$1.8 million  amortizing  advance drawn to fund a commercial real estate loan on
an  apartment  building  in  a  moderate-income  tract  within  the  Bank's  CRA
assessment area.  Offsetting these additions were reductions  resulting from the
maturity  and  prepayment  of $4.0  million and $3.0  million of fixed rate term
advances respectively.

         The following table compares the composition of the Company's borrowing
portfolio  by  remaining  term to maturity as a  percentage  of total  assets at
September 30, 2004 with that of September 30, 2003. Scheduled principal payments
on amortizing borrowings are reported as maturities.

<TABLE>
<CAPTION>
                                                     September 30, 2004                     September 30, 2003
                                                     ------------------                     ------------------
                                                                   (Dollars in thousands)
                                                                   ----------------------
                                                                Percent of                             Percent of
                                                                ----------                             ----------
Remaining Term                                 Amount          Total Assets           Amount           Total Assets
--------------                                 ------          ------------           ------           ------------
<S>                                       <C>                      <C>          <C>                     <C>
Overnight                                   $     2,700              0.64%        $         -                  -%
One year or less                                  1,057              0.25%              4,000               0.94%
One to two years                                  8,060              1.90%              2,000               0.47%
Two to three years                                8,062              1.90%              9,000               2.11%
Three to four years                              12,065              2.84%              4,000               0.94%
Four to five years                                7,547              1.77%             12,000               2.81%
More than five years                             18,000              4.23%             24,000               5.61%
                                            -----------             -----         -----------              -----
Total                                       $    57,491             13.53%        $    55,000              12.88%
                                            ===========             =====         ===========              =====
</TABLE>

         Stockholder's  equity  increased  $17.0  million,  or  76.2%,  to $39.3
million at  September  30, 2004 from $22.3  million at September  30, 2003.  The
increase  reflects the  completion of the minority  stock  offering  whereby the
Company  sold  1,666,350  shares of common  stock at $10 per share and  received
proceeds  of $16.1  million,  net of  conversion  costs.  Further,  the  Company

                                       9

<PAGE>

recognized net income of $2.2 million for the year ended  September 30, 2004, in
addition  to a $77,000  increase in  accumulated  other  comprehensive  loss for
unrealized after-tax losses on securities available-for-sale.

Comparison of Operating Results for the Years Ended September 30, 2004 and 2003

         General.  Net  income for the year ended  September  30,  2004 was $2.2
million, an increase of $759,000, or 54.1% from 2003. The increase in net income
resulted from an increase in net interest income and non-interest income, offset
by increases in non-interest expense and the provision for income taxes.

         Interest  Income.  Total interest income increased by $728,000 or 4.2%,
to $18.2  million for the year ended  September  30, 2004 from $17.5 million for
the year ended  September  30,  2003.  The  primary  factor for the  increase in
interest income was an increase of $36.2 million or 10.3% in the average balance
of  interest  earnings  assets for the year ended  September  30, 2004 to $388.9
million from $352.7 million for the year ended September 30, 2003. This increase
in the average balance was partially  offset by a 27 basis points decline in the
average yield to 4.68% in fiscal 2004 from 4.95% in fiscal 2003.

         Interest income on loans  increased  $674,000 or 4.7%, to $15.0 million
for the year ended  September  30, 2004 from $14.3  million for the 2003 period.
The average balance of loans  receivable,  net increased $40.2 million to $278.6
million  for the year ended  September  30,  2004,  which  more than  offset the
decrease in the average yield on loans receivable, net from 6.01% in fiscal 2003
to 5.39% in fiscal 2004.

         The  increase in  interest  income on loans was offset by a decrease in
interest income on federal funds sold and other interest-bearing deposits, which
declined $153,000 or 71.2% to $62,000 for the year ended September 30, 2004. The
decrease  resulted  from  declines in the average  yield and average  balance of
those  assets.  There was a 62 basis  point  decrease  in the  average  yield on
federal funds sold and other interest-bearing deposits from 1.60% in fiscal 2003
to 0.98% in fiscal 2004.  This decrease in interest  income was exacerbated by a
decline in the average balance of federal funds sold and other  interest-bearing
deposits from $13.5 million for fiscal 2003 to $6.3 million for fiscal 2004.

         Interest  income  on  securities  increased  $207,000  or  7.1% to $3.1
million for the year ended September 30, 2004. The average balance of securities
increased $3.2 million to $104.0  million for the year ended  September 30, 2004
from $100.8  million for the year ended  September 30, 2003.  Additionally,  the
average yield on securities increased 11 basis points in the current fiscal year
to 3.01% from 2.90% in fiscal 2003.

         Interest Expense.  Total interest expense decreased by $765,000 or 8.6%
to $8.1 million for the year ended September 30, 2004 from $8.9 million in 2003.
For  those  same  periods,  the  average  cost of  interest-bearing  liabilities
decreased 40 basis  points from 2.81% to 2.41.  This decline in the average cost
was offset by an  increase of $20.4  million in the average  balance of interest
bearing  liabilities  to $336.2  million in fiscal 2004 from  $315.8  million in
fiscal 2003.

         The  average  balance of  interest  bearing  deposits  increased  $15.2
million or 5.8% for the year ended  September 30, 2004.  The average  balance of
certificates of deposit  decreased $4.4 million to $116.9 million in fiscal 2004
from  $121.3  million  in  fiscal  2003.  In  addition,   the  average  cost  of
certificates  of deposit  decreased  from 2.83% to 2.49%.  The  average  cost of

                                       10

<PAGE>

savings accounts  decreased from 1.97% in 2003 to 1.55% in 2004, which more than
offset the increase of $19.0 million or 16.3% in the average  balance of savings
accounts.

         Interest expense on FHLB advances  increased $25,000 to $2.9 million as
a result of an increase in the average balance from $54.9 million in fiscal 2003
to $60.1 million in fiscal 2004. This was partially  offset by a decrease in the
average cost of advances from 5.16% in 2003 to 4.76% in 2004.  The lower average
cost is primarily due to utilization of overnight line of credit  borrowings and
new term borrowings with an average cost that is less than those that matured or
were prepaid by the Company during the year.

         Net Interest  Income.  Net interest income increased by $1.5 million or
17.4%,  to $10.1 million for the year ended September 30, 2004 from $8.6 million
for the year ended September 30, 2003. The net interest rate spread increased 14
basis points to 2.28% in 2004 from 2.14% in 2003 while the net  interest  margin
increased  16  basis  points  to  2.60%  from  2.44%.   Both  increases  reflect
interest-bearing  liabilities  repricing  downward  slightly  more  rapidly than
assets.

         Provision  for Loan Losses.  Provisions  for loan losses are charged to
operations at a level required to reflect probable incurred credit losses in the
loan portfolio.  The provision for loan losses decreased $47,000 to $207,000 for
the year ended  September  30,  2004  compared  to  $254,000  for the year ended
September 30, 2003.  Provisions for  nonperforming  assets and historical losses
based on net  charge-offs  were nominal due to a history of low  charge-offs and
relative  stability of  nonperforming  assets.  However,  the application of the
Bank's loan loss methodology  outlined  earlier 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 the year
ended September 30, 2004, total  one-to-four  family  mortgages  increased $36.3
million  representing  an increase of 16.8% and  reflecting  the majority of the
Bank's loan growth. Multi-family and commercial real estate loans increased $7.0
million or 19.3% and commercial loans decreased $1.2 million or 75.3%.  Consumer
loans decreased  $34,000 or 4.4% and home equity loans increased $1.8 million or
19.9% while construction loans, net of loans in process,  increased $2.6 million
or 581.1%.

         As a result of recent  loan  growth,  a large part of the  Bank's  loan
portfolio is considered  "unseasoned",  meaning the loans were  originated  less
than two 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.

         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.  The allowance for loan losses as a percentage of
gross  loans  outstanding  declined  slightly  to 0.50% for  September  30, 2004
compared to 0.52% at September 30, 2003 reflecting  balances of $1.6 million and
$1.4 million, respectively.  Non-performing loans as a percentage of gross loans
was 0.17% at September  30, 2004  compared to 0.20% at September  30, 2003.  The
level of the  allowance is based on estimates  and the ultimate  losses may vary
from those estimates.

         Noninterest Income.  Noninterest income increased $580,000, or 80.8% to
$1.3  million  for the year  ended  September  30,  2004  compared  to  2003.  A
significant  portion  of that  increase  resulted  from the  absence  in 2004 of
$188,000 in loss on sale of available-for-sale securities that had been recorded
during 2003.  Additionally,  service  charges on deposit  accounts  increased by

                                       11

<PAGE>

$245,000 primarily due to the  implementation of new deposit services.  Gains on
sale of  held-for-sale  loans  decreased  $124,000 to $27,000 for the year ended
September 30, 2004 from $151,000 for 2003.  Income from cash surrender  value of
life  insurance  decreased  $20,000 for the  comparative  periods due to reduced
yields  reflecting lower market interest rates.  Finally,  gain on sale of other
real estate owned increased $173,000 and other non-interest  income increased by
$118,000,  due  in  large  part  to  collection  of  comparatively  higher  loan
prepayment penalties.

         Noninterest Expense.  Noninterest expense increased $795,000,  or 11.6%
to $7.7 million for the year ended  September 30, 2004 from $6.9 million for the
year ended  September  30, 2003.  The increase was  primarily a result of higher
expenses for  salaries and employee  benefits,  occupancy  and  equipment,  data
processing, advertising, and other non-interest expenses.

         Salaries  and  benefits  increased  $305,000 or 6.8% for the year ended
September  30,  2004.  A large  portion of the  increase  was due to $215,000 in
employee stock  ownership plan expense  arising from the  implementation  of the
plan during the current fiscal year.  Medical and related  benefit plan premiums
increased 9.4% or $35,000 while salaries and wages  including  bonus and payroll
taxes,  increased  $178,000  or 5.3% for the year ended  September  30,  2004 as
compared  to the same  period  in 2003.  These  increases  were  offset by lower
deferred compensation plan benefit expenses of $98,000,  which had been adjusted
in the prior year for a decrease  in the  discount  rate used to  calculate  the
liability in a lower rate environment.  In addition,  expense for temporary help
declined  $23,000  in 2004 as a result of  decreased  utilization  of  temporary
services that were required in 2003 to augment loan  processing  and  accounting
staff due to strong loan origination volume and extended staff absences.

         Occupancy and equipment  expense  increased $31,000 to $853,000 for the
year ended  September  30, 2004 as compared to $822,000 for 2003,  due to higher
computer expenses  primarily related to upgrades and enhancements to information
technology support and security  services.  Data processing costs also increased
$109,000  mainly  due to  increases  in service  bureau  core  processing  costs
resulting  from  growth in deposit and loan  accounts  as well as  non-recurring
costs associated with comprehensive system upgrades.

