UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996

COMMISSION FILE NUMBER 0-18620

JSB FINANCIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED ON ITS CHARTER)

DELAWARE 11-3000874
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

303 MERRICK ROAD, LYNBROOK, NEW YORK 11563
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(516) 887-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

CLASS OF COMMON STOCK OUTSTANDING AT AUGUST 6, 1996
- - --------------------- -----------------------------
$.01 PAR VALUE 9,768,482

INDEX

PART I - FINANCIAL INFORMATION

Page
Number
ITEM 1. Financial Statements - Unaudited

Consolidated Statements of Financial Condition
at June 30, 1996 and December 31, 1995 3

Consolidated Statements of Income for the Three
Months and Six Months Ended June 30, 1996
and June 30, 1995 4

Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1996
and June 30, 1995 5- 6

Notes to Consolidated Financial Statements 7-11

ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-19

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings 20

ITEM 2. Changes in Securities 20

ITEM 3. Defaults Upon Senior Securities 20

ITEM 4. Submission of Matters to a Vote of Security Holders 20-21

ITEM 5. Other Information 21

ITEM 6. Exhibits and Reports on Form 8-K 21

Signatures 22

JSB FINANCIAL, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

JUNE 30, DECEMBER 31,
1996 1995

ASSETS
Cash and due from banks .......................................... $ 12,736 $ 14,893
Federal funds sold ............................................... 54,000 71,000
---------- ---------
Cash and cash equivalents ................................... 66,736 85,893

Securities available-for-sale, at estimated fair value ........... 43,661 40,071
Securities held-to-maturity, net (estimated fair value of
$536,401 and $593,991, respectively) ............................ 536,411 592,060
Other investments ................................................ 6,859 6,302
Mortgage loans, net .............................................. 795,674 739,037
Other loans, net ................................................. 28,319 29,208
Premises and equipment, net ...................................... 16,592 15,157
Interest due and accrued ......................................... 12,391 12,907
Real estate held for investment, net ............................. 6,014 6,395
Real estate held for sale and Other real estate ("ORE") .......... 6,557 7,314
Claims receivable, net ........................................... 4,083 8,165
Other assets ..................................................... 2,763 2,686
---------- ----------
Total Assets ........................................ $1,526,060 $1,545,195
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Due to depositors ................................................ $1,164,424 $1,163,446
Advance payments for real estate taxes and insurance ............. 11,462 8,231
Official bank checks outstanding ................................. 7,032 24,392
Accrued expenses and other liabilities ........................... 10,425 9,019
---------- ----------
Total Liabilities .................................. 1,193,343 1,205,088
---------- ----------

Commitments and Contingencies (See Notes 5 and 6.)

STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, 15,000,000 shares authorized;
none issued) .................................................... - -
Common stock ($.01 par value, 30,000,000 shares authorized;
16,000,000 issued; 10,051,904 and 10,504,775 outstanding,
respectively) ................................................... 160 160
Additional paid-in capital ....................................... 163,078 162,566
Retained income, substantially restricted ........................ 282,137 276,317
Net unrealized gain on securities available-for-sale, net of tax . 17,709 15,750
Common stock held by Benefit Restoration Plan Trust, at cost
(166,848 shares) ................................................ (3,270) (3,270)
Common stock held in treasury, at cost (5,948,096 and 5,495,225
shares, respectively) ........................................... (127,097) (111,416)
---------- ----------
Total Stockholders' Equity ......................... 332,717 340,107
---------- ----------
Total Liabilities and Stockholders' Equity ......... $1,526,060 $1,545,195
========== ==========

See accompanying Notes to the unaudited consolidated financial statements.

