<PAGE> 1


                       SECURITIES AND EXCHANGE COMMISSION
                              450 5TH STREET, N.W.
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
      Act of 1934 For the Year Ended March 31, 1998
                                      OR
[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities 
      Exchange Act of 1934

      For the transition period from __________ to ___________

                           COMMISSION FILE NO. 0-22499

                            BAYONNE BANCSHARES, INC.
                            ------------------------ 
             (Exact name of registrant as specified in its charter)

                  DELAWARE                         22-3511899
                  --------                         ----------
           (State or other jurisdiction of         (I.R.S. Employer
            incorporation or organization)         Identification Number)

      568 BROADWAY, BAYONNE, NEW JERSEY               07002
      ---------------------------------               -----
      (Address of Principal Executive Offices)        (Zip Code)

                                 (201) 437-1000
                                 --------------
                         (Registrant's Telephone Number)

Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK, PAR 
                                                            -----------------
                                                            VALUE $.01 PER SHARE
                                                            --------------------
                                                               (Title of Class)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
YES   X     No 
    -----      -----

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K.
[  ]

      As of March 31, 1998, the aggregate market value of the voting stock held
by persons other than the directors and executive officers of the Registrant,
computed by reference to the closing sales price of the Registrant's common
stock on the Nasdaq National Market on March 31, 1998, as reported in The Wall
                                                                      --------
Street Journal, was approximately $124.4 million. There were 9,088,581 shares of
--------------
the Registrant's Common Stock issued and outstanding as of March 31, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

      None


<PAGE> 2


     The Form 10-K filed by the Registrant on June 29, 1998 is hereby amended
to include the information required to be disclosed under Part III of the Form
10-K.

                                    PART III

ITEM 10.    DIRECTORS AND OFFICERS OF THE REGISTRANT

INFORMATION WITH RESPECT TO THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

      The following table sets forth, as of a recent date, the names of the
Directors and Named Executive Officer, as defined below, of Bayonne Bancshares,
Inc. (the "Company"); their ages; a brief description of their recent business
experience, including present occupations and employment; certain directorships
held by each; the year in which each became a Director and the year in which
their terms as Director of the Company expire. The table also sets forth the
amount of Common Stock and the percent thereof beneficially owned by each
Director and Named Executive Officer and all Directors and executive officers as
a group as of a recent date.

<TABLE>
<CAPTION>

                                                                             SHARES OF
NAME AND PRINCIPAL                                             EXPIRATION   COMMON STOCK
OCCUPATION AT PRESENT                               DIRECTOR   OF TERM AS   BENEFICIALLY     PERCENT OF
AND FOR PAST FIVE YEARS                       AGE    SINCE(1)   DIRECTOR      OWNED(2)         CLASS
-----------------------                       ---    --------   --------      --------         -----

DIRECTORS

<S>                                            <C>     <C>         <C>       <C>                 <C> 
Patrick F.X. Nilan(3)                          68      1963        1998      280,823(4)(5)       3.1%
  Chairman of the Board of the Company                                              (6)
  and the Bank.  Mr. Nilan served as
  President and Chief Executive Officer of
  the Bank until his retirement in June
  1997.

Joseph L. Wisniewski                           67      1967        1998       91,826(5)(6)       1.0%
  Retired Senior Vice President of the
  Bank.  Mr. Wisniewski was employed by
  the Bank in various capacities from 1956
  until his retirement in August 1996.

James F. Sisk                                  59      1983        2000       74,583(4)(5)        *
  Mr. Sisk is the Public Safety Director of
  the City of Bayonne.  He served as the
  Chief of Police of the City of Bayonne
  until 1996.

Patrick D. Conaghan                            61      1986        1999      110,440(4)(5)       1.2%
  Partner in the law firm of Conaghan &
  Conaghan.

Frederick G. Whelpley                          77      1973        1999       93,311(4)(5)       1.0%
  Retired Chief Executive Officer of
  Bayonne Hospital.

</TABLE>


                                                    2

<PAGE> 3

<TABLE>
<CAPTION>

                                                                             SHARES OF
NAME AND PRINCIPAL                                             EXPIRATION   COMMON STOCK
OCCUPATION AT PRESENT                               DIRECTOR   OF TERM AS   BENEFICIALLY     PERCENT OF
AND FOR PAST FIVE YEARS                       AGE    SINCE(1)   DIRECTOR      OWNED(2)         CLASS
-----------------------                       ---    --------   --------      --------         -----

<S>                                            <C>     <C>        <C>       <C>                   <C> 
Michael Nilan(3)                               34      1997       1999       86,276(6)(7)         *
  President and Chief Executive Officer                                            (8)
  of the Company since February 1997
  and the Bank since July 1997.
  Mr. Nilan was employed by the Bank in
  various capacities prior to assuming the
  positions of President and Chief
  Executive Officer of the Company and
  the Bank.

NAMED EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS

Eugene V. Malinowski, C.P.A.                   58        --         --       40,535(8)            *
  Vice President and Chief Financial
  Officer of the Company and the Bank.
  Prior to joining the Bank, Mr. 
  Malinowski was Vice President, Chief 
  Operating Officer and Chief Financial 
  Officer of a telephone reseller, and 
  prior to that was Executive Vice 
  President and Chief Financial Officer
  of a commercial bank.

