<PAGE>
================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 10-Q


(Mark One)

     [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

     [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____

Commission File Number:  0-22474
                         -------

                   AMERICAN BUSINESS FINANCIAL SERVICES, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Delaware                                        87-0418807
           --------                                        ----------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)


111 Presidential Boulevard, Bala Cynwyd, PA                   19004
-------------------------------------------                   -----
  (Address of principal executive offices)                  (Zip Code)


                                 (610) 668-2440
                                 --------------
               (Registrant's telephone number including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the past 90
days.
Yes __X__    No ____

As of November 9, 1999, there were 3,405,279 shares of the registrant's Common
Stock issued and outstanding.


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


<PAGE>


           American Business Financial Services, Inc. and Subsidiaries


                                      INDEX
<TABLE>
<CAPTION>

PART I     FINANCIAL INFORMATION                                                                                              Page
                                                                                                                              ----
<S>       <C>                                                                                                                <C>
Item 1.    Financial Information

           Consolidated Balance Sheets as of September 30, 1999
               and June 30, 1999..............................................................................................  2
           Consolidated Statements of Income for the three months ended
               September 30, 1999 and 1998....................................................................................  3
           Consolidated Statements of Stockholders' Equity for the three months ended
               September 30, 1999 and 1998....................................................................................  4
           Consolidated Statements of Cash Flow for the three months ended
               September 30, 1999 and 1998....................................................................................  5
           Notes to Consolidated Financial Statements.........................................................................  7

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 13

Item 3.    Quantitative and Qualitative Disclosure about Market Risk.......................................................... 30

PART II    OTHER INFORMATION.................................................................................................. 31

Item 1.    Legal Proceedings
Item 2.    Changes in Securities
Item 3.    Defaults Upon Senior Securities
Item 4.    Submission of Matters to a Vote of Security Holders
Item 5.    Other Information
Item 6.    Exhibits and Reports on Form 8-K
</TABLE>



<PAGE>

PART I - FINANCIAL INFORMATION
Item 1- Financial Information

           American Business Financial Services, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                                            September 30,                 June 30,
                                                                                 1999                       1999
                                                                            ------------                 ----------
                                                                             (Unaudited)                   (Note)
<S>                                                                         <C>                         <C>
Assets
Cash and cash equivalents                                                    $   24,378                  $   22,395
Loan and lease receivables, net
     Available for sale                                                          46,069                      33,776
     Other                                                                        8,046                       6,863
Interest-only and residual strips                                               202,318                     178,218
Receivable for sold loans and leases                                             55,039                      66,086
Prepaid expenses                                                                  2,471                       1,671
Property and equipment, net                                                      12,538                      10,671
Servicing rights                                                                 50,099                      43,210
Other assets                                                                     28,981                      33,411
                                                                             ----------                  ----------
Total assets                                                                 $  429,939                  $  396,301
                                                                             ==========                  ==========

Liabilities and Stockholders' Equity

Liabilities
     Subordinated debt and notes payable                                     $  296,232                  $  270,343
     Accounts payable and accrued expenses                                       30,436                      26,826
     Deferred income taxes                                                       20,432                      16,604
     Other liabilities                                                           20,963                      24,282
                                                                             ----------                  ----------
Total liabilities                                                               368,063                     338,055
                                                                             ----------                  ----------

Stockholders' equity
     Preferred stock, par value $.001, Authorized, 1,000,000 shares
         Issued and outstanding, none                                                --                          --
     Common stock, par value $.001, Authorized, 9,000,000 shares
         Issued: 3,579,504 and 3,703,514 shares (including treasury
         shares of 38,200 and 116,550)                                                3                           3
     Additional paid-in capital                                                  23,943                      23,339
     Accumulated other comprehensive income                                       4,035                       3,354
     Retained earnings                                                           34,980                      33,596
     Treasury stock, 38,200 and 116,550 shares                                     (485)                     (1,446)
                                                                             ----------                  ----------
                                                                                 62,476                      58,846
     Note receivable                                                               (600)                       (600)
                                                                             ----------                  ----------
Total stockholders' equity                                                       61,876                      58,246
                                                                             ----------                  ----------
Total liabilities and stockholders' equity                                   $  429,939                  $  396,301
                                                                             ==========                  ==========
</TABLE>

Note: The balance sheet at June 30, 1999 has been derived from the audited
financial statements at that date.

See accompanying notes to consolidated financial statements.

                                       2
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
                        Consolidated Statements of Income
                  (amounts in thousands except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                        Three Months ended
                                                                           September 30,
                                                              -----------------------------------
                                                                 1999                      1998
                                                              ---------                 ---------
<S>                                                           <C>                      <C>
Revenues
     Gain on sale of loans and leases                         $  19,121                 $  13,781
     Interest and fees                                            7,509                     4,539
     Servicing income                                             1,189                       490
     Other income                                                     1                        14
                                                              ---------                 ---------
Total revenues                                                   27,820                    18,824
                                                              ---------                 ---------

Expenses
     Interest                                                     7,646                     4,803
     Provision for credit losses                                    141                       126
     Employee related costs                                       1,995                     1,213
     Sales and marketing                                          7,612                     5,358
     General and administrative                                   4,109                     2,142
                                                              ---------                 ---------
Total expenses                                                   21,503                    13,642
                                                              ---------                 ---------
Income before provision for income taxes                          6,317                     5,182
Provision for income taxes                                        2,527                     1,762
                                                              ---------                 ---------
Net income                                                    $   3,790                 $   3,420
                                                              =========                 =========
Earnings per common share
     Basic                                                    $    1.06                 $    0.92
                                                              =========                 =========
     Diluted                                                  $    1.03                 $    0.90
                                                              =========                 =========
Average Common Shares:
     Basic                                                        3,580                     3,700
     Diluted                                                      3,685                     3,824
</TABLE>


See accompanying notes to consolidated financial statements.


                                       3
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                             (amounts in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                       Common Stock
                                                ---------------------------                     Accumulated
                                                    Number                      Additional         Other
                                                   Of Shares                      Paid-In      Comprehensive       Retained
                                                  Outstanding     Amount          Capital          Income          Earnings
                                                --------------- -----------     ------------  -----------------   -----------
<S>                                                <C>          <C>            <C>             <C>              <C>
Balance, June 30, 1999                                3,587       $     3        $    23,339     $    3,354       $   33,596
Comprehensive income:
     Net income                                          --            --                 --             --            3,790
     Unrealized gains on investment securities           --            --                 --            681               --
                                                   --------       -------        -----------     ----------       ----------
Total comprehensive income                               --            --                 --            681            3,790
                                                   --------       -------        -----------     ----------       ----------
Exercise of stock options                                 1            --                                --               --
Repurchase of treasury shares                           (47)           --                 --             --               --
Cash dividends ($0.07 per share)                         --            --                 --             --             (250)
Stock dividend (5% of outstanding shares):
     Issuance of treasury shares                         --            --                 --             --               --
     Issuance of new shares                              --            --                604             --           (2,156)
                                                   --------       -------        -----------     ----------       ----------
Balance, September 30, 1999                           3,541       $     3        $    23,943     $    4,035       $   34,980
                                                   ========       =======        ===========     ==========       ==========
Balance, June 30, 1998                                3,699       $     3        $    23,256     $       --       $   20,083
Comprehensive income:
     Net income                                          --            --                 --             --            3,420
                                                   --------       -------        -----------     ----------       ----------
Total comprehensive income                               --            --                 --             --            3,420
                                                   --------       -------        -----------     ----------       ----------
Cash dividends ($0.015 per share)                        --            --                 --             --              (52)
                                                   --------       -------        -----------     ----------       ----------
Balance, September 30, 1998                           3,699       $     3        $    23,256     $       --       $   23,451
                                                   ========       =======        ===========     ==========       ==========
</TABLE>

[RESTUB]

<TABLE>
<CAPTION>
                                                                                   Total
                                                  Treasury        Note         Stockholders'
                                                    Stock      Receivable         Equity
                                                 ------------ --------------  ---------------
<S>                                             <C>           <C>             <C>
Balance, June 30, 1999                            $   (1,446)   $    (600)      $   58,246
Comprehensive income:
     Net income                                           --           --            3,790
     Unrealized gains on investment securities            --           --              681
                                                  ----------    ---------       ----------
Total comprehensive income                                --           --            4,471
                                                  ----------    ---------       ----------
Exercise of stock options                                 --           --               --
Repurchase of treasury shares                           (591)          --             (591)
Cash dividends ($0.07 per share)                          --           --             (250)
Stock dividend (5% of outstanding shares):
     Issuance of treasury shares                       1,552           --            1,552
     Issuance of new shares                               --           --           (1,552)
                                                  ----------    ---------       ----------
Balance, September 30, 1999                       $     (485)   $    (600)      $   61,876
                                                  ==========    =========       ==========
Balance, June 30, 1998                            $       --    $    (600)      $   42,742
Comprehensive income:
     Net income                                           --           --            3,420
                                                  ----------    ---------       ----------
Total comprehensive income                                --           --            3,420
                                                  ----------    ---------       ----------
Cash dividends ($0.015 per share)                         --           --              (52)
                                                  ----------    ---------       ----------
Balance, September 30, 1998                       $       --    $    (600)      $   46,110
                                                  ==========    =========       ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4