JSB FINANCIAL, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995

Interest Income
Mortgage loans, net ................................ $17,131 $16,015 $33,882 $31,855
Debt & equity securities, net ...................... 5,796 7,031 12,085 13,553
Collateralized mortgage obligations, net ("CMOs") .. 2,484 2,399 4,800 5,529
Other loans, net ................................... 552 627 1,094 1,195
Mortgage-backed securities, net ("MBS")............. 191 249 397 515
Federal funds sold ................................. 804 729 1,605 1,123
------- ------- ------- -------
Total Interest Income ............................ 26,958 27,050 53,863 53,770
------- ------- ------- -------

Interest Expense
Deposits ........................................... 10,041 10,293 20,188 20,048
------- ------- ------- -------
Net Interest Income ............................. 16,917 16,757 33,675 33,722
Provision for Possible Loan Losses ................. 160 159 321 315
Provision for Possible Other Losses ................ - 2,040 - 2,040
------- ------- ------- -------
Net Interest Income After Provision for
Possible Credit Losses ........................... 16,757 14,558 33,354 31,367
------- -------- ------- -------

Non-Interest Income
Real estate operations, net ........................ 444 354 821 486
Loan fees and service charges ...................... 641 574 1,512 1,153
Income on loaned securities ........................ 21 13 31 34
Miscellaneous income/(loss) ........................ 29 100 (14) 182
------- ------- ------- -------
Total Non-Interest Income ........................ 1,135 1,041 2,350 1,855
------- ------- ------- -------

Non- Interest Expense
Compensation and benefits .......................... 4,151 4,434 8,230 8,673
Occupancy and equipment expenses, net .............. 1,204 1,195 2,602 2,433
Federal deposit insurance premiums ................. - 717 1 1,434
Advertising ........................................ 294 291 579 573
ORE (income)/expense, net of provisions ............ (790) 60 (818) 113
Other general and administrative ................... 1,203 1,283 2,734 2,525
------- ------- ------- -------
Total Non-Interest Expense ....................... 6,062 7,980 13,328 15,751
------- ------- ------- -------
Income Before Provision for Income Taxes ........... 11,830 7,619 22,376 17,471
Provision for Income Taxes ......................... 5,032 3,228 9,500 7,473
------- ------- ------- -------

Net Income ......................................... $ 6,798 $ 4,391 $12,876 $ 9,998
======= ======= ======= =======

Earnings and Cash Dividends Per Share:
Earnings per common and common equivalent share .. $ .63 $ .39 $1.19 $ .89
===== ===== ===== =====
Earnings Per Share Assuming Full Dilution ........ N/A N/A $1.19 $ .89
===== =====

Cash Dividends ................................... $ .30 $ .25 $ .60 $ .50
===== ===== ===== =====

Weighted Average Number of Shares and Share
Equivalents Outstanding - Primary ................ 10,744 11,172 10,811 11,183
====== ====== ====== ======

Weighted Average Number of Shares and Share
Equivalents Outstanding - Fully Diluted .......... N/A N/A 10,814 11,183
====== ======

See accompanying Notes to the unaudited consolidated financial statements.

JSB FINANCIAL, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

SIX MONTHS ENDED
JUNE 30,
1996 1995

Cash flows from operating activities
Net income ........................................................ $ 12,876 $ 9,998
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses ................................ 321 315
Provision for possible other losses ............................... - 2,040
Loss on Nationar capital stock .................................... - 38
Gain on sale from redemption of common stock ...................... (4) -
Decrease in deferred loan fees and discounts, net ................. (283) (326)
Accretion of discount (in excess of) less than amortization
of premium on MBS and CMOs ....................................... (249) 338
Accretion of discount in excess of amortization of
premium on debt securities ....................................... (101) (131)
Depreciation and amortization on premises and equipment ........... 914 979
Mortgages loans originated for sale ............................... (339) (815)
Proceeds from sale of mortgage loans originated for sale .......... 342 830
Gains on sale of mortgage loans ................................... (3) (15)
Gain on sale of student loans ..................................... (6) (7)
Earned portion of Bank Recognition and Retention Plans stock ...... - 675
Tax benefit for stock plans credited to capital ................... 430 1,360
Decrease in interest due and accrued .............................. 516 369
Transfer of federal funds sold to Nationar to claims receivable ... - (10,200)
Payments received against Nationar claims ......................... 4,082 -
Gain on sale of other real estate ................................. (705) -
(Decrease) increase in official bank checks outstanding ........... (17,360) 4,808
Other ............................................................. (164) (1,618)
-------- --------
Net cash provided by operating activities ....................... 267 8,638
-------- --------