Directors and executive officers a Group        --        --        --      856,116(9)           9.4%
(10 persons)
</TABLE>
-------------------------------
*   Represents less than 1.0% of the Company's common stock.
(1) Includes years of service as a Director of First Savings Bank of New Jersey,
    SLA (the "Bank").
(2) Each person effectively exercises sole (or shares with spouse or other 
    immediate family member) voting or dispositive power as to shares reported 
    herein.
(3) Patrick F.X. Nilan is the father of Michael Nilan.
(4) Includes 19,915, 3,983, 4,049 and 3,983 options awarded to Messrs. Patrick
    F.X. Nilan, Conaghan, Whelply and Sisk, respectively, pursuant to the
    Bayonne Bankshares M.H.C. and First Savings Bank of New Jersey, SLA 1995
    Stock Option Plan (the "1995 Stock Option Plan"), that are currently
    exercisable or will become exercisable in 60 days. Upon consummation of the
    Conversion and Reorganization, the Company adopted the 1995 Stock Option
    Plan and thereby agreed to issue Common Stock in accordance with the terms
    of such Plan. The adjusted exercise price of all of the options that have
    been awarded to date pursuant to the 1995 Stock Option Plan is $4.43.
(5) Includes 23,898, 4,776, 4,776 and 4,776 shares awarded to Messrs. Patrick
    F.X. Nilan, Conaghan, Whelply and Sisk, respectively, pursuant to the
    Bayonne Bankshares M.H.C. and First Savings Bank of New Jersey, SLA 1995
    Recognition and Retention Plan (the "1995 Recognition Plan") that have not
    vested. Includes 9,738 shares awarded to each of Messrs. Patrick F.X. Nilan,
    Wisniewski, Sisk, Conaghan and Whelply pursuant to the Bayonne Bancshares,
    Inc. 1998 Stock-Based Incentive Plan (the "Incentive Plan") that have not
    vested. Awards granted under the 1995 Recognition Plan and the Incentive
    Plan vest in equal installments of 20% per year. Upon consummation of the
    Conversion and Reorganization, the Company adopted the 1995 Recognition Plan
    and thereby agreed to issue Common Stock in accordance with the terms of
    such Plan. Each recipient has voting power as to the shares awarded.

                                      3

<PAGE> 4



(6) Includes 13,429, 7,901 and 10,029 shares allocated to Messrs. Patrick F.X.
    Nilan, Joseph L. Wisniewski and Michael Nilan, respectively, pursuant to the
    ESOP for which each has sole voting power.
(7) Includes 6,069 options awarded to Mr. Michael Nilan pursuant to the 1995
    Stock Option Plan that are currently exercisable or will become exercisable
    in 60 days.
(8) Includes 32,709 and 24,348 shares awarded to Mr. Michael Nilan under the
    1995 Recognition Plan and the Incentive Plan, respectively, and 21,424
    shares awarded to Mr. Malinowski under the Incentive Plan, that have not
    vested. Shares awarded under the 1995 Recognition Plan and the Incentive
    Plan vest in equal annual installments of 20% per year. Each recipient has
    voting power as to the shares awarded.
(9) Includes 82,417 shares awarded under the 1995 Recognition Plan that have not
    vested as to which voting may be directed. Includes 54,688 options awarded
    under the 1995 Stock Option Plan that are currently exercisable or will
    become exercisable in 60 days. Includes 94,462 shares awarded under the
    Incentive Plan that have not vested as to which voting may be directed.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Exchange Act requires the Company's officers (as
defined in regulations promulgated by the SEC thereunder) and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.

    Based solely on a review of copies of such reports of ownership furnished to
the Company, or written representations that no forms were necessary, the
Company believes that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with except that one reportable transaction by each of
Messrs. Patrick F.X. Nilan, Conaghan, Whelpy, Michael Nilan and Sisk was not
reported on a timely basis on a Form 4. Each required filing was subsequently
filed.

ITEM 11.    EXECUTIVE COMPENSATION

DIRECTORS' COMPENSATION

    DIRECTORS' FEES. In connection with the conversion and reorganization of the
Bank to the stock holding company form of organization (the "Conversion and
Reorganization"), and as a result of the transition to operating as a publicly
owned company, the Board of Directors determined to restructure the compensation
of directors to emphasize stock-based incentives and reduce the reliance on
cash-based compensation. Accordingly, in 1997, the Board of Directors reduced
the quarterly retainer for non-employee directors by 50% and the fees paid to
non-employee directors for each meeting attended by 33 1/3%. Non-employee
directors presently receive $500 for each Board of Directors meeting attended,
plus a $3,000 retainer each quarter. The Chairman of the Board receives $665 for
each Board of Directors meeting attended, plus a quarterly retainer of $3,750.
Nonemployee directors serving on the Asset/Liability Committee and the Audit
Committee are paid $250 for each meeting attended, and non-employee directors
serving on the Security and Investment Committee are paid $500 monthly.

    In 1987, the Bank, prior to its reorganization into the mutual holding
company form of organization, entered into annuity compensation agreements with
each of the Bank's current directors. The Bank paid all of its obligations under
the agreements in 1987, and therefore, the agreements do not represent a current
expense for the Bank. Pursuant to the agreements, the Bank currently pays each
outside director an annual benefit of $16,000. The payments will continue to be
made over the lifetime of each outside director with no fewer than 120 monthly
payments, which commenced in 1992, to be made to each director or his
beneficiary, and are in addition to other fees received by directors. These
agreements are fully funded by Presidential Life Insurance Company and the Bank
is a mere conduit for payments to each outside director.

                                        4

<PAGE> 5



    CONSULTING AGREEMENT. The Company and Patrick F.X. Nilan entered into a
three year consulting agreement subsequent to Mr. Nilan's retirement as
President and Chief Executive Officer of the Bank. Pursuant to the agreement,
Mr. Nilan will provide advice with respect to all areas in which the Company or
the Bank does business and in which Mr. Nilan has special knowledge, skill and
expertise, utilize his business and industry contacts to assist with the
implementation of the Bank's business plan, represent the Company and the Bank
at civic and community functions, and advise the Company and the Bank on
strategic planning matters, government affairs, industry trends and economic
factors affecting the Bank's business and future prospects. Mr. Nilan will be
paid a fee of $100,000 annually for his services.