<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flow
                             (dollars in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
                                                                                     Three Months ended
                                                                                         September 30,
                                                                             --------------------------------
                                                                                 1999                 1998
                                                                             -----------           ----------
<S>                                                                          <C>                  <C>
Cash Flows from Operating Activities:
   Net income                                                                $    3,790            $    3,420
   Adjustments to reconcile net income to net
       cash used in operating activities:
          Gain on sale of loans and leases                                      (19,121)              (13,781)
          Depreciation and amortization                                           4,428                 2,066
          Interest accretion on interest-only and residual strips                (2,749)                   --
          Provision for credit losses                                               141                   126
          Accounts written off, net                                                 (10)                 (153)
   Loans and leases originated for sale                                        (262,737)             (204,356)
   Proceeds from sale of loans and leases                                       235,048               170,971
   Principal payments on loans and leases                                         1,290                 2,297
   Increase in accrued interest and fees on
       loan and lease receivables                                                (1,183)                 (845)
   Increase in overcollateralization on securitized loans and leases             (2,007)               (2,000)
   Decrease in interest-only and residual strips                                  4,278                 2,124
   Decrease (increase) in receivable for loans and leases sold                   13,277                (7,816)
   Increase in prepaid expenses                                                    (800)                 (580)
   Increase in accounts payable and accrued expenses                              3,610                   762
   Increase in deferred  income taxes                                             3,389                     7
   (Decrease) increase in loans in process                                       (3,319)               12,696
   Increase (decrease) in other, net                                              3,477                (1,317)
                                                                             ----------            ----------
Net cash used in operating activities                                           (19,198)              (36,379)
                                                                             ----------            ----------
Cash Flows from Investing Activities:
   Purchase of property and equipment, net                                       (2,800)               (1,624)
   Purchase of investment                                                            --                  (646)
   Principal receipts on investments                                                  6                   239
                                                                             ----------            ----------
Net cash used in investing activities                                            (2,794)               (2,031)
                                                                             ----------            ----------
</TABLE>

                                       5

<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
                Consolidated Statements of Cash Flow (continued)
                             (dollars in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                       Three Months ended
                                                                                          September 30,
                                                                              ---------------------------------
                                                                                  1999                   1998
                                                                              -----------             ---------
<S>                                                                          <C>                      <C>
Cash Flows from Financing Activities:
   Proceeds from issuance of subordinated debt                                $   45,249              $  25,843
   Redemptions of subordinated debt                                              (16,693)                (9,653)
   Net (repayments) borrowings on revolving lines of credit                       (1,722)                24,212
   Principal payments on note payable, other                                        (945)                  (563)
   Financing costs incurred                                                       (1,073)                (1,834)
   Cash dividend paid                                                               (250)                   (52)
   Repurchase of treasury stock                                                     (591)                    --
                                                                              ----------              ---------
Net cash provided by financing activities                                         23,975                 37,953
                                                                              ----------              ---------
      Net increase (decrease) in cash and cash equivalents                         1,983                   (457)
      Cash and cash equivalents, beginning of period                              22,395                  4,486
                                                                              ----------              ---------
      Cash and cash equivalents, end of period                                $   24,378              $   4,029
                                                                              ==========              =========

Supplemental disclosures of cash flow information
      Cash paid during the period for:
        Interest                                                              $    7,646              $   4,484
        Income taxes                                                          $       --              $   2,262
</TABLE>

                                       6


<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                               September 30, 1999

1.       Basis of Financial Statement Presentation

         American Business Financial Services, Inc. ("ABFS"), together with its
         subsidiaries (the "Company"), is a diversified retail financial service
         organization operating throughout the United States. The Company
         originates, sells and services loans to businesses secured by real
         estate and other business assets, mortgage and home equity loans,
         including loans to credit impaired borrowers secured by first and
         second mortgages and business equipment leases. In addition the Company
         sells subordinated debt securities to the public, the proceeds of which
         are used to fund loan and lease originations and the Company's
         operations.

         The accompanying unaudited consolidated financial statements have been
         prepared in accordance with generally accepted accounting principles
         for interim financial information and pursuant to the rules and
         regulations of the Securities and Exchange Commission. Accordingly,
         they do not include all the information and footnotes required by
         generally accepted accounting principles for complete financial
         statements. In the opinion of management, all adjustments (consisting
         of normal recurring accruals and the elimination of intercompany
         balances) considered necessary for a fair presentation have been
         included. Operating results for the three month period ended September
         30, 1999 are not necessarily indicative of financial results that may
         be expected for the full year ended June 30, 2000. These unaudited
         consolidated financial statements should be read in conjunction with
         the audited consolidated financial statements and notes thereto
         included in the Company's Annual Report on Form 10-K for the fiscal
         year ended June 30, 1999.

         Certain prior period financial statement balances have been
         reclassified to conform to the current period presentation. All
         outstanding share, average common share and earnings per common share
         amounts have been retroactively adjusted to reflect the effect of a 5%
         stock dividend declared August 18, 1999, and paid September 27, 1999.

         Recent Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
         the Statement of Financial Accounting Standards No. 133 "Accounting for
         Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS
         No. 133 establishes accounting and reporting standards for derivative
         instruments, including certain derivative instruments embedded in other
         contracts (collectively referred to as derivatives), and for hedging
         activities. It requires that entities recognize all derivatives as
         either assets or liabilities in the statement of financial position and
         measure those instruments at fair value. If certain conditions are met,
         a derivative may be specifically designated as (a) a hedge of the
         exposure to changes in the fair value of a recognized asset or
         liability or an unrecognized firm commitment (fair value hedge), (b) a
         hedge of the exposure to variable cash flows of a forecasted
         transaction (cash flow hedge), or (c) a hedge of the foreign currency
         exposure of a net investment in a foreign operation, an unrecognized
         firm commitment, an available-for-sale security, or a
         foreign-currency-denominated forecasted transaction. At the time of
         issuance SFAS No. 133 was to be effective on a prospective basis for
         all fiscal quarters of fiscal years beginning after June 15, 1999.
         Subsequently in August 1999, the FASB issued the Statement of Financial
         Accounting Standards No. 137, which deferred the effective date of the
         standard until years beginning after June 15, 2000. The adoption of
         this standard is not expected to have a material effect on the
         Company's financial condition or results of operations.

                                       7
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                               September 30, 1999

         In October 1998, the FASB issued Statement of Financial Accounting
         Standards ("SFAS No. 134"), "Accounting for Mortgage-Backed Securities
         Retained after the Securitization of Mortgage Loans Held for Sale by a
         Mortgage Banking Enterprise". SFAS No. 134, which became effective
         January 1, 1999, requires that after the securitization of a mortgage
         loan held for sale, the resulting mortgage-backed security or other
         retained interests be classified based on the Company's ability and
         intent to hold or sell the investments. As a result, retained interests
         previously classified as trading assets, as required by prior
         accounting principles, had been reclassified to available-for-sale on
         January 1, 1999.

2.       Loan and Lease Receivables - Available for Sale

         Loan and lease receivables available for sale which are held in the
         Company's portfolio were as follows (in thousands):
<TABLE>
<CAPTION>
                                                                           September 30,                   June 30,
                                                                                1999                         1999
                                                                            ------------                  ---------
<S>                                                                         <C>                           <C>
         Real estate secured loans                                          $  27,148                     $ 21,027
         Leases net of unearned income of  $2,699
                 and $1,543                                                    19,754                       13,451
                                                                            ---------                     --------
                                                                               46,902                       34,478
         Less: Allowance for credit losses on loans and leases
               available for sale                                                 833                          702
                                                                            ---------                     --------
                                                                            $  46,069                     $ 33,776
                                                                            =========                     ========
</TABLE>

3.       Interest-Only and Residual Strips

         Activity for interest-only and residual strips during the three-month
         period ended September 30, 1999 was as follows (in thousands):
<TABLE>
<CAPTION>

<S>                                                                          <C>
         Balance at beginning of period                                      $ 178,218
         Initial recognition of interest-only and residual strips               24,509
         Interest accretion                                                      2,749
         Cash receipts                                                          (4,278)
         Net adjustments to fair value                                           1,120
                                                                             ---------
         Balance at end of period                                            $ 202,318
                                                                             =========
</TABLE>

                                       8

<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)
                               September 30, 1999

4.       Servicing Rights

         Activity for servicing rights during the three-month period ended
         September 30, 1999 was as follows (in thousands):
<TABLE>
<CAPTION>

<S>                                                                          <C>
         Balance at beginning of period                                      $  43,210
         Initial recognition of servicing rights                                 9,344
         Amortization                                                           (2,455)
                                                                             ---------
         Balance at end of period                                            $  50,099
                                                                             =========
</TABLE>

         Servicing rights are periodically valued by the Company based on a
         discounted cash flow analysis of loans and leases remaining in the
         securitization trusts. A review for impairment is performed on a
         disaggregated basis, referred to as a stratum, for the predominant risk
         characteristics of the underlying loans and leases, which consist of
         loan type, credit quality and other factors. Impairments if they
         occurred would be recognized in a valuation allowance for each impaired
         stratum in the period of impairment. At September 30, 1999 no
         valuation allowance for impairment is required.

