SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]  Annual report pursuant to section 13 or 15 (d) of the Securities Exchange
     Act of 1934

     For the fiscal year ended                September 30, 2003
                                   ---------------------------------------------

                                      -OR-

[ ]  Transition report pursuant to section 13 or 15(d) of the Securities
       Exchange Act of 1934
     For the transition period from ___________ to _____________.

                         Commission File Number: 0-31789
                                                ---------

                               ASB HOLDING COMPANY
                               -------------------
                 (Name of Small Business Issuer in Its Charter)

       United States                                             56-2317250
-------------------------------                            ---------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                             Identification No.)

365 Broad Street, Bloomfield, New Jersey                           07003
----------------------------------------                   ---------------------
(Address of Principal Executive Offices)                        (Zip Code)

Issuer's Telephone Number, Including Area Code:  (973) 748-3600
                                                ----------------

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

Securities registered under Section 12(g) of the Exchange Act:
                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. YES X  NO  .
                                                                      ---   --

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year: $18.2 million.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant, based on the last sale price of the registrant's Common Stock on
December 19, 2003 was $22.3 million (1,321,993 shares at $16.86 per share).

     As of December 22, 2003,  there were  5,554,500  outstanding  shares of the
registrant's Common Stock.

     Transitional Small Business Disclosure Format (check one): YES     NO  X
                                                                    ---    ---

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     September 30, 2003. (Part II)
2.   Portions  of  the  Proxy   Statement   for  the  2004  Annual   Meeting  of
     Stockholders. (Part III)



<PAGE>

                                     PART I

Forward-Looking Statements

     ASB Holding  Company (the  "Company") may from time to time make written or
oral  "forward  looking  statements",  including  statements  contained  in  the
Company's filings with the Securities and Exchange Commission ("SEC") (including
this Annual Report on Form 10-KSB and the exhibits  thereto),  in its reports to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

     These forward-looking  statements involve risks and uncertainties,  such as
statements  of the  Company's  plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in,  monetary  and fiscal  policies and
laws,  including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the  perceived  overall  value of these  products  and  services  by  users,
including the features, pricing and quality as compared to competitors' products
and services;  the impact of changes in financial  services laws and regulations
(including  laws   concerning   taxes,   banking,   securities  and  insurance);
technological  changes;  acquisitions;  changes in consumer  spending and saving
habits;  and the  success of the Company at managing  the risks  resulting  from
these factors.

     The Company cautions that the listed factors are not exclusive. The Company
does not undertake to update any forward-looking  statement,  whether written or
oral, that may be made from time to time by or on behalf of the Company.

Item 1.  Description of Business.

General

     The Company is a federally-chartered corporation that was organized in June
2003 for the purpose of being a holding company for American  Savings Bank of NJ
(the "Bank"), a federally-chartered  stock savings bank. On October 3, 2003, the
Company  completed a minority stock offering in which it sold 1,666,350  shares,
or 30% of its outstanding  common stock. The remaining majority of the 5,554,500
outstanding  shares  of the  Company  are  owned by  American  Savings,  MHC,  a
federally-chartered mutual holding company.

     In June 2003, the Company organized a new subsidiary,  ASB Investment Corp,
a New  Jersey-incorporated  company,  for the purpose of selling  insurance  and
investment products,  including annuities, to customers of American Savings Bank
of NJ and the general  public,  with initial  activities  limited to the sale of
fixed rate annuities.

                                       2

<PAGE>

     The Company is a unitary  savings and loan holding  company and conducts no
significant  business or operations of its own. References in this Annual Report
on Form 10-KSB to the Company or Registrant  generally  refer to the Company and
the Bank, unless the context indicates  otherwise.  References to "we," "us," or
"our" refer to the Bank or Company, or both, as the context indicates.

     Our core business is attracting and retaining  retail  deposits in order to
fund a  variety  of  mortgage  and  consumer  loan  products.  We  operate  as a
traditional   community  bank,   offering  retail  banking  services,   one-  to
four-family  residential  mortgage loans, home equity loans and lines of credit,
multi-family  and  non-residential  mortgage loans and consumer  loans.  We also
invest  in  mortgage-backed   securities  and   collateralized   mortgage-backed
obligations.  The  principal  source  of funds  for our  lending  and  investing
activities is deposits, supplemented with Federal Home Loan Bank borrowings. Our
principal  source of income is interest on loans and  securities.  Our principal
expense is interest paid on deposits and borrowings.

Market Area

     Our main office is located in Bloomfield, New Jersey, and our branch office
is located in Cedar  Grove,  New Jersey.  Our lending is  concentrated  in Essex
County, New Jersey, and our predominant  sources of deposits are the communities
in which our two offices are located as well as the neighboring communities. Our
business of attracting  deposits and making loans is primarily  conducted within
our market  area.  A downturn in the local  economy  could  reduce the amount of
funds  available  for deposit and the ability of borrowers to repay their loans.
As a result, our profitability could decrease.

Competition

     We face  substantial  competition in our attraction of deposits,  which are
our primary source of funds for lending,  and in the origination of loans.  Many
of our  competitors  are  significantly  larger  institutions  and have  greater
financial and managerial  resources.  Our ability to compete  successfully  is a
significant factor affecting our profitability.

     Our  competition  for deposits and loans  historically  has come from other
insured  financial  institutions  such as local and regional  commercial  banks,
savings  institutions,  and credit unions located in our primary market area. We
also  compete  with  mortgage  banking  companies  for real  estate  loans,  and
commercial  banks  and  savings   institutions  for  consumer  loans;  and  face
competition for funds from investment products such as mutual funds,  short-term
money funds and corporate and government securities.




                                       3
<PAGE>

Lending Activities

     General.  We  have  traditionally  focused  on the  origination  of one- to
four-family  loans,  which  comprise a  significant  majority  of the total loan
portfolio.  We also  provide  financing  on  multi-family  dwellings,  mixed-use
properties  and  other  commercial  real  estate.   Commercial  business  loans,
generally  secured by real  estate,  construction  loans,  home equity loans and
consumer loans make up the rest of the total loan portfolio.

     Loan Portfolio  Composition.  The following tables analyzes the composition
of our loan portfolio by loan category at the dates indicated.

<TABLE>
<CAPTION>
                                                                          At September 30
                                                                          ---------------
                                        2003                2002                2001                2000                 1999
                                        ----                ----                ----                ----                 ----
                                   Amount   Percent    Amount   Percent    Amount   Percent    Amount   Percent    Amount    Percent
                                   ------   -------    ------   -------    ------   -------    ------   -------    ------    -------
                                                                       (Dollars in thousands)

Type of Loans:
-------------
<S>                             <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>         <C>
Mortgage Loans
  One- to four-family(1)          $215,984   81.59%   $167,564   79.06%   $131,513   76.18%   $108,678   73.97%   $ 89,833    71.56%
  Multi-family, commercial
    and other ................      36,202   13.68      29,503   13.92      24,903   14.42      21,867   14.88      18,653    14.86
Construction .................       1,233    0.47       4,875    2.30       9,402    5.45      10,697    7.28      11,317     9.02
Consumer .....................         780    0.29         795    0.38         540    0.31         547    0.37         695     0.55
Home equity ..................       8,893    3.36       6,904    3.36       5,863    3.40       4,903    3.34       4,967     3.96
Commercial ...................       1,610    0.61       2,298    1.08         417    0.24         238    0.16          66     0.05
                                  --------  ------    --------  ------    --------  ------    --------  ------    --------   ------
     Total loans receivable        264,702  100.00%    211,939  100.00%     172,638 100.00%    146,930  100.00%    125,531   100.00%
                                            ======              ======              ======              ======               ======

Less:
  Allowance for loan losses...      (1,371)             (1,117)             (1,009)             (1,003)               (999)
  Net deferred origination
    costs.....................         796                 673                 532                 400                 312
  Loans in process............        (783)             (3,121)             (5,839)             (5,369)             (6,615)
                                     -----            --------            --------            --------            --------
     Total loans receivable, net  $263,344            $208,374            $166,322            $140,958            $118,229
                                  ========            ========            ========            ========            ========
</TABLE>

--------------
(1)  Includes loans held for sale of $500,000 and $452,000 at September 30, 2003
     and September 30, 2000, respectively.


                                       4
<PAGE>

     Loan Maturity Schedule.  The following table sets forth the maturity of our
loan  portfolio at  September  30, 2003.  Demand  loans,  loans having no stated
maturity,  and overdrafts are shown as due in one year or less. This table shows
contractual  maturities  and  does  not  reflect  repricing  or  the  effect  of
prepayments. Actual maturities may differ.

<TABLE>
<CAPTION>

                                                                     At September 30, 2003
                               ----------------------------------------------------------------------------------------------------
                                              Multi-family,
                               One- to Four-   Commercial
                                  Family        and Other    Construction     Consumer      Home Equity    Commercial        Total
                                  ------        ---------    ------------     --------      -----------    ----------        -----
                                                                           (In thousands)

<S>                            <C>           <C>             <C>            <C>            <C>            <C>            <C>
Amounts Due:
Within 1 Year ..............     $    106      $    559        $    208       $    769       $     99       $  1,089       $  2,830
                                 --------      --------        --------       --------       --------       --------       --------

After 1 year:
  1 to 5 years .............        2,683         1,542           1,025             11             59            449          5,769
  5 to 10 years ............       29,919         4,806               0              0          1,946             72         36,743
  10 to 15 years ...........       59,970        11,587               0              0          6,789              0         78,346
  Over 15 years ............      123,306        17,708               0              0              0              0        141,014
                                 --------      --------        --------       --------       --------       --------       --------


Total due after one year....      215,878        35,643           1,025             11          8,794            521        261,872
                                 --------      --------        --------       --------       --------       --------       --------

Total amount due ...........     $215,984      $ 36,202        $  1,233       $    780       $  8,893       $  1,610       $264,702
                                 ========      ========        ========       ========       ========       ========       ========
</TABLE>


                                       5
<PAGE>

     The following  table sets forth the dollar amount of all loans at September
30, 2003 due after September 30, 2004, which have fixed interest rates and which
have floating or adjustable interest rates.

                                                     Floating or
                                      Fixed Rates  Adjustable Rates    Total
                                      -----------  ----------------    -----
                                                    (In thousands)

One- to four-family ................   $166,482       $ 49,396       $215,878
Multi-family, commercial and other..     18,150         17,493         35,643
Construction .......................          0          1,025          1,025
Consumer ...........................         11              0             11
Home equity ........................          0          8,794          8,794
Commercial .........................        172            349            521
                                       --------       --------       --------
  Total ............................   $184,815       $ 77,057       $261,872
                                       ========       ========       ========

     One- to Four-Family  Mortgage Loans. Our primary lending activity  consists
of the  origination of one- to  four-family  mortgage  loans,  most of which are
secured by property located in northern New Jersey. We will generally  originate
a mortgage loan in an amount up to 80% of the lesser of the  appraised  value or
the purchase price of a mortgaged property.  For loans exceeding this guideline,
private mortgage insurance on the loan is typically required.