    INCENTIVE PLAN. The Company's shareholders approved the Bayonne Bancshares,
Inc. 1998 Stock-Based Incentive Plan (the "Incentive Plan") under which all
directors of the Company and the Bank are eligible to receive stock-based
compensation awards. Under the Incentive Plan, each outside director of the
Company and Bank was granted non-statutory stock options to purchase 24,346
shares of Common Stock (with Limited Rights), and awards of 9,738 shares of
Common Stock ("Stock Awards") (collectively, the "Directors' Awards") on April
27, 1998, which vest in five equal installments commencing April 27, 1999. The
Limited Rights provide, in the event of a change in control, a lump sum cash
payment equal to the difference between the exercise price of the related option
and the fair market value of the shares of Common Stock subject to the option on
the date of exercise, less any applicable tax withholding. The non-statutory
stock option awards vest in five (5) equal annual installments commencing on
April 27, 1999, and have an exercise price of $16.31. All options granted under
the Incentive Plan expire 10 years from the date of grant. In the event an
outside director ceases service due to death or disability, all Directors'
Awards will immediately vest or become exercisable and all stock options will
remain exercisable for a period of three (3) years.

EXECUTIVE COMPENSATION

    THE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE GRAPH
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE EXCHANGE ACT,
EXCEPT AS TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.

    COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the Securities and Exchange Commission ("SEC"), the Company is
required to provide certain data and information in regard to the compensation
and benefits provided to the Company's Chief Executive Officer and other
executive officers of the Company for the fiscal year ended March 31, 1998. The
disclosure requirements for the Chief Executive Officer and other executive
officers include a report explaining the rationale and considerations that led
to fundamental compensation decisions affecting those individuals.

    The following policies and procedures were utilized to determine executive
compensation levels for fiscal 1998. As a result of the Conversion and
Reorganization and other operational changes, subjective qualitative measures
were more heavily relied upon by the Compensation Committee of the Company (the
"Committee") than quantitative measures.

    Compensation Policies and Procedures. The Committee consists of the entire
    ------------------------------------
Board of Directors of the Company, The Committee is responsible for
administering the compensation and benefit programs for the executive officers
and employees of the Company and the Bank and to make recommendations regarding
the amount and composition of compensation paid to the executive officers,
including the President and Chief Executive Officer. Members of the Committee
who are employees of the Company or the Bank, however, do not participate in the
Committee's determination of their own compensation package.

    The Committee's goal is to establish executive compensation policies that:


                                        5

<PAGE> 6



    o       Link the interests of management and shareholders;

    o       Link executive compensation with the long-term performance of 
            Bayonne Bancshares, Inc. and its subsidiaries;

    o       Attract, retain and reward highly qualified and productive persons;

    o       Link compensation to individual performance; and

    o       Establish compensation levels that are internally equitable and
            externally competitive with comparable financial institutions.

    The compensation program developed by the Committee to achieve these goals
consists primarily of (1) a base salary; (2) an annual bonus; and (3)
stock-based compensation. In addition, executive officers participate in other
benefit plans available to all employees, including a Retirement Plan, Employee
Stock Ownership Plan ("ESOP"), and 401(K) Plan.

    As a result of the Conversion and Reorganization of the Bank, the Committee
revised the executive compensation policies to reflect the status of the Company
as a public company. The Committee believes that the compensation policies it
has established contributed to the success of the Company in making the
transition to a publicly owned company, as well as to the increase in net income
and earnings per share, recorded by the Company for the year ended March 31,
1998.

    Base Salary. The Committee annually reviews and evaluates base salary for
    -----------
all executive officers, and in conducting such reviews places primary
consideration upon the Bank's overall objectives and performance, peer group
comparisons and individual performance. In addition, salary levels reflect an
individual officer's responsibilities and experience and the Committee's
evaluation of competitive marketplace conditions.

    Salary levels recommended by the Committee are intended to be consistent and
competitive with the practices of comparable financial institutions and each
executive's level of responsibility. The Committee generally utilizes internal
and/or external surveys of compensation paid to executive officers performing
similar duties for depository institutions and their holding companies with
particular focus on the level of compensation paid by comparable institutions in
the metropolitan New York region. For the fiscal year ended March 31, 1998, the
Company utilized an internal survey prepared by William M. Mercer, Inc.

    Although the Committee's recommendations are discretionary and no specific
formula is used for decision making, salary determinations reflect the overall
performance of the Company and the Bank and the performance of the individual
executive officer. In addition, for the fiscal year ended March 31, 1998, the
Committee gave consideration to the adjustments required to be made by each
executive officer in response to the transition of the Company to a publicly
owned entity in determining the appropriate salary levels.

    Annual Incentives. In determining annual bonus awards, the Committee
    -----------------
considers the entire compensation package of each executive officer. Although
all determinations by the Committee regarding bonuses paid to executive officers
are discretionary and no specific formula is used for awarding bonuses, the
primary factors considered by the Committee include the profitability of the
Company and the Bank, the level of responsibility of each executive officer and
their contribution to the financial performance of the Company and the Bank. No
particular weighting of the factors considered by the Committee is used to
calculate bonuses.

    Stock-Based Compensation. The Company maintains stock benefit plans,
    ------------------------
discussed in more detail below, for the purpose of providing long-term
incentives to its employees, including executive officers, through the award of
stock options and restricted stock awards. The Committee believes that stock
options and restricted stock awards align the interests of management with
shareholders because the executive officers receive value if the market value of
the Common Stock increases. Under the Company's stock option plans, the exercise
price of

                                        6

<PAGE> 7



options granted to executive officers is equal to or greater than the market
value of the Common Stock on the date of grant. Therefore, the options have
value only to the extent the share price of the Common Stock increases.
Furthermore, although the Committee has discretion to determine the terms of
options and stock awards granted to executive officers and other employees of
the Company and the Bank, options and stock awards granted under the Company's
plans typically vest in equal annual installments over a period of five years,
which provides incentives to management to maximize both short-term and
long-term shareholder value. The Committee considered past awards of stock
options and restricted stock awards, as well as possible future awards, in
determining the overall compensation package of each executive officer.