Net cash flow from investing activities Loans originated:
Mortgage loans .................................................. (79,363) (19,739)
Other loans ..................................................... ( 8,724) (13,971)
Purchases of CMOs held-to-maturity ................................ (93,500) (14,381)
Purchases of debt securities held-to-maturity and securities
available-for-sale ............................................... (229,900) (180,021)
Principal payments on:
Mortgage loans .................................................. 21,118 7,286
Other loans ..................................................... 9,429 11,794
CMOs ............................................................ 53,184 139,631
MBS ............................................................. 1,147 1,261
Proceeds from maturities of securities held-to-maturity ........... 325,000 130,000
Proceeds from sale of student loans ............................... 239 487
Purchases of Federal Home Loan Bank stock ......................... (558) (188)
Proceeds from sale of common stock ................................ 19 -
Purchases of premises and equipment, net of disposals ............. (2,349) (1,192)
Net decrease in real estate held for investment ................... 381 235
Proceeds from sale of ORE ......................................... 2,225 -
Net decrease in investment in real estate held for sale ........... 757 682
-------- --------
Net cash (used) provided by investing activities ................ (895) 61,884
-------- --------

(Continued)

JSB FINANCIAL, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)

SIX MONTHS ENDED
June 30,
1996 1995

Net cash flow from financing activities
Net increase (decrease) in due to depositors ...................... 978 (35,678)
Increase in advance payments for real estate taxes and insurance .. 3,231 1,738
Proceeds from common stock option exercises ....................... 780 738
Cash dividends paid to common stockholders ........................ (6,228) (5,334)
Payments to repurchase common stock ............................... (17,290) (4,645)
-------- --------
Net cash used by financing activities ........................... (18,529) (43,181)
-------- --------

(Decrease) increase in cash and cash equivalents .................. (19,157) 27,341
Cash and cash equivalents at beginning of year .................... 85,893 45,295
-------- --------
Cash and cash equivalents at end of quarter ....................... $ 66,736 $ 72,636
======== ========

See accompanying Notes to the unaudited consolidated financial statements.

JSB FINANCIAL, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The financial information is prepared in conformity with generally accepted
accounting principles for interim financial statements and with instructions to
Form 10-Q and Article 10 of Regulation S-X. Such principles are applied on a
basis materially consistent with those reflected in the 1995 Annual Report filed
with the Securities and Exchange Commission, except as described in Note 2
below. The financial information included herein, other than the consolidated
statement of financial condition as of December 31, 1995, has been prepared by
management without audit by independent certified public accountants who do not
express an opinion thereon. The consolidated statement of financial condition as
of December 31, 1995, has been derived from, but does not include all the
disclosures contained in, the audited consolidated financial statements for the
year ended December 31, 1995. The information furnished includes all adjustments
and accruals consisting only of normal recurring accrual adjustments which are
in the opinion of management, necessary for a fair presentation of results for
the interim period. The foregoing interim results are not necessarily indicative
of the results of operations for the full year ending December 31, 1996.

These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto, included in the
Annual Report to Stockholders for JSB Financial, Inc. (the "Company") for the
year ended December 31, 1995.

2. Adoption of Accounting Standards

(a) In October, 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation" ("Statement 123"). Statement 123 applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities where the payment amounts are based on
the entity's common stock price, except for employee stock ownership plans.