5.       Other Assets

         Other assets were comprised of the following (in thousands):
<TABLE>
<CAPTION>
                                                                           September 30,                   June 30,
                                                                                1999                         1999
                                                                            -----------                    --------
<S>                                                                         <C>                          <C>
         Goodwill, net of accumulated amortization
              of $2,197 and $1,913                                          $  14,734                      $ 15,018
         Financing costs, debt offering costs, net of
              accumulated amortization of $4,633 and $3,903                     4,865                         4,487
         Due from securitization trusts                                         3,780                         6,266
         Investments held to maturity (mature October 1999
         through April 2011)                                                    1,008                         1,014
         Real estate owned                                                        843                           843
         Other                                                                  3,751                         5,783
                                                                            ---------                      --------
                                                                            $  28,981                      $ 33,411
                                                                            =========                      ========
</TABLE>

                                       9
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)
                               September 30, 1999

6.       Subordinated Debt and Notes Payable

         Subordinated debt and notes payable were comprised of the following (in
         thousands):
<TABLE>
<CAPTION>
                                                                           September 30,                 June 30,
                                                                                1999                       1999
                                                                            ------------                 ---------
<S>                                                                         <C>                          <C>
         Subordinated debentures (a)                                        $  235,887                   $ 206,918
         Subsidiary subordinated debentures (b)                                  4,321                       4,735
         Warehouse revolving line of credit (c)                                 33,780                      42,626
         Warehouse revolving line of credit (d)                                  7,732                       3,764
         Warehouse revolving line of credit (e)                                  5,259                         102
         Revolving line of credit (f)                                            3,000                       5,000
         Repurchase agreement (g)                                                4,677                       4,677
         Senior subordinated debt (h)                                              617                       1,250
         Other debt                                                                959                       1,271
                                                                            ----------                   ---------
                                                                            $  296,232                   $ 270,343
                                                                            ==========                   =========
</TABLE>

         (a) Subordinated debentures due October 1999 through September 2009,
             interest rates ranging from 6.15% to 12.00%; subordinated to all of
             the Company's indebtedness.
         (b) Subsidiary subordinated debentures due October 1999 through May
             2003, interest rates ranging from 9.00% to 10.45%; subordinated to
             all of the Company's senior indebtedness.
         (c) $150 million warehouse revolving line of credit expiring October
             2000, interest rates ranging from LIBOR plus 1.375% to LIBOR plus
             2.0%, collateralized by certain loan receivables.
         (d) $20 million warehouse revolving line of credit expiring September
             2000, interest rates at prime less 1.0% or LIBOR at the Company's
             option, collateralized by lease receivables.
         (e) $150 million warehouse line of credit expiring August 2000,
             interest rate of LIBOR plus 1.0%, collateralized by loan
             receivables.
         (f) $5 million revolving line of credit expiring December 1999,
             interest rate of LIBOR plus 2.0%, collateralized by certain
             residual interests in securitization trusts.
         (g) Repurchase agreement due October 1999, interest rate of LIBOR plus
             0.5%, collateralized by certain lease backed securities.
         (h) Senior subordinated debt due through December 1999, interest rate
             of 12.0%, subordinated to certain subsidiary's senior indebtedness.


                                       10

<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)
                               September 30, 1999


7.       Earnings Per Share

         Following is a reconciliation of the Company's basic and diluted
         earnings per share calculations (in thousands except per share data):
<TABLE>
<CAPTION>
                                                                                   Three Months ended
                                                                                       September 30,
                                                                           ----------------------------------
                                                                              1999                     1998
                                                                           ---------                 --------
<S>     <C>                                                               <C>                       <C>
         Earnings
         (a)  Net income                                                   $   3,790                 $  3,420

         Average Common Shares
         (b) Average common shares outstanding                                 3,580                    3,700
             Average potentially dilutive shares                                 105                      124
                                                                           ---------                 ========
         (c) Average common and potentially dilutive shares                    3,685                    3,824
                                                                           =========                 ========

         Earnings Per Common Share
         Basic (a/b)                                                       $    1.06                 $   0.92
         Diluted (a/c)                                                     $    1.03                 $   0.90
</TABLE>

8.       Segment Information

         The Company has three operating segments: Loan and Lease Origination,
         Servicing, and Investment Note Services.

         The Loan and Lease Origination segment originates business purpose
         loans secured by real estate and other business assets, home equity
         loans including loans to credit-impaired borrowers, conventional first
         mortgage loans secured by one to four family residential real estate
         and small ticket and middle market business equipment leases.

         The Servicing segment services the loans and leases the Company
         originates both while held in the Company's portfolio and subsequent to
         securitization. Servicing activities include billing and collecting
         payments from borrowers, transmitting payments to investors, accounting
         for principal and interest, collections and foreclosure activities and
         disposing of real estate owned.

         The Investment Note Services segment markets the Company's subordinated
         debt securities pursuant to a registered public offering. The proceeds
         from the sale of subordinated debt are used to fund the Company's
         general operating and lending activities.

         All Other mainly represents segments that do not meet the Statement of
         Financial Accounting Standards No. 131 "Disclosures about Segments of
         an Enterprise and Related Information" quantitative or defined
         thresholds for determining reportable segments, financial assets not
         related to operating segments, unallocated overhead and other expenses
         of the Company unrelated to the reportable segments identified.

                                       11
<PAGE>

           American Business Financial Services, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (continued)
                               September 30, 1999


The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.

Reconciling items represent elimination of inter-segment income and expense
items

<TABLE>
<CAPTION>

Three months ended                    Loan and          Investment
September 30, 1999                     Lease               Note                                       Reconciling
(in thousands)                       Origination         Services        Servicing     All Other         Items        Consolidated
                                    ------------       ------------    ------------   ----------      ------------    -------------
<S>                                 <C>               <C>             <C>           <C>              <C>               <C>
External revenues:
    Gain on sale of loans and
      leases                           $19,121           $     -          $     -       $      -         $     -         $ 19,121
    Interest income                      1,409               226                -          3,050               -            4,685
    Non-interest income                    896                 -            3,118              -               -            4,014
Inter-segment revenues                       -             7,038                -          2,247          (9,285)               -
Operating expenses:
    Interest expense                     4,729             5,478               20          4,457          (7,038)           7,646
    Non-interest expense                10,460             1,610            1,356            431               -           13,857
    Inter-segment expense                2,247                 -                -              -          (2,247)               -
Income tax expense                       1,596                70              697            164               -            2,527
                                       -------           -------          -------       --------         -------         --------
Net income                             $ 2,394           $   106          $ 1,045       $    245         $     -         $  3,790
                                       =======           =======          =======       ========         =======         ========
Segment assets                         $86,508           $20,232          $49,349       $273,850         $     -         $429,939
                                       =======           =======          =======       ========         =======         ========

</TABLE>


                                       12
<PAGE>



American Business Financial Services, Inc. and Subsidiaries
PART 1. FINANCIAL INFORMATION (continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

         Our consolidated financial information set forth below should be read
in conjunction with the consolidated financial statements and the accompanying
notes to consolidated financial statements included in Item 1. of this Quarterly
Report, and the consolidated financial statements, notes to consolidated
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K
for the year ended June 30, 1999.

Forward Looking Statements

         When used in this Quarterly Report on Form 10-Q the words or phrases
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "projected," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including but not limited to general economic conditions, changes
in interest rates, changes in future residential real estate values, regulatory
changes (legislative or otherwise) affecting the real estate market and mortgage
lending activities, competition, demand for our services, availability of
funding, loan payment rates, delinquency and default rates, changes in factors
influencing the loan securitization market and other risks identified in our
Securities and Exchange Commission filings. Such factors, which are discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, could affect our financial performance and could cause the actual
results for future periods to differ materially from any opinion or statements
expressed herein with respect to future periods. As a result, we wish to caution
readers not to place undue reliance on any such forward looking statements,
which speak only as of the date made.

General

         American Business Financial Services, Inc. is a retail financial
services organization operating throughout the United States. We originate sell
and service business purpose loans, home equity loans, first mortgage loans and
equipment leases through our principal direct and indirect subsidiaries. We also
underwrite, process and purchase home equity loans through the Bank Alliance
Program whereby we purchase home equity loans from financial institutions that
do not meet the underlying guidelines of the selling institutions but meet our
underwriting criteria. Loans originated primarily consist of fixed rate loans
secured by first or second mortgages on single family residences. Our customers
include credit impaired borrowers and other borrowers who would qualify for
loans from traditional sources but who are attracted to our loan and lease
products due to our personalized service and timely response to loan or lease
applications. We originate loans and leases through a retail branch network of
26 offices. In addition we sell subordinated debt securities to the public, the
proceeds of which are used to fund loan and lease originations and our
operations.

Securitizations

         The ongoing securitization of loans and leases is a central part of our
current business strategy. We sell loans and leases through securitizations with
servicing retained in order to fund additional loan and lease originations and
to provide additional sources of revenue through retained mortgage and lease
servicing rights. We rely primarily on securitizations to generate cash proceeds
for repayment of warehouse credit facilities and other borrowings. Several
factors affect our ability to complete securitizations, including conditions in
the securities markets generally, conditions in the asset-backed securities
markets specifically and credit quality of the portfolio of loans and leases
serviced.

                                       13
<PAGE>

           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

Any substantial reduction in the size or availability of the securitization
market for loans and leases could have a material adverse effect on our results
of operations and financial condition.

     Our quarterly revenues and net income have fluctuated in the past and may
fluctuate in the future principally as a result of the timing and size of
securitizations and changes in market interest rates. The strategy of selling
loans and leases through securitizations requires building an inventory of loans
and leases over time, during which time costs and expenses are incurred. Since a
gain on sale is not recognized until a securitization is completed, operating
results for a given quarter can fluctuate significantly as a result of the
timing and level of securitizations.

         The gain on sale of loans and leases may be unfavorably impacted to the
extent we hold fixed-rate mortgage loans or leases in our available for sale
portfolio prior to securitization. A significant variable affecting the gain on
sale of loans and leases in a securitization is the spread between the average
coupon rate on fixed rate loans and leases, and the weighted average
pass-through rate to investors for interests issued in connection with a
securitization. Although the loan and lease coupon rate is fixed at the time the
loan or lease is originated, the pass-through rate to investors is not fixed
until the pricing of the securitization which occurs just prior to the sale of
the loans and leases. Therefore, if market rates required by investors increase
prior to securitization of the loans and leases, the spread between the average
coupon rate on the loans and leases and the pass-through rate to investors may
be reduced or eliminated.