         Other  non-interest  expenses  increased  $204,000  for the year  ended
September  30, 2004 as  compared  to 2003.  Professional  and  consulting  fees,
including legal fees,  increased $12,000 due to expenses associated with being a
public company.  Further,  general and administrative expenses increased $74,000
consisting  primarily of $38,000 in  comparatively  higher expenses  relating to
printing  and the bulk  purchase  of  brochures  and forms and $25,000 in higher
costs  associated with new deposit  service  programs.  Other expense  increases
included  $4,000 for  corporate  insurance,  $9,000 in  transfer  agent fees and
$18,000 for regulatory fees resulting from increased regulatory  assessments due
to asset growth and the  establishment  of a holding  company.  These additional
costs were offset by minor decreases in other miscellaneous  expenses.  Further,
net loan processing  charges increased  primarily due to reduced  recognition of
loan modification  fees offsetting  related costs resulting from the deferral of
such fees and costs in the current period.

         The  Bank  also  recognized   $125,000  in  borrowed  funds  prepayment
penalties for the year ended September 30, 2004 compared to none in fiscal 2003.
This expense  resulted from the prepayment of $3.0 million of FHLB advances with
a weighted average cost of 6.28%.

         Finally,  advertising expenses were higher by $18,000 in 2004 resulting
from increased print, radio, and television ads, and higher agency fees.

                                       12

<PAGE>

         Management  expects increased expenses in the future resulting from the
ongoing  expenses  associated  with the employee  stock  ownership  plan and the
potential stock benefit plans, as well the ongoing costs associated with being a
public  company.   These  costs  include  periodic  reporting,   annual  meeting
materials,  transfer agent services,  and accounting and other professional fees
including  compliance  costs  associated  with the  Sarbanes-Oxley  Act of 2002.
Furthermore,  we intend to expand our branch office  network in the future,  and
expenses related to such expansion may impact earnings in future periods.

         Provision  for Income Taxes.  The provision for income taxes  increased
$566,000 for the year ended September 30, 2004 from the same period in 2003. The
effective  tax rate was 38.8% and 36.5% for the years ended  September  30, 2004
and 2003. The slight  increase in the effective tax rate results  primarily from
an increase in  nondeductible  expenses  related to the employee stock ownership
plan.

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 September 30, 2004, the
total  approved  loan  origination  commitments  outstanding  amounted  to $14.8
million.  At the same  date,  unused  lines of credit  were  $13.1  million  and
construction  loans in  process  were  $4.1  million.  Certificates  of  deposit
scheduled to mature in one year or less at September  30,  2004,  totaled  $72.8
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

                                       13

<PAGE>

with the Bank.  In addition,  the Bank has the ability at September  30, 2004 to
borrow an  additional  $47.8 million from the Federal Home Loan Bank of New York
as a funding source to meet commitments and for liquidity purposes.

                  The following tables disclose our contractual  obligations and
commercial commitments as of September 30, 2004. Scheduled principal payments on
amortizing borrowings are reported as maturities.

<TABLE>
<CAPTION>
                                                        Less Than                                      After
                                           Total         1 Year        1-3 Years      4-5 Years       5 Years
                                           -----         ------        ---------      ---------       -------
                                                                    (In thousands)
<S>                                   <C>            <C>           <C>            <C>            <C>
Federal Home Loan Bank
       advances(1)                      $    57,491    $    3,757    $    16,122    $    19,612    $    18,000
                                        ===========    ==========    ===========    ===========    ===========

         Total                          $    57,491    $    3,757    $    16,122    $    19,612    $    18,000
                                        ===========    ==========    ===========    ===========    ===========
</TABLE>

------------------
(1)  At September 30, 2004, our total collateralized  borrowing limit was $105.3
     million, of which we had $57.5 million outstanding.

<TABLE>
<CAPTION>

                                               Total
                                              Amounts       Less Than                                  Over
                                             Committed       1 Year        1-3 Years    4-5 Years     5 Years
                                             ---------       ------        ---------    ---------     -------
                                                                         (In thousands)
<S>                                     <C>             <C>            <C>          <C>          <C>
Lines of credit(1)                         $    13,130     $       630    $     254    $     120    $   12,126
     Construction loans in
       process                                   4,100           1,025        3,075            -             -
     Other commitments to
       extend credit(1)                         14,771          14,771            -            -             -
                                           -----------     -----------    ---------    ---------    ----------
         Total                             $    32,001     $    16,426    $   3,329    $     120    $   12,126
                                           ===========     ===========    =========    =========    ==========
</TABLE>
-------------
(1)  Represents amounts committed to customers.

Additionally,  an agreement  dated February 22, 2004 to purchase real estate was
signed for the  acquisition  of a future branch site in Essex County.  The total
purchase price is $1,700,000 with a balance due at closing of $1,530,000.

Capital

         Consistent  with its goals to operate a sound and profitable  financial
organization,  American  Savings  Bank of NJ actively  seeks to maintain a "well
capitalized"  institution in accordance  with regulatory  standards.  The Bank's
total equity was $32.8  million at September  30, 2004, or 7.79% of total assets
on that date. As of September 30, 2004, American Savings Bank of NJ exceeded all
capital requirements of the Office of Thrift Supervision.  American Savings Bank
of NJ's  regulatory  capital ratios at September 30, 2004 were as follows:  core
capital 7.89%; Tier I risk-based capital,  15.21%; and total risk-based capital,
15.93%.  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

                                       14

<PAGE>

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.

Recent Regulatory and Accounting Developments

EITF 03-1, Other-Than-Temporary Impairment

         In March 2004, the FASB Emerging  Issues Task Force ("EITF")  reached a
consensus regarding EITF 03-1, "The Meaning of  Other-Than-Temporary  Impairment
and Its Application to Certain Investments." The consensus clarifies the meaning
of other-than-temporary impairment and its application to investments classified
as either available-for-sale or held-to-maturity under SFAS 115, "Accounting for
Certain  Investments in Debt and Equity  Securities," and investments  accounted
for under the cost method or the equity method.  The recognition and measurement
guidance   for  which  the   consensus   was   reached   is  to  be  applied  to
other-than-temporary  impairment  evaluations.  In September 2004, the Financial
Accounting Standards Board ("FASB") issued a final FASB Staff Position, FSP EITF
Issue  03-01-1,  which has delayed the effective  date for the  measurement  and
recognition guidance of EITF 03-01. The comment period is currently open related
to this  staff  position.  The  implementation  date is  unknown  until  further
guidance  is issued by the  FASB.  We are  currently  evaluating  the  impact of
adopting EITF 03-01.

Subsequent Event

         American  Savings  Bank  of NJ has  one  subsidiary,  American  Savings
Investment  Corp.,  which was  formed in August  2004 under New Jersey law as an
investment  company.  The  purpose  of this  subsidiary  is to invest in stocks,
bonds, notes and all types of equity, mortgages, debentures and other investment
securities. The subsidiary was funded during the first quarter of fiscal 2005.

                                       15

<PAGE>

Average Balances, Interest, and Average Yields/Cost

The  following  table  presents  certain  information  at and  for  the  periods
indicated  regarding  average  balances of assets and liabilities as well as the
total dollar amounts of interest income from average interest-earning assets and
interest expense on average interest-bearing  liabilities and average yields and
costs.  The yields and costs for the periods  indicated  are derived by dividing
income  or  expense  by  the  average   balances   of  assets  or   liabilities,
respectively,  for the periods  presented.  Average  balances  were derived from
average daily balances.

<TABLE>
<CAPTION>

                          At September 30,  --------------------------Year Ended September 30, -------------------------------------
                      ----------2004------  ------------2004------------  ---------------2003---------    -------------2002---------
                                                      Interest   Average              Interest Average             Interest  Average
                                   Yield/    Average   Earned/   Yield/    Average     Earned/ Yield/   Average     Earned/  Yield/
                         Balance    Cost     Balance    Paid      Cost     Balance      Paid    Cost    Balance      Paid     Cost
                         -------    ----     -------    ----      ----     -------      ----    ----    -------      ----     ----
                                                                          (Dollars in thousands)
<S>                   <C>          <C>    <C>        <C>        <C>     <C>        <C>          <C>   <C>       <C>          <C>
Interest-
earning assets:
   Loans
     receivable,
     net(1)             $308,970     5.34%  $278,632   $15,017    5.39%   $238,474   $14,343      6.01% $186,974  $  12,907    6.90%
   Investment
     securities(2)        92,962     3.34    103,978     3,125    3.01     100,787     2,918      2.90    91,141      4,414    4.84
   Other interest-
     earning assets(3)     5,778     1.65      6,302        62    0.98      13,462       215      1.60    13,506        257    1.90
                        --------     ----   --------   -------    ----    --------   -------      ----  --------  ---------    ----
   Total interest-
     earning assets      407,710     4.83    388,912    18,204    4.68     352,723    17,476      4.95   291,621     17,578    6.03
   Non-interest-
     earning assets       17,234              10,755                         9,459                         8,223
                        --------            --------                      --------                      --------
   Total assets         $424,944            $399,667                      $362,182                      $299,844
                        ========            ========                      ========                      ========
Interest-bearing
liabilities:
   NOW & money market   $ 38,696     1.06%  $ 23,086       225    0.97%   $ 22,511   $   290      1.29% $ 14,381  $     211    1.47%
   Savings deposits(4)   143,401     1.58    136,100     2,109    1.55     117,052     2,307      1.97    86,475      2,196    2.54
   Certificates of
     deposit             118,020     2.65    116,926     2,912    2.49     121,310     3,439      2.83   114,965      4,158    3.62
                        --------     ----   --------   -------    ----    --------   -------      ----  --------  ---------    ----
   Total interest-
     bearing
     deposits            300,117     1.93    276,113     5,246    1.90     260,873     6,036      2.31   215,821      6,565    3.04
   FHLB advances          57,491     4.72     60,125     2,859    4.76      54,923     2,834      5.16    43,859      2,264    5.16
                        --------     ----   --------   -------    ----    --------   -------      ----  --------  ---------    ----
   Total interest-
     bearing
     liabilities         357,608     2.38    336,238     8,105    2.41     315,796     8,870      2.81   259,680      8,829    3.40
                                     ----              -------    ----               -------      ----            ---------    ----
   Non-interest-
     bearing deposits     22,599              22,080                        20,303                        16,333
   Other non-interest-
     bearing
     liabilities           5,423               3,884                         4,441                         3,507
                        --------            --------                      --------                      --------
   Total liabilities     385,630             362,202                       340,540                       279,520
   Accumulated other
     comprehensive income   (482)               (508)                           74                           475
   Retained earnings &
     other equity         39,796              37,973                        21,568                        19,849
                        --------            --------                      --------                      --------
   Total liabilities
     and equity         $424,944            $399,667                      $362,182                      $299,844
                        ========            ========                      ========                      ========

   Net interest spread(5)            2.45%              $10,099   2.28%              $ 8,606      2.14%             $ 8,749    2.63%
                                     ====               =======   ====               =======      ====              =======    ====
   Net interest margin(6)            2.74%                        2.60%                           2.44%                        3.00%
                                     ====                         ====                            ====                         ====
   Ratio of interest-
     earning assets
     to interest-
     bearing
     liabilities          114.01%                       115.67%                       111.69%                        112.30%
                          ======                        ======                        ======                         ======
</TABLE>
--------------
(1)  Calculated net of deferred fees and loss reserves.  Non-accruing loans have
     been included as loans carrying a zero yield. Includes loans held for sale.
(2)  Calculated   based  on  amortized  cost  excluding  FAS  115  market  value
     adjustment.
(3)  Includes  Federal Home Loan Bank stock at cost and term deposits with other
     financial institutions.
(4)  Includes money market savings accounts and stock subscriptions  received in
     connection with the Company's  initial public offering which closed October
     3, 2003.
(5)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(6)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.