Statement 123 established a fair value based method of accounting for
stock-based compensation arrangements with employees rather than the intrinsic
value based method that is contained in Accounting Principles Board Opinion 25
("Opinion 25"). Statement 123 does not require an entity to adopt the new fair
value based method for purposes of preparing its basic financial statements.
While the Statement 123 fair value based method is considered by the FASB to be
preferable to the Opinion 25 method, entities may opt to continue to use the
method prescribed by Opinion 25. Entities not adopting the fair value method
under Statement 123 are required to present pro forma net income and earnings
per share, in the notes to the financial statements, as if the fair value based
method had been adopted.

The accounting requirements of Statement 123 are effective for transactions
entered into during fiscal years that begin after December 15, 1995. The
disclosure requirements became effective for financial statements for fiscal
years beginning after December 15, 1995, or for any earlier fiscal year for
which Statement 123 is initially adopted for recognizing compensation cost. Pro
forma disclosures required for entities that elect to continue to measure cost
using the Opinion 25 method must include the effects of all awards granted in

fiscal years that begin after December 15, 1994. Pro forma disclosures for
awards granted in the first fiscal year beginning after December 15, 1994, need
not be included in financial statements for that fiscal year but should be
presented subsequently whenever financial statements for that fiscal year are
presented for comparative purposes with financial statements for a later year.
Management intends to provide the disclosures required by Statement 123 and
continue to measure costs using the Opinion 25 method.

(b) In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("Statement
121"). This statement requires that long-lived assets and certain identifiable
intangibles, and goodwill related to those assets to be held and used and
long-lived assets and certain identifiable intangibles to be disposed of, be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.

In performing the review for recoverability, the entity should estimate the
future cash flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, an impairment loss is not recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset.

This Statement generally requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value of cost to sell.

In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights" ("Statement 122"). Statement 122, (See Note 3.) amends SFAS
No. 65, "Accounting for Certain Mortgage Banking Activities" ("Statement 65"),
to require that a company recognize, as separate assets, rights to service
mortgage loans for others, regardless of how those servicing rights are
acquired. A company that acquires mortgage servicing rights through either the
purchase or origination of mortgage loans and sells or securitizes those loans
with servicing rights retained should allocate the total cost of the mortgage
loans to the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values if it is practicable to
estimate those fair values. This statement also requires that a company assess
its capitalized mortgage servicing rights for impairment based on an estimated
fair value of those rights.

Statements 121 and 122 are each effective for fiscal years beginning after
December 15, 1995, applied prospectively. The adoption of Statements 121 and
122, effective January 1, 1996 had no material impact on the Company's financial
condition or results of operations.

3. Impact of New Accounting Standard Not Yet Adopted

In June 1996, the FASB issued SFAS No, 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" (Statement
125"). Statement 125 establishes accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial components approach that focuses
on control.
Under this approach, an entity, subsequent to a transfer of

financial assets, must recognize the financial and servicing assets it controls
and the liabilities it has incurred, derecognize financial assets when control
has been surrendered, and derecognize liabilities when extinguished. Standards
for distinguishing transfers of financial assets that are sales from those that
are secured borrowings are provided in Statement 125. A transfer not meeting the
criteria for a sale must be accounted for as a secured borrowing with pledged
collateral.

Statement 125 requires that liabilities and derivatives incurred or
obtained by transferors as part of a transfer of financial assets be initially
measured at fair value, if practicable. It additionally requires that servicing
assets and other retained interests in transferred assets be measured by
allocating the previous carrying amount between the assets sold, if any, and
retained interests, if any, based on their relative fair values at the date of
transfer. Servicing assets and liabilities must be subsequently measured by
amortization in proportion to and over the period of estimated net servicing
income or loss and assessed for asset impairment, or increased obligation, based
on their fair value.

This Statement requires that a liability be derecognized if either (a) the
debtor pays the creditor and is relieved of its obligation for the liability or
(b) the debtor is legally released from being the primary obligor under the
liability either judicially or by the creditor.