    1995 STOCK OPTION PLAN. During the fiscal year ended March 31, 1996, the
Bank adopted the 1995 Stock Option Plan, which was subsequently adopted by the
Company. Subsequent to the adoption of the 1995 Stock Option Plan, all of the
executive officers of the Bank received grants of options to purchase shares of
the Bank Common Stock, which options commenced vesting in equal annual
installments of 20% on August 9, 1996. Upon consummation of the Conversion and
Reorganization, the Company adopted the 1995 Stock Option Plan and each option
to purchase Bank Common Stock under such Plan was exchanged for 2.933 options to
purchase Company Common Stock. The Committee did not make any additional awards
under the 1995 Stock Option Plan during fiscal 1998.

    1995 RECOGNITION AND RETENTION PLAN. The Bank and its former mutual holding
company adopted the 1995 Recognition Plan and made awards of restricted stock to
all of the executive officers of the Bank in July 1995. The awards commenced
vesting in equal annual installments of 20% on July 28, 1996. Upon consummation
of the Conversion and Reorganization, the Company adopted the 1995 Recognition
Plan, and all previously awarded, but unvested shares of Bank Common Stock and
any shares that had not yet been awarded were converted into 2.933 shares of
Company Common Stock. The Committee did not make any additional awards under the
1995 Recognition Plan during fiscal 1998.

    1998 INCENTIVE PLAN. Due in part to the Company's transition to a publicly
owned company and the desire of the Board of Directors to link executive
compensation to the performance of the Common Stock, the Board adopted the
Bayonne Bancshares, Inc. 1998 Stock-Based Incentive Plan, which the shareholders
approved on March 27, 1998. Pursuant to the Incentive Plan, executive officers
and other employees of the Company and Bank are eligible to receive grants of
stock options to purchase shares of Common Stock (with Limited Rights) and
awards of Common Stock ("Stock Awards"). Subject to certain adjustments to
prevent dilution of stock options and Stock Awards granted to participants, the
maximum number of shares reserved for purchase pursuant to the exercise of
options and option-related Awards that may be granted under the Incentive Plan
is 486,919 shares. The maximum number of the shares reserved for Stock Awards is
194,768 shares.

    A committee of non-employee directors of the Company makes awards under the
Incentive Plan and determines the terms of all awards. Options granted may be
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. Incentive stock options afford tax benefits to the recipient upon
compliance with certain conditions set forth in the Code and do not result in
tax deductions for the Company. The Limited Rights provide, in the event of a
change in control, a lump sum cash payment equal to the difference between the
exercise price of the related option and the fair market value of the shares of
Common Stock subject to the option on the date of exercise, less any applicable
tax withholding. In no event may options be exercised more than 10 years from
the date of grant. The committee of outside directors that administers the
Incentive Plan may condition the vesting of options and Stock Awards granted
under the Plan on the attainment of predetermined performance goals.

    No awards were made under the Incentive Plan during fiscal 1998. Prior to
granting awards under the Incentive Plan, the Company retained an independent
compensation consultant to review the current compensation of executive officers
and to make recommendations as to awards to such officers under the Incentive
Plan. Following review and consideration of the compensation consultant's
report, the committee determined on April

                                        7

<PAGE> 8



27, 1998, to grant both stock options and stock awards pursuant to the Incentive
Plan to certain executive officers of the Company and the Bank. All of the stock
options and stock awards initially granted will vest in equal annual
installments of 20% commencing on April 27, 1999.

    Chief Executive Officer. Michael Nilan entered into an employment agreement
    -----------------------
with the Bank during fiscal 1998 that provides for a base salary of $150,000. In
addition, Mr. Nilan was paid a bonus of $2,000 for fiscal 1998 and participated
in the benefit plans available to all officers and employees of the Company and
the Bank. No specific formula was used in connection with the Committee's
decisions regarding Mr. Nilan's base salary, bonus and other compensation, nor
did the Committee set specified compensation levels based on the achievement of
particular quantifiable objectives or financial goals of the Company and the
Bank. Rather, the Committee considered the overall financial performance of the
Company and the Bank, the responsibilities and experience of Mr. Nilan and the
individual contributions made by Mr. Nilan. Specifically, the factors considered
by the Committee in determining Michael Nilan's overall compensation package
included:

    o       The profits recorded by the Company and the Bank for fiscal year 
            1998;
    o       The increase in the market value of the Company's Common Stock;
    o       The successful implementation of the Company's strategic business 
            plan and the continued operation of the Bank in a safe and sound 
            manner;

    o       Actions taken by Michael Nilan to facilitate the transition of the
            Company to a publicly owned entity; and

    o       Michael Nilan's active participation on behalf of the Company and
            the Bank in civic and community events.


                           THE COMPENSATION COMMITTEE
                               Patrick F.X. Nilan
                              Joseph L. Wisniewski
                                  James F. Sisk
                               Patrick D. Conaghan
                              Frederick G. Whelply
                                  Michael Nilan


                                        8

<PAGE> 9

<TABLE>
<CAPTION>

      SUMMARY COMPENSATION TABLE. The following table shows, for the year ended
March 31, 1998, the cash compensation paid, as well as certain other
compensation paid or accrued for that year to the Chief Executive Officers and
one other executive officer of the Company and the Bank in fiscal year 1998 (the
"Named Executive Officers"). No other executive officer of the Company or Bank
earned and/or received salary and bonus in excess of $100,000 in fiscal year
1998.