     The majority of our  residential  loans are originated with fixed rates and
have terms of fifteen to thirty  years.  In  addition,  we offer  borrowers  the
flexibility of selecting a particular maturity date of the borrower's choice. We
also offer  mortgage  loans with bi-weekly  payments.  Our adjustable  rate loan
products  provide for an  interest  rate that is tied to the  one-year  Constant
Maturity U.S.  Treasury  index and have terms of up to thirty years with initial
fixed rate periods of one,  three,  five,  seven,  or ten years according to the
terms of the  loan.  We also  offer an  adjustable  rate  loan  with a rate that
adjusts every three years to the  three-year  Constant  Maturity  U.S.  Treasury
index.

     The  fixed  rate  mortgage  loans  that we  originate  generally  meet  the
secondary   mortgage  market   standards  of  the  Federal   National   Mortgage
Association.  For the purposes of interest rate risk management, we occasionally
sell  qualifying  one- to  four-family  residential  mortgages in the  secondary
market to the Federal National Mortgage  Association and other investors without
recourse and with servicing retained,  and we have entered into a master selling
and servicing  agreement with the Federal National  Mortgage  Association  under
which the Bank sold $9.4  million in the past year.  Loan sales may  increase or
decrease in the future in connection with interest rate risk management.

     Substantially  all of our  residential  mortgages  include  "due  on  sale"
clauses,  which are provisions giving us the right to declare a loan immediately
payable if the borrower sells or otherwise transfers an interest in the property
to a third  party.  Property  appraisals  on real  estate  securing  our one- to
four-family   residential   loans  are  made  by  state  certified  or  licensed
independent  appraisers  approved  by the  Board of  Directors.  Appraisals  are
performed in accordance  with applicable  regulations  and policies.  We require
title  insurance  policies on all first  mortgage real estate loans  originated.
Homeowners,  liability, fire and, if required, flood insurance policies are also
required.



                                       6

<PAGE>

     Multi-family,  Commercial  and  Other  Mortgage  Loans.  We also  originate
non-residential   mortgage  loans,   including  loans  on  apartment  buildings,
retail/service  properties,  and other  income-producing  properties,  including
mixed-use  properties  combining  residential and commercial space. We generally
require no less than a 25% down payment or equity  position for  non-residential
mortgage loans.  Typically these loans are made with amortization terms of up to
twenty-five  years.  The majority of our  non-residential  mortgage loans are on
properties located within northern New Jersey and all are within the state.

     The  non-residential  mortgage  loans  portfolio grew from $18.7 million at
September 30, 1999 to $36.2 million at September 30, 2003,  however,  the growth
of one- to four-family  loans has outpaced the growth in  non-residential  loans
such that non-residential  loans as a percentage of the total loan portfolio has
decreased  slightly.  We  are  currently  evaluating  strategies  to  grow  this
portfolio.

     Non-residential   mortgage   loans   generally  are  considered  to  entail
significantly  greater risk than that which is involved with one- to four-family
real estate lending.  The repayment of these loans typically is dependent on the
successful  operations  and income  stream of the  borrower  and the real estate
securing the loan as collateral.  These risks can be  significantly  affected by
economic conditions. In addition,  non-residential real estate lending generally
requires  substantially  greater  evaluation and oversight  efforts  compared to
residential real estate lending.

     Construction  Lending.  Essentially all of our  construction  lending is in
northern New Jersey. Our construction  lending includes loans to individuals for
construction of a primary  residence as well as loans to builders and developers
for  multi-unit  or  multi-house  projects.  We have no formal  limits as to the
number of projects a builder has under  construction or development,  and make a
case by case determination on loans to builders and developers who have multiple
projects  under  development.  We  generally do not make  construction  loans to
builders on a speculative basis,  without a contract in place. In some cases, we
convert a construction  loan to the permanent end mortgage loan upon  completion
of construction.

     Construction  lending is generally considered to involve a higher degree of
credit risk than long-term permanent financing of residential properties. If the
estimate of  construction  cost proves to be inaccurate,  we may be compelled to
advance additional funds to complete the construction with repayment  dependent,
in part,  on the success of the  ultimate  project  rather than the ability of a
borrower or  guarantor  to repay the loan.  If we are forced to  foreclose  on a
project  prior  to  completion,  there is no  assurance  that we will be able to
recover all of the unpaid  portion of the loan. In addition,  we may be required
to fund  additional  amounts  to  complete  a  project  and may have to hold the
property for an indeterminate period of time.

     The outstanding  principal  balance of our construction  loan portfolio has
experienced a significant  reduction over the last several years.  We decided to
reduce our  origination of  construction  loans  following the retirement of the
loan  officer  who  had  primarily  overseen  this  portfolio  and  management's
determination that the bank lacked sufficient staffing to maintain the portfolio
at the same level as had been previously maintained. We may in the future return
to active origination of construction loans.

     Consumer  Loans.  Consumer  loans  consist  of  savings  secured  loans and
unsecured  consumer  loans.  We will  generally  lend  up to 90% of the  account
balance on a savings  secured  loan.  At September  30, 2003,  we had $68,000 of
unsecured consumer loans.

     Consumer loans  generally have shorter terms and higher interest rates than
residential  loans.  The consumer  loan market can be helpful in  improving  the
spread between the average loan yield and the cost of funds and at the same time
improve the matching of rate sensitive assets and liabilities.


                                       7
<PAGE>

     Consumer  loans  entail  greater  risks than  residential  mortgage  loans,
particularly consumer loans that are unsecured. Further, consumer loan repayment
is dependent on the borrower's continuing financial stability and is more likely
to be adversely affected by job loss, divorce,  illness or personal  bankruptcy.
Finally,  the application of various federal laws,  including  federal and state
bankruptcy and  insolvency  laws, may limit the amount which can be recovered on
consumer loans in the event of a default.

     Our  underwriting  standards for consumer loans include a determination  of
the applicant's  credit history and an assessment of the applicant's  ability to
meet existing  obligations  and payments on the proposed  loan. The stability of
the  applicant's  monthly  income may be  determined  by  verification  of gross
monthly income from primary  employment,  and  additionally  from any verifiable
secondary income.

     Home Equity  Loans.  Our home equity loan  portfolio  includes  home equity
lines of credit and second mortgage term loans.  Home equity loans are primarily
originated in our market area and are generally  made in amounts of up to 80% of
value  on term  loans  and up to 80% of value on home  equity  lines of  credit.
During 2001, we began  offering  home equity loans on  investment  properties in
addition to loans on primary residences. Loans on investment properties are made
in  amounts  of up to 65% of value on term  loans and up to 60% of value of home
equity lines of credit.

     Our  second  mortgage  loans are fixed rate loans for terms of up to twenty
years.  Collateral  value  is  determined  through  drive-by  appraisal.  Second
mortgages and home equity lines of credit do not require title  insurance but do
require homeowner, liability, fire and, if required, flood insurance policies.

     Commercial Loans. We also originate  commercial business loans to a variety
of professionals,  sole  proprietorships and small businesses,  primarily in our
market area.  These loans are  generally  secured by real  estate.  We will make
unsecured  commercial loans in amounts up to $25,000.  We generally  require the
personal  guarantee of the business owner.  Commercial  lending products include
term loans and lines of credit.  Our commercial  term loans generally have terms
from one to five years and are mostly fixed rate loans.  Our commercial lines of
credit have terms from one to three years and are mostly adjustable rate loans.

     The  commercial  loan  portfolio  has grown  significantly  recently,  from
$66,000  at  September  30,  1999 to $1.6  million  at  September  30,  2003.  A
significant portion of this portfolio is one lending relationship.

     Unlike  single-family  residential mortgage loans, which generally are made
on the  basis  of the  borrower's  ability  to make  repayment  from  his or her
employment  and other income and which are secured by real property  whose value
tends to be more easily  ascertainable,  commercial business loans typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the  borrower's  business.  As a result,  the  availability  of funds for the
repayment of commercial  business  loans may be  substantially  dependent on the
success of the business itself and the general economic environment.  Commercial
business loans,  therefore,  have greater credit risk than residential  mortgage
loans. In addition,  commercial  loans generally carry larger balances to single
borrowers or related  groups of borrowers  than one- to  four-family  loans.  In
addition, commercial lending generally requires substantially greater evaluation
and oversight  efforts  compared to residential or  non-residential  real estate
lending.


                                       8
<PAGE>

     Loans to One  Borrower.  Under  federal  law,  savings  institutions  have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the  institution's  unimpaired  capital and
surplus.  Accordingly, as of September 30, 2003, our loans to one borrower limit
was approximately $3.5 million.

     At September 30, 2003, our largest single borrower had an aggregate balance
of approximately $2.0 million, representing six loans secured by commercial real
estate,  including  apartment  buildings  located  in our market  area,  and the
borrower's  personal  residence.  Our  second  largest  single  borrower  had an
aggregate balance of approximately $1.9 million, representing ten loans of which
six are secured by commercial  real estate,  including  apartment  buildings and
mixed-use  properties  located in our market area, and the  borrower's  personal
residence and four are unsecured deposit account overdraft protection loans. Our
third largest borrower had an aggregate  balance of approximately  $1.9 million,
representing  five loans secured by commercial real estate,  including mixed use
and multifamily loans, and a the borrower's personal residence. At September 30,
2003,  all of  these  lending  relationships  were  current  and  performing  in
accordance with the terms of their loan agreements.

     Loan  Originations,  Purchases,  Sales,  Solicitation  and Processing.  Our
customary sources of loan applications include repeat customers,  referrals from
realtors and other  professionals,  and "walk-in"  customers.  A majority of our
loan  originations  is produced by the bank's one loan officer,  whose  referral
base consists of a variety of sources, including customers,  realtors,  lawyers,
title companies and accountants.

     We  primarily  originate  our own loans and retain  them in our  portfolio.
Gross loan originations  totaled $141.1 million for the year ended September 30,
2003. Net of principal repayments, loan originations totaled approximately $70.9
million for the fiscal year ended  September  30,  2003.  During the years ended
September 30, 2003,  2002 and 2001, we did not purchase any whole loans.  During
the year ended September 30, 2003, we sold 46 loans for $9.4 million. During the
years  ended  September  30,  2001 and 2002 we sold  substantially  fewer  loans
totaling $1.4 million and $258,000 respectively.  The increase in loan sales the
past year is part of our interest rate risk  management  strategy.  We generally
sell loans on a non-recourse  basis, with servicing  retained.  At September 30,
2003, loans serviced for the benefit of others totaled $16.1 million.