                                       16
<PAGE>

Rate/Volume Analysis

         The following  table presents the effects of changing rates and volumes
on the  interest  income and interest  expense of the  Company.  The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by
prior volume).  The volume column shows the effects  attributable  to changes in
volume  (changes in volume  multiplied by prior rate).  The  rate/volume  column
shows changes  attributable to changes in both rate and volume,  which cannot be
segregated.

<TABLE>
<CAPTION>
                                                                                 2004 - 2003
                                                                                 -----------
                                                                              Increase (Decrease)
                                                                                            Rate/
                                                                  Volume         Rate       Volume          Net
                                                                  ------         ----       ------          ---
                                                                                   (Dollars in thousands)
<S>                                                         <C>          <C>          <C>          <C>
Interest-earning assets:
    Loans receivable                                          $    2,415   $   (1,491)  $     (251)  $      674
    Securities                                                        92          112            4          207
    Other interest-earning assets                                   (114)         (83)          44         (153)
                                                              ----------   ----------   ----------   ----------
       Total interest-earning assets                               1,793         (965)         (99)         728

Interest-bearing liabilities:
    NOW and money market accounts                                      7          (70)          (2)         (65)
    Savings accounts                                                 375         (493)         (80)        (198)
    Certificates of deposit                                         (124)        (418)          15         (527)
                                                              ----------   ----------   ----------   ----------
       Total interest bearing deposits                               353       (1,080)         (63)        (791)
    Federal Home Loan Bank advances                                  268         (222)         (21)          25
                                                              ----------   ----------   ----------   ----------
       Total interest-bearing liabilities                            574       (1,258)         (81)        (765)
                                                              ----------   ----------   ----------   ----------
          Increase (decrease) in net interest income          $    1,219   $      293   $      (18)  $    1,494
                                                              ==========   ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                                 2003 - 2002
                                                                                 -----------
                                                                              Increase (Decrease)
                                                                                            Rate/
                                                                  Volume         Rate       Volume          Net
                                                                  ------         ----       ------          ---
                                                                                   (Dollars in thousands)
<S>                                                         <C>          <C>          <C>          <C>
Interest-earning assets:
    Loans receivable                                          $    3,555   $   (1,661)  $     (458)  $    1,436
    Securities                                                       466       (1,775)        (187)      (1,496)
    Other interest-earning assets                                      -          (42)           -          (42)
                                                              ----------   ----------   ----------   ----------
       Total interest-earning assets                               4,021       (3,478)        (645)        (102)

Interest-bearing liabilities:
    NOW and money market accounts                                    119          (26)         (14)          79
    Savings accounts and certificates                                777         (492)        (174)         111
    Certificates of deposit                                          229         (899)         (49)        (719)
                                                              ----------   ----------   ----------   ----------
       Total interest bearing deposits                             1,125       (1,417)        (237)        (529)
    Federal Home Loan Bank advances                                  571           (1)           -          570
                                                              ----------   ----------   ----------   ----------
       Total interest-bearing liabilities                          1,696       (1,418)        (237)          41
                                                              ----------   ----------   ----------   ----------
          Increase (decrease) in net interest income          $    2,325   $   (2,060)  $     (408)  $     (143)
                                                              ==========   ==========   ==========   ==========
</TABLE>


Management of Interest Rate Risk and Market Risk

         Qualitative   Analysis.   Because  the   majority  of  our  assets  and
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,  American Savings
Bank of NJ's  management  expects  that  changes  in  interest  rates may have a
significant, adverse impact on the bank's net interest income.

                                       17

<PAGE>

         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:

     o    The  interest  income we earn on our  interest-earning  assets such as
          loans and securities; and

     o    The interest expense we pay on our  interest-bearing  liabilities such
          as deposits and amounts we borrow.

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

         In addition,  changes in interest  rates can affect the average life of
loans and mortgage-backed and related securities.  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 earned on the
prepaid loans or securities. At September 30, 2004, 80.18% of our loan portfolio
was comprised of one- to four-family  mortgage loans,  which  experienced a very
high prepayment rate throughout fiscal 2003 and early 2004.

         Our net  interest  rate  spread,  which is the  difference  between the
yields we receive on assets and the rates we pay on liabilities,  increased over
the current fiscal year after decreasing  during in the prior year. For the year
ended  September 30, 2004 our net interest rate spread was 2.28%, as compared to
2.14% for the year ended September 30, 2003. In large part, this  improvement in
net interest rate spread resulted from slowing asset prepayments attributable to
interest rates rising from their historical lows of the prior year.  During that
prior year, decreases in market interest rates triggered rapid loan and security
prepayments  which  caused our net  interest  rate spread to shrink.  Our spread
shrank because the decrease in the yields on our securities and loan  portfolios
was greater than the  decrease in the rates we paid on deposits  and  borrowings
during that year. This caused a decrease in our earnings,  sometimes referred to
as an "earnings squeeze" which eased somewhat in the current year.

         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 recently originated hybrid ARMs that are fixed rate for an
initial period of time and longer-term, fixed rate loans. At September 30, 2004,
excluding  allowance for loan losses and net deferred  origination  costs, loans
totaled $309.6 million  comprising 72.9% of total assets. Of those loans,  fixed
rate  mortgages  totaled  $176.9  million or 41.6% of total  assets while hybrid
ARMs,  including  3/1,  5/1, 7/1 and 10/1 ARMs totaled $91.5 million of 21.5% 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.

                                       18

<PAGE>

         The Board of Directors has  established an  Asset/Liability  Management
Committee,  comprised  of  Joseph  Kliminski,  the  Bank's  President  and Chief
Executive Officer,  Richard Bzdek, the Bank's Executive Vice President and Chief
Operating  Officer,  Catherine  Bringuier,  the Bank's Senior Vice President and
Chief Lending  Officer,  Eric Heyer,  the Bank's Senior Vice President and Chief
Financial  Officer,  Josephine  Castaldo,  the Bank's Vice  President  of Branch
Administration,  and John Scognamiglio, the Bank's Vice President and Controller
which is responsible for monitoring  interest rate risk. The committee  conducts
regular,  informal  meetings,  generally  on a  weekly  basis,  to  address  the
day-to-day  management of the assets and liabilities of American Savings Bank of
NJ,  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 have  utilized  various  strategies  to enable us to improve the  matching of
interest-earning asset maturities to interest-bearing  liability maturities. The
main elements of these strategies include seeking to:

     o    Originate loans with adjustable rate features or fixed rate loans with
          short maturities including commercial real estate loans;

     o    Lengthen the  maturities of our  liabilities  through  utilization  of
          Federal Home Loan Bank advances;

     o    Attract low cost checking and  transaction  accounts  which tend to be
          less interest rate sensitive;

     o    Continue to originate loans eligible for sale in the secondary  market
          and, if warranted, sell long term fixed rate loans; and

     o    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  Savings Bank of NJ's net portfolio value as of September 30, 2004. The
net portfolio value was calculated by the Office of Thrift Supervision, based on
information provided by American Savings Bank of NJ.
<TABLE>
<CAPTION>
                                               Net Portfolio
                                               Value as % of                       Board
                   Net Portfolio Value    Present Value of Assets             Established Limits
                   -------------------    -----------------------           -----------------------
                                                       Net                      Net
                                                    Portfolio     Basis       Portfolio    Basis
   Changes in                                         Value       Point       Value        Point
    Rates(1)       $ Amount   $ Change   % Change     Ratio       Change      Ratio        Chang
    --------       --------   --------   --------     -----       ------      -----        -----
                  (Dollars in thousands)
<S>             <C>          <C>       <C>        <C>            <C>        <C>          <C>
     +300 bp       26,542      -20,605   -44%        6.52%         -423 bp     5.00%       -450 bp
     +200 bp       34,051      -13,096   -28%        8.15%         -260 bp     6.00%       -300 bp
     +100 bp       41,042       -6,105   -13%        9.58%         -117 bp     7.00%       -150 bp
        0 bp       47,147                           10.75%                     8.00%
     -100 bp       49,572        2,425    +5%       11.13%          +38 bp     7.00%       -150 bp
</TABLE>

---------------
(1)  The -200bp and -300bp  scenarios  are not shown due to the  abnormally  low
     prevailing interest rate environment.

                                       19

<PAGE>

         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 a rapid increase in interest
rates would adversely affect our net interest margin and earnings. Given the low
interest rates prevalent in the current marketplace, management is continuing to
evaluate a variety of  strategies to manage the earnings  risks  presented by an
upward movement in interest rates.  These strategies  include the continued sale
of longer term,  fixed rate  conforming  loan  originations  into the  secondary
market and the use of wholesale borrowings to match fund longer term, fixed rate
loan  originations  that  are  retained  in  portfolio.  Additionally,  the Bank
continues to evaluate the costs and benefits of incrementally  restructuring its
portfolio of FHLB advances.  Such a restructuring  transaction took place during
the current  fiscal year when the bank  recognized a $125,000  penalty to prepay
$3.0 million of fixed rate FHLB advances with a weighted  average cost of 6.28%.
In the current interest rate  environment,  such prepayments  result in one time
charges  to  earnings  in the  form of FHLB  prepayment  penalties  which,  when
replaced by lower cost funding,  lowers the interest paid on borrowings  thereby
improving  the bank's net  interest  spread  and  margin  and  enhancing  future
earnings.