         Our growth strategy is dependent upon our ability to increase our loan
and lease origination volume through both geographic expansion and growth in
current markets. The implementation of this strategy will depend in large part
on a variety of factors outside of our control, including, but not limited to,
our ability to obtain adequate financing on favorable terms, profitably
securitize our loans and leases on a regular basis and continue to expand in the
face of increasing competition. Our failure with respect to any of these factors
could impair our ability to successfully implement our growth strategy, which
could adversely affect our results of operations and financial condition.

Securitization Accounting Considerations

         When we securitize our loans and leases by selling them to trusts we
receive cash and a retained interest in the securitized loans and leases which
is called a residual interest. The trust issues multi-class securities, which
derive their cash flows from the pool of securitized loans and leases. These
securities which are senior to our residual interest in the trusts, are sold to
public investors. In addition, when we securitize our loans and leases we retain
the right, for a fee, to service the loans and leases. Servicing includes
billing and collecting payments from borrowers, transmitting payments to
investors, accounting for principal and interest, collections and foreclosure
activities and disposing of real estate owned.

         As the holder of residual interests in a securitization, we are
entitled to receive certain excess (or residual) cash flows. These cash flows
are the difference between the payments made by the loan and lease borrowers and
the sum of the scheduled and prepaid principal and interest paid to the
investors in the trust, servicing fees, trustee fees and, if applicable,
insurance fees. Overcollateralization requirements, representing an excess of
the aggregate principal balances of loans and leases in a securitized pool over
investor interests, are established to provide credit enhancement for the trust
investors. In order to meet the required overcollateralization levels, the trust
initially retains the excess cash flow until after the overcollateralization
requirements, which are specific to each securitization, are met.

                                       14
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         Gain on sale of loans and leases securitized represents the difference
between the net proceeds received and the allocated cost of loans and leases
securitized. The allocated cost of the loans and leases securitized is
determined by allocating their net carrying value between the loans and leases
securitized, our retained residual interests in the securitization and retained
servicing rights, based upon their relative fair values.

         The calculation of the fair value of residual interests and servicing
rights is based upon the present value of the future expected excess cash flows
from the securitized loans and leases and utilizes certain assumptions made by
management at the time loans and leases are sold. These assumptions include the
discount rate used to calculate present value, the rates of prepayment and
default rates on the pool of loans or leases. The rate of prepayment of loans
and leases may be affected by a variety of economic and other factors, including
prevailing interest rates and the availability of alternative financing to
borrowers. The effect of those factors on loan and lease prepayment rates may
vary depending on the type of loan or lease. Estimates of prepayment rates are
made based on management's expectation of future prepayment rates, which are
based, in part, on the historical rate of prepayment of the loans and leases and
other considerations. Although we believe we have made reasonable estimates of
prepayment rates and default assumptions, the actual prepayment and default
experience may materially vary from our estimates. The gain recognized upon the
sale of loans and leases will have been overstated if prepayments or losses are
greater than estimated. To the extent that prepayments or defaults differ from
the estimates made, adjustments of the gain on sale of loans and leases may be
required. Higher levels of future prepayments, delinquencies and/or liquidations
could result in a reduction in the value of residual interests, which would
adversely affect income in the period of adjustment.

         Interest-only and residual strips and servicing rights are periodically
revalued based on a discounted cash flow analysis of loans and leases remaining
in the trusts. The assumptions for prepayment and default rates are monitored
against actual experience and adjusted if warranted.


                                       15

<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         The following chart presents certain key assumptions used in the
initial valuation and periodic revaluation performed on our interest-only and
residual strips and servicing rights from securitizations during the first
quarter of fiscal 2000.

                                                 Initial             Periodic
                                                Valuation           Revaluation
   -----------------------------------------------------------------------------

   Discount rates
       Home equity loans                           11.0%                11.0%
       Business purpose loans                      11.0%                11.0%
       Business equipment leases                   11.0%                11.0%

   Annual prepayment rates
       Home equity loans                     2.0 - 24.0%(a)       2.0 - 24.0%(a)
       Business purpose loans                3.0 - 10.0%(b)       3.0 - 13.0%(b)
       Business equipment leases                     -- (c)               -- (c)

   Annual credit loss rates
       Home equity loans                           0.25%                0.25%
       Business purpose loans                      0.25%                0.25%
       Business equipment leases                   0.50%                0.50%

   Actual cumulative credit losses
       Home equity loans                              --                0.26%
       Business purpose loans                         --                0.11%
       Business equipment leases                      --                0.60%
   -----------------------------------------------------------------------------

    (a) Ramped over 12 to 18 months
    (b) Ramped over 24 months
    (c) Residual values are continuously adjusted based on actual experience.


                                       16
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

RESULTS OF OPERATIONS

Summary Financial Results
(dollars in thousands, except per share data)

                                             Three Months ended
                                                September 30,
                                           -----------------------
                                                                      Percentage
                                             1999           1998       increase
                                           ---------     ---------    ----------

Total revenues........................    $  27,820      $  18,824        47.8%
Total expenses........................       21,503         13,642        57.6
Net income............................        3,790          3,420        10.8

Return on average equity..............        25.03%         30.21%
Return on average assets..............         3.64           5.27

Earnings per share:
  Basic...............................    $    1.06      $    0.92        15.2%
  Diluted.............................         1.03           0.90        14.4
Dividends declared per share..........         0.07           0.015      366.7

         Net Income. For the first quarter of fiscal 2000 net income increased
$0.4 million, or 10.8%, to $3.8 million from $3.4 million for the first quarter
of fiscal 1999. Basic earnings per common share increased to $1.06 on average
common shares of 3,579,966 compared to $0.92 per share on average common shares
of 3,699,576 for the first quarter of fiscal 1999. Diluted earnings per common
share increased to $1.03 on average common shares of 3,684,548 compared to $0.90
per share on average common shares of 3,824,119 for the first quarter of fiscal
1999. All fiscal 1999 average common share and per share amounts have been
retroactively adjusted to reflect the effect of a 5% stock dividend declared
August 18, 1999, and paid on September 27, 1999.

         Increases in net income and earnings per share primarily resulted from
the impact of growth in the volume of loans and leases originated and
securitized during the period and increases in the collection of fee income due
to growth in loans and leases available for sale and securitized loans and
leases for which servicing was retained, referred to as the total managed
portfolio.

         In the first quarter of fiscal 2000, the quarterly dividend was
increased by 366.7% to $0.07 per share from $0.015 per share in the first
quarter of fiscal 1999. The common dividend payout ratio based on diluted
earnings per share was 6.8% for the first quarter of fiscal 2000, compared to
1.7% for the first quarter of fiscal 1999.

         As previously announced on July 17, 1998 our Board of Directors
authorized the repurchase of up to 10% of the outstanding shares of our common
stock over a one-year period. In May 1999 the repurchase period was extended for
an additional year to July 2000 to repurchase an additional 10%. In the first
quarter of fiscal 2000, 46,400 shares were repurchased representing 1.3% of the
outstanding shares. Of the prior repurchases 38,200 shares remained in treasury
after the use of shares for the 5% stock dividend described above.

                                       17
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         Total Revenues. For the first quarter of fiscal 2000, total revenues
increased $9.0 million, or 47.8%, to $27.8 million from $18.8 million for the
first quarter of fiscal 1999. Growth in total revenue was the result of
increased gains on sales of loans and leases as a result of the increased volume
of loans and leases securitized, increases in interest and fees collected on
loans and leases originated and, to a lesser extent, increases in servicing
income due to the growth of the total managed portfolio.

         Gain on Sale of Loans and Leases. Gain on sale of loans and leases
increased $5.3 million, or 38.7%, to $19.1 million for the first quarter of
fiscal 2000 from $13.8 million in the first quarter of fiscal 1999. The increase
was the result of selling $210.2 million of loans and leases through
securitizations in fiscal 2000, including, $24.2 million of business purpose
loans, $176.7 million of home equity loans and $9.3 million of equipment leases
compared to $13.6 million of business purpose loans, $126.3 million of home
equity loans and $13.5 million of equipment leases in the first quarter of
fiscal 1999.

         Gain on sale of loans and leases as a percentage of loans and leases
securitized were 9.1% in fiscal 2000, compared to 8.9% in fiscal 1999. Factors
impacting the year to year comparability of the gain percentage included
increases in the relative percentage of business purpose loans to home equity
loans securitized. Business purpose loans have a higher coupon rate which
results on an increased value of our residual interests in the pool of
securitized loans. This factor was offset by the impact of the January 1, 1999
adoption of the Statement of Financial Accounting Standards No. 134 "Accounting
for Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise" (SFAS No. 134). SFAS No.
134 requires that after the securitization of a mortgage loan held for sale, an
entity classify the resulting mortgage-backed security or other retained
interests based on its ability and intent to hold or sell those investments. In
accordance with the provisions of SFAS No. 134, we have reclassified our
retained interests from trading securities to available-for-sale securities. As
available-for-sale securities, subsequent adjustments to the fair value of
retained interests are recorded in stockholders' equity and reported as a
component of comprehensive income. The adoption of SFAS No. 134 did not have a
material effect on our financial condition, but reduced gains on sale by $3.3
million pre-tax in the quarter ended September 30, 1999.