     We occasionally  purchase  participations  in loans originated  through the
Thrift Institutions Community Investment Corporation of New Jersey. At September
30, 2003, our participations  through such entity included multi-family or other
non-one- to four-family  properties,  such as assisted  living  facilities.  The
aggregate balance of Thrift Institutions Community Investment Corporation of New
Jersey  participations  at  September  30, 2003 was $1.8 million and the average
balance  on a  single  participation  was  approximately  $110,000.  We may sell
participation interests in multi-family,  commercial and other real estate loans
or construction  loans if the total loan would otherwise exceed our loans-to-one
borrower limit.

     Loan Commitments.  We give written commitments to prospective  borrowers on
all  residential  and  non-residential  mortgage  loans.  The  total  amount  of
commitments to extend credit for mortgage and consumer loans as of September 30,
2003, was approximately $11.6 million,  excluding commitments on unused lines of
credit of $10.3 million and undisbursed  portions of construction loans totaling
$783,000.


                                       9
<PAGE>

     Loan  Approval  Procedures  and  Authority.  Our lending  policies and loan
approval limits are  recommended by senior  management and approved by the Board
of Directors. Our Loan Origination Manager and one of our loan underwriters have
authority  to approve  one- to  four-family  loans up to  $322,700,  the Federal
National Mortgage Association conforming loan limit. Our loan committee consists
of three officers: the President and Chief Executive Officer, the Executive Vice
President and Chief Operating  Officer,  and the Senior Vice President and Chief
Lending  Officer.  Each of these  officers  has  authority  to  approve  one- to
four-family loans up to $350,000. One- to four-family loans between $350,000 and
$500,000  require the approval of at least one member of the loan  committee and
either the Loan Underwriter or the Loan Origination Manager. One- to four-family
loans between $500,000 and $700,000 require the approval of at least two members
of the loan committee.  One- to four-family  loans greater than $700,000 require
the  approval of the Board of  Directors.  Loans other than one- to  four-family
loans up to $500,000  require  the  approval of at least two members of the loan
committee.  Loans other than one- to  four-family  loans  greater than  $500,000
require the approval of the Board of Directors.

Asset Quality

     Loan Delinquencies and Collection  Procedures.  The borrower is notified by
both mail and telephone when a loan is sixteen days past due. If the delinquency
continues,  subsequent  efforts are made to contact the delinquent  borrower and
additional  collection  notices and letters are sent. When a loan is ninety days
delinquent,  it is referred to an attorney for repossession or foreclosure.  All
reasonable  attempts are made to collect from borrowers  prior to referral to an
attorney for collection. In certain instances, we may modify the loan or grant a
limited  moratorium on loan  payments to enable the borrower to  reorganize  his
financial  affairs,  and we attempt to work with the  borrower  to  establish  a
repayment schedule to cure the delinquency.

     As to mortgage loans, if a foreclosure  action is taken and the loan is not
reinstated, paid in full or refinanced, the property is sold at judicial sale at
which we may be the buyer if there are no  adequate  offers to satisfy the debt.
Any  property  acquired  as the  result  of  foreclosure  or by  deed in lieu of
foreclosure  is  classified  as real estate  owned until it is sold or otherwise
disposed of. When real estate owned is acquired,  it is recorded at the lower of
the unpaid  principal  balance of the related loan or its fair market value less
estimated selling costs. The initial writedown of the property is charged to the
allowance for loan losses.  Adjustments  to the carrying value of the properties
that result from  subsequent  declines in value are charged to operations in the
period in which the  declines  occur.  At September  30,  2003,  we held no real
estate owned.

     Loans are reviewed on a regular basis and are placed on non-accrual  status
when  they are more  than  ninety  days  delinquent.  Loans  may be  placed on a
non-accrual status at any time if, in the opinion of management,  the collection
of additional  interest is doubtful.  Interest  accrued and unpaid at the time a
loan is placed  on  non-accrual  status  is  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income,  depending  on the  assessment  of the  ultimate
collectibility of the loan. At September 30, 2003, we had approximately $517,000
of loans that were held on a non-accrual basis.


                                       10

<PAGE>

     Non-Performing  Assets. The following table provides information  regarding
our  non-performing  loans  and  other  non-performing  assets  as of the  dates
indicated.

<TABLE>
<CAPTION>

                                                                           At September 30,
                                                          --------------------------------------------------
                                                           2003       2002       2001       2000       1999
                                                           ----       ----       ----       ----       ----
                                                                        (Dollars in thousands)

<S>                                                     <C>        <C>        <C>        <C>        <C>
Loans accounted for on a non-accrual basis:
  One- to four-family .................................   $  147     $  147     $  309     $  374     $  610
  Multi-family, commercial and other ..................      369        423        287        343        215
  Construction ........................................       --         --         --         --         --
  Consumer ............................................        1         --         21         --          2
  Home equity .........................................       --         --         11         61         63
  Commercial ..........................................       --         --         --         --         --
                                                          ------     ------     ------     ------     ------
     Total ............................................      517        570        628        778        890

Accruing loans contractually past due 90 days or more .       --         --         --         --         --
                                                          ------     ------     ------     ------     ------

Total non-performing loans ............................      517        570        628        778        890

Real estate owned .....................................       --         --         --         --        122

Other non-performing assets ...........................       --         --         --         --         --
                                                          ------     ------     ------     ------     ------

Total non-performing assets ...........................   $  517     $  570     $  628     $  778     $1,012
                                                          ======     ======     ======     ======     ======

Allowance for loan losses to non-performing loans......   265.18%    195.96%    160.67%    128.92%    112.25%

Total non-performing loans to total loans..............     0.20%      0.27%      0.36%      0.53%      0.71%

Total non-performing loans to total assets.............     0.12%      0.17%      0.24%      0.35%      0.42%

Total non-performing assets to total assets............     0.12%      0.17%      0.24%      0.35%      0.48%
</TABLE>

     During the year ended September 30, 2003,  gross interest income of $43,538
would have been recorded on loans accounted for on a non-accrual  basis if those
loans had been  current,  and $1,156 of interest  on such loans was  included in
income for the year ended September 30, 2003.

     Classified  Assets.   Management,  in  compliance  with  Office  of  Thrift
Supervision ("OTS") guidelines,  has instituted an internal loan review program,
whereby non-performing loans are classified as substandard, doubtful or loss. It
is our  policy to review  the loan  portfolio,  in  accordance  with  regulatory
classification  procedures,  on at  least  a  quarterly  basis.  When a loan  is
classified as  substandard  or doubtful,  management is required to evaluate the
loan for impairment.  When management  classifies a portion of a loan as loss, a
reserve  equal to 100% of the loss amount is required to be  established  or the
loan is to be charged-off.

     An asset is considered "substandard" if it is inadequately protected by the
paying capacity and net worth of the obligor or the collateral  pledged, if any.
Substandard assets include those characterized by the distinct  possibility that
the insured  institution  will  sustain  some loss if the  deficiencies  are not
corrected.  Assets classified as "doubtful" have all of the weaknesses  inherent
in  those  classified  substandard,  with  the


                                       11

<PAGE>

added  characteristic that the weaknesses present make collection or liquidation
in full highly  questionable and improbable,  on the basis of currently existing
facts, conditions, and values. Assets, or portions thereof, classified as "loss"
are considered  uncollectible  and of so little value that their  continuance as
assets  without the  establishment  of a specific loss reserve is not warranted.
Assets which do not  currently  expose the insured  institution  to a sufficient
degree of risk to warrant classification in one of the aforementioned categories
but which have credit  deficiencies  or potential  weaknesses are required to be
designated "special mention" by management.

     Management's classification of assets is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination  process.  The
following  table  discloses  our  classification  of assets and  designation  of
certain  loans as special  mention as of September  30, 2003.  At September  30,
2003, all of the classified  assets and special mention  designated  assets were
loans.

                                                      At
                                                 September 30,
                                                     2003
                                                 -------------
                                                 (In thousands)

    Special Mention.....................             $1,107
    Substandard.........................                501
    Doubtful............................                250
    Loss................................                  0
                                                     ------
      Total.............................             $1,858
                                                     ======

     At September 30, 2003,  none of the loans  classified as "special  mention"
and approximately  $441,000 of loans classified as "substandard" are included in
the table under  non-performing  assets.  At September 30, 2003,  $75,000 of the
loans  classified as "doubtful" are included  under  non-performing  assets,  as
shown in the table.

     Allowance  for Loan Losses.  The  allowance  for loan losses is a valuation
account that reflects our  estimation of the losses in our loan portfolio to the
extent they are both  probable  and  reasonable  to estimate.  The  allowance is
maintained  through provisions for loan losses that are charged to income in the
period they are established. We charge losses on loans against the allowance for
loan  losses when we believe  the  collection  of loan  principal  is  unlikely.
Recoveries on loans previously charged-off are added back to the allowance.

     Our  methodology for calculating the allowance for lease and loan losses is
based upon FAS 5 and FAS 114.  Under FAS 114,  we identify  and analyze  certain
loans for impairment.  If an impairment is identified on a specific loan, a loss
allocation is recorded in the amount of that  impairment.  Loan types subject to
FAS 114 are construction  loans,  multi-family  mortgage loans,  non-residential
mortgage loans and commercial  (non-mortgage)  loans. We also conduct a separate
review  of all  loans  on  which  the  collectibility  of  principal  may not be
reasonably  assured.  We evaluate all classified loans individually and base our
determination of a loss factor on the likelihood of  collectibility of principal
including  consideration of the value of the underlying  collateral securing the
loan.

                                       12

<PAGE>


     Under our  implementation of FAS 5, we segregate loans by loan category and
evaluate  homogeneous loans as a group. The loss  characteristics  of aggregated
homogeneous loans are examined using two sets of factors:  (1) annual historical
loss  experience  factors that consider the net  charge-off  history of both the
bank and that of its regional peer group and (2) environmental factors. Although
there may be other  factors  that also  warrant  consideration,  we consider the
following environmental factors:

     o    levels and trends of delinquencies and impaired loans;
     o    levels and trends of charge-offs and recoveries;
     o    trends in volume and terms of loans;
     o    changes to lending policies, procedures and practices;
     o    experience, ability and depth of lending management and staff;
     o    national, regional and local economic trends and conditions;
     o    industry conditions; and
     o    changes in credit concentration.

     In recent  years,  our  charge-offs  have been low and,  consequently,  our
estimation  of the  amount of losses in the loan  portfolio  both  probable  and
reasonable to estimate has been more reflective of other factors.