                                                                              LONG-TERM COMPENSATION
                                                                         -------------------------------------
                                       ANNUAL COMPENSATION(1)                     AWARDS            PAYOUTS
                                     ----------------------------------  -------------------------- ----------
                                                             OTHER       RESTRICTED    SECURITIES
                                                             ANNUAL        STOCK       UNDERLYING     LTIP      ALL OTHER
NAME AND                   FISCAL     SALARY     BONUS     COMPENSATION    AWARDS     OPTIONS/SARS  PAYOUTS   COMPENSATION
PRINCIPAL POSITIONS         YEAR      ($)(1)      ($)          ($)         ($)(2)        (#)(3)        ($)         ($)
-------------------        ------    --------   -------    -------------  --------   --------------  -------   ------------

<S>                         <C>      <C>        <C>            <C>          <C>         <C>            <C>     <C>
Michael Nilan(5).........   1998     $150,000   $ 2,000        --             --          --           --      $82,229(4)
President and Chief         1997       99,000     5,000        --             --          --           --       36,354
Executive Officer

Patrick F.X. Nilan(6)....   1998     $217,625   $    --        --             --          --           --      $98,229(4)
Chairman of the Company     1997      470,000    37,500        --             --          --           --       82,008
and the Bank; former        1996      432,597    75,000        --           176,540     33,950         --       38,203
President and 
Chief Executive of
the Bank    

Eugene V. Malinowski.....   1998     $116,000   $12,000        --             --          --           --      $   --
Vice President and Chief
Financial Officer

</TABLE>
----------------------------
(1) Includes compensation deferred at the election of the officer pursuant to
    the Bank's Financial Institution's Thrift Plan (the "401(k) Plan"). Salary
    for Patrick F.X. Nilan includes $106,250 received for services as President
    and Chief Executive Officer of the Bank through June 30, 1997, $36,375 in
    directors fees, and $75,000 in fees for services as a consultant to the
    Company and the Bank.
(2) Messrs. Michael and Patrick F.X. Nilan were awarded 2,852 and 13,580 shares
    of the Bank's common stock (the "Bank Common Stock"), respectively, pursuant
    to the 1995 Recognition Plan (the "1995 Recognition Plan"). The awards were
    granted on July 28, 1995, and had a fair market value of $13.00, based upon
    the closing price per share of the Bank Common Stock on the date of grant.
    Awards granted under the 1995 Recognition Plan vest in equal installments at
    a rate of 20% per year commencing on July 28, 1996, unless otherwise
    determined by the Board. Awards will be 100% vested upon termination of
    employment due to death, disability or following a change in control. Upon
    consummation of the Conversion and Reorganization, the Company adopted the
    1995 Recognition Plan as a plan of the Company and issued its Common Stock
    in lieu of Bank Common Stock to the 1995 Recognition Plan in accordance with
    its terms. As of the effective date of the Conversion and Reorganization,
    rights outstanding under the Plans were assumed by the Company and
    constitute rights only for shares of Company Common Stock, with each such
    right being for a number of shares of Common Stock equal to the number of
    shares of Bank Common Stock that were available thereunder immediately prior
    to such effective date multiplied by the exchange ratio of 2.933 (the
    "Exchange Ratio"). The price of each right has been adjusted to reflect the
    Exchange Ratio so that the aggregate purchase price of the right is
    unaffected, but there is no change in the other terms and conditions of the
    rights. Accordingly, at March 31, 1998, the number of shares awarded to
    Messrs. Michael and Patrick F.X. Nilan pursuant to the 1995 Recognition
    Plan, as adjusted for the Conversion and Reorganization, was 8,365 and
    39,830, respectively, with a market value of $124,429 and $592,471,
    respectively, based upon the closing price of the Common Stock on that date
    of $14.875 per share.
(3) Messrs. Michael and Patrick F.X. Nilan were awarded options to purchase
    3,449 and 33,950 shares of Bank Common Stock, respectively, on August 9,
    1995 pursuant to the 1995 Stock Option Plan. Pursuant to the 1995

                                        9

<PAGE> 10



    Stock Option Plan, options commenced vesting in five equal annual
    installments on August 9, 1996, with an exercise price of $13.00. Upon
    consummation of the Conversion and Reorganization, the Company adopted the
    1995 Stock Option Plan and agreed to issue shares of Common Stock in lieu of
    Bank Common Stock in accordance with the terms of such Plan. Accordingly,
    the number of options awarded to Messrs. Michael and Patrick F.X. Nilan
    pursuant to the 1995 Stock Option Plan, as adjusted for the Conversion and
    Reorganization, was 10,115 and 99,575, respectively. The adjusted exercise
    price of the options is $4.43. All of the options awarded to Patrick F.X.
    Nilan immediately vested upon his retirement on June 30, 1997.
(4) Includes $16,000 received by Patrick F.X. Nilan pursuant to the Bank's
    annuity compensation agreements. Includes the value of 5,528 and 5,528
    shares allocated to Michael Nilan and Patrick F.X. Nilan, respectively,
    pursuant to the Bank's ESOP as of March 31, 1998. Does not include amounts
    contributed by the Bank pursuant to the Bank's noncontributory defined
    benefit plan (the "Retirement Plan"), the Bank's nonqualified supplemental
    executive retirement income-deferred compensation agreements ("Executive
    Agreements"), automobile insurance on personal vehicles used in lieu of
    automobiles supplied by the Bank, nor reimbursement of mileage while on
    company business.
(5) Michael Nilan was appointed President and Chief Executive Officer of the
    Company on February 6, 1997. 
(6) Patrick F.X. Nilan retired from the positions of President and Chief 
    Executive Officer of the Bank effective June 30, 1997. He continues to serve
    as Chairman of the Board of the Company and the Bank. Effective July 1, 
    1997, Michael Nilan was appointed President and Chief Executive Officer of 
    the Bank.