The following schedule details our loan and lease originations during the
three-month periods ended September 30, 1999 and 1998 (in thousands):

                                             Three Months ended
                                                September 30,
                                       -------------------------------
                                          1999                 1998
                                       ----------           ----------

     Business purpose loans            $   23,411           $   12,688
     Home equity loans                    208,262              167,012
     Equipment leases                      15,509               24,656
                                       ----------           ----------

                                       $  247,182           $  204,356
                                       ==========           ==========


                                       18
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         Loan originations for our business loan subsidiary, American Business
Credit, Inc., which offers business purpose loans secured by real estate
increased $10.7 million, or 84.5%, to $23.4 million from $12.7 million in the
first quarter of fiscal 1999. This increase is attributable geographic to
expansion of American Business Credit's lending program including recent
expansion into the Chicago market place.

         Home equity loans originated by our subsidiaries Upland Mortgage, New
Jersey Mortgage and Investment Corp. and Processing Service Center increased
$41.3 million, or 24.7%, to $208.3 million from $167.0 million for the first
quarter of fiscal 1999. The home equity business line continued to phase in
advanced Internet technology through our web site www. UplandMortgage.com. This
site now takes online loan applications and incorporates our proprietary Rapid
Credit Approval system and an advanced e-mail system. These capabilities are
part of an overall strategy to pursue a fully automated web site by the first
quarter of the year 2000.

         Leases originated by our subsidiary American Business Leasing decreased
$9.1 million, or 37.1%, to $15.5 million from $24.6 million for the first
quarter of fiscal 1999. This decrease is a result of our reduced emphasis on the
leasing business and American Business Leasing's concentration on higher
yielding, more profitable leases by focusing on niche markets, so that it is
competing with other leasing companies of similar size.

         Interest and Fees. Interest and fee income for the first quarter of
fiscal 2000 increased $3.0 million, or 65.4%, to $7.5 million from $4.5 million
in the first quarter of fiscal 1999. Interest and fee income consists primarily
of interest income earned on loans and leases while held in our portfolio,
premiums earned on loans sold with servicing released, other ancillary fees
collected in connection with loan and lease originations and interest accretion
on the value of interest-only and residual strips. Interest income accretion on
interest-only and residual strips increased due to both the increases in the
interest-only and residual strip balance and increases in cash flow from our
residual interests in the trusts. As a greater balance of the securitized
portfolio seasons increases in the fair value of interest-only and residual
strips are realized as accretion income, which represents increases in the
present value of future cash flows from the securitized loans and leases due to
the passage of time.

         Interest income increased $2.4 million, or 100.1%, to $4.7 million from
$2.3 million for the first quarter of fiscal 1999. This increase was primarily
attributable to recording $2.7 million of interest accretion on the fair value
of interest-only and residual strips. This increase was partially offset by a
$0.6 million reduction in interest income on portfolio loans as a result of a
reduction in the duration of time portfolio loans accrued interest income prior
to securitization.

         Fee income increased $0.6 million, or 28.1%, to $2.8 million from $2.2
million for the first quarter of fiscal 1999 as a result of an increase in the
volume of loans originated for the three-month period ended September 30, 1999.

         Servicing Income. Servicing income is comprised of contractual and
ancillary fees collected on securitized loans and leases less amortization of
the servicing rights assets recorded at the time loans and leases are
securitized. For the first quarter of fiscal 2000, servicing income increased
$0.7 million, or 142.7%, to $1.2 million from $0.5 million for the first quarter
of fiscal 1999. The increase was the result of growth in the total managed
portfolio from $709.7 million at September 30, 1998 to $1.2 billion at June 30,
1999 to $1.3 billion at September 30, 1999.


                                       19
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         As a percentage of the average managed portfolio, servicing income for
the quarter increased to 0.10% from 0.08% in the prior year. This increase was
the result of the increased origination of loans with prepayment fees and the
collection of other ancillary fees.

         Total Expenses. For the first quarter of fiscal 2000, total expenses
increased $7.9 million, or 57.6%, to $21.5 million from $13.6 million for the
first quarter of fiscal 1999. As described in more detail below, this increase
was a result of increased interest expense attributable to the sale of
subordinated debt and borrowings used to fund loan and lease originations and
increases in sales and marketing, and general and administrative expenses
related to growth in loan and lease originations, the growth of the total
managed portfolio and the continued building of support area infrastructure to
support the increases in originated and managed portfolios.

         Interest Expense. For the first quarter of fiscal 2000, interest
expense increased $2.8 million, or 59.2%, to $7.6 million from $4.8 million for
the first quarter of fiscal 1999. The increase was attributable to an increase
in the amount of subordinated debt outstanding during the first quarter of
fiscal 2000, the proceeds of which were used to fund loan and lease originations
and investments in operations required to position us for future growth, and the
costs related to greater utilization of warehouse and credit line facilities to
fund loan and lease originations. Average subordinated debt outstanding during
the three months ended September 30, 1999 was $230.4 million compared to $117.7
million during the three months ended September 30, 1998. Average interest rates
paid on subordinated debt outstanding increased to 9.42% for during the three
months ended September 30, 1999 from 9.34% during the three months ended
September 30, 1998. Rates offered on subordinated debt increased to attract
additional funds as well as in response to general increases in market rates.
The average outstanding balances under warehouse and other credit lines were
$119.7 million during the three months ended September 30, 1999, compared to
$94.3 million during the three months ended September 1998.

         Provision for Credit Losses. The provision for credit losses on
portfolio loans and leases for the first quarter of fiscal 2000 was $0.1
million, which was consistent with the first quarter of fiscal 1999. An
allowance for credit losses for portfolio loans and leases is maintained
primarily to account for loans and leases that are delinquent and are expected
to be ineligible for sale into a future securitization. The allowance is
calculated based upon management's estimate of the expected collectibility of
loans and leases outstanding based upon a variety of factors, including but not
limited to, periodic analysis of the portfolio, economic conditions and trends,
historical credit loss experience, borrowers ability to repay, and collateral
considerations. Although we maintain an allowance for credit losses at the level
we consider adequate to provide for potential losses, there can be no assurances
that actual losses will not exceed the estimated amounts or that an additional
provision will not be required. The allowance for credit losses was $0.8 million
at September 30, 1999 compared to $0.7 million at June 30, 1999 and $1.1 million
at September 30, 1998. The changes in the allowance for credit losses are due
primarily to fluctuations in the balances of loan and lease receivables
available for sale to $46.9 million at September 30, 1999 from $34.5 million at
June 30, 1999 and $84.2 million at September 30, 1998.

         In addition to the allowance for credit losses on portfolio loans and
leases, certain assumptions are made regarding the expected impact of credit
losses on the fair value of interest-only strips and residual interests created
in securitizations. See "Securitization Accounting Considerations" for more
information regarding these credit loss assumptions.


                                       20
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         The following table summarizes the changes in the allowance for credit
losses by loan and lease type for the three months ended September 30, 1999 (in
thousands).

                                    Business     Home
                                    Purpose     Equity     Equipment
                                     Loans       Loans      Leases      Total
                                    --------  --------     ---------   -------

Balance at beginning of  period      $ 26         $243        $433        $702
Provision for credit losses            19           91          31         141
(Charge-offs) recoveries, net         (21)           2           9         (10)
                                    -----       ------     -------     -------

Balance at end of period             $ 24         $336        $473        $833
                                    =====       ======     =======     =======

         Charge-offs related to securitized loans and leases were generally
absorbed by securitization trusts.

         Sales and Marketing Expenses. For the first quarter of fiscal 2000,
sales and marketing expenses increased $2.3 million, or 42.1%, to $7.6 million
from $5.3 million for the first quarter of fiscal 1999. The increase was
primarily attributable to targeted television and radio advertising related to
home equity loans and advertising costs resulting from increased newspaper and
direct mail advertising related to sales of subordinated debt and loan products.
Subject to market conditions, we plan to continue to increase the amount of
funds spent on advertising throughout the United States to generate additional
increases in loan originations and sales of subordinated debt securities. As a
result, it is anticipated that sales and marketing expenses will continue to
increase in the future.

         General and Administrative Expenses. For the first quarter of fiscal
2000, general and administrative expenses increased $2.0 million, or 91.8%, to
$4.1 million from $2.1 million for the first quarter of fiscal 1999. The
increases were primarily attributable to increases in rent, telephone, office
expense, professional fees and other expenses incurred as a result of the
previously discussed growth in loan and lease originations and in the volume of
total loans and leases managed during fiscal 2000 and the continued building of
support area infrastructure to support the increases in originations and the
managed portfolio.

                                       21
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

BALANCE SHEET INFORMATION
(in thousands, except per share data)

Balance Sheet Data:

                                                 September 30,         June 30,
                                                     1999                1999
                                                --------------        ---------

Cash and cash equivalents                         $   24,378          $  22,395
Loan and lease receivables, net:
      Available for sale                              46,069             33,776
      Other                                            8,046              6,863
Interest-only and residual strips                    202,318            178,218
Servicing rights                                      50,099             43,210
Total assets                                         429,939            396,301
Subordinated debt and notes payable                  296,232            270,343
Total liabilities                                    368,063            338,055
Total stockholders' equity                            61,876             58,246
Book value per common share                            17.47              16.24

         Total assets increased $33.6 million, or 8.5%, to $429.9 million at
September 30, 1999 from $396.3 million at June 30, 1999 primarily due to
increases in interest-only and residual strips, loans and lease receivables
available for sale, and to a lesser extent, servicing rights.