     Our allowance  estimation  methodology  utilizes historical loss experience
and environmental  factors such as the local and national economy,  growth rate,
trends  in  delinquencies  and  non-performing  loans,   experience  of  lending
personnel,  and other such factors.  However,  we have had significant growth in
the past one to two  years,  part of which  is  attributable  to the new  branch
office  opened in 2001.  As a result of the  significant  loan  growth,  a large
portion of our loan portfolio is considered "unseasoned," meaning that 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.  In the absence of adequate historical
loss  experience  upon which the Bank can base its allowance  calculations,  the
Bank includes peer group  information in its  evaluation of the  allowance.  The
peer group information  utilized by the bank is that of OTS regulated thrifts in
the northeast  region.  Management  believes that the majority of thrifts in the
northeast region have similar loan portfolio composition.








                                       13

<PAGE>

     This  estimation  is  inherently  subjective  as it requires  estimates and
assumptions  that are susceptible to significant  revisions as more  information
becomes available or as future events change.  Future additions to the allowance
for loan losses may be necessary if economic and other  conditions in the future
differ substantially from the current operating  environment.  In addition,  the
OTS as an integral part of its  examination  process,  periodically  reviews our
loan and foreclosed  real estate  portfolios and the related  allowance for loan
losses and valuation  allowance for foreclosed real estate.  The OTS may require
the  allowance for loan losses or the valuation  allowance for  foreclosed  real
estate to be increased based on its review of information  available at the time
of the examination, which would negatively affect our earnings.

     The following  table sets forth  information  with respect to our allowance
for loan losses for the periods indicated:

<TABLE>
<CAPTION>
                                                                         Year Ended September 30,
                                                   -------------------------------------------------------------
                                                       2003         2002         2001        2000         1999
                                                     --------     --------    --------     --------     --------
                                                                       (Dollars in thousands)

<S>                                              <C>          <C>          <C>         <C>          <C>
Allowance balance at beginning of period......     $   1,117    $   1,009    $   1,003   $     999    $   1,041

Provision for loan losses ....................           254          105            2          22          (10)

Charge-offs:
  One- to four-family ........................            --           --           --         (19)         (34)
  Consumer ...................................            --           (1)          --          --           --
                                                   ---------    ---------    ---------   ---------    ---------
     Total charge-offs .......................            --           (1)          --         (19)         (34)
                                                   ---------    ---------    ---------   ---------    ---------
Recoveries:
  Consumer ...................................            --            4            4           1            2
                                                   ---------    ---------    ---------   ---------    ---------
     Total recoveries                                     --            4            4           1            2
                                                   ---------    ---------    ---------   ---------    ---------

Net (charge-offs) recoveries .................            --           3            4          (18)         (32)
                                                   ---------    ---------    ---------   ---------    ---------

Allowance balance at end of period ...........     $   1,371    $   1,117    $   1,009   $   1,003    $     999
                                                   =========    =========    =========   =========    =========

Total loans outstanding at end of period......     $ 264,702    $ 211,939    $ 172,638   $ 146,930    $ 125,531
                                                   =========    =========    =========   =========    =========

Average loans outstanding during period.......     $ 238,474    $ 186,974    $ 150,938   $ 128,463    $ 116,564
                                                   =========    =========    =========   =========    =========

Allowance as a % of total loans...............         0.52%        0.53%        0.58%       0.68%        0.80%

Net loans charge-offs as a % of average loans.         0.00%        0.00%        0.00%       0.01%        0.03%
</TABLE>

                                       14
<PAGE>

     Allocation of Allowance for Loan Losses. The following table sets forth the
allocation  of our allowance for loan losses by loan category and the percent of
loans in each category to total loans  receivable,  net, at the dates indicated.
The portion of the loan loss allowance  allocated to each loan category does not
represent the total  available for future losses which may occur within the loan
category  since  the  total  loan  loss  allowance  is  a  valuation  allocation
applicable to the entire loan portfolio.

<TABLE>
<CAPTION>
                                                                        At September 30,
                                 ------------------------------------------------------------------------------------------------
                                       2003               2002                2001                 2000               1999
                                 -----------------   -----------------   -----------------  ------------------  -----------------
                                          Percent             Percent             Percent             Percent            Percent
                                          of Loans            of Loans            of Loans            of Loans           of Loans
                                          to Total            to Total            to Total            to Total           to Total
                                  Amount   Loans     Amount     Loans    Amount     Loans    Amount     Loans   Amount     Loans
                                  ------  --------   ------   ---------  ------   ---------  ------   --------  ------   --------
                                                                            (Dollars in thousands)

<S>                            <C>        <C>      <C>       <C>       <C>       <C>       <C>       <C>      <C>        <C>
At end of period allocated to:
  One- to four-family ........   $  685     81.59%   $  531    79.06%    $  366    76.18%    $  315    73.97%   $  294     71.56%
  Multi-family, commercial
    and other ................      566     13.68       452    13.92        463    14.42        481    14.88       463     14.86
  Construction ...............        3      0.47        13     2.30         55     5.45        124     7.28       170      9.02
  Consumer ...................        3      0.29         3     0.38          2     0.31          2     0.37         3      0.55
  Home equity ................       37      3.36        29     3.26         36     3.40         39     3.34        37      3.96
  Commercial .................       34      0.61        46     1.08         11     0.24          5     0.16         2      0.05
  Unallocated ................       43        --        43       --         76       --         37       --        30        --
                                 ------    ------    ------   ------     ------   ------     ------   ------    ------    ------

     Total allowance .........   $1,371    100.00%   $1,117   100.00%    $1,009   100.00%    $1,003   100.00%   $  999    100.00%
                                 ======    ======    ======   ======     ======   ======     ======   ======    ======    ======
</TABLE>






                                       15
<PAGE>

Securities Portfolio

     General.  Federally chartered savings banks have the authority to invest in
various types of liquid assets.  The investments  authorized by the bank's board
approved  investment  policy  include  U.S.  government  and  government  agency
obligations,  mortgage-related securities of various U.S. government agencies or
government-sponsored   entities  and  private   corporate   issuers   (including
securities  collateralized  by mortgages),  certificates  of deposits of insured
banks and savings  institutions  and municipal  securities.  Our policy does not
permit corporate  non-residential  mortgage related  securities.  Our investment
securities  portfolio at September  30, 2003 did not contain  securities  of any
issuer with an  aggregate  book value in excess of 10% of our equity,  excluding
those issued by the United States  Government  or its  agencies,  other than the
following:  (i) an investment in an adjustable  rate mortgage mutual fund with a
carrying  value of  approximately  $ 9.9 million at  September  30,  2003,  (ii)
collateralized  mortgage  obligations  issued by  Residential  Funding  Mortgage
Security,  Inc. with a carrying value of $ 3.6 million at September 30, 2003 and
(iii) collateralized mortgage obligations issued by Citicorp Mortgage Securities
Inc. with a carrying value of $ 1.4 million at September 30, 2003.

     Statement  of  Financial  Accounting  Standards  No. 115,  "Accounting  for
Certain Investments in Debt and Equity Securities,"  requires that securities be
categorized as "held-to-maturity," "trading securities" or "available-for-sale,"
based on  management's  intent as to the ultimate  disposition of each security.
Statement No. 115 allows debt securities to be classified as  "held-to-maturity"
and reported in financial  statements  at amortized  cost only if the  reporting
entity has the positive intent and ability to hold these securities to maturity.
Securities  that might be sold in response to changes in market  interest rates,
changes in the security's  prepayment risk,  increases in loan demand,  or other
similar factors cannot be classified as "held-to-maturity."

     We do not  currently  use or  maintain a trading  account.  Securities  not
classified as "held-to-maturity" are classified as  "available-for-sale."  These
securities are reported at fair value,  and  unrealized  gains and losses on the
securities are excluded from earnings and reported,  net of deferred taxes, as a
separate component of equity.

     All of our  securities  carry  market risk  insofar as  increases in market
rates of interest may cause a decrease in their  market  value.  Investments  in
securities are made based on certain considerations,  which include the interest
rate, tax considerations,  yield,  settlement date and maturity of the security,
our liquidity position,  and anticipated cash needs and sources. The effect that
the  proposed  security  would  have on our credit  and  interest  rate risk and
risk-based  capital  is also  considered.  We  purchase  securities  to  provide
necessary  liquidity  for  day-to-day  operations,  to aid in the  management of
interest rate risk and when investable funds exceed loan demand.

     Our  investment  policy,  which is approved by the Board of  Directors,  is
designed to foster  earnings and  liquidity  within  prudent  interest rate risk
guidelines,   while  complementing  our  lending  activities.   Generally,   our
investment  policy is to invest funds in various  categories of  securities  and
maturities based upon our liquidity needs,  asset/liability management policies,
investment   quality,    marketability   and   performance    objectives.    The
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,  Treasurer and Chief Financial Officer,  and Josephine Castaldo,  the
Bank's  Vice  President  of  Branch  Administration,   is  responsible  for  the
administration  of the securities  portfolio.  This committee  conducts regular,
informal meetings,  generally on a weekly basis, and meets quarterly to formally
review the bank's securities portfolio. The results of the committee's quarterly

                                       16

<PAGE>

review are reported to the full Board,  which makes adjustment to the investment
policy and strategies as it considers necessary and appropriate.

     We do not currently  participate in hedging  programs,  interest rate caps,
floors or swaps,  or other  activities  involving the use of  off-balance  sheet
derivative financial instruments,  but we may do so in the future as part of our
interest rate risk management. Further, we do not invest in securities which are
not rated investment grade.

     Actual  maturities of the securities held by us may differ from contractual
maturities because issuers may have the right to call or prepay obligations with
and without prepayment  penalties.  At September 30, 2003, we had $ 13.5 million
of callable securities in our portfolio.

     Mortgage-related   Securities.   Mortgage-related  securities  represent  a
participation  interest  in a  pool  of  one-  to  four-family  or  multi-family
mortgages, although we focus primarily on mortgage-related securities secured by
one-  to  four-family  mortgages.  Our  mortgage-related   securities  portfolio
includes  mortgage-backed  securities and  collateralized  mortgage  obligations
issued by U.S. government  agencies or  government-sponsored  entities,  such as
Federal  Home  Loan  Mortgage  Corporation,  the  Government  National  Mortgage
Association,  and  the  Federal  National  Mortgage  Association,  as well as by
private  corporate  issuers.  The  portfolio  also  includes an investment in an
adjustable rate mortgage  mutual fund, with a carrying value of  approximately $
9.9 million at September 30, 2003.