This Statement provides implementation guidance for assessing isolation of
transferred assets and for accounting for transfers of partial interests,
servicing of financial assets, securitizations, transfers of sales-type and
direct financing lease receivables, securities lending transactions, repurchase
agreements including "dollar rolls", "wash sales", loan syndications and
participations, risk participations in banker's acceptances, factoring
agreements, transfers of receivables with recourse and extinguishments of
liabilities.

This Statement supersedes FASB Statements No. 76, "Extinguishment of Debt"
and No. 77, "Reporting by Transferors for Transfer of Receivables with
Recourse". Statement 125 amends Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement 115"), to prohibit the
classification of a debt security as held to maturity if it can be prepaid or
otherwise settled in such a way that the holder of the security would not
recover substantially all of its recorded investment. Statement 125 further
requires that loans and other assets that can be prepaid or otherwise settled in
such a way that the holder would not recover substantially all of its recorded
investment shall be subsequently measured like debt securities classified as
available for sale or trading under Statement 115, as amended by Statement 125.
Statement 125 also amends and extends to all servicing assets and liabilities
the accounting for mortgage servicing rights now in Statement 65, and supersedes
Statement 122.

Statement 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Earlier or retroactive application is not permitted.

The Company does not expect that the implementation of Statement 125 will
have a material affect on its consolidated financial statements.

4. Debt and Equity Securities

The following tables set forth information regarding the Company's debt and
equity securities as of:

June 30, 1996
----------------------

Carrying Value/ Estimated Fair
Amortized Cost Value
---------------- --------------
(In Thousands)

Held-to-Maturity
----------------
U.S. Government and federal
agency securities $344,829 $345,038

CMOs 185,131 184,287

MBS 6,451 7,076
-------- --------

Total Securities held-to-Maturity $536,411 $536,401
======== ========

Carrying/
Fair
Cost Value
-------- ---------
Available-for-Sale (In Thousands)
------------------
Equity securities:
Common stock $ 11,121 $ 29,572
SLMA* stock 6 1,480
FHLMC* stock 576 12,569
FNMA* stock 2 40
-------- --------
Total equity securities $ 11,705 $ 43,661
======== ========

* Student Loan Marketing Association ("SLMA"), Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal National Mortgage Association ("FNMA").

5. Loss Contingency

On February 6, 1995, the Superintendent of Banks for the State of New York
(the "Superintendent") seized Nationar, a check-clearing and trust company,
freezing all of Nationar's assets. On that date, Jamaica Savings Bank FSB (the
"Bank") had: Federal funds sold to Nationar of $10.0 million; demand accounts of
$200,000 and $38,000 of Nationar capital stock. The Bank charged off the $38,000
of Nationar capital stock during the first quarter of 1995. In May 1995,
management, in accordance with the Company's standard procedures for monitoring
asset quality, established a $2.0 million, or 20.0% valuation allowance against
the amount invested with Nationar.

During the second quarter of 1996, the Superintendent made an initial
distribution (i.e. dividend) from the Nationar estate. On June 27, 1996, the
Bank received a payment of $4.1 million, representing 40.0% of the Bank's total
accepted claims against the Nationar estate. The Nationar claims process is
ongoing, and the Superintendent has, in the Fifth Interim Status Report on
Nationar, dated July 17, 1996, stated that he expects to seek authority to
distribute a second dividend from Nationar's estate before the end of 1996.
Based upon the Fifth Interim Status Report, the Bank believes that a substantial
portion of its remaining $6.1 million of accepted claims will be paid from the
Nationar estate; however, the timing and amounts of such payments remains
unknown. The $2.0 million valuation allowance established by the Bank will
remain in effect, subject to adjustment depending upon the Bank's receipt of
future dividends from the Nationar estate. Future adjustments to the allowance
may be made as the claims process continues. The foregoing events will not have
any material adverse effect on the Company's or the Bank's ability to meet their
liquidity needs.