         Interest-only and residual strips, which are residual interests created
in connection with securitizations, increased $24.1 million, or 13.5%, to $202.3
million from $178.2 million at June 30, 1999. We completed $210.2 million in
loan and lease securitizations during the first quarter of fiscal 2000,
resulting in the recording of $24.5 million of interest-only and residual
strips. In addition, interest accretion and increases in the fair value of
interest-only and residual strips recorded in the quarter were $2.7 million and
$1.1 million, respectively. These increases were offset by cash receipts
received during the quarter from securitization trusts of $4.3 million. Loans
and leases available for sale increased $12.3 million or 36.4% to $46.1 million
from $33.8 million at June 30, 1999. The balances of loans and leases available
for sale tend to fluctuate based on the timing and size of securitizations of
portfolio loans and origination volume during the quarter. Servicing rights
increased $6.9 million, or 15.9% to $50.1 million from $43.2 million at June 30,
1999, due to the recording of $9.3 million of mortgage servicing rights obtained
in connection with loan securitizations, partially offset by amortization of
servicing rights.

         Total liabilities increased $30.0 million, or 8.9%, to $368.1 million
from $338.0 million at June 30, 1999 due primarily to an increase in
subordinated debt and notes payable. The increase in subordinated debt and notes
payable of $25.9 million, or 9.6%, was principally attributable to net sales of
subordinated debt. Subordinated debt outstanding at September 30, 1999 was
$240.2 million. Borrowings net of repayments on lines of credit were stable at
$46.7 million compared to $46.5 million in the prior quarter. Other notes
payable and lines of credit decreased $2.9 million from the prior quarter due to
repayments. See "Liquidity and Capital Resources" for further detail.

                                       22
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

Managed Portfolio Quality

         Total delinquencies (loans and leases with payments past due greater
than 30 days) in the total managed portfolio were $44.0 million at September 30,
1999 compared to $37.6 million at June 30, 1999 and $21.1 million at September
30, 1998. Total delinquencies as a percentage of the total managed portfolio
(the "delinquency rate") were 3.28% at September 30, 1999 compared to 3.19% at
June 30, 1999 and 2.97% at September 30, 1998. The increase in the delinquency
rate from prior periods was attributable to the maturation of the managed
portfolio, which was $1.3 billion at September 30, 1999, $1.2 billion at June
30, 1999 and $709.7 million at September 30, 1998. Delinquent loans and leases
in the available for sale portfolio at September 30, 1999 were $1.6 million, or
3.9%. (See "Provision for Credit Losses" for further discussion of risks
associated with potential increases in delinquencies.)

         Total real estate owned ("REO"), comprising foreclosed properties and
deeds acquired in lieu of foreclosure, increased to $12.3 million, or 0.92% of
the total managed portfolio at September 30, 1999 compared to $9.9 million or
0.85% and $2.0 million or 0.30%, respectively, at June 30, 1999 and September
30, 1998. The increase in REO reflects the seasoning of the portfolio and the
results of loss mitigation initiatives of quick repossession of collateral
through accelerated foreclosure processes and "Cash For Keys" programs. Cash for
Keys is a program whereby in certain select situations, when collateral values
of loans support the action, a delinquent borrower may be offered a monetary
payment in exchange for the deed to a property held as collateral for a loan.
This process eliminates the need to initiate a formal foreclosure process, which
could take many months.

         Published statistics gathered from a national sample of sub-prime
mortgage companies by the Mortgage Information Corporation, have shown that
delinquency rates averaged 13.2% as of June 30, 1999, as compared to our current
delinquency rate of 3.28% and our June 30, 1999 delinquency rate of 3.19%. We
believe that our delinquency rate is the result of our centralized credit
underwriting structure, adherence to written underwriting standards and emphasis
on collections. Our standards are based on early identification of loans and
leases that have become credit problems, followed by a thorough evaluation and
implementation of appropriate action to work out these loans and leases. In
addition, the business purpose and home equity loans we originate have an
average loan-to-value ratio of 61.5% and 78.0%, respectively, and the
predominate share of our home mortgage products are first liens as opposed to
junior lien loans. We believe these factors may mitigate certain potential
losses on our managed portfolio.

        Included in total REO at September 30, 1999 was $0.8 million recorded
in our financial statements, and $11.5 million in loan securitization trusts.
Property acquired by foreclosure or in settlement of loan and lease receivables
is recorded in our financial statements at the lower of the cost basis in the
loan or fair value of the property less estimated costs to sell. The expected
impact of credit losses for delinquent loans, leases and REO property held by
securitization trusts are reflected through assumptions for credit losses used
in the estimation of the fair value of our interest-only and residual strips and
servicing rights. (See "Securitization Accounting Considerations" for further
information regarding these assumptions.)




                                       23
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
        Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         The following table provides data concerning delinquency experience,
REO and loss experience for the managed loan and lease portfolio (dollars in
thousands):

<TABLE>
<CAPTION>
                                      September 30, 1999          June 30, 1999         September 30, 1998
                                    -----------------------  -----------------------  -----------------------
                                        Amount        %          Amount        %         Amount         %
                                     -----------    ----      -----------    ----      ----------     ----
        Delinquency by Type
Business Purpose Loans
<S>                                  <C>                      <C>                      <C>
Total managed portfolio............. $   165,827              $   148,932              $  111,877
Period of delinquency
    31-60 days...................... $       710     .43%     $     1,506    1.01%     $    1,388     1.24%
    61-90 days......................       1,165     .70              475     .32           1,181     1.06
    Over 90 days....................       8,732    5.27            8,612    5.78           4,457     1.06
                                     -----------    ----      -----------    ----      ----------     ----
    Total delinquencies............. $    10,607    6.40%     $    10,593    7.11%     $    7,026     6.28%
                                     ===========    ====      ===========    ====      ==========     ====
REO................................. $     3,434              $     2,881              $    1,187
                                     ===========              ===========              ==========
Home Equity Loans
Total managed portfolio............. $ 1,006,075              $   858,806              $  467,647
                                     ===========              ===========              ==========
Period of delinquency
    31-60 days...................... $     5,614     .56%     $     4,836     .56%     $    4,918     1.05%
    61-90 days......................       4,807     .48            4,149     .48           1,658      .35
    Over 90 days....................      20,379    2.03           15,346    1.79           4,883     1.04
                                     -----------    ----      -----------    ----      ----------     ----
    Total delinquencies............. $    30,800    3.06%     $    24,331    2.83%     $   11,459     2.44%
                                     ===========    ====      ===========    ====      ==========     ====
REO................................. $     8,873              $     7,067              $      853
                                     ===========              ===========              ==========
Equipment Leases
Total managed portfolio............. $   168,973              $   169,180              $  130,141
                                     ===========              ===========              ==========
Period of delinquency
    31-60 days...................... $       300     .18%     $       389     .23%     $      659      .50%
    61-90 days......................         236     .14              425     .25             685      .53
    Over 90 days....................       2,011    1.19            1,826    1.08           1,269      .98
                                     -----------    ----      -----------    ----      ----------     ----
    Total delinquencies............. $     2,547    1.51%     $     2,640    1.56%     $    2,613     2.01%
                                     ===========    ====      ===========    ====      ==========     ====
              Combined
Total managed portfolio............. $ 1,340,875              $ 1,176,918              $  709,665
                                     ===========              ===========              ==========
Period of delinquency
    31-60 days...................... $     6,624     .49%     $     6,731     .57%     $    6,965      .98%
    61-90 days......................       6,208     .46            5,049     .43           3,525      .50
    Over 90 days....................      31,122    2.32           25,784    2.19          10,608     1.49
                                     -----------    ----      -----------    ----      ----------     ----
    Total delinquencies............. $    43,954    3.28%     $    37,564    3.19%     $   21,098     2.97%
                                     ===========    ====      ===========    ====      ==========     ====
REO................................. $    12,307              $     9,948              $    2,040
                                     ===========              ===========              ==========

Losses experienced during the
    period(a)(b) ................... $       761    .25 %     $     1,137     .12%     $      153      .09%
                                     ===========    ====      ===========    ====      ==========     ====
</TABLE>

(a) Percentage based on annualized losses and average total managed portfolio.
(b) Losses recorded on our books were $10,000 and losses absorbed by
securitization trusts were $751,000 for the three months ended September 30,
1999. Losses recorded on our books were $1.1 million and losses absorbed by
securitization trusts were $30,000 for the year ended June 30, 1999. All losses
were recorded on our books for the three months ended September 30, 1998.



                                       24
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
        Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

INTEREST RATE RISK MANAGEMENT

         A primary market risk exposure that we face is interest rate risk.
Profitability and financial performance is sensitive to changes in U.S. Treasury
yields, LIBOR yields and the spread between the effective rate of interest
received on loans and leases available for sale or securitized (generally fixed
interest rates) and the interest rates paid pursuant to credit facilities or the
pass-through rate to investors for interests issued in connection with
securitizations. A substantial and sustained increase in market interest rates
could adversely affect our ability to originate and purchase loans and leases.
The overall objective of our interest rate risk management strategy is to
mitigate the effects of changing interest rates on profitability and the fair
value of interest rate sensitive balances (primarily loans and leases available
for sale, interest-only strips, servicing rights and subordinated debt).