      EMPLOYMENT AGREEMENTS. Subsequent to the Conversion and Reorganization,
the Company and the Bank entered into employment agreements (the "Employment
Agreements") with Mr. Michael Nilan (the "Executive"). The Employment Agreements
are intended to ensure that the Company and the Bank will be able to maintain a
stable and competent management base after the Conversion and Reorganization.
The continued success of the Company and the Bank depend to a significant degree
on the skills and competence of Mr. Michael Nilan.

      The Employment Agreements, as amended and restated, provide for a
three-year term for the Executive. The Bank Employment Agreement provides that,
commencing on the first anniversary date and continuing each anniversary date
thereafter, the Board of Directors of the Bank will review the agreements and
the Executive's performance for purposes of determining whether to extend the
agreement with the Bank for an additional year, such that the new term would be
the same as the original term. The Company Employment Agreement automatically
extends daily, such that the new term is the same as the original term unless
written notice of non-renewal is given by the Board of Directors of the Company
after conducting a performance evaluation of the Executive. The base salary for
the Executive under the Employment Agreements is $150,000. In addition to the
base salary, the Employment Agreements provide for, among other things,
participation in stock benefit plans and other fringe benefits applicable to
executive personnel. The Employment Agreements provide for termination by the
Company or the Bank for cause, as defined in the agreements, at any time. In the
event the Company or the Bank chooses to terminate the Executive's employment
for reasons other than for cause, or in the event of the Executive's resignation
from the Company or the Bank upon: (i) failure to re-elect the Executive to his
current offices; (ii) a material change in the Executive's functions, duties or
responsibilities; (iii) a relocation of the Executive's principal place of
employment by more than 25 miles; (iv) liquidation or dissolution of the Company
or the Bank; or (v) a breach of the agreement by the Company or the Bank, the
Executive or, in the event of death, his beneficiary, is entitled to receive the
remaining base salary payments due to the Executive and the contributions that
would have been made on the Executive's behalf to any employee benefit plans of
the Company or the Bank during the remaining term of the agreements. The Company
or the Bank will also continue and pay for the Executive's life, health and
disability coverage for the remaining term of the Employment Agreements.

      The Employment Agreements provide for severance payments in the event of a
change in control. If voluntary or involuntary termination follows a "change in
control" of the Company or the Bank, as defined in the Employment Agreements,
the Executive or, in the event of death, his beneficiary, will be entitled to a
payment equal to the greater of: (1) the payments due for the remaining term of
the agreement; or (2) a severance payment equal

                                       10

<PAGE> 11



to three times the average of the five preceding taxable years' compensation.
The Company and the Bank would also continue the Executive's life, health, and
disability coverage for 36 months.

      Payments to the Executive under the Bank's Employment Agreement will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payments under the Company Employment Agreement will be made by the
Company. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements will be paid by the Company or the Bank if the Executive is
successful on the merits pursuant to a legal judgment, arbitration or
settlement. The Employment Agreements also provide that the Company and the Bank
will indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively. In the event of a change in control of the Company
or the Bank, the total amount of payments that would be due under the Employment
Agreements, based solely on cash compensation paid to Mr. Michael Nilan over the
past three fiscal years and excluding any benefits under any employee benefit
plan that may be payable, would be approximately $237,000.

      CHANGE IN CONTROL AGREEMENTS. Subsequent to the Conversion and
Reorganization, the Bank entered into Change in Control Agreements with three
executive officers of the Bank and the Bank and the Company entered into Change
in Control Agreements with Mr. Malinowski and another executive officer
(collectively, the "CIC Agreements"). Such agreements have terms of three years.
The CIC Agreements provide that commencing on the first anniversary date and
continuing on each anniversary thereafter, the Bank's CIC Agreements may be
renewed by the Board of Directors for an additional year while the term of the
Company's CIC Agreements are extended on a daily basis unless written notice of
non-renewal is given by the Board of Directors of the Company. The CIC
Agreements with the Company also provide that in the event voluntary or
involuntary termination follows a change in control of the Bank or the Company,
the officer is entitled to receive a severance payment equal to three times the
officer's average annual compensation for the five years preceding termination,
depending on the term of the officers' CIC Agreement. The Bank's CIC Agreements
have a similar change in control provision; however, the officer would only be
entitled to receive a severance payment under one agreement. The Company and the
Bank will also continue, and pay for, the officer's life, health and disability
coverage for 36 months following termination. Payments to the officer under the
Bank's CIC Agreements will be guaranteed by the Company in the event that
payments or benefits are not paid by the Bank. In the event of a change in
control of the Bank or Company, the total payments that would be due under the
CIC Agreements, based solely on the cash compensation paid to the officers
covered by the CIC Agreements over the past three fiscal years and excluding any
benefits under any employee benefit plan that may be payable, would be
approximately $1.2 million.

      RETIREMENT PLAN. The Bank maintains a Retirement Plan pursuant to which
all employees age 21 or older who have worked at the Bank for a period of six
months are eligible to accrue benefits. The Bank annually contributes an amount
to the Retirement Plan necessary to satisfy the actuarially determined minimum
funding requirements in accordance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). The Retirement Plan operates on a plan year
beginning December 15 each year.