     The mortgage originators use intermediaries  (generally government agencies
and  government-sponsored  enterprises,  but also a variety of private corporate
issuers)  to pool  and  repackage  the  participation  interests  in the form of
securities,  with  investors  such as us receiving  the  principal  and interest
payments on the  mortgages.  Securities  issued or sponsored by U.S.  government
agencies and  government-sponsored  entities are guaranteed as to the payment of
principal and interest to investors. Privately issued securities typically offer
rates above those paid on government agency issued or sponsored securities,  but
lack the guaranty of those agencies and are generally  less liquid  investments.
In the absence of an agency guarantee, our policy requires that we purchase only
privately-issued mortgage-related securities that have been assigned the highest
credit rating (AAA) by the applicable  securities rating agencies.  Limiting our
purchases of  privately-issued  mortgage-related  securities to those with a AAA
rating  reduces  our  added  credit  risk in  purchasing  non-agency  guaranteed
securities.  Moreover,  because there is a robust secondary market for AAA-rated
privately-issued   mortgage-related  securities,  much  of  the  liquidity  risk
otherwise associated with our investment in non-agency securities is mitigated.

     Mortgage-backed  securities are  pass-through  securities  typically issued
with  stated  principal  amounts,  and the  securities  are  backed  by pools of
mortgages  that have loans with interest  rates that are within a specific range
and  have  varying  maturities.  The  life of a  mortgage-backed  security  thus
approximates the life of the underlying  mortgages.  Mortgage-backed  securities
generally  yield less than the mortgage loans  underlying such  securities.  The
characteristics  of the  underlying  pool  of  mortgages,  i.e.,  fixed-rate  or
adjustable-rate,  as well as prepayment  risk, are passed on to the  certificate
holder.  Mortgage-backed  securities  are  generally  referred  to  as  mortgage
participation certificates or pass-through certificates.

     Collateralized mortgage obligations are  mortgage-derivative  products that
aggregate pools of mortgages and mortgage-backed securities and create different
classes of securities with varying maturities and amortization schedules as well
as a residual  interest with each class having  different risk  characteristics.
The  cash  flows  from  the  underlying  collateral  are  usually  divided  into
"tranches" or classes whereby  tranches have descending  priorities with respect
to the  distribution  of  principal  and interest  repayment  of the  underlying
mortgages   and   mortgage-backed   securities   as  opposed  to  pass   through
mortgage-backed  securities

                                       17

<PAGE>

where  cash  flows are  distributed  pro rata to all  security  holders.  Unlike
mortgage-backed  securities from which cash flow is received and prepayment risk
is shared pro rata by all securities holders,  cash flows from the mortgages and
mortgage-backed  securities underlying  collateralized  mortgage obligations are
paid in accordance  with a predetermined  priority to investors  holding various
tranches of the  securities or  obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral and other tranches.  Investing in collateralized mortgage obligations
allows us to better manage the  prepayment and extension  risk  associated  with
conventional  mortgage-related  securities.  Management believes  collateralized
mortgage  obligations  represent  attractive   alternatives  relative  to  other
investments  due to the wide variety of maturity,  repayment  and interest  rate
options available.  At September 30, 2003,  collateralized  mortgage obligations
comprised $ 66.8 million of our securities portfolio.

     Other Securities. In addition, at September 30, 2003 we held an approximate
investment  of $3.1  million in Federal  Home Loan Bank of New York common stock
(this  amount  is not  shown in the  securities  portfolio).  As a member of the
Federal  Home Loan Bank of New York,  ownership of Federal Home Loan Bank of New
York common shares is required.

     The  following  table  sets  forth  the  carrying  value of our  securities
portfolio at the dates indicated. Securities that are held-to-maturity are shown
at our amortized cost, and securities that are  available-for-sale  are shown at
the current market value.

<TABLE>
<CAPTION>
                                                          At September 30,
                                                          ----------------
                                                     2003       2002       2001
                                                   --------   --------   --------
                                                             (In thousands)
<S>                                              <C>        <C>        <C>
Securities Held-to-Maturity:
---------------------------
  U.S. government and federal agency
     obligations ...............................   $     --   $     --   $     --
 Collateralized mortgage agency obligations ....        193      3,076      4,970
  Government National Mortgage Association .....        476        711      1,137
  Federal Home Loan Mortgage Corporation .......        657        986      1,214
  Federal National Mortgage Association ........      1,513      2,197      2,866
                                                   --------   --------   --------

    Total securities held-to-maturity ..........      2,839      6,970     10,187
                                                   --------   --------   --------
Securities Available-for-Sale:
-----------------------------
  U.S. government and federal agency obligation      13,484         --         --
  Collateralized mortgage non-agency obligations      4,962     19,177     30,580
  Collateralized mortgage agency obligations ...     61,685     57,346     17,164
  Government National Mortgage Association .....        320        513        770
  Federal Home Loan Mortgage Corporation .......        346        885        892
  Federal National Mortgage Association ........     16,664      2,213      2,616
  Mutual fund ..................................      9,930     10,000         --
                                                   --------   --------   --------

    Total securities available-for-sale ........    107,391     90,134     52,022
                                                   --------   --------   --------
    Total ......................................   $110,230   $ 97,104   $ 62,209
                                                   ========   ========   ========
</TABLE>



                                       18
<PAGE>

     The following table sets forth certain  information  regarding the carrying
values,   weighted   average   yields  and  maturities  of  our  investment  and
mortgage-backed  securities  portfolio at September  30, 2003.  This table shows
contractual  maturities  and  does  not  reflect  repricing  or  the  effect  of
prepayments. Actual maturities may differ.

<TABLE>
<CAPTION>
                                                                      At September 30, 2003
                                     --------------------------------------------------------------------------------------
                                                                                             More than
                                     One Year or Less One to Five Years Five to Ten Years    Ten Years     Total Securities
                                     ---------------- ----------------- ----------------- ---------------- ----------------
                                     Carrying Average Carrying  Average Carrying  Average Carrying Average Carrying Average  Market
                                      Value    Yield   Value     Yield   Value     Yield   Value    Yield   Value    Yield   Value
                                     -------- ------- --------  ------- ---------  ------ -------- ------- -------- -------  ------
                                                                                            (Dollars in thousands)

<S>                                <C>              <C>        <C>    <C>               <C>              <C>       <C>    <C>
U.S. Government and Federal Agency   $    --     --%  $ 13,484   2.38%  $     --      --% $     --     --% $ 13,484  2.38%  $ 13,484

Mortgage-backed non-agency
 obligations .....................        --     --         --     --         --      --     4,962   0.20     4,962  0.20      4,962

Government National Mortgage
 Association .....................        --     --         39   7.41         --      --     4,393   2.45     4,432  2.50      4,446

Federal Home Loan Mortgage
 Association .....................        --     --          2   7.93      3,455    0.53    37,221   2.49    40,678  2.24     40,687


Federal National Mortgage
 Association .....................         8   3.93         --     --      9,594    3.33    27,142   2.94    36,744  3.04     36,746
                                     -------   ----   --------   ----    -------    ----  --------   ----  --------  ----   --------

  Total ..........................   $     8   3.93%  $ 13,525   2.39%   $13,049    3.03% $ 73,718   2.49% $100,300  2.46%  $100,325
                                     =======   ====   ========   ====    =======    ====  ========   ====  ========  ====   ========
</TABLE>

                                       19
<PAGE>

Sources of Funds

     General.  Deposits  are our major  source of funds  for  lending  and other
investment purposes.  In addition, we derive funds from loan and mortgage-backed
securities principal repayments,  and proceeds from the maturity,  call and sale
of  mortgage-backed  securities and investment  securities.  Loan and securities
payments are a relatively  stable  source of funds,  while  deposit  inflows are
significantly  influenced by general interest rates and money market conditions.
Borrowings  (principally  from the  Federal  Home  Loan  Bank)  are also used to
supplement the amount of funds for lending and investment.

     Deposits.  Our current deposit products include  checking,  savings,  money
market,  club accounts,  certificates of deposit  accounts ranging in terms from
thirty days to ten years, and individual  retirement  accounts.  Deposit account
terms vary,  primarily as to the required minimum balance amount,  the amount of
time that the funds must remain on deposit and the applicable interest rate.

     Deposits are obtained primarily from within New Jersey. Traditional methods
of advertising  are used to attract new customers and deposits,  including print
media,  cable  television,  direct  mail  and  inserts  included  with  customer
statements.  We do not utilize the services of deposit brokers.  Although we did
offer special savings programs in connection with the opening of our Cedar Grove
branch  office,  premiums or incentives  for opening  accounts are generally not
offered. We periodically select particular certificate of deposit maturities for
promotion.

     The  determination  of  interest  rates is based upon a number of  factors,
including:  (1) our need for funds based on loan demand,  current  maturities of
deposits and other cash flow needs; (2) a current survey of general market rates
and rates of a selected group of competitors'  rates for similar  products;  (3)
our current  cost of funds and yield on assets;  and (4) the  alternate  cost of
funds on a wholesale  basis, in particular the cost of advances from the Federal
Home Loan Bank.  Interest  rates are reviewed by senior  management  on a weekly
basis.

     At  September  30,  2003,  $121.7  million  or 41.56% our  deposits  are in
certificates of deposit.  Our liquidity could be reduced if a significant amount
of  certificates  of deposit,  maturing  within a short period of time, were not
renewed.  Historically,  a significant  portion of the  certificates  of deposit
remain  with us after  they  mature  and we  believe  that this  will  continue.
However,  the need to retain these time deposits  could result in an increase in
our cost of funds.

     An additional  $28.6 million or 9.78% of our deposits at September 30, 2003
are in a  promotional  savings  account  whose  balances  earn an  above  market
interest rate through  December 31, 2003.  Our  liquidity  could be reduced if a
significant  amount of these  accounts are not  retained  when the rates paid on
such accounts return to market levels.





                                       20


<PAGE>

     The following table sets forth the  distribution of deposits at the bank at
the dates  indicated and the weighted  average  nominal  interest rates for each
period on each category of deposits presented.

<TABLE>
<CAPTION>
                                                                      At September 30,
                               ----------------------------------------------------------------------------------------------
                                            2003                           2002                             2001
                               -----------------------------  ------------------------------  -------------------------------
                                                    Weighted                        Weighted                         Weighted
                                         Percent    Average              Percent    Average              Percent     Average
                                         of Total   Nominal              of Total   Nominal              of Total    Nominal
                               Amount    Deposits    Rate     Amount     Deposits    Rate      Amount    Deposits     Rate
                               ------    --------    ----     ------     --------    ----      ------    --------     ----
                                                                 (Dollars in thousands)

<S>                         <C>        <C>         <C>      <C>        <C>         <C>      <C>        <C>          <C>
Non-interest-bearing demand
   deposits ...............   $ 21,676     7.40%       --%    $ 16,816     6.36%       --%    $ 13,635     7.22%        --%

Interest-bearing demand
   deposits ...............     21,721     7.42      0.98       27,733    10.48      1.55        9,756     5.17       1.76

Savings deposits ..........    127,720    43.62      1.60      101,433    38.34      2.30       54,100    28.65       2.87

Time deposits .............    121,709    41.56      2.55      118,605    44.82      3.14      111,337    58.96       4.62
                              --------   ------      ----     --------   ------      ----     --------   ------       ----

     Total deposits .......   $292,826   100.00%     1.79%    $264,587   100.00%     2.45%    $188,828   100.00%      3.64%
                              ========   ======      ====     ========   ======      ====     ========   ======       ====

</TABLE>

                                       21


<PAGE>



     The  following  table  shows the amount of our  certificates  of deposit of
$100,000 or more by time remaining until maturity as of September 30, 2003.