         Loans and Leases Available for Sale - Gain on sale of loans and leases
may be unfavorably impacted to the extent fixed-rate mortgage loans or leases in
the available for sale portfolio are held prior to securitization. A significant
variable affecting the gain on sale of loans and leases in a securitization is
the spread between the average coupon rate on fixed rate loans and leases, and
the weighted average pass-through rate to investors for interests issued in
connection with the securitization. Although the average loan and lease coupon
rate is fixed at the time the loan or lease is originated, the pass-through rate
to investors is not fixed until the pricing of the securitization which occurs
just prior to the sale of the loans and leases. Therefore, if market rates
required by investors increase prior to securitization of the loans and leases,
the spread between the average coupon rate on the loans and leases and the
pass-through rate to investors may be reduced or eliminated.

         Hedging strategies are utilized in an attempt to mitigate the effect of
changes in interest rates on fixed-rate loan and lease portfolios between the
date of origination and the date of securitization. These strategies include the
utilization of derivative financial instruments such as futures and forward
pricing on securitizations. The nature and quality of hedging transactions are
determined based on various factors, including market conditions and the
expected volume of mortgage loan and lease originations and purchases. The gain
or loss derived from these hedging transactions is deferred and recognized as an
adjustment to the gain on sale of loans and leases when the loans and leases are
securitized. During the first quarter of fiscal 2000, gains of $0.2 million were
incurred on hedging transactions (futures contracts), which were recognized as a
component of the gain on sale recorded on securitizations during the period. At
September 30, 1999 a hedge contract was open for the short-sale of $20 million
of U.S. Treasury securities. Unrealized losses on this contract were $30,000 at
period end. In addition, At September 30, 1999, we were obligated to satisfy a
loan securitization prefund requirement of $20.9 million of mortgage loans. This
prefund requirement was satisfied in the second quarter.

         In the future we may expand the types of derivative financial
instruments we use to hedge interest rate risk. Such instruments could include
interest rate swaps and interest rate options or other derivative instruments.

         We have implemented a hedging strategy in an attempt to mitigate the
effect of changes in market value of fixed-rate mortgage loans held for sale.
However, an effective interest rate risk management strategy is complex and no
such strategy can completely insulate us from interest rate changes. Poorly
designed strategies or improperly executed transactions may increase rather than
mitigate risk. In addition, hedging involves transaction and other costs. Such
costs could increase as the period covered by the hedging protection increases.
It is expected that such loss would be offset by income realized from
securitizations in that period or in future periods. As a result, we may be

                                       25
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)


prevented from effectively hedging fixed-rate loans held for sale, without
reducing income in current or future periods due to the costs associated with
hedging activities.

         Interest-only and Residual Strips and Servicing Rights - A portion of
the certificates issued to investors by securitization trusts are floating
interest rate certificates based on one-month LIBOR plus a spread. The fair
value of the excess cash flow we will receive from these trusts would be
effected by any changes in rates paid on the floating rate certificates. At
September 30, 1999, $95.4 million of debt issued by securitization trusts was
floating rate debt based on LIBOR representing 8.8% of total debt issued by
securitization trusts. Due to increases in LIBOR between June 30, 1999 and
September 30, 1999 the fair value of our interest-only and residual strips
decreased by $1.6 million. The decrease in fair value was recognized as part of
a net adjustment to other comprehensive income, which is a component of retained
earnings.

         A significant decline in market interest rates could increase the level
of loan prepayments, thereby decreasing the size of the total managed loan and
lease portfolio and the related projected cash flows. Higher than anticipated
rates of loan prepayments could require a write down of the fair value of the
related interest-only and residual strips and servicing rights, adversely
impacting earnings during the period of adjustment. Revaluation of our
interest-only and residual strips and servicing rights are periodically
performed. As part of the revaluation process assumptions used for prepayment
rates are monitored against actual experience and adjusted if warranted. It is
estimated that a 100 basis point increase in prepayment rates would decrease the
fair value of interest-only and residual strips by approximately $5.2 million
and the fair value of servicing rights by approximately $1.2 million.

         We attempt to minimize prepayment risk on interest-only strips and
servicing rights by requiring prepayment fees on business purpose loans and home
equity loans, where permitted by law. Currently, approximately 94% of business
purpose loans and 80% of home equity loans we originate are subject to
prepayment fees. In addition, we have found that credit impaired borrowers are
less sensitive to interest rates than monthly payments further reducing
prepayment expectations.

         Subordinated Debt - We also experience interest rate risk to the extent
that as of September 30, 1999 approximately $130.8 million of our liabilities
were comprised of fixed rate subordinated debt with scheduled maturities of
greater than one year. To the extent that market interest rates demanded for
subordinated debt increase in the future, the rates paid on replacement debt
could exceed rates currently paid thereby increasing interest expense and
reducing net income.

LIQUIDITY AND CAPITAL RESOURCES

         Our business requires continual access to short and long-term sources
of debt financing. Our cash requirements include the funding of loan and lease
originations, payment of interest expense, funding of over-collaterization
requirements in connection with our securitizations, payment of operating
expenses and funding of capital expenditures. We rely on borrowings such as
subordinated debt and warehouse credit facilities to fund these business
activities. At September 30, 1999, a total of $240.2 million of subordinated
debt was outstanding, and credit facilities totaling $429.7 million were
available, of which $56.8 million was drawn upon.

                                       26
<PAGE>


          American Business Financial Services, Inc. and Subsidiaries
        Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         We continue to significantly rely on access to the asset-backed
securities market through securitizations to generate cash proceeds for the
repayment of debt and to fund our ongoing operations. As a result of the terms
of the securitizations, we will receive less cash flow from the portfolios of
loans and leases securitized than we would otherwise receive absent
securitizations. Additionally, pursuant to the terms of the securitizations, we
act as the servicer of the loans and leases we securitize and in that capacity
are obligated to advance funds in certain circumstances which may create greater
demands on our cash flow than either selling loans with servicing released or
maintaining a portfolio of loans and leases.

         A majority of our loan originations are non-conforming mortgages to
subprime borrowers. Certain participants in the non-conforming mortgage industry
have experienced greater than anticipated losses on their securitization
residual interests due to the effects of increased credit losses and increased
prepayment rates, resulting in some competitors exiting the business or
recording valuation allowances or write downs for these conditions in fiscal
1999. In addition, unusual movements in the capital markets in fiscal 1999
resulted in increased demand for U.S. Treasury securities which had an adverse
impact on the demand for asset-backed securities including those backed by
non-conforming mortgage loans. As a result, some participants experienced
restricted access to capital required to fund loan originations, and have been
precluded from participation in the asset-backed securitization market. However,
we have maintained our ability to obtain funding and to securitize loans and
leases. Factors that have minimized the effect of adverse market conditions on
our business include our ability to originate loans and leases through
established retail channels, focus on credit underwriting, assessment of
prepayment fees on loans, diversification of lending in the home equity,
business loan and equipment lease markets and the ability to raise capital
through sales of subordinated debt securities pursuant to a registered public
offering.

         Subject to economic, market and interest rate conditions, we intend to
continue to transact additional securitizations of our loan and lease
portfolios. Any delay or impairment in our ability to securitize loans and
leases, as a result of market conditions or otherwise, could adversely affect
our results of operations.

         To a limited extent, we intend to continue to augment the interest and
fee income earned on loan and lease portfolios by selling loans and leases
either at the time of origination or from our portfolio to unrelated third
parties. These transactions also create additional liquid funds available for
lending activities.

         Subordinated Debt Securities - During the first quarter of fiscal 2000,
we sold $28.5 million in principal amount of subordinated debt securities with
maturities ranging between one day and ten years. As of September 30, 1999,
$240.2 million of subordinated debt was outstanding. Under a shelf registration
statement declared effective by the Securities and Exchange Commission on
October 15, 1999, we registered $300.0 million of subordinated debt for future
issuance. The proceeds from sales of subordinated debt securities will be used
to fund general operating and lending activities. We intend to meet our
obligation to repay such debt as it matures with income from operations,
including securitization or sale of loans or leases, working capital and cash
generated from additional debt financing. The utilization of funds for the
repayment of such obligations should not adversely affect operations.

                                       27
<PAGE>



           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         Credit Facilities - The following is a description of the warehouse and
other credit facilities utilized to fund the origination of loans and leases
prior to securitization and for other operating purposes as of September 30,
1999. All of these facilities are senior in right of payment to our subordinated
debt (in thousands).

<TABLE>
<CAPTION>
                                                                           Amount         Amount
                                                                         Committed       Utilized
                                                                        -----------     ---------
<S>                                                 <C>                  <C>            <C>
Warehouse revolving line of credit, expiring August 2000                 $  150,000     $   5,259
Warehouse revolving line of credit, expiring October 2000                   150,000        33,780
Warehouse revolving line of credit, expiring September 2000                  20,000         7,732
                                                                         ----------    ----------

Total warehouse facilities                                                  320,000        46,771
                                                                         ----------    ----------

Revolving line of credit, expiring December 1999                              5,000         3,000
Repurchase agreement                                                          4,677         4,677
Commercial paper conduit for lease production, expiring
 October 1999                                                               100,000         2,334

Total credit facilities                                                  $  429,677    $   56,782
                                                                         ==========    ==========
</TABLE>

         The warehouse revolving lines of credit are secured by loan and lease
receivables. The other credit facilities are secured with certain residual
interests in securitization trusts. The warehouse credit agreements require that
we maintain specific covenants regarding net worth, leverage and other
standards. At September 30, 1999, we are in compliance with the terms of all
loan covenants.

         Any failure to renew or obtain adequate funding under a warehouse
credit facility, or other borrowings, or any substantial reduction in the size
or pricing in the markets for loans and leases, could have a material adverse
effect on our results of operations and financial condition. To the extent we
are not successful in maintaining or replacing existing financing, we may have
to curtail our loan and lease production activities or sell loans and leases
rather than securitize them, thereby having a material adverse effect on our
results of operations and financial condition.