         For the purpose of managing interest rate risk, we continue to maintain
a strategy  of selling a portion of our long  term,  fixed rate  mortgage  loans
originated into the secondary market.  For the year ended September 30, 2004, we
sold a  total  of  $4.8  million  of  loans  to the  Federal  National  Mortgage
Association.  Gains on sales of mortgage loans held for sale totaled $27,000 for
2004.  Such  sales  contributed  to a 14.9% or $11.3  million  reduction  in the
balance of fixed rate mortgage loans with original maturities  exceeding fifteen
years during 2004.

         We offer  borrowers the option to lock in their  interest rate prior to
closing their mortgage  loans.  Once a loan's rate is locked,  we are exposed to
market value risk because 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.  However, at September 30, 2004, the
Bank had no outstanding  contracts to sell long term,  fixed rate mortgage loans
to 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.

                                       20

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
ASB Holding Company
Bloomfield, New Jersey


We have audited the accompanying  consolidated statements of financial condition
of ASB Holding  Company and  subsidiaries as of September 30, 2004 and 2003, and
the related consolidated statements of income, changes in equity, and cash flows
for the years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of ASB  Holding  Company and
subsidiaries as of September 30, 2004 and 2003 and the results of its operations
and its cash flows for the years then ended in  conformity  with U.S.  generally
accepted accounting principles.


                                                /s/Crowe Chizek and Company LLC

                                                Crowe Chizek and Company LLC

Oak Brook, Illinois
December 1, 2004

                                       21

<PAGE>

                               ASB HOLDING COMPANY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           September 30, 2004 and 2003
                        (In thousands except share data)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------

                                                                       2004           2003
                                                                   -----------    -----------
<S>                                                              <C>            <C>
ASSETS
Cash and cash equivalents
    Cash and due from banks                                        $     2,256    $     1,206
    Interest-bearing deposits                                            5,778         31,259
    Federal funds sold                                                       -          5,900
                                                                   -----------    -----------
       Total cash and cash equivalents                                   8,034         38,365

Securities available-for-sale                                           89,495        107,391
Securities held-to-maturity (fair value:
  2004 - $2,806, 2003 - $2,864)                                          2,794          2,839
Loans receivable, net of allowance for loan losses
  2004 - $1,578; 2003 - $1,371                                         308,970        262,844
Loans held for sale                                                          -            500
Premises and equipment                                                   3,910          3,939
Federal Home Loan Bank stock, at cost                                    2,890          3,150
Cash surrender value of life insurance                                   6,242          5,028
Accrued interest receivable                                              1,359          1,255
Other assets                                                             1,250          1,755
                                                                   -----------    -----------

    Total assets                                                   $   424,944    $   427,066
                                                                   ===========    ===========

LIABILITIES AND EQUITY
Deposits
    Non-interest-bearing                                           $    22,599    $    21,676
    Interest-bearing                                                   300,117        271,150
                                                                   -----------    -----------
       Total deposits                                                  322,716        292,826
Stock subscriptions received                                                 -         52,137
Advance payments by borrowers for taxes
  and insurance                                                          2,322          2,079
Federal Home Loan Bank advances                                         57,491         55,000
Accrued expenses and other liabilities                                   3,049          2,685
Common Stock in ESOP subject to contingent repurchase obligation            52              -
                                                                   -----------    -----------
    Total liabilities                                                  385,630        404,727

Commitments and contingent liabilities

Equity
    Preferred stock $.10 par value;
      5,000,000 shares  authorized
    Common stock $.10 par value; 20,000,000 shares
      authorized; 5,554,500 shares issued and outstanding                  555              -
    Additional paid in capital                                          15,687            100
    Unearned ESOP shares                                                (1,200)             -
    Retained earnings                                                   24,806         22,644
    Accumulated other comprehensive (loss)                                (482)          (405)
    Amount reclassified on ESOP shares                                     (52)             -
                                                                   -----------    -----------
       Total equity                                                     39,314         22,339
                                                                   -----------    -----------

          Total liabilities and equity                             $   424,944    $   427,066
                                                                   ===========    ===========

----------------------------------------------------------------------------------------------
</TABLE>

           See accompanying notes to consolidated financial statements

                                       22
<PAGE>

                               ASB HOLDING COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended September 30, 2004 and 2003
                        (In thousands except share data)


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

                                                           2004       2003
                                                         --------   --------
Interest and dividend income
    Loans, including fees                                $ 15,017   $ 14,343
    Securities                                              3,125      2,918
    Federal funds sold and other                               62        215
                                                         --------   --------
       Total interest income                               18,204     17,476

Interest expense
    NOW and money market                                      225        290
    Savings                                                 2,109      2,307
    Certificates of deposit                                 2,912      3,439
    Federal Home Loan Bank advances                         2,859      2,834
                                                         --------   --------
       Total interest expense                               8,105      8,870
                                                         --------   --------

Net interest income                                        10,099      8,606

Provision for loan losses                                     207        254
                                                         --------   --------

Net interest income after provision for loan losses         9,892      8,352

Noninterest income
    Deposit service fees and charges                          697        452
    Income from cash surrender value of life insurance        207        227
    Gain on sale of loans                                      27        151
    Loss on sales of securities available-for- sale             -       (188)
    Gain on sale of other real estate owned                   176          3
    Other                                                     191         73
                                                         --------   --------
       Total noninterest income                             1,298        718

Noninterest expense
    Salaries and employee benefits                          4,812      4,507
    Occupancy and equipment                                   853        822
    Data processing                                           652        543
    Advertising                                               247        229
    Federal deposit insurance                                  46         43
    Borrowed funds prepayment penalty                         125          -
    Other                                                     922        718
                                                         --------   --------
       Total noninterest expense                            7,657      6,862
                                                         --------   --------

Income before provision for income taxes                    3,533      2,208

Provision for income taxes                                  1,371        805
                                                         --------   --------

Net income                                               $  2,162   $  1,403
                                                         ========   ========

Earnings per share:
     Basic and diluted                                   $   0.40   $   0.36

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

           See accompanying notes to consolidated financial statements

                                       23
<PAGE>

                               ASB HOLDING COMPANY
                  CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
                     Years Ended September 30, 2004 and 2003
                                 (In thousands)
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                                    Accumulated
                                                                                       Other      Amount
                                                                                      Compre-  Reclassified
                                                Additional   Unearned                 hensive       on                     Compre-
                                      Common      Paid-in      ESOP      Retained     Income       ESOP         Total      hensive
                                       Stock      Capital     Shares     Earnings     (Loss)      Shares       Equity      Income
                                       -----      -------     ------     --------     ------      ------       ------      ------

<S>                                 <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Balance at September 30, 2002        $      -    $       -   $      -    $  21,341   $     531   $       -   $  21,872

Initial funding of ASB
  Holding Company                           -          100          -         (100)          -           -

Comprehensive income
    Net income                              -            -          -        1,403           -           -       1,403
    Change in unrealized
      Gain (loss) on securities
      available-for-sale,
      net of taxes                          -            -          -            -        (936)          -        (936)
                                                                                                              --------
       Total comprehensive
         income                                                                                                                467
                                     --------    ---------   --------    ---------   ---------   ---------   ---------     =======

Balance at September 30, 2003               -          100          -       22,644        (405)          -      22,339

Issuance of common stock,
  net of issuance costs                   555       15,506     (1,333)           -           -           -      14,728

ESOP shares earned                          -           81        133            -           -           -         214

Reclassification of
  common stock in ESOP
  to contingent repurchase
  obligation                                -            -          -            -           -         (52)        (52)

Comprehensive income
    Net income                              -            -          -        2,162           -           -       2,162
    Change in unrealized
      Gain (loss) on securities
      available-for-sale,
      net of taxes                          -            -          -            -         (77)          -         (77)
                                                                                                              --------
       Total comprehensive
         income                                                                                                              2,085
                                     --------    ---------   --------    ---------   ---------   ---------   ---------    ========

Balance at September 30, 2004        $    555    $  15,687   $ (1,200)   $  24,806   $    (482)  $     (52)  $  39,314
                                     ========    =========   ========    =========   =========   =========   =========

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
           See accompanying notes to consolidated financial statements

                                       24
<PAGE>

                               ASB HOLDING COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended September 30, 2004 and 2003
                                 (In thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------

                                                                       2004        2003
                                                                     --------    --------
<S>                                                                <C>         <C>
Cash flows from operating activities
    Net income                                                       $  2,162    $  1,403
    Adjustments to reconcile net income to net cash
      provided by operating activities
       Depreciation and amortization                                      417         371
       Net amortization of premiums and discounts                         292       1,036
       Losses on sales of securities available-for-sale                     -         188
       ESOP compensation expense                                          214           -
       Provision for loan losses                                          207         254
       Increase in cash surrender value of life insurance                (207)       (227)
       Gain on sale of other real estate owned                           (176)         (3)
       Gain on sale of loans                                              (27)       (151)
       Proceeds from sales of loans                                     4,774       9,561
       Net change in loans held for sale                                  500        (500)
       Decrease (increase) in accrued interest receivable                (104)         58
       Decrease (increase) in other assets                                591        (979)
       Change in deferred income taxes                                    (34)        142
       Increase (decrease) in other liabilities                           364         (22)
                                                                     --------    --------
          Net cash provided by operating activities                     8,973      11,131

Cash flows from investing activities
    Net increase in loans receivable                                  (51,289)    (64,194)
    Purchases of securities held-to-maturity                             (922)          -
    Principal paydowns on securities held-to-maturity                     954       4,133
    Purchases of securities available-for-sale                        (21,459)   (111,503)
    Sales of securities available-for-sale                                  -      21,026
    Calls of securities available-for-sale                             13,560           -
    Principal paydowns on securities available-for-sale                25,387      70,435
    Purchase of Federal Home Loan Bank stock                           (2,222)     (1,660)
    Redemption of Federal Home Loan Bank stock                          2,482         710
    Purchase of bank-owned life insurance                              (1,007)       (324)
    Purchase of premises and equipment                                   (388)       (524)
    Proceeds from sale of other real estate owned                         385          63
                                                                     --------    --------
       Net cash used in investing activities                          (34,519)    (81,838)

Cash flows from financing activities
    Net increase in deposits                                           29,890      28,239
    Stock subscriptions held for parent received (refunded)           (52,137)     52,137
    Net change in advance payments by borrowers
      for taxes and insurance                                             243         366
    Repayment of Federal Home Loan Bank of New
      York advances                                                    (7,009)     (4,000)
    Federal Home Loan Bank of New York advances                         6,800      15,000
    Net change in Federal Home Loan Bank of New York
       overnight lines of credit                                        2,700           -
    Net proceeds from stock issuance                                   14,728           -
                                                                     --------    --------
       Net cash provided by financing activities                       (4,785)     91,742
                                                                     --------    --------