                                                  Certificates
    Remaining Time Until Maturity                 of Deposits
                                                 (In thousands)

    Within three months....................         $ 9,528
    Three through six months...............           7,108
    Six through twelve months..............           4,522
    Over twelve months.....................          10,699
                                                    -------

    Total                                           $31,857
                                                    =======

     Borrowings.  To supplement our deposits as a source of funds for lending or
investment,  we borrow funds in the form of advances  from the Federal Home Loan
Bank.  We regularly  make use of Federal Home Loan Bank  advances as part of our
interest  rate risk  management,  primarily to extend the duration of funding to
match the longer term fixed rate loans held in the loan portfolio as part of our
growth strategy.

     Advances  from the  Federal  Home Loan Bank are  typically  secured  by the
Federal  Home Loan Bank stock we own and a portion of our  residential  mortgage
loans  and  may  be  secured  by  other  assets,  mainly  securities  which  are
obligations of or guaranteed by the U.S. government.  At September 30, 2003, our
borrowing  limit  with the  Federal  Home  Loan  Bank was  approximately  $106.8
million. Additional information regarding our Federal Home Loan Bank advances is
included under Note 8 of the Notes to the Financial Statements.

     The  Bank is  evaluating  the  costs  and  benefits  of  restructuring  its
portfolio of FHLB  advances.  To do so would likely result in a significant  one
time charge to earnings in the form of FHLB prepayment penalties which, in turn,
would lower the interest  paid on borrowings  and should  improve the bank's net
interest spread and margin and enhance future earnings.

     The following table sets forth certain  information  regarding our borrowed
funds.

                                                       At or For the
                                                  Year Ended September 30,
                                            -----------------------------------
                                              2003         2002          2001
                                            --------     --------      --------

Federal Home Loan Bank Advances:

Average balance outstanding...............  $54,923      $ 43,859      $ 39,094

Maximum amount outstanding
  at any month-end during the period......  $61,800      $ 48,500      $ 46,000

Balance outstanding at end of period......  $55,000      $ 44,000      $ 46,000

Weighted average interest rate during
   the period.............................    5.16%         5.16%         5.78%

Weighted average interest rate at end
   of period..............................    5.13%         5.59%         5.14%

                                       22
<PAGE>

Subsidiary Activity

     In  addition to American  Savings  Bank of NJ, ASB Holding  Company has one
service corporation  subsidiary,  ASB Investment Corp, a New Jersey corporation,
which was  organized  in June 2003 for the  purpose  of  selling  insurance  and
investment products,  including annuities, to customers of American Savings Bank
of NJ and the  general  public  through a third  party  networking  arrangement.
Initially,  activities at this  subsidiary  will be limited to the sale of fixed
rate annuities.  ASB Investment Corp is not a licensed  insurance agency, and it
may only offer insurance products through an agreement with a licensed insurance
agency.  In June 2003, ASB Investment  Corp entered into an agreement with Essex
National Insurance Agency,  Inc., a licensed insurance agency,  through which it
may offer insurance products.

     ASB  Investment  Corp is not a  registered  broker-dealer  and it does  not
currently conduct any securities  activities.  ASB Investment Corp may not offer
and sell securities unless it becomes registered.  Rules promulgated by the SEC,
however, permit savings banks, such as American Savings Bank of NJ, to offer and
sell securities  without  registering as a  broker-dealer  if the bank contracts
directly with a registered broker-dealer to offer and sell securities through an
agreement with the bank, and we could conduct such activities  through  American
Savings Bank of NJ without registering either American Savings Bank of NJ or ASB
Investment Corp as broker-dealers.

Personnel

     As of September  30, 2003,  we had 49 full-time  employees and 17 part-time
employees. The employees are not represented by a collective bargaining unit. We
believe our relationship with our employees is satisfactory.


                                       23
<PAGE>

Regulation

     Set forth below is a brief  description  of certain laws that relate to the
regulation of the Bank and the Company.  The description  does not purport to be
complete and is qualified  in its entirety by reference to  applicable  laws and
regulations.  The Bank and the Company operate in a highly  regulated  industry.
This  regulation  and  supervision  establishes  a  comprehensive  framework  of
activities in which a federal savings bank may engage and is intended  primarily
for the protection of the deposit insurance fund and depositors.

     Any change in applicable statutory and regulatory requirements,  whether by
the OTS, the Federal Deposit Insurance Corporation ("FDIC") or the United States
Congress,  could have a material adverse impact on the Company and the Bank, and
their  operations.  The adoption of  regulations  or the  enactment of laws that
restrict  the  operations  of the Bank and/or the  Company or impose  burdensome
requirements upon one or both of them could reduce their profitability and could
impair the value of the Bank's  franchise  which could hurt the trading price of
the Company's common stock.

     On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of
2002 (the "Act"). The SEC has promulgated  certain  regulations  pursuant to the
Act  and  will  continue  to  propose  additional   implementing  or  clarifying
regulations  as necessary in  furtherance of the Act. The passage of the Act and
the  regulations  implemented  by the SEC subject  publicly-traded  companies to
additional and more cumbersome reporting regulations and disclosure.  Compliance
with the Act and corresponding regulations may increase the Company's expenses.

Regulation of the Bank

     General. As a federally  chartered,  SAIF-insured savings bank, the Bank is
subject  to  extensive  regulation  by the  OTS and the  FDIC.  This  regulatory
structure gives the regulatory  authorities  extensive  discretion in connection
with their  supervisory  and enforcement  activities and  examination  policies,
including  policies  regarding the classification of assets and the level of the
allowance for loan losses.  The activities of federal  savings banks are subject
to extensive regulation  including  restrictions or requirements with respect to
loans to one borrower,  the percentage of  non-mortgage  loans or investments to
total  assets,  capital  distributions,   permissible  investments  and  lending
activities,  liquidity  management,  transactions  with affiliates and community
reinvestment.  Federal savings banks are also subject to reserve requirements of
the Federal  Reserve  System.  A federal  savings bank's  relationship  with its
depositors and borrowers is regulated by both state and federal law,  especially
in such matters as the ownership of savings accounts and the form and content of
the bank's mortgage documents.

     The Bank must file regular reports with the OTS and the FDIC concerning its
activities and financial  condition,  and must obtain regulatory approvals prior
to entering into certain  transactions  such as mergers with or  acquisitions of
other financial  institutions.  The OTS regularly examines the Bank and prepares
reports to the Bank's Board of Directors on  deficiencies,  if any, found in its
operations.

     Insurance of Deposit  Accounts.  The FDIC  administers two separate deposit
insurance funds. Generally, the Bank Insurance Fund ("BIF") insures the deposits
of commercial banks and the Savings Association  Insurance Fund ("SAIF") insures
the deposits of savings institutions. The FDIC is authorized to increase deposit
insurance  premiums if it determines  such increases are appropriate to maintain
the  reserves  of either  the BIF or SAIF or to fund the  administration  of the
FDIC. In addition,  the FDIC is authorized to levy emergency special assessments
on BIF and SAIF  members.  The  assessment  rate for most savings  institutions,
including the Bank, is currently 0%.


                                       24
<PAGE>

     In addition, all FDIC-insured  institutions are required to pay assessments
to the FDIC at an annual  rate of  approximately  .0312% of insured  deposits to
fund interest payments on bonds issued by the Financing Corporation ("FICO"), an
agency of the Federal government  established to recapitalize the predecessor to
the SAIF. These assessments will continue until the FICO bonds mature in 2017.

     Regulatory Capital  Requirements.  OTS capital  regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total  adjusted  assets,  (2) "Tier 1" or "core" capital equal to at least 4%
(3% if the  institution  has  received the highest  possible  rating on its most
recent  examination) of total adjusted assets,  and (3) risk-based capital equal
to 8% of total risk-weighted assets. At September 30, 2003 the Bank exceeded all
regulatory capital requirements and was classified as "well capitalized."

     In  addition,  the OTS may require  that a savings  institution  that has a
risk-based  capital  ratio  of less  than  8%,  a ratio  of  Tier 1  capital  to
risk-weighted  assets  of less  than 4% or a ratio  of Tier 1  capital  to total
adjusted  assets of less than 4% (3% if the institution has received the highest
rating on its most recent  examination)  take  certain  action to  increase  its
capital ratios. If the savings  institution's capital is significantly below the
minimum  required  levels of capital or if it is  unsuccessful in increasing its
capital ratios, the OTS may restrict its activities.

     For purposes of the OTS capital regulations, tangible capital is defined as
core capital less all intangible  assets except for certain  mortgage  servicing
rights.  Tier 1 or core  capital  is  defined  as common  stockholders'  equity,
non-cumulative perpetual preferred stock and related surplus, minority interests
in   the   equity   accounts   of   consolidated   subsidiaries,   and   certain
non-withdrawable accounts and pledged deposits of mutual savings banks. The Bank
does not have any non-withdrawable accounts or pledged deposits. Tier 1 and core
capital  are  reduced  by  an  institution's  intangible  assets,  with  limited
exceptions for certain mortgage and non-mortgage  servicing rights and purchased
credit card relationships. Both core and tangible capital are further reduced by
an amount  equal to the savings  institution's  debt and equity  investments  in
"non-includable"  subsidiaries engaged in activities not permissible to national
banks other than  subsidiaries  engaged in  activities  undertaken  as agent for
customers  or  in  mortgage   banking   activities  and  subsidiary   depository
institutions or their holding companies.

     The  risk-based  capital  standard  for savings  institutions  requires the
maintenance of total capital of 8% of risk-weighted assets. Total capital equals
the sum of core and  supplementary  capital.  The  components  of  supplementary
capital  include,  among other  items,  cumulative  perpetual  preferred  stock,
perpetual   subordinated   debt,   mandatory   convertible   subordinated  debt,
intermediate-term  preferred stock, the portion of the allowance for loan losses
not  designated  for specific loan losses and up to 45% of  unrealized  gains on
equity  securities.  The  portion  of the  allowance  for loan and lease  losses
includable  in  supplementary  capital  is  limited  to a  maximum  of  1.25% of
risk-weighted assets. Overall,  supplementary capital is limited to 100% of core
capital.  For purposes of  determining  total capital,  a savings  institution's
assets are reduced by the amount of capital instruments held by other depository
institutions  pursuant  to  reciprocal  arrangements  and by the  amount  of the
institution's  equity  investments  (other  than  those  deducted  from core and
tangible   capital)   and  its  high   loan-to-value   ratio   land   loans  and
non-residential construction loans.