6. Subsequent Events

On July 9, 1996, the Company's Board of Directors declared a $.30 per share
dividend on its common stock. The dividend is to be paid on August 21, 1996, to
stockholders of record on August 7, 1996.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

General/Financial Condition

JSB Financial, Inc. is a Delaware-chartered holding company. The Company's
assets, which totaled approximately $1.53 billion at June 30, 1996, included
assets totaling $1.45 billion owned by its wholly owned subsidiary, Jamaica
Savings Bank FSB. In addition to the Bank's assets, the Company's earning assets
were comprised of $53.1 million in money market investments deposited in the
Bank, $50.0 million in short-term federal agency securities, and $15.3 million
in mortgage loans secured by multi-family rental properties.

At June 30, 1996, the Bank's non-performing assets, which totaled $19.0
million, included: non-performing loans of $14.2 million; claims receivable from
Nationar (net of $2.0 million of allowances) of $4.1 million (see following
discussion) and $770,000 of ORE. The $14.2 million of non-performing loans
continues to include a $12.8 million underlying cooperative mortgage loan that
is under foreclosure and on non-accrual status. The ratio of non-performing
assets to total assets was 1.25% and 1.50% at June 30, 1996 and December 31,
1995, respectively.

The Bank generally includes in non-performing loans, loans which are 90
days or more in arrears and loans which have been placed on non-accrual status.
In addition to non-performing loans, non-performing assets include ORE, net of
allowances, as well as any other investments on which the collection of
principal and interest is uncertain. The ratio of non-performing loans to total
loans was 1.70% and 1.78% at June 30, 1996 and December 31, 1995, respectively.
During the second quarter of 1996, the Bank sold a 232 unit garden apartment
that was acquired through foreclosure during the first quarter of 1996. The
property, on which the Bank had previously held an $8.2 million mortgage, was
sold for $8.9 million. The sale terms provided for the purchaser to make a down
payment of $2.2 million in cash and the Bank originated a $6.7 million mortgage.
The pretax gain of $705,000 includes the recovery of $529,000 of legal fees,
expensed in prior periods, that were incurred in connection with acquiring title
to the property.

The net interest margin increased to 4.65% for the six months ended June
30, 1996, compared to 4.60% for the six months ended June 30, 1995. The interest
rate spread for the year to date period ended June 30, 1996 increased to 3.87%
from 3.85% for the same period in 1995.

Liquidity and Capital Resources

The Company's funds are primarily obtained through dividends paid by the
Bank. The Bank's primary source of funds are deposits, proceeds from maturities
of debt securities, principal and interest payments on CMOs, mortgage and other
loans. During the six months ended June 30, 1996, purchases of U.S. Government
and agency securities represented the most significant use of funds from
investing activities. Mortgage originations, substantially all of which are at
fixed rates, increased for the six months ended 1996 to $79.4 million, from
$19.7 million for the comparative period in 1995. The increase is primarily
reflective of increased originations of multi-family mortgage loans during the
first quarter of 1996. For the six months ended June 30, 1996, maturities of
U.S. Government and agency securities and principal payments on CMOs generated

the most significant cash inflow from investing activities. The $17.3 million
used to make repurchases of the Company's common stock, represents the largest
use of funds for financing activities, followed by dividend payments which
totaled $6.2 million. The increase in dividend payments reflects the increase in
dividends paid per share to $.60 for the first half of 1996, compared to $.50
per share for the first half of 1995. The deposit gains of $978,000 for the
first half of 1996, reflects deposit increases of $4.7 million during the first
quarter, followed by deposit outflows of $3.8 million during the second quarter.
Management continues to monitor deposit levels and evaluate various strategies
to maintain the Bank's deposit base.

The net increase in deposits of $978,000 to $1.164 billion at June 30,
1996, from $1.163 billion at December 31, 1995, reflects, a $19.2 million
increase in certificate accounts and a $982,000 increase in lease security
accounts. These increases were substantially offset by decreases in passbook
accounts, money market accounts, demand deposit accounts and negotiable order of
withdrawal (NOW) accounts of $14.9 million, $2.3 million, $1.1 million and
$900,000, respectively. Interest rates offered on passbook accounts remained
relatively low compared to alternative short-term investments, the effect of
which is apparent in the deposit shifts from passbook accounts to short-term
certificate accounts.