Net change in cash and cash equivalents                               (30,331)     21,035

Cash and cash equivalents at beginning of year                         38,365      17,330
                                                                     --------    --------

Cash and cash equivalents at end of year                             $  8,034    $ 38,365
                                                                     ========    ========

-----------------------------------------------------------------------------------------
</TABLE>
                                  (Continued)

                                       25
<PAGE>

                               ASB HOLDING COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended September 30, 2004 and 2003
                              (Tables in thousands)

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

                                                                2004     2003
                                                                ----     ----

Supplemental cash flow information:
    Cash paid during the period for
       Interest                                               $8,101   $8,839
       Income taxes, net of refunds                            1,166    1,049

Supplemental disclosures of noncash investing transactions:
    Conversion of loans to other real estate owned            $  209   $   60

           See accompanying notes to consolidated financial statements

                                       26
<PAGE>

                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of  Consolidation:  ASB Holding Company is a
-----------------------------------------------------
federally chartered  corporation  organized in June 2003 that was formed for the
purpose of acquiring  all of the capital  stock of American  Savings Bank of NJ,
which was  previously  owned by  American  Savings,  MHC, a  federally-chartered
mutual holding company. American Savings Bank of NJ 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 American Savings,  MHC. Currently all
of the outstanding  stock of American  Savings Bank of NJ is held by ASB Holding
Company.  The MHC holds 70% of the outstanding stock of ASB Holding Company with
the remaining 30% held by the public.

The consolidated financial statements include ASB Holding Company and its wholly
owned subsidiaries,  American Savings Bank of NJ ("the Bank") and ASB Investment
Corp  ("the  Investment   Corp"),   together   referred  to  as  "the  Company."
Intercompany transactions and balances are eliminated in consolidation.

The only 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 no activity to date.

The accounting and reporting  policies of the Company are based upon  accounting
principles  generally  accepted  in the United  States of America and conform to
predominant  practices  within  the  banking  industry.  Significant  accounting
polices followed by the Company are presented below.

Use of Estimates: In preparing the financial statements,  management is required
----------------
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  as of the date of the balance  sheets and revenues and expenses for
the period.  Actual  results could differ  significantly  from those  estimates.
Material  estimates that are particularly  susceptible to significant  change in
the near term relate to the  determination of the allowance for losses on loans,
prepayment  speed  assumptions   related  to   mortgage-backed   securities  and
collateralized  mortgage obligations,  and the valuation of real estate acquired
in connection with foreclosures or in satisfaction of loans.

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

                                  (Continued)

                                       27
<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A substantial  portion of the Bank's loans are secured by real estate in the New
Jersey  market.  In  addition,  a  substantial  portion of real estate  owned is
located in that same market. Accordingly, as with most financial institutions in
the market area,  the ultimate  collectibility  of a substantial  portion of the
Bank's loan  portfolio  and the recovery of the  carrying  amount of real estate
owned are susceptible to changes in market conditions.

Cash and Cash  Equivalents:  For purposes of the statements of cash flows,  cash
--------------------------
and  cash  equivalents  include  cash on  hand  and in  banks;  interest-bearing
deposits; and federal funds sold, which are generally sold for one-day periods.

Securities:  Securities  are  classified  as  held-to-maturity  and  carried  at
----------
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available-for-sale when they might be
sold before maturity.  Securities  available-for-sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income.

Interest income includes amortization of purchase premium or discount.  Premiums
and discounts are  amortized  using the level yield method.  Gains and losses on
sales are based on the  amortized  cost of the  security  sold.  Securities  are
written down to fair value when a decline in fair value is other than temporary.

Loans:  Mortgages  on real estate and other loans are stated at the  outstanding
-----
principal  amount of the loans,  net of deferred loan fees and the allowance for
loan losses. Interest income on loans is accrued and credited to interest income
as earned.  Loans are  generally  placed on  nonaccrual  status when they become
delinquent  90 days or more as to  principal or interest or when it appears that
principal or interest is  uncollectible.  Interest accrued prior to a loan being
placed  on  nonaccrual  status  is  subsequently  reversed.  Interest  income on
nonaccrual  loans is  recognized  only in the  period in which it is  ultimately
collected.  Loans are  returned  to an accrual  status when  factors  indicating
doubtful collectibility no longer exist.

The  Bank  defines  the  population  of  impaired  loans  to be  all  nonaccrual
commercial  real  estate,  multi-family,  and land  loans.  Impaired  loans  are
individually  assessed to determine  whether the loan's carrying value is not in
excess of the fair value of the  collateral  or the present  value of the loan's
expected  future  cash  flows.  Smaller  balance  homogeneous  loans that may be
collectively  evaluated for impairment  such as  residential  mortgage loans and
installment loans, are specifically excluded from the impaired loan portfolio.

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

                                  (Continued)

                                       28

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans  Held-For-Sale:  Loans  held-for-sale  are carried at the lower of cost or
--------------------
market,  using the aggregate method. Gains and losses on sales of mortgage loans
are recognized at the time of sale.

Allowance  For Loan  Losses:  The  allowance  for  loan  losses  is a  valuation
---------------------------
allowance for probable  incurred  credit losses,  increased by the provision for
loan losses and decreased by charge-offs less recoveries.  Management  estimates
the  allowance  balance  required  using past loan loss  experience,  peer group
information, the nature and volume of the portfolio,  information about specific
borrower situations and estimated collateral values,  economic  conditions,  and
other factors.  Allocations of the allowance may be made for specific loans, but
the entire  allowance is available for any loan that, in management's  judgment,
should be charged  off.  Loan losses are  charged  against  the  allowance  when
management believes that the uncollectibility of a loan balance is confirmed.

A loan is impaired when full payment under the loan terms is not expected.  If a
loan is  impaired,  a portion of the  allowance is allocated so that the loan is
reported  net,  at the  present  value of  estimated  future cash flow using the
loan's existing rate or at the fair value of collateral if repayment is expected
solely from the collateral.

Loan Fees: Loan fees and certain direct loan  origination  costs for originating
---------
mortgage loans are deferred and the net fee or cost is recognized  into interest
income using the interest method over the contractual lives of the loans.

Real Estate Owned:  When properties are acquired through  foreclosure,  they are
-----------------
transferred  at the  lower of the book  value or  estimated  fair  value and any
required write-downs are charged to the allowance for loan losses. Subsequently,
such properties are carried at the lower of the adjusted cost or fair value less
estimated selling costs. Estimated fair value of the property is generally based
on an  appraisal.  The Bank  maintains an allowance for real estate owned losses
for subsequent declines in estimated fair value.  Expenses of holding foreclosed
properties,  net of other income,  are charged to operations as incurred.  Gains
and losses from sales of such properties are recognized as incurred.

Premises and Equipment: Land is carried at cost. Office properties and equipment
----------------------
are  carried  at cost,  less  accumulated  depreciation.  Office  buildings  and
improvements are depreciated  using the  straight-line  method with useful lives
ranging from 20 to 40 years. Furniture,  fixtures, and equipment are depreciated
using the straight-line method with useful lives ranging from 3 to 10 years.

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

                                  (Continued)

                                       29

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Mortgage  Servicing  Rights:  Servicing  assets represent the allocated value of
---------------------------
retained  servicing  rights on loans  sold.  Servicing  assets are  expensed  in
proportion  to,  and over the  period  of,  estimated  net  servicing  revenues.
Impairment is evaluated  based on the fair value of the assets,  using groupings
of the  underlying  loans as to  interest  rates  and then,  secondarily,  as to
prepayment  characteristics.  Fair value is determined  using prices for similar
assets with similar  characteristics,  when available,  or based upon discounted
cash flows  using  market-based  assumptions.  Any  impairment  of a grouping is
reported as a valuation allowance. Mortgage servicing rights totaled $80,930 and
$70,289 at September 30, 2004 and 2003 and are included with other assets on the
balance sheet.

Income  Taxes:  The  provision for income taxes is the total of the current year
-------------
income  tax due or  refundable  and the  change in the  deferred  tax assets and
liabilities.  Deferred tax assets and liabilities  are the estimated  future tax
consequences  attributable  to  differences  between the  financial  statements'
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases,  computed using enacted tax rates. The realization of deferred tax assets
is assessed and a valuation allowance provided, when necessary, for that portion
of the asset which is not likely to be realized. Management believes, based upon
current facts, that it is more likely than not there will be sufficient  taxable
income in future years to realize the deferred tax assets.

Employee  Stock  Ownership  Plan: The cost of shares issued to the ESOP, but not
--------------------------------
yet allocated to participants,  is shown as a reduction of shareholders' equity.
Compensation  expense  is  based  on the  market  price  of  shares  as they are
committed to be released to  participant  accounts.  Dividends on allocated ESOP
shares reduce retained  earnings;  dividends on unearned ESOP shares reduce debt
and accrued interest. Participants may put their ESOP shares back to the Company
upon  termination,  and an amount of equity equal to these shares times  current
market price is reclassified out of shareholders' equity.

Earnings Per Common Share: Basic earnings per common share is net income divided
-------------------------
by the weighted average number of common shares  outstanding  during the period.
ESOP shares are considered outstanding for this calculation unless unearned. The
weighted average common shares  outstanding were 5,427,906 and 3,888,150 for the
years ended  September  30, 2004 and 2003.  There were no  potentially  dilutive
securities for the years ended  September 30, 2004 and 2003.  Earnings per share
for the prior period has been  restated to reflect the  conversion of 100 shares
of Bank stock into 3,188,150 shares of Company stock representing 100% ownership
of the Bank prior to the minority stock offering.

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

                                  (Continued)

                                       30

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive  Income:  Comprehensive  income  consists  of net income and other
---------------------
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities  available-for-sale,  which are also recognized as separate
components of equity.

Loss  Contingencies:  Loss  contingencies,  including  claims and legal  actions
-------------------
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

Reclassifications:  Some  items in the  prior  year  financial  statements  were
-----------------
reclassified to conform to the current presentation.


NOTE 2 - MINORITY OFFERING

On October 3, 2003,  the Company  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.  The Company
contributed  $9,616,000 or approximately  60% of the net proceeds to the Bank in
the form of a capital contribution.  The Company loaned $1,333,000 to the Bank's
employee stock  ownership plan and the ESOP used those funds to acquire  133,000
shares of common stock at $10 per share.