     A savings institution's  risk-based capital requirement is measured against
risk-weighted assets, which equal the sum of each on-balance-sheet asset and the
credit-equivalent  amount of each  off-balance-sheet item after being multiplied
by an assigned  risk weight.  These risk weights  range from 0% for cash to 100%
for delinquent loans,  property acquired through foreclosure,  commercial loans,
and other assets.

                                       25
<PAGE>

     OTS rules require a deduction  from capital for savings  institutions  with
certain levels of interest rate risk.  The OTS calculates the  sensitivity of an
institution's  net portfolio value based on data submitted by the institution in
a schedule to its quarterly  Thrift Financial Report and using the interest rate
risk measurement  model adopted by the OTS. The amount of the interest rate risk
component,  if any, deducted from an institution's total capital is based on the
institution's  Thrift Financial Report filed two quarters  earlier.  The OTS has
indefinitely postponed  implementation of the interest rate risk component,  and
the Bank has not been  required  to  determine  whether it will be  required  to
deduct an interest rate risk component from capital.

     Prompt Corrective Regulatory Action. Under the OTS Prompt Corrective Action
regulations,   the  OTS  is  required  to  take   supervisory   actions  against
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's level of capital.  Generally, a savings institution that has total
risk-based  capital  of less than  8.0%,  or a  leverage  ratio or a Tier 1 core
capital ratio that is less than 4.0%, is  considered to be  undercapitalized.  A
savings  institution that has total risk-based  capital less than 6.0%, a Tier 1
core risk-based capital ratio of less than 3.0% or a leverage ratio that is less
than  3.0% is  considered  to be  "significantly  undercapitalized."  A  savings
institution  that has a tangible  capital to assets  ratio equal to or less than
2.0% is deemed  to be  "critically  undercapitalized."  Generally,  the  banking
regulator is required to appoint a receiver or  conservator  for an  institution
that is  "critically  undercapitalized."  The  regulation  also  provides that a
capital  restoration  plan must be filed with the OTS within  forty-five days of
the  date  an  institution  receives  notice  that  it  is   "undercapitalized,"
"significantly  undercapitalized" or "critically undercapitalized." In addition,
numerous  mandatory  supervisory  actions become  immediately  applicable to the
institution,  including, but not limited to, restrictions on growth,  investment
activities, capital distributions,  and affiliate transactions. The OTS may also
take  any  one  of  a  number  of  discretionary   supervisory  actions  against
undercapitalized institutions, including the issuance of a capital directive and
the replacement of senior executive officers and directors.

     Dividend  and  Other  Capital  Distribution  Limitations.  The OTS  imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

     A savings  institution  that is a subsidiary  of a savings and loan holding
company,  such as the Bank, must file an application or a notice with the OTS at
least thirty days before making a capital  distribution.  A savings  institution
must file an application for prior approval of a capital distribution if: (i) it
is not eligible for expedited treatment under the applications  processing rules
of the OTS;  (ii) the total amount of all capital  distributions,  including the
proposed capital distribution,  for the applicable calendar year would exceed an
amount  equal to the  savings  bank's  net income for that year to date plus the
institution's  retained net income for the preceding  two years;  (iii) it would
not  adequately  be  capitalized  after the  capital  distribution;  or (iv) the
distribution would violate an agreement with the OTS or applicable regulations.

     The  Bank  will  be  required  to file a  capital  distribution  notice  or
application  with the OTS before  paying any dividend to the  Company.  However,
capital  distributions  by the Company,  as a savings and loan holding  company,
will not be subject to the OTS capital distribution rules.

     The OTS may  disapprove  a  notice  or deny an  application  for a  capital
distribution if: (i) the savings institution would be undercapitalized following
the capital  distribution;  (ii) the proposed capital distribution raises safety
and  soundness  concerns;  or (iii) the  capital  distribution  would  violate a
prohibition  contained in any statute,  regulation or agreement.  In addition, a
federal  savings  institution  cannot  distribute  regulatory  capital  that  is
required for its liquidation account.

                                       26
<PAGE>

     Qualified  Thrift Lender Test.  Federal  savings  institutions  must meet a
qualified  thrift  lender  ("QTL")  test or they become  subject to the business
activity  restrictions  and branching  rules  applicable to national  banks.  To
qualify as a QTL, a savings  institution  must  either (i) be deemed a "domestic
building and loan association" under the Internal Revenue Code by maintaining at
least 60% of its total  assets in  specified  types of assets,  including  cash,
certain  government  securities,  loans  secured by and other assets  related to
residential real property,  educational loans and investments in premises of the
institution or (ii) satisfy the statutory QTL test set forth in the Home Owners'
Loan Act by  maintaining  at least  65% of its  "portfolio  assets"  in  certain
"Qualified Thrift  Investments"  (defined to include  residential  mortgages and
related equity investments,  certain mortgage-related securities, small business
loans,  student  loans and  credit  card  loans,  and 50% of  certain  community
development loans). For purposes of the statutory QTL test, portfolio assets are
defined  as  total  assets  minus  intangible  assets,   property  used  by  the
institution in conducting its business,  and liquid assets equal to 20% of total
assets.  A savings  institution  must  maintain its status as a QTL on a monthly
basis in at least nine out of every twelve months.  The Bank met the QTL test as
of  September  30,  2003 and in each of the last twelve  months and,  therefore,
qualifies as a QTL.


     Transactions with Affiliates.  Generally, federal banking law requires that
transactions   between  a  savings  institution  or  its  subsidiaries  and  its
affiliates  must  be on  terms  as  favorable  to  the  savings  institution  as
comparable transactions with non-affiliates. In addition, certain types of these
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by  affiliates  in order to  receive  loans  from the  savings  institution.  In
addition,  a savings  institution may not extend credit to any affiliate engaged
in  activities  not  permissible  for a bank  holding  company  or  acquire  the
securities of any affiliate that is not a subsidiary. The OTS has the discretion
to treat  subsidiaries  of savings  institutions as affiliates on a case-by-case
basis.

     Community  Reinvestment Act. Under the Community  Reinvestment Act ("CRA"),
every insured depository  institution,  including the Bank, has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire  community,  including  low- and  moderate-income
neighborhoods.  The CRA does not  establish  specific  lending  requirements  or
programs  for  financial   institutions  nor  does  it  limit  an  institution's
discretion  to develop the types of products and  services  that it believes are
best suited to its particular community.  The CRA requires the OTS to assess the
depository institution's record of meeting the credit needs of its community and
to take such record into account in its  evaluation of certain  applications  by
such  institution,  such as a merger or the  establishment of a branch office by
the Bank. An unsatisfactory  CRA examination rating may be used as the basis for
the denial of an application by the OTS.

     Federal Home Loan Bank ("FHLB") System. The Bank is a member of the FHLB of
New York,  which is one of twelve regional FHLBs.  Each FHLB serves as a reserve
or  central  bank for its  members  within  its  assigned  region.  It is funded
primarily from funds deposited by financial  institutions  and proceeds  derived
from the sale of consolidated  obligations of the FHLB System. It makes loans to
members  pursuant  to  policies  and  procedures  established  by the  board  of
directors of the FHLB.

     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of New York in an amount equal to the greater of 1% of our aggregate unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year or 5% of FHLB  advances.  We are in  compliance  with
this  requirement.  The FHLB imposes  various  limitations  on advances  such as
limiting the amount of certain types of real estate related collateral to 30% of
a member's capital and limiting total advances to a member.

                                       27
<PAGE>

     The FHLBs are  required  to provide  funds for the  resolution  of troubled
savings  institutions  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.

     Federal Reserve System.  The Federal Reserve System requires all depository
institutions  to  maintain  non-interest-bearing  reserves at  specified  levels
against their  checking  accounts and  non-personal  certificate  accounts.  The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve System may be used to satisfy the OTS liquidity requirements.

     Savings  institutions  have  authority  to borrow from the Federal  Reserve
System "discount  window," but Federal Reserve System policy generally  requires
savings  institutions  to exhaust all other sources  before  borrowing  from the
Federal Reserve System.

Regulation of the Company

     General.  The Company is a federal mutual holding company subsidiary within
the  meaning of Section  10(o) of the Home  Owners'  Loan Act. It is required to
file reports with the OTS and is subject to regulation  and  examination  by the
OTS. In addition,  the OTS has  enforcement  authority  over the Company and any
non-savings  institution  subsidiaries.  This  permits  the OTS to  restrict  or
prohibit  activities  that it determines to be a serious risk to the Bank.  This
regulation is intended  primarily for the  protection of the  depositors and not
for the benefit of stockholders of the Company.

     Activities Restrictions. As a savings and loan holding company formed after
May 4, 1999, the Company is not a grandfathered unitary savings and loan holding
company  under the  Gramm-Leach-Bliley  Act (the "GLB  Act").  As a result,  the
Company and its non-savings  institution  subsidiaries  are subject to statutory
and regulatory restrictions on their business activities. Under the Home Owners'
Loan Act, as amended by the GLB Act, the  non-banking  activities of the Company
are restricted to certain activities specified by OTS regulation,  which include
performing  services  and  holding  properties  used  by a  savings  institution
subsidiary,  activities  authorized for savings and loan holding companies as of
March 5, 1987, and non-banking activities permissible for bank holding companies
pursuant to the Bank Holding  Company Act of 1956 (the "BHC Act") or  authorized
for financial holding companies pursuant to the GLB Act. Furthermore, no company
may  acquire  control of the Bank  unless the  acquiring  company  was a unitary
savings and loan holding company on May 4, 1999 (or became a unitary savings and
loan holding company pursuant to an application  pending as of that date) or the
company is only engaged in activities  that are  permitted for multiple  savings
and loan holding  companies or for financial holding companies under the BHC Act
as amended by the GLB Act.

     Mergers and  Acquisitions.  The Company must obtain  approval  from the OTS
before acquiring more than 5% of the voting stock of another savings institution
or savings and loan holding  company or acquiring such an institution or holding
company by merger,  consolidation  or purchase of its assets.  In  evaluating an
application for the Company to acquire control of a savings institution, the OTS
would  consider the financial and managerial  resources and future  prospects of
the Company and the target  institution,  the effect of the  acquisition  on the
risk to the insurance  funds, the convenience and the needs of the community and
competitive factors.