On June 3, 1996, the Bank paid a cash dividend of $20.0 million to its
parent, JSB Financial. This dividend, while having no impact on the consolidated
financial statements of the Company, reduced the Bank's regulatory capital. The
Bank continues to substantially exceed all current regulatory capital
requirements. (See "Regulations" contained herein.)

During the second quarter of 1996, the Company completed its ninth stock
repurchase program and continued to repurchase shares of its common stock under
its tenth stock repurchase program. Of the 900,000 shares targeted for
repurchase under the current program, 100,900 had been repurchased during the
quarter ended June 30, 1996. The Company repurchased a total of 530,900 shares
of its common stock, at an aggregate cost of $17.3 million, or at an average
price of $32.57 per share, during the six months ended June 30, 1996. Pursuant
to the Company's 1990 stock option plans, 78,029 shares were reissued from
treasury stock for option exercises.

On April 9, 1996, the Company's Board of Directors declared a cash dividend
of $.30 per share to stockholders of record on May 8, 1996. The dividend
payment, which totaled $3.1 million, was made on May 22, 1996. A subsequent cash
dividend of $.30 per share was declared on July 9, 1996, and is payable on
August 21, 1996, to stockholders of record on August 7, 1996.

Regulations

As a condition of deposit account insurance, Office of Thrift Supervision
("OTS") regulations require that the Bank calculate three regulatory net worth
requirements on a quarterly basis, and satisfy each requirement at the
calculation date and throughout the ensuing quarter. The three requirements are:
tangible capital of 1.50%, leverage ratio (or "core capital") of 3.00%, and a
risk-based assets capital ratio of 8.00%. Although the minimum core capital
ratio is 3.00%, the OTS Prompt Corrective Action Regulation stipulates that an
institution with less than 4.00% core capital is deemed to be undercapitalized.
The Bank's capital ratios at June 30, 1996, were as follows:

Dollars
Percentage (In Thousands)
---------- ------------

TANGIBLE CAPITAL
Required 1.50% $ 21,643
Actual 12.37 178,434
----- --------
Excess 10.87% $156,791
===== ========

CORE CAPITAL
Required 3.00% $ 43,286
Actual 12.37 178,434
----- --------
Excess 9.37% $135,148
===== ========

RISK BASED CAPITAL
Required 8.00% $ 72,983
Actual 18.87 172,140
----- --------
Excess 10.87% $ 99,157
===== ========

Comparison of Operating Results for the Three Months Ended
June 30, 1996 and 1995

Net income for the three months ended June 30, 1996, was $6.8 million, or
$.63 per share, compared with $4.4 million, or $.39 per share for the three
months ended June 30, 1995.

Net interest income for the three months ended June 30, 1996, was $16.9
million, compared to $16.8 million for the three months ended June 30, 1995.
This net increase reflects a $252,000 decrease in interest expense, partially
offset by a $92,000 decrease in interest income. The annualized yield on
interest earning assets was 7.41%, compared to 7.40%, for the quarters ended
June 30, 1996 and 1995, respectively. The annualized cost of interest bearing
deposits decreased slightly to 3.54% from 3.60% for the quarters ended June 30,
1996 and 1995, respectively. For the quarter ended June 30, 1996, the net
interest rate spread and net interest margin were 3.87% and 4.65%, respectively,
compared to 3.80% and 4.58%, respectively for the quarter ended June 30, 1995.

Interest earned on mortgage loans increased by $1.1 million, or 7.0%, to
$17.1 million from $16.0 million, reflecting continued growth in the mortgage
portfolio, partially offset by a decrease in the yield to 8.73% for the quarter
ended June 30, 1996, from 9.25% for the quarter ended June 30, 1995. During
1996, the Bank continued to sell one-to four-family mortgage loans, without
recourse, to FNMA and the State of New York Mortgage Association ("SONYMA").
During the quarter ended June 30, 1996, the Bank sold $246,000 in mortgage
loans, realizing a net gain of $2,000, compared to a sale of $93,000 during the
quarter ended June 30, 1995, which resulted in a net gain of $6,000.