After the sale of the stock,  the MHC holds 70%,  or  3,888,150  shares,  of the
outstanding  stock of the Company,  with the remaining 30% or,  1,666,350 shares
held by  persons  other  than the MHC.  The  Company  holds  100% of the  Bank's
outstanding  common stock.  The Bank may not pay dividends to the Company if the
dividends  would  cause the Bank to fall  below the "well  capitalized"  capital
threshold.

The Company had stock subscriptions  received totaling  $52,137,000 at September
30, 2003 pending  completion of the Company's  initial public  offering.  At the
time of closing on October 3, 2003, gross proceeds of $15,330,000 became capital
of the Company with the remainder returned on oversubscriptions.

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

                                  (Continued)

                                       31

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 3 - SECURITIES

The fair value of securities available-for-sale was as follows:

<TABLE>
<CAPTION>
                                                                     Gross         Gross
                                                      Fair        Unrealized    Unrealized
                                                      Value          Gains        Losses
                                                      -----          -----        ------
<S>                                             <C>             <C>          <C>
     2004
     ----
         U.S. Government and federal agency       $     13,840    $       -    $    (157)
         Mortgage-backed
              FHLMC                                      5,219           20          (26)
              FNMA                                      16,261           54         (359)
              GNMA                                         202            1            -
         Collateralized mortgage obligations
              Agency                                    42,870           41         (246)
              Non-agency                                 1,234            3           (3)
         Mutual fund                                     9,869            -         (131)
                                                  ------------    ---------    ---------

                                                  $     89,495    $     119    $    (922)
                                                  ============    =========    =========

     2003
     ----
         U.S. Government and federal agency       $     13,484    $       6    $     (60)
         Mortgage-backed
              FHLMC                                        346            -           (3)
              FNMA                                      16,664           20         (341)
              GNMA                                         320            7            -
         Collateralized mortgage obligations
              Agency                                    61,685          201         (403)
              Non-agency                                 4,962            -          (31)
         Mutual fund                                     9,930            -          (70)
                                                  ------------    ---------    ---------

                                                  $    107,391    $     234    $    (908)
                                                  ============    =========    =========
</TABLE>

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

                                  (Continued)

                                       32

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 3 - SECURITIES (Continued)

The  amortized  cost  and  fair  value of  securities  held-to-maturity  were as
follows:

<TABLE>
<CAPTION>
                                                                  Gross         Gross
                                                 Amortized     Unrealized    Unrealized      Fair
                                                   Cost           Gains        Losses        Value
                                                   ----           -----        ------        -----
<S>                                            <C>           <C>          <C>          <C>
     2004
     ----
         Mortgage-backed
              FHLMC                              $      490    $       2    $      (1)   $     491
              FNMA                                    1,870           11           (6)       1,875
              GNMA                                      327            3            -          330
         Collateralized mortgage obligations
              Agency                                    107            3            -          110
                                                 ----------    ---------    ---------    ---------

                                                 $    2,794    $      19    $      (7)   $   2,806
                                                 ==========    =========    =========    =========
     2003
     ----
         Mortgage-backed
              FHLMC                              $      657    $       3    $      (1)   $     659
              FNMA                                    1,513            7           (4)       1,516
              GNMA                                      476           14            -          490
         Collateralized mortgage obligations
              Agency                                    193            6            -          199
                                                 ----------    ---------    ---------    ---------

                                                 $    2,839    $      30    $      (5)   $   2,864
                                                 ==========    =========    =========    =========
</TABLE>

There  were no  securities  sales  during  the year ended  September  30,  2004.
Proceeds from sales of securities  amounted to $21,026,000 during the year ended
September 30, 2003 resulting in gross gains of $0 and gross losses of $188,000.

The fair  value  of debt  securities  and  carrying  amount,  if  different,  at
September 30, 2004 by contractual  maturity were as follows.  Securities not due
at a single  maturity  date,  primarily  mortgage-backed  securities,  are shown
separately.

                                                                       Available
                                          Held-to-Maturity             for Sale
                                      Carrying          Fair             Fair
                                       Amount           Value            Value
                                       ------           -----            -----

     Due from one to five years    $          -     $          -    $     13,840
     Mortgage-backed                      2,794            2,806          65,786
     Mutual fund                              -                -           9,869
                                   ------------     ------------    ------------
         Total                     $      2,794     $      2,806    $     89,495
                                   ============     ============    ============

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

                                  (Continued)

                                       33
<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 3 - SECURITIES (Continued)

Securities  with carrying  values of $11,386,213 and $4,481,971 at September 30,
2004 and 2003, respectively, were pledged to secure public deposits and advances
as required or permitted by law.

Available-for-sale  securities with unrealized  losses at September 30, 2004 not
recognized in income are presented  below by length of time the securities  have
been in an unrealized loss position:

<TABLE>
<CAPTION>

                                   Less than 12 Months
                                   -------------------          12 Months or More                 Total
                                    Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
  Description of Securities        Value          Loss         Value          Loss          Value         Loss
  -------------------------        -----          ----         -----          ----          -----         ----
<S>                              <C>           <C>           <C>           <C>          <C>            <C>
U.S. Government and federal
 agency                           $   8,885     $    (112)    $   4,955     $    (45)    $    13,840    $    (157)
Mortgage backed                       6,520           (80)        8,649         (305)         15,169         (385)
Collateralized mortgage
 obligations                         29,307          (209)        4,831          (40)         34,138         (249)
Mutual fund                               -             -         9,869         (131)          9,869         (131)
                                  ---------     ---------     ---------     --------      ----------    ---------
   Total temporarily impaired     $  44,712     $    (401)    $  28,304     $   (521)     $   73,016    $    (922)
                                  =========     =========     =========     ========      ==========    =========
</TABLE>

Held-to-maturity  securities  with  unrealized  losses at September 30, 2004 not
recognized in income are as follows:

<TABLE>
<CAPTION>
                                   Less than 12 Months         12 Months or More                 Total
                                    Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
  Description of Securities        Value          Loss         Value          Loss          Value         Loss
  -------------------------        -----          ----         -----          ----          -----         ----
<S>                             <C>           <C>           <C>           <C>           <C>           <C>
Mortgage-backed                   $     562     $      (6)    $     117     $     (1)     $      679    $      (7)
                                  ---------     ---------     ---------     --------      ----------    ---------

   Total temporarily impaired     $     562     $      (6)    $     117     $     (1)     $      679    $      (7)
                                  =========     =========     =========     ========      ==========    =========
</TABLE>

The Company evaluates securities for other-than-temporary impairment at least on
a quarterly  basis, and more frequently when economic or market concerns warrant
such evaluation.  Consideration is given to the length of time and the extent to
which the fair value has been less cost,  the financial  condition and near-term
prospects of the issuer, and the intent and ability of the Company to retain its
investment  in the  issuer  for a period  of time  sufficient  to allow  for any
anticipated   recovery  in  fair  value.  In  analyzing  an  issuer's  financial
condition,  the Company may consider  whether the  securities  are issued by the
federal  government or its agencies,  whether downgrades by bond rating agencies
have occurred, and the results of reviews of the issuer's financial condition.

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

                                  (Continued)

                                       34
<PAGE>

                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 3 - SECURITIES (Continued)

At September 30, 2004,  securities with unrealized  losses had depreciated  only
1.3% from the Company's  amortized cost basis.  These unrealized  losses related
principally to changes in interest rates. As the Company has the ability to hold
these securities for the foreseeable  future since they are classified as either
available-for-sale or held-to-maturity, no declines were deemed to be other than
temporary.


NOTE 4 - LOANS

Loans at period-end were as follows:

                                                 2004               2003
                                              ---------          ---------
      Mortgage loans:
          One-to-four-family                  $ 251,531          $ 215,484
          Multi-family and commercial            43,197             36,202
          Construction                            7,175              1,233
      Consumer                                      746                780
      Home equity                                10,666              8,893
      Commercial                                    398              1,610
                                              ---------          ---------
          Total loans                           313,713            264,202
      Allowance for loan losses                  (1,578)            (1,371)
      Net deferred loan costs                       935                796
      Loans in process                           (4,100)              (783)
                                              ---------          ---------

          Loans, net                          $ 308,970          $ 262,844
                                              =========          =========

Certain  directors  and officers of the Bank and  companies  with which they are
affiliated have obtained loans from the Bank on various occasions.  A summary of
such loans made by the Bank in the ordinary course of business is as follows:

                                                   2004            2003
                                                -----------    -----------

     Beginning balance                          $     1,142    $       520
         New loans                                        3            624
         Effect of changes in related parties            32            265
         Repayments                                    (170)          (267)
                                                -----------    -----------

              Ending balance                    $     1,007    $     1,142
                                                ===========    ===========

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

                                  (Continued)

                                       35
<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 4 - LOANS (Continued)

Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
financial  statements.  At  September  30, 2004 and 2003,  the unpaid  principal
balances of these loans totaled $16,936,826 and $16,103,798, respectively.

Activity in the allowance for loan losses was as follows:

                                                           2004     2003
                                                           ----     ----

     Balance at beginning of year                        $1,371   $1,117
     Provision charged to income                            207      254
     Charge-offs                                              -        -
     Recoveries                                               -        -
                                                         ------   ------

         Balance at end of year                          $1,578   $1,371
                                                         ======   ======

Impaired loans were as follows:

                                                           2004     2003
                                                           ----     ----
     Period-end loans with no allocated allowance
       for loan losses                                   $    -   $  294
     Period-end loans with allocated allowance
       for loan losses                                      259      250
                                                         ------   ------

         Total                                           $  259   $  544
                                                         ======   ======

                                                           2004     2003
                                                           ----     ----

     Amount of the allowance for loan losses allocated   $  129   $  125
     Average of impaired loans during the period            398      623
     Interest income recognized during impairment            19       18
     Cash-basis interest income recognized                   19       18

Nonperforming loans were as follows:

                                                           2004     2003
                                                           ----     ----

     Loans past due over 90 days still on accrual        $    -   $    -
     Nonaccrual loans                                       519      517

Nonperforming loans and impaired loans are defined  differently.  Some loans may
be included in both categories,  whereas other loans may only be included in one
category.

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

                                  (Continued)

                                       36

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 5 - ACCRUED INTEREST RECEIVABLE

Accrued interest receivable is summarized as follows:

                                                      2004     2003
                                                      ----     ----

     Securities                                     $  307   $  352
     Loans receivable                                1,052      903
                                                    ------   ------

                                                    $1,359   $1,255
                                                    ======   ======


NOTE 6 - PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:
                                                      2004     2003
                                                      ----     ----

     Land$                                             840   $  840
     Office buildings and improvements               3,413    3,248
     Furniture and equipment                         3,528    3,305
                                                    ------   ------
                                                     7,781    7,393
     Less accumulated depreciation                   3,871    3,454
                                                    ------   ------

         Total                                      $3,910   $3,939
                                                    ======   ======

An agreement  dated February 22, 2004 to purchase real estate was signed for the
acquisition  of a future branch site in Essex County.  Total  purchase  price is
$1,700,000.  The above amounts  include  $206,905  incurred for a deposit on the
contract of sale and professional  fees in connection with the acquisition.  The
balance of $1,530,000 is due at closing.