      At the normal retirement age of 65 (or the fifth anniversary of plan
participation, if later), the plan is designed to provide a life annuity
guaranteed for 10 years. The retirement benefit provided is an amount equal to
2% of a participant's average monthly salary, multiplied by the total number of
years of service from the date of employment to normal retirement date. This
amount is reduced by approximately .63% of average monthly salary up to the
covered compensation wage base (as defined in the Retirement Plan) multiplied by
the total number of years of service (up to a maximum of 35 years).
Notwithstanding the above formula, the Retirement Plan will pay a minimum
monthly benefit equal to 2% of monthly salary, times years of service up to ten
years of service. Retirement benefits are also payable upon retirement due to
early and late retirement, disability or death. A reduced benefit is payable
upon early retirement at or after age 55 and the completion of ten years of
service with the Bank. Upon termination of employment other than as specified
above, a participant is eligible to receive his vested accrued benefit as a
retirement annuity commencing on such participant's normal date. Benefits are
payable in various annuity forms with the normal form being an annuity for the
participant's life, with a minimum guarantee of payments for

                                       11

<PAGE> 12



five years. For the plan year ended December 14, 1997, the Bank made a
contribution to the Retirement Plan of $305,000.

      The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
1997, expressed in the form of a life annuity with a five year guaranteed
payment for the final average salary and benefit service classification
specified below. Benefits payable under the Retirement Plan are not subject to a
deduction for Social Security or other amounts.

<TABLE>
<CAPTION>

                                      YEARS OF BENEFIT SERVICE
                   ----------------------------------------------------------------
HIGH 5 YEAR
FINAL AVERAGE
EARNINGS(1)          5       10      15      20      25       30      35      40
------------       ------  ------- ------- ------- -------  ------  ------  -------

<S>               <C>      <C>     <C>     <C>     <C>     <C>     <C>     <C>     
$ 20,000          $ 2,000  $ 4,000 $ 4,125 $ 5,500 $ 6,875 $ 8,250 $ 9,625 $ 11,625
$ 40,000            4,000    8,000   9,188  12,250  15,313  18,375  21,438   25,438
$ 60,000            6,000   12,000  15,188  20,250  25,313  30,375  35,438   41,438
$ 80,000            8,000   16,000  21,188  28,250  35,313  42,375  49,438   57,438
$100,000           10,000   20,000  27,188  36,250  45,313  54,375  63,438   73,438
$150,000           15,000   30,000  42,188  56,250  70,313  84,375  98,438  113,438
$152,000(2)        15,200   30,400  42,788  57,050  71,313  85,575  99,838  115,038
$152,000(2)        15,200   30,400  42,788  57,050  71,313  85,575  99,838  115,038
</TABLE>

(1)  High five-year average monthly earnings means the average of a
     participant's monthly earnings in the five consecutive years yielding the
     highest such average while a participant in the Retirement Plan. For
     participants with less than five years of service, it is the average of
     monthly earnings for all complete calendar years of participation.
(2)  Limited due to maximum earnings limits under Section 401(a)(17) of the 
     Code.


      As of December 14, 1997, officers Michael Nilan, Patrick F.X. Nilan and
Eugene V. Malinowski had 11, 37 and 1 years of credit service, respectively, and
accrued benefits under the Retirement Plan equal to annual retirement benefits
of $16,061, $149,436 and $0, respectively. Mr. Patrick F.X. Nilan retired from
the Bank on June 30, 1997 and received a lump sum benefit payment of $1.6
million under the Retirement Plan.

      SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME-DEFERRED COMPENSATION AGREEMENTS.
The Bank has previously maintained supplemental executive retirement agreements
for certain executives of the Bank and their beneficiaries whose benefits from
the tax-qualified defined benefit plan maintained by the Bank were reduced by
reason of (i) the annual limitation on benefits and contributions imposed by
Section 415 of the Code and (ii) the limitation imposed by Section 401(a)(17) of
the Code with respect to compensation that can be taken into consideration in
the determination of benefits. The lump sum payments represented the present
value of the executives' accrued annual benefits under the supplemental
executive retirement agreements based on a current actuarial valuation. The Bank
determined that paying the participants in a lump sum would benefit the Bank
over time by saving the annual accruals that would otherwise be required to fund
the supplemental executive retirement agreements. The Bank has discontinued this
plan, but may reinstate it in the future as employees become eligible.




                                       12

<PAGE> 13



      OPTION EXERCISES AND YEAR-END VALUE. Set forth below is certain
information concerning exercised and unexercisable options during the fiscal
year ended March 31, 1998 for Named Executive Officers.

<TABLE>
<CAPTION>

                                    AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
                                          AND FISCAL YEAR-END OPTION VALUES


                                                NUMBER OF UNEXERCISED       VALUE OF UNEXERCISED IN-
                                                  OPTIONS AT FISCAL           THE-MONEY OPTIONS AT
                       SHARES                          YEAR-END                FISCAL YEAR-END(2)
                       ACQUIRED                --------------------------  ---------------------------
                        UPON        VALUE
NAME                   EXERCISE    REALIZED    EXERCISABLE/UNEXERCISEABLE   EXERCISABLE/UNEXERCISABLE
----                   --------  -----------   --------------------------  ---------------------------
                  
<S>                     <C>       <C>                  <C>                      <C>    
Michael Nilan.......       -          -                4,046/6,069              $42,260/$63,390
Patrick F.X. Nilan..    62,391    $518,762(3)           37,184/0                  $388,387/$0
Eugene V. Malinowski       -          -                   -/-                         -/-

</TABLE>
----------------------------
(1)Represents the number of options of Common Stock held as of March 31, 1998.
(2)Equals the difference between the $4.43 exercise price of such options and
   the aggregate fair market value of the shares of Common Stock that would be
   received upon exercise, assuming such exercise occurred on March 31, 1998, at
   which date the last sale of the Common Stock, as quoted on the Nasdaq
   National Market, was at $14.875 per share.
(3)The market price of the Common Stock on September 30, 1997, the date Mr.
   Patrick F.X. Nilan exercised 42,476 options, was $12.625, and the market
   price of the Common Stock on February 10, 1998, the date Mr.
   Patrick F.X. Nilan exercised 19,915 options, was $13.00.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
received to date regarding such ownership filed by such persons with the Company
and with the SEC, in accordance with Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Other than those persons
listed below, the Company is not aware of any person, as such term is defined in
the Exchange Act, that owns more than 5% of the Company's Common Stock.