     Waivers of Dividends by American  Savings,  MHC.  OTS  regulations  require
American Savings, MHC to notify the OTS of any proposed waiver of its receipt of
dividends  from  the  Company  The OTS  reviews  dividend  waiver  notices  on a
case-by-case basis, and, in general,  does not object to any such waiver

                                       28
<PAGE>

if: (i) the mutual holding  company's  board of directors  determines  that such
waiver is consistent with such directors' fiduciary duties to the mutual holding
company's  members;  (ii) for as long as the savings  association  subsidiary is
controlled by the mutual holding company,  the dollar amount of dividends waived
by the mutual  holding  company are  considered as a restriction on the retained
earnings  of  the  savings  association,  which  restriction,  if  material,  is
disclosed in the public  financial  statements of the savings  association  as a
note to the financial statements; (iii) the amount of any dividend waived by the
mutual holding  company is available for declaration as a dividend solely to the
mutual holding  company,  and, in accordance  with SFAS No. 5, where the savings
association  determines  that the payment of such dividend to the mutual holding
company is probable,  an  appropriate  dollar amount is recorded as a liability;
and (iv) the amount of any waived  dividend is considered as having been paid by
the savings  association in evaluating  any proposed  dividend under OTS capital
distribution regulations.

     We anticipate that American  Savings,  MHC will waive dividends paid by the
Company,  if any. Under OTS regulations,  our public  stockholders  would not be
diluted  because of any dividends  waived by American  Savings,  MHC (and waived
dividends would not be considered in determining an appropriate  exchange ratio)
in the event American Savings, MHC converts to stock form.

                                       29

<PAGE>

     Conversion of American Savings,  MHC to Stock Form. OTS regulations  permit
American  Savings,  MHC to convert from the mutual form of  organization  to the
capital  stock  form of  organization,  commonly  referred  to as a second  step
conversion.  There can be no assurance  when, if ever, a second step  conversion
will  occur,  and the Board of  Directors  has no current  intention  or plan to
undertake a second step  conversion.  In a second step  conversion a new holding
company  would be formed  as the  successor  to the  Company  (the "New  Holding
Company"),  American Savings,  MHC's corporate  existence would end, and certain
depositors  of the Bank would  receive the right to subscribe  for shares of the
New Holding  Company.  In a second step  conversion,  each share of common stock
held by stockholders other than American Savings, MHC ("Minority  Stockholders")
would be automatically  converted into a number of shares of common stock of the
New Holding Company  determined  pursuant to an exchange ratio that ensures that
Minority Stockholders own the same percentage of common stock in the New Holding
Company  as they  owned in the  Company  immediately  prior to the  second  step
conversion. Under OTS regulations, The Company stockholders would not be diluted
because of any dividends waived by American  Savings,  MHC (and waived dividends
would not be considered in determining an appropriate  exchange  ratio),  in the
event American  Savings,  MHC converts to stock form. The total number of shares
held by  Minority  Stockholders  after a second  step  conversion  also would be
increased by any purchases by Minority Stockholders in the stock offering of the
new holding company conducted as part of the second step conversion.

Item 2.     Description of Property.

     At September 30, 2003, our net investment in property and equipment totaled
$3.9  million.  We use an  outside  service  company  for data  processing.  The
following  table sets forth the location of our main office and branch  offices,
the year the offices were opened and the net book value of each office.

                                   Year
                                 Facility     Leased or      Net Book Value at
Office Location                   Opened       Owned        September 30, 2003
---------------                  --------     ---------     ------------------
                                                              (In thousands)
Main Office
365 Broad Street
Bloomfield, New Jersey  07003      1965        Owned             $  1,502

Main Office Drive Up Facility
16 Pitt Street
Bloomfield, New Jersey  07003      1998        Owned                 $376

Full Service Branch
310 Pompton Avenue
Cedar Grove, New Jersey  07009     2001        Owned               $2,061


(b)      Investment Policies.

     See "Item 1.  Description of Business"  above for a general  description of
the Bank's investment policy. The Bank's investment policy is designed to foster
earnings and  liquidity  within  prudent  interest rate risk  guidelines,  while
complementing the Bank's lending activities.

     (1)  Investments  in Real Estate or Interests in Real Estate.  See "Item 1.
Description  of  Business - Lending  Activities,"  and "Item 2.  Description  of
Property."


                                       30
<PAGE>

     (2)  Investments  in Real Estate  Mortgages.  See "Item 1.  Description  of
Business - Lending Activities."

     (3) Investments in Securities of or Interests in Persons  Primarily Engaged
in Real  Estate  Activities.  See "Item 1.  Description  of  Business  - Lending
Activities."

(c)      Description of Real Estate and Operating Data.

         Not Applicable.

Item 3.  Legal Proceedings

     The Bank from time to time, is a party to routine litigation,  which arises
in the normal course of business, such as claims to enforce liens,  condemnation
proceedings  on properties in which the bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the business of the bank. There were no lawsuits pending or known to
be  contemplated  against  the Bank at  September  30,  2003 that  would  have a
material effect on our operations or income.

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

     No matter was  submitted  to a vote of security  holders  during the fourth
quarter of the fiscal year.

                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The  information   contained  under  the  section  captioned  "Stock  Price
Information" of the Company's  Annual Report to Stockholders for the fiscal year
ended  September  30,  2003 (the  "Annual  Report")  is  incorporated  herein by
reference.

Item 6.  Management's Discussion and Analysis or Plan of Operation

     The  information  contained  under  the  section  captioned   "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Annual Report is incorporated herein by reference.

Item 7.  Financial Statements

     The Registrant's financial statements listed under Item 13 are incorporated
herein by reference.

Item 8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

     Not applicable.

                                       31

<PAGE>

Item 8A. Controls and Procedures

     (a)  Evaluation  of  disclosure  controls  and  procedures.  Based on their
          -----------------------------------------------------
evaluation  as of a date within 90 days of the filing date of this Annual Report
on Form 10-KSB,  the  Registrant's  principal  executive  officer and  principal
financial officer have concluded that the Registrant's  disclosure  controls and
procedures  (as defined in Rules  13a-14(c) and 15d-14(c)  under the  Securities
Exchange  Act of 1934  (the  "Exchange  Act"))  are  effective  to  ensure  that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods specified in SEC rules and forms.

     (b) Changes in internal controls.  There were no significant changes in the
         ----------------------------
Registrant's  internal  controls or in other  factors  that could  significantly
affect these controls subsequent to the date of their evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons:
         Compliance with Section 16(a) of the Exchange Act.

     The  information  contained  under the sections  captioned  "Section  16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I -  Election  of
Directors"  in the  Company's  Proxy  Statement  for the 2004 Annual  Meeting of
Stockholders (the "Proxy Statement") is incorporated herein by reference.

     The  Company has  adopted a Code of Ethics  that  applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions. The Company's Code of Ethics
is filed as Exhibit 14 to this Annual Report on Form10-KSB.

Item 10. Executive Compensation

     The  information  contained  under  the  section  captioned  "Director  and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     (a) Security Ownership of Certain Beneficial Owners

     Information  required by this item is  incorporated  herein by reference to
the first chart in the section captioned "Proposal I - Election of Directors" in
the Proxy Statement.

     (b) Security Ownership of Management

     Information  required by this item is  incorporated  herein by reference to
the first chart in the section captioned  "Proposal I- Election of Directors" in
the Proxy Statement.

     (c) Management of the Registrant  knows of no  arrangements,  including any
pledge by any person of securities of the Registrant, the operation of which may
at a subsequent date result in a change in control of the Registrant.

     (d) Securities Authorized for Issuance under Equity Compensation Plans

     As of September 30, 2003, the Registrant had no equity  compensation  plans
to be disclosed pursuant to this item.

                                       32



<PAGE>

Item 12. Certain Relationships and Related Transactions

     The information  required by this item is incorporated  herein by reference
to the section captioned "Certain Relationships and Related Transactions" in the
Proxy Statement.

Item 13. Exhibits, List, and Reports on Form 8-K

     (a) Listed below are all financial statements and exhibits filed as part of
this report.

     1. The consolidated  statements of financial  condition as of September 30,
2003 and 2002 and the  related  consolidated  statements  of income,  changes in
stockholders' equity, and cash flows for the years then ended, together with the
related notes and the report of independent certified public accountants.

     2. The  following  exhibits  are  included in this  Report or  incorporated
herein by reference:

                  (a)      List of Exhibits:

                   3(i)    Charter of ASB Holding Company*
                   3(ii)   Bylaws of ASB Holding Company*
                   4       Specimen Stock Certificate of ASB Holding Company**
                  10.1     Employment Agreement between American Savings Bank of
                               NJ and Joseph Kliminski**
                  10.2     Employment Agreement between American Savings Bank of
                               NJ and Richard M. Bzdek**
                  10.3     Employment Agreement between American Savings Bank of
                               NJ and Eric B. Heyer**
                  10.4     Form of Executive Salary Continuation Agreement**
                  10.5     Employment Agreement between ASB Holding Company and
                               Joseph Kliminski
                  13       Annual Report to Stockholders
                  14       Code of Ethics
                  21       Subsidiaries
                  31       Certification Pursuant to Section 302 of the
                               Sarbanes-Oxley Act of 2002
                  32       Certification Pursuant to Section 906 of the
                               Sarbanes-Oxley Act of 2002
         ---------------
         *      Incorporated  by  reference  to  Amendment  No. 1 to the
                Company's  Registration  Statement  on Form SB-2  (File No.
                333-105472 filed with the SEC on July 11, 2003).
         **     Incorporated by reference to the Company's Registration
                Statement on Form SB-2 (File No. 333-105472 filed with the SEC
                on May 22, 2003).

                (b) Reports on Form 8-K:

                    During the quarter ended  September 30, 2003, the Registrant
                    did not file any reports on Form 8-K.

                                       33

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized  as of
December 23, 2003.

                                      ASB HOLDING COMPANY


                                      By:  /s/ Joseph  Kliminski
                                           -------------------------------------
                                           Joseph Kliminski
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)

     Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,  as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of December 23, 2003.


/s/ W. George Parker                  /s/ Joseph Kliminski
---------------------------------     ------------------------------------------
W. George Parker                      Joseph Kliminski
Chairman and Director                 President, Chief Executive Officer and
                                      Director


/s/ Eric B. Heyer                     /s/ Vincent S. Rospond
---------------------------------     ------------------------------------------
Senior Vice President, Treasurer      Director
and Chief Financial Officer
(Principal Financial and
Accounting Officer)



/s/ H. Joseph North                   /s/ James H. Ward, III
---------------------------------     ------------------------------------------
H. Joseph North                       James H. Ward, III
Director                              Vice Chairman and Director


/s/ Stanley Obal                      /s/ Robert Gaccione
---------------------------------     ------------------------------------------
Stanley Obal                          Robert Gaccione
Director                              Director