NOTE 7 - DEPOSITS

Deposit accounts are summarized as follows:

                                                2004             2003
                                                ----             ----

Demand deposits                             $ 22,599         $ 21,676
NOW and money market accounts                 38,696           21,721
Savings accounts                             143,401          127,720
Certificates of deposit                      118,020          121,709
                                            --------         --------

    Total deposits                          $322,716         $292,826
                                            ========         ========

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

                                  (Continued)

                                       37

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 7 - DEPOSITS (Continued)

Certificates of deposit accounts with balances over $100,000 totaled $31,536,775
and $27,756,666 at September 30, 2004 and 2003, respectively.  All other deposit
accounts with balances over $100,000  totaled  $97,668,361  and  $70,174,744  at
September 30, 2004 and 2003,  respectively.  Deposit  balances over $100,000 are
not federally insured.

Scheduled maturities of certificates of deposit were as follows:

                  2005                                    $     72,752
                  2006                                          11,717
                  2007                                          14,777
                  2008                                           6,324
                  2009 and thereafter                           12,450
                                                          ------------
                                                          $    118,020
                                                          ============


NOTE 8 - FEDERAL HOME LOAN BANK OF NEW YORK ADVANCES

The Bank has multiple  advances with the Federal Home Loan Bank with  maturities
through 2013 and rates  ranging from 2.80% to 6.19% at September  30, 2004.  One
$2.0  million  advance  with a coupon of 5.797%  maturing in 2008 is callable in
2005.  Another  advance for $1.8  million with a coupon of 4.57% has a five year
final  maturity in June 2009,  with a twenty  year  amortization  schedule.  The
remaining $53.7 million of Federal Home Loan Bank advances are non-callable.  In
addition,  there is an overnight line of credit borrowing of $2.7 million with a
coupon  of 2.04%  which  matures  October  1,  2004.  Scheduled  repayments  and
maturities of advances from the Federal Home Loan Bank are as follows:

                                     Weighted
                                   Average Rate
                                       2004            2004           2003
                                       ----            ----           ----

     Maturing in 2004                     -%       $         -    $     4,000
     Maturing in 2005                  5.48              1,057          2,000
     Maturing in 2006                  3.51              8,060          9,000
     Maturing in 2007                  4.39              8,062          4,000
     Maturing in 2008                  5.51             12,065         12,000
     Maturing in 2009                  4.88              7,547          6,000
     Maturing in 2010                  5.15              6,000          6,000
     Maturing in 2011                  5.18              6,000          6,000
     Maturing in 2012                  5.22              5,000          5,000
     Maturing in 2013                  4.79              1,000          1,000
     Overnight line of credit          2.04              2,700              -
                                                   -----------    -----------

                                       4.72%       $    57,491    $    55,000
                                                   ===========    ===========

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

                                  (Continued)

                                       38

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES (Continued)

At September 30, 2004, advances are secured primarily by mortgage loans totaling
$90,957,818,  and all stock in the Federal  Home Loan Bank  totaling  $2,890,000
under a blanket  collateral  agreement for the amount of the notes  outstanding.
Additionally,  specific  investment  securities  totaling $9,415,000 also secure
such  advances.  At September  30,  2004,  the Bank's  borrowing  limit with the
Federal Home Loan Bank was approximately $105.3 million.


NOTE 9 - INCOME TAXES

An analysis of the provision for income taxes is as follows:

                                                             2004      2003
                                                             ----      ----

     Current                                              $ 1,382    $  663
     Deferred                                                 (11)      142
                                                          -------    ------

                                                          $ 1,371    $  805
                                                          =======    ======

A reconciliation  of income tax expense at the statutory federal income tax rate
and the actual income tax expense was as follows:

                                                             2004       2003
                                                          --------    -------

     Federal income tax expense at statutory rate         $  1,201    $   751
     Increase in taxes resulting from
         State income taxes, net of federal benefit            204        120
         Tax-exempt income from life insurance                 (70)       (77)
         Nondeductible ESOP expense                             28          -
         Other, net                                              8         11
                                                          --------    -------

              Income tax expense                          $  1,371    $   805
                                                          ========    =======


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

                                  (Continued)

                                       39

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 9 - INCOME TAXES (Continued)

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:

                                                         2004     2003
                                                         ----     ----

Deferred tax assets
    Unrealized loss on securities available-for-sale   $  321      269
    Provision for loan losses                             630      527
    Deferred loan origination fees                          3        9
    Accrued expenses and other liabilities                693      620
                                                       ------   ------
         Total gross deferred tax assets                1,647    1,425

Deferred tax liabilities
    Depreciation                                          203      148
    Deferred loan origination costs                       623      535
    Other                                                 198      182
                                                       ------   ------
         Total gross deferred tax liabilities           1,024      865
                                                       ------   ------

             Net deferred tax asset                    $  623   $  560
                                                       ======   ======

Retained  earnings   includes   allocations  for  federal  income  tax  purposes
representing  tax  bad  debt  deductions  of  approximately  $1,500,000  through
September 30, 2004 on which no tax has been paid and no deferred  federal income
taxes have been  provided.  The related  amount of  deferred  tax  liability  is
approximately  $599,000.  Reductions of amounts so allocated for purposes  other
than tax bad debt losses will create income for tax purposes only, which will be
subject to the then current corporate income tax rate.


NOTE 10 - BENEFIT PLANS

The Bank has a directors'  retirement plan that provides  retirement benefits to
all members of the Board of Directors  vested under the plan in accordance  with
the plan document.  During the years ended September 30, 2004 and 2003, the Bank
accrued   expenses   related  to  the  plan   totaling   $55,179  and  $124,404,
respectively.

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

                                  (Continued)

                                       40

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 10 - BENEFIT PLANS (Continued)

The Bank has a 401(k) profit sharing plan covering  substantially all employees.
Contributions  to the plan are made at the  discretion of the Board of Directors
and  charged  to  expense  annually.  The plan also  allows  participant  salary
deferrals into the plan along with a matching contribution provided by the Bank.
Total expenses related to the plan,  including employer match and profit sharing
contributions, were $248,163 and $242,450 for the years ended September 30, 2004
and 2003.

During 2002, the Bank implemented a supplemental  executive retirement plan that
provides  benefits to certain key officers in accordance with the plan document.
During the years ended September 30, 2004 and 2003, Bank expenses related to the
plan  totaled  $204,632  and  $233,332.  During  2002,  the Bank also  purchased
bank-owned  life  insurance  on the  individuals  covered  by  the  supplemental
executive retirement plan.

In  December  2002,  the Bank  and  four of the  Bank's  officers  entered  into
employment  agreements  commencing  on  January  1,  2003.  The Chief  Executive
Officer's  agreement was for a three-year  term and the others were for two-year
terms. In the event of the involuntary  termination of the officer's  employment
following any change in control of the Bank or ASB Holding Company,  absent just
cause, the officer shall be paid an amount equal to two times, or three times in
the case of the Chief Executive Officer,  the officer's five-year average annual
taxable cash compensation.  In the event the officer's  employment is terminated
by the Bank  without  just cause,  the Bank is  obligated to continue to pay the
salary up to the date of termination of the remaining term of the agreement.

The  Company  has also  entered  into an  employment  agreement  with the  Chief
Executive  Officer  with  terms  of  which  are  substantially  the  same as the
employment  agreement with the Bank.  However, it provides that if employment is
terminated  without just cause as defined in the agreement,  he will be entitled
to a continuation of his salary for three years from the date of termination.


NOTE 11 - ESOP PLAN

Employees participate in an employee stock option plan (ESOP). The ESOP borrowed
from the Company to purchase  133,308  shares of stock at $10.00 per share.  The
Company makes discretionary contributions to the ESOP, as well as pays dividends
on unallocated  shares to the ESOP, and the ESOP uses funds it receives to repay
the loan. When loan payments are made, ESOP shares are allocated to participants
based on relative  compensation and expense is recorded.  Dividends on allocated
shares increase participant accounts.

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

                                  (Continued)

                                       41
<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 11 - ESOP PLAN (Continued)

Participants receive the shares at the end of employment. Under the terms of the
plan and in accordance  with ERISA  regulation,  a participant may require stock
received to be repurchased unless the stock is traded on an established  market.
The Over The  Counter  Bulletin  Board is not  considered  to be an  established
market for purposes of this  regulation and a liability has been  established to
reflect this repurchase obligation.

There were no discretionary  contributions to the ESOP during 2004.  Expense for
2004 was $215,237.

Shares held by the ESOP were as follows:

         Allocated to participants                                  3,333
         Unearned                                                 129,975

              Total ESOP shares                                   133,308
                                                              -----------

              Fair value of unearned shares                   $     2,015
                                                              ===========

              Fair value of allocated shares subject
                to repurchase obligation                      $        52
                                                              ===========


NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Bank is party to financial  instruments with  off-balance-sheet  risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments include commitments to fund loans and previously approved
unused  lines of credit.  The  Bank's  exposure  to credit  loss in the event of
nonperformance  by the parties to these financial  instruments is represented by
the contractual amount of the instruments.  The Bank uses the same credit policy
for commitments as it uses for on-balance-sheet items.

The contract amount of these financial instruments is summarized as follows:

                                                       2004           2003

     Commitments to extend credit                  $    14,771    $    11,590
     Unused lines of credit                             13,130         10,286
     Construction loans in process                       4,100            783


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

                                  (Continued)

                                       42

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (Continued)

Fixed rate loan  commitments  totaled  $1,211,400 at September 30, 2004 and have
interest rates ranging from 4.50% to 6.00%.

Since many  commitments  expire  without  being used,  the amounts  above do not
necessarily  represent future cash commitments.  Collateral may be obtained upon
exercise of a  commitment.  The amount of collateral is determined by management
and may include  commercial and  residential  real estate and other business and
consumer assets.

NOTE 13 - REGULATORY CAPITAL REQUIREMENTS

ASB  Holding  Company as a unitary  thrift  holding  company  is not  subject to
specific  regulatory  capital  guidelines.   The  Bank  is  subject  to  various
regulatory  capital  requirements  administered by the federal banking agencies.
Under  capital  adequacy  guidelines  and the  regulatory  framework  for prompt
corrective  action,  the Bank must meet specific capital guidelines that involve
quantitative   measures  of  the  Bank's   assets,   liabilities,   and  certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's  capital  amounts and  classifications  are also  subject to  qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,  capital  distributions  are  limited,  as is asset growth and
expansion, and capital restoration plans are required.