         We lease our corporate headquarters in Bala Cynwyd, PA under an
operating lease expiring in January 2003 at a minimum annual rental of
approximately $2.2 million. We lease additional office space in Bala Cynwyd, PA
under an operating lease expiring September 2004, at a minimum annual rental of
approximately $0.6 million. We also lease a facility in Roseland, New Jersey
under an operating lease expiring July 2003 at an annual rental of $0.8 million.
The corporate headquarters and Roseland leases have a renewal provision at an
increased annual rental.

Year 2000 Update

         A Year 2000 ("Y2K") Task Force was established to assess Y2K issues and
to implement a Y2K compliance program. The Task Force, which meets weekly,
includes members of the Information Technology Department, Finance Department,
Legal Department, representatives from all business units, and an independent
consultant with Y2K expertise. The Task Force reports monthly to executive
management. The Task Force has completed an assessment of the core information
technology (IT) systems and is continuing the process of evaluating the
remainder of the non-core IT systems as well as non-IT systems. The non-IT
systems include the telecommunications systems, business machines and building
and premises systems.


                                       28
<PAGE>

           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)

         The Task Force has adopted a five-phase approach to assess Y2K issues
and to address those issues that are reasonably within its control:

         Phase 1 - Awareness: The awareness process included contacting all
business units to educate management regarding the Y2K program and to discern
any potential issues. Awareness efforts are continuing through the span of the
project.

         Phase 2 - Assessment: An inventory was conducted of all core and
non-core IT hardware and software, including business applications, operating
systems, third-party products, and internal and external interfaces that may be
at risk. Each critical system was reviewed, rated for importance to business
operations and identified as "retain" or "retire". We are in the process of
replacing most core IT systems due to strategic and growth reasons unrelated to
the Y2K issue. All systems acquired as part of this enhancement project must be
certified by their vendors as Y2K compliant. Non-IT systems, including the
telecommunications systems, business machines, building and premises systems and
key suppliers, whose Y2K failures could have a material impact on our operation
were evaluated by obtaining specific responses from third parties. The
assessment phase also included the development of appropriate response plans,
such as repair, conversion, replacement or elimination of affected systems.

         Phase 3 - Renovation: This phase involved the remediation of Y2K issues
identified as a result of the assessment. All required remediation efforts have
been completed.

         Phase 4 - Validation: This phase involved establishing a test
environment, performing systems tests and validating the results on all IT
hardware, software and data processing infrastructure which includes mainframe,
network and server related equipment. All verification testing has been
completed. Validation of new "replacement" systems is being performed as part of
their implementation.

         Phase 5 - Implementation: This phase involved the deployment of the
appropriate Y2K compliant strategy based on the results of the Assessment,
Renovation and Validation phases.

Year 2000 Risks and Contingency Plans

         The majority of our IT hardware and infrastructure is less than 2 years
old, minimizing exposure to Y2K issues. This inventory was checked against
vendor provided Y2K information for validation. Also, we intend that all new
hardware and software acquisitions are represented and warranted by the vendors
as Y2K compliant and that any systems developed by in-house programmers will
continue to be created using Y2K compliant tools, platforms, and procedures.

         We have contacted suppliers who provide necessary goods and services,
including banking institutions who provide financial services, to evaluate their
Y2K compliance plans. Their responses were reviewed and evaluated to ensure that
no Y2K related event will materially impede the ability of our suppliers to
continue to provide needed goods and services as the Year 2000 is approached and
reached. We believe all responses received indicate that these goods and
services are, or will be, Year 2000 compliant.

         We estimated that the costs directly associated with the Y2K compliance
program would be approximately $0.8 million. This budgeted amount did not
include the costs associated with the "replacement" systems as referenced in
Phase 2. The funds necessary to complete the systems replacement project and the
Y2K compliance program are included in the Information Technology operating


                                       29
<PAGE>


           American Business Financial Services, Inc. and Subsidiaries
         Management's Discussion and Analysis of Financial Condition and
                       Results of Operations (continued)


budget. Approximately $0.6 million of the amount budgeted for costs directly
associated with the Y2K compliance program have been expended as of September
30, 1999 which include salaries for certain time spent by our internal Y2K
project team.

         Contingency plans have been developed that will be used, if necessary,
in the event that any hardware, software or other computer systems, or those of
our vendors are not compliant, based on risks identified as a result of the
assessment and testing phases of our Year 2000 compliance program. Contingency
plans were prepared for all business units. These plans detail what each
business unit will do if any or all components of their business process falters
due to Y2K complications. We believe that the key to minimizing the impact of
any Y2K problem is early recognition, effective communications and timely
response. Towards this end, our contingency plans also include the establishment
of a Y2K command center, as well as an Advisory Team, Management Team and an
Implementation Team, each with their defined responsibilities, to mitigate any
issues that may arise.


         While we fully expect that the precautions being taken will prepare us
for entering Year 2000, there is always the potential for risk due to unforeseen
events. Our failure or any of our material suppliers failure to bring their
systems into Year 2000 compliance on a timely basis may have a material adverse
effect on our operations.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

                  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Interest Rate Risk Management". Additional
quantitative and qualitative disclosures regarding market risk are contained in
the Company's Form 10-K for the fiscal year ended June 30, 1999.



                                       30
<PAGE>



American Business Financial Services, Inc. and Subsidiaries
PART II. OTHER INFORMATION

Item 1. Legal Proceedings

         On October 23, 1997, a class action suit was filed in the Superior
Court of New Jersey - Law Division, Essex County (the "Superior Court") at
Docket No. L-12066-97 against New Jersey Mortgage and Investment and Corp.
("NJMIC") by Alfred G. Roscoe, on behalf of himself and others similarly
situated. Mr. Roscoe sought certification that the action may be maintained as a
class action as well as unspecified compensatory damages and injunctive relief.
In his complaint, Mr. Roscoe alleged that NJMIC violated New Jersey's Mortgage
Financing on Real Estate Law, N.J.S.A. 46:10A-1 et seq., by requiring him and
other borrowers to pay or reimburse NJMIC for attorneys' fees and costs in
connection with loans made to them by NJMIC. Mr. Roscoe further asserted that
NJMIC's alleged actions violated New Jersey's Consumer Fraud Act, N.J.S.A.
56:8-1, et seq., and constituted common law fraud and deceit. On February 24,
1998, after oral argument before the Superior Court, an order was entered in
favor of NJMIC and against Mr. Roscoe granting NJMIC's Motion for Summary
Judgement. Mr. Roscoe appealed to the Superior Court of New Jersey - Appellate
Division (the "Appellate Division"). Oral argument on the appeal was heard on
January 20, 1999 before a two-judge panel of the Appellate Division. On February
3, 1999, the panel filed a per curiam opinion affirming the superior court's
ruling in favor of NJMIC.

         On March 4, 1999, a Petition for Certification for review of the final
judgement of the Superior Court was filed with the Supreme Court of New Jersey
(the "Supreme Court"). NJMIC filed its Brief on Opposition for Certification on
March 16, 1999, which pleading was followed by the Petitioner's filing of a
Reply Brief. No decision has been rendered by the Supreme Court at this time.

         Pursuant to the terms of the Agreement for Purchase and Sale of Stock
of NJMIC between the Company and the former stockholders of NJMIC, such former
stockholders are required to indemnify the Company up to $16.0 million in
connection with any losses related to, caused by or arising from NJMIC's failure
to comply with applicable law to the extent such losses exceed $100,000.
Such former stockholders have agreed to defend the Company in this suit.

         Additionally from time to time, we are involved as plaintiff or
defendant in various legal proceedings arising in the normal course of its
business. While the ultimate outcome of these various legal proceedings cannot
be predicted with certainty, it is the opinion of management that the resolution
of these legal actions should not have a material effect on our financial
position, results of operations or liquidity.

Item 2. Changes in Securities - None

Item 3. Defaults Upon Senior Securities - None

Item 4. Submission of Matters to a Vote of Security Holders - None

Item 5. Other Information - None


                                       31
<PAGE>


American Business Financial Services, Inc. and Subsidiaries
PART II. OTHER INFORMATION - continued

Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits


     Exhibit
     Number            Description of Exhibit
     -------           ----------------------
       10.1            Lease Agreement dated August 30, 1999 related to One
                       Presidential Boulevard

       10.2            Employment Agreement between American Business Financial
                       Services, Inc. and Albert Mandia

       10.3            Change in Control Agreement between American Business
                       Financial Services, Inc. and Albert Mandia

         27            Financial Data Schedule

(b)      Reports on Form 8-K:

         No reports on Form 8-K were filed during the quarter ended September
30, 1999.

                                       32
<PAGE>



                                    SIGNATURE

         Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

                                      AMERICAN BUSINESS FINANCIAL SERVICES, INC.




DATE: November 15, 1999               BY:  /s/ Albert W. Mandia
      -----------------                    -------------------------------------
                                           Albert W. Mandia
                                           Executive Vice President and Chief
                                           Financial Officer



                                       33
<PAGE>


           American Business Financial Service, Inc. and Subsidiaries
                                  Exhibit Index



     Exhibit
      Number           Description of Exhibit
      ------           ----------------------
       10.1            Lease Agreement dated August 30, 1999 related to
                       One Presidential Boulevard

       10.2            Employment Agreement between American Business Financial
                       Services, Inc. and Albert Mandia

       10.3            Change in Control Agreement between American Business
                       Financial Services, Inc. and Albert Mandia

        27             Financial Data Schedule




                                       34