                                       13

<PAGE> 14

<TABLE>
<CAPTION>

                                                                 AMOUNT OF
                                                                 NATURE OF       PERCENT
                                                                 BENEFICIAL         OF
TITLE OF CLASS        NAME AND ADDRESS OF BENEFICIAL OWNER       OWNERSHIP         CLASS
--------------        ------------------------------------       ---------        -------

<S>                   <C>                                         <C>               <C> 
Common Stock........  First Savings Bank of New Jersey, SLA       708,179(1)        7.8%
                      Employee Stock Ownership Plan ("ESOP")
                      568 Broadway
                      Bayonne, New Jersey 07002

Common Stock........  Jeffrey S. Halis                             94,846(2)        1.0%(3)
                      500 Park Avenue
                      Fifth Floor
                      New York, New York  10022

Common Stock........  Michael Lowenstein                          431,151(4)        4.7%(5)
                      500 Park Avenue
                      Fifth Floor
                      New York, New York  10022

Common Stock........  Franklin Resources, Inc.                    618,505(6)        6.8%
                      777 Mariners Island Blvd.
                      San Mateo, California  94404
</TABLE>
-------------------------
(1)Shares of Common Stock were acquired by the ESOP in the second-step
   conversion and reorganization of the Bank from the mutual holding company
   structure to the stock holding company structure, which was consummated on
   August 22, 1997 (the "Conversion and Reorganization"). The ESOP Committee
   administers the ESOP. First Security Trust Company has been appointed as the
   trustee for the ESOP ("ESOP Trustee"). The ESOP Trustee, subject to its
   fiduciary duty, must vote all allocated shares held in the ESOP in accordance
   with the instructions of the ESOP participants. At July 28, 1998, 191,186
   shares had been allocated under the ESOP and 516,993 shares remain
   unallocated. Each participant, however, will be deemed to have one share of
   Common Stock in the ESOP allocated to such participant's account for the
   purpose of providing voting instructions to the ESOP Trustee. Under the ESOP,
   unallocated shares and allocated shares as to which voting instructions are
   not given by participants are to be voted by the ESOP Trustee in a manner
   calculated to most accurately reflect the instructions received from
   participants regarding the allocated stock so long as such vote is in
   accordance with the fiduciary provisions of the Employee Retirement Income
   Security Act of 1974, as amended ("ERISA").
(2)Based on information disclosed in a Schedule 13D/A filed with the SEC on June
   9, 1998.
(3)The 431,151 shares reported in a Schedule 13D filed by Michael Lowenstein on
   September 5, 1997 include shares owned by Tyndall Partners, L.P., Madison
   Avenue Partners, L.P., Tyndall Institutional Partners, L.P., and Halo
   International, Ltd. (collectively, the "investment group"). According to the
   Schedule 13D filed on September 5, 1997, Michael Lowenstein possesses the
   sole power to vote and dispose of the common stock held by the investment
   group. However, Jeffrey S. Halis is a general partner of Halo Capital
   Partners, L.P., which is the sole general partner of each member of the
   investment group, and also serves as a member of Jemi Management, L.L.C.,
   which serves as the investment manager for Halo International, Ltd.
(4)Based on information disclosed in a Schedule 13D filed with the SEC on 
   September 5, 1997.
(5)Mr. Lowenstein disclaims any interest in the shares owned individually by 
   Mr. Halis.
(6)Based on information disclosed in a Schedule 13G filed with the SEC on 
   January 28, 1998.

   Information regarding the security ownership of management is disclosed under
Item 10.




                                       14

<PAGE> 15



ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   All loans made by the Bank to its directors and executive officers are made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons and
do not involve more than the normal risk of collectibility or present other
unfavorable features. The Bank may, in the future, determine to offer loans to
executive officers and directors on terms not available to the public, but
available to other employees, in accordance with recently modified federal
regulations. Under the Bank's existing policy, any loan to an executive officer
or director, must be approved, in advance, by a majority of the disinterested
members of the Board of Directors.



                                       15

<PAGE> 16


                                  SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly cause this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                              BAYONNE BANCSHARES, INC.


Date: July 29, 1998                 By:   /s/ Michael Nilan
                                          --------------------------------------
                                          Michael Nilan
                                          Director, President and Chief 
                                          Executive Officer


   Pursuant to the requirements of the Securities Exchange of 1934, this report
has been signed by the following persons on behalf of the Bank and in capacities
and on the dates indicated.


By: /s/ Patrick F.X. Nilan
    ---------------------------
    Patrick F.X. Nilan
    Chairman of the Board


Date:  July 29, 1998


By: /s/ Michael Nilan          By:   /s/ Eugene V. Malinowski
    ---------------------            ---------------------------
    Michael Nilan                    Eugene V. Malinowski
    Director, President and Chief    Vice President and Chief
    Executive Officer                Financial Officer (Principal Financial and
    (Principal Executive Officer)    Accounting Officer)


Date:  July 29, 1998                Date:  July 29, 1998


By: /s/ Joseph L. Wisniewski         By:   /s/ Frederick Whelply
    -------------------------              -----------------------
    Joseph L. Wisniewski                   Frederick Whelply
    Director                               Director


Date:  July 29, 1998                Date:  July 29, 1998


By: /s/ James F. Sisk                By:   /s/ Patrick D. Conaghan
    ------------------------               ------------------------
    James F. Sisk                          Patrick D. Conaghan
    Director                               Director


Date:  July 29, 1998                Date:  July 29, 1998



                                       16