The Bank's actual and required capital amounts and ratios are presented below.

<TABLE>
<CAPTION>
                                                                                                  To Be Well
                                                                        For Capital            Capitalized Under
                                                                         Adequacy              Prompt Corrective
                                                  Actual                 Purposes                   Action
                                              -----------------       -----------------      -------------------
                                              Amount      Ratio       Amount      Ratio      Amount        Ratio
                                              ------      -----       ------      -----      ------        -----
<S>                                      <C>            <C>      <C>             <C>      <C>            <C>
As of September 30, 2004
    Total capital (to risk-weighted
      assets)                              $   34,857     15.93%   $   17,505      8.0%     $  21,881      10.0%
    Tier I capital (to risk-weighted)
      assets)                                  33,279     15.21         8,752      4.0         13,129       6.0
    Tier I (core) capital (to adjusted
      total assets)                            33,279      7.89        16,865      4.0         21,081       5.0
</TABLE>

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

                                  (Continued)

                                       43

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 13 - REGULATORY CAPITAL REQUIREMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                                  To Be Well
                                                                        For Capital            Capitalized Under
                                                                         Adequacy              Prompt Corrective
                                                  Actual                 Purposes                   Action
                                              -----------------       -----------------      -------------------
                                              Amount      Ratio       Amount      Ratio      Amount        Ratio
                                              ------      -----       ------      -----      ------        -----
<S>                                      <C>            <C>      <C>             <C>      <C>            <C>
As of September 30, 2003
    Total capital (to risk-weighted
      assets)                              $   24,015     11.9%    $   16,124      8.0%     $  20,155      10.0%
    Tier I capital (to risk-weighted)
      assets)                                  22,644     11.2          8,062      4.0         12,093       6.0
    Tier I (core) capital (to adjusted
      total assets)                            22,644      5.3         17,099      4.0         21,374       5.0
</TABLE>

As of September 30, 2004, the most recent notification from the Office of Thrift
Supervision  categorized  the  Bank as well  capitalized  under  the  regulatory
framework for prompt corrective action.  There are no conditions or events since
that notification that management believes have changed the Bank's category.

The  following  is a  reconciliation  of  the  Bank's  equity  under  accounting
principles  generally  accepted  in the  United  States of America  ("GAAP")  to
regulatory capital as of the dates indicated:

                                                       2004           2003
                                                       ----           ----

GAAP equity                                         $32,818        $22,239
Accumulated other comprehensive loss                    461            405
                                                    -------        -------
    Tier I capital                                   33,279         22,644
General regulatory allowance for loan losses          1,578          1,371
                                                    -------        -------

    Total capital                                   $34,857        $24,015
                                                    =======        =======

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

                                  (Continued)

                                       44

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  amount and estimated fair value of financial  instruments  were as
follows:

<TABLE>
<CAPTION>
                                                               2004                              2003
                                                               ----                              ----
                                                                      Estimated                          Estimated
                                                     Carrying           Fair           Carrying            Fair
                                                      Amount            Value           Amount             Value
                                                      ------            -----           ------             -----
<S>                                           <C>             <C>               <C>             <C>
     Financial assets
         Cash and cash equivalents              $      8,034    $       8,034     $     38,365    $     38,365
         Securities available-for-sale                89,495           89,495          107,391         107,391
         Securities held-to-maturity                   2,794            2,806            2,839           2,864
         Loans receivable, net                       308,970          309,268          262,844         266,169
         Loans held for sale                               -                -              500             500
         Federal Home Loan Bank stock                  2,890            2,890            3,150           3,150
         Accrued interest receivable                   1,359            1,359            1,255           1,255

     Financial liabilities
         Deposits                                    322,716          323,434          292,826         294,690
         Stock subscriptions received                      -                -           52,137          52,137
         Advance payments by
           borrowers for taxes and
           insurance                                   2,322            2,322            2,079           2,079
         Federal Home Loan Bank
           advances                                   57,491           59,959           55,000          59,490
         Accrued interest payable                        264              264              260             260
</TABLE>

The  methods  and  assumptions  used to  estimate  fair value are  described  as
follows:

Carrying  amount is the  estimated  fair  value  for cash and cash  equivalents,
Federal Home Loan Bank stock,  accrued interest  receivable and payable,  demand
deposits, stock subscriptions received, short-term debt, and variable rate loans
or deposits that reprice frequently and fully. Security fair values are based on
market prices or dealer quotes and, if no such information is available,  on the
rate and term of the security and information  about the issuer.  For fixed rate
loans or  deposits  and for  variable  rate loans or  deposits  with  infrequent
repricing  or repricing  limits,  fair value is based on  discounted  cash flows
using current market rates applied to the estimated  life and credit risk.  Fair
values for impaired loans are estimated  using  discounted cash flow analysis or
underlying  collateral values.  Fair value of debt,  including Federal Home Loan
Bank advances,  is based on current rates for similar financing.  The fair value
of off-  balance-sheet  items is based on the current fees or cost that would be
charged to enter into or terminate  such  arrangements.  The fair value of these
off-balance-sheet items is not material.

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

                                  (Continued)

                                       45

<PAGE>
                               ASB HOLDING COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           September 30, 2004 and 2003
                              (Tables in Thousands)

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

NOTE 15 - OTHER COMPREHENSIVE LOSS

Other comprehensive loss components and related taxes were as follows.

                                                                2004       2003
                                                                ----       ----

Unrealized holding losses on available-for-sale securities   $  (129)   $(1,746)
Reclassification adjustments for losses later recognized
  in income                                                        -        188
                                                             -------    -------
Net unrealized gains and losses                                 (129)    (1,558)
Tax effect                                                        52        622
                                                             -------    -------

    Other comprehensive income (loss)                        $   (77)   $  (936)
                                                             =======    =======


NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                   Interest       Net Interest           Net                 Earnings per Share
                                    Income           Income            Income              Basic and Fully Diluted
                                    ------           ------            ------              -----------------------
2004
----
<S>                          <C>               <C>                <C>                      <C>
    First quarter             $      4,453      $      2,367       $     474                $        .09
    Second quarter                   4,564             2,622             587                         .11
    Third quarter                    4,471             2,510             537                         .10
    Fourth quarter                   4,716             2,600             564                         .10

2003
----
    First quarter             $      4,437      $      2,184       $     364                $        .09
    Second quarter                   4,405             2,154             269                         .07
    Third quarter                    4,413             2,227             500                         .13
    Fourth quarter                   4,220             2,042             270                         .07
</TABLE>

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

                                  (Continued)

                                       46

<PAGE>

                             DIRECTORS AND OFFICERS


Directors of ASB Holding Company and American
Savings Bank of NJ
------------------

    Joseph Kliminski
    President and Chief Executive Officer

    W. George Parker
    Chairman of the Board
    President and Chief Executive Officer of Adco Chemical Company

    James H. Ward III
    Vice Chairman,
    Retired Investor

    Robert A. Gaccione
    Partner of the law firm Gaccione, Pomaco & Malanga P.C.

    H. Joseph North
    Retired Town Administrator of Bloomfield, NJ

    Stanley Obal
    Retired owner of Obal's Inn tavern and restaurant

    Vincent S. Rospond
    Attorney and majority stockholder of the law firm
    Rospond, Rospond & Conte, P.A.


Officers of
ASB Holding Company
-------------------

    Joseph Kliminski
    President and Chief Executive Officer

    Richard M. Bzdek
    Executive Vice President, Chief Operating Officer and Secretary

    Eric B. Heyer
    Sr. Vice President, Treasurer and Chief Financial Officer


Officers of
American Savings Bank of NJ
---------------------------

    Joseph Kliminski
    President and Chief Executive Officer

    Richard M. Bzdek
    Executive Vice President, Chief Operating Officer and Secretary

    Eric B. Heyer
    Sr. Vice President, Treasurer and Chief Financial Officer

    Catherine Bringuier
    Sr. Vice President and Chief Lending Officer

    Robert J. Pavics
    Vice President Internal Auditor

    Josephine Castaldo
    Vice President Branch Administration

    John Scognamiglio
    Vice President Controller

                                       47

<PAGE>

                       INVESTOR AND CORPORATE INFORMATION

Annual Meeting

The annual  meeting of  stockholders  will be held at 10:00 a.m., on January 20,
2005 at the  Wilshire  Grand Hotel  located at 350  Pleasant  Valley  Way,  West
Orange, New Jersey.

Stock Listing

ASB Holding  Company  common stock is listed on the OTC Bulletin Board under the
symbol "ASBH".  The high and low closing  prices for the Company's  common stock
for the year ended  September  30, 2004  (trading  began  October 3, 2003) is as
follows:


                                                              High        Low
                                                              ----        ---

For the Fiscal Year Ended September 30, 2004
--------------------------------------------
      First Quarter..................................        $18.50     $16.20
      Second Quarter.................................         17.95      16.65
      Third Quarter..................................         17.15      14.25
      Fourth Quarter.................................         15.90      14.50

--------------------------------------------------------------------------------
At December 10, 2004 there were 5,554,500  shares of ASB Holding  Company common
stock outstanding (including unallocated ESOP shares and shares held by American
Savings, MHC) and there were 463 registered holders of record. No dividends were
paid during the year ended September 30, 2004.

Stockholder and General Inquiries                Transfer Agent

ASB Holding Company                              Registrar and Transfer Company
365 Broad Street                                 10 Commerce Drive
Bloomfield, New Jersey 07003                     Cranford, New Jersey 07016
(973) 748-3600                                   (800) 525-7686
Attention:  Eric B. Heyer
Investor Relations

Annual Reports

A copy of the ASB  Holding  Company's  Annual  Report  on  Form  10-KSB  without
exhibits for the year ended  September 30, 2004 as filed with the Securities and
Exchange Commission, may be obtained without charge by contacting Eric B. Heyer,
Investor  Relations,  ASB Holding  Company,  365 Broad Street,  Bloomfield,  New
Jersey, 07003.

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<PAGE>

                                OFFICE LOCATIONS

Main Office
-----------
     365 Broad Street
     Bloomfield, New Jersey  07003
     (973) 748-3600

              Main Office Drive Up Facility
              16 Pitt Street
              Bloomfield, New Jersey 07003

Cedar Grove Branch
------------------
     310 Pompton Avenue
     Cedar Grove, New Jersey 07009
     (973) 239-6450


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