For the three months ended June 30, 1996, income from debt and equity
securities, net, decreased by $1.2 million, or 17.6%, to $5.8 million from $7.0
million for the three months ended June 30, 1995. This decrease is the result of
a decrease in the average investment in U.S. Government and federal agency
securities and other investments of $69.3 million, or 15.0%, to $391.8 million,
compared to $461.1 million for the three months ended June 30, 1995. The
annualized yield on the debt and equity security portfolio decreased to 5.92%
for the three months ended June 30, 1996 from 6.10% for the three months ended
June 30, 1995. The debt and equity securities portfolio activity for the current
period included purchases of $179.9 million and maturities of $215.0 million,
compared with purchases of $100.0 million and maturities of $75.0 million for
the quarter ended June 30, 1995. There were no sales of any securities from the
"available-for-sale" portfolio for the comparative quarters.

For the quarter ended June 30, 1996, income on CMOs increased by 3.5%, to
$2.5 million, with an annualized yield of 5.46%, from income of $2.4 million
with an annualized yield of 4.33% for the quarter ended June 30, 1995. During
the second quarter of 1996, the Bank received principal payments of $30.3
million on CMOs, compared with $75.5 million for the quarter ended June 30,
1995. CMO purchases during the quarter ended June 30, 1996 totaled $26.9
million, compared to purchases of $14.4 million for the quarter ended June 30,
1995, as more CMOs meeting the Bank's investment guidelines became available on
the secondary market. The Bank did not sell any CMOs during either period.

Income on federal funds sold increased by $75,000, or 10.3% to $804,000 for
the quarter ended June 30, 1996 from $729,000 for the quarter ended June 30,
1995. This increase resulted from an increase in the average investment in
federal funds of $11.7 million to $60.8 million for the current period, compared

with $49.1 million for the quarter ended June 30, 1995. This increase was
partially offset by a decrease in the annualized yield on federal funds sold to
5.29% for the current quarter, compared to 5.94% for the quarter ended June 30,
1995.

Interest expense decreased by 2.4%, to $10.0 million for the quarter ended
June 30, 1996, compared to $10.3 million for the quarter ended June 30, 1995.
This net decrease reflects the decrease in average interest bearing deposits of
$7.5 million, to $1,135.0 million for the three months ended June 30, 1996,
compared to $1,142.5 million for the three months ended June 30, 1995. The cost
of interest bearing deposits decreased slightly to 3.54% from 3.60% from the
comparative quarter.

The provision for possible loan losses remained relatively unchanged. There
were no provisions made for possible other losses, during the quarter ended June
30, 1996, compared to $2.0 million for the quarter ended June 30, 1995. (See
Note 5 to the Unaudited Consolidated Financial Statements.) Management regularly
evaluates the quality and performance of the Company's asset portfolios, and
thereby assesses the adequacy of the loan loss allowances. Based upon
management's assessments of the loan portfolios, no specific loss provisions
were established during the current quarter.

Total non-interest income for the three months ended June 30, 1996,
increased to $1.1 million from $1.0 million, a net increase of $94,000, or 9.0%.
The net change in non-interest income is comprised of: (1) a $90,000 increase
from real estate operations related to the sale of cooperative apartments; (2) a
$67,000 increase in loan fees and service charges resulting primarily from an
increase in prepayment penalties and (3) a $71,000 decrease in miscellaneous
income resulting primarily from a $68,000 real estate tax abatement refund
received during the second quarter of 1995.

During the three months ended June 30, 1996, the Bank recognized $10,000 in
fee income related to credit cards. The amounts and timing of future fee income
related to these credit cards remains uncertain, as this is a new product for
the Bank. The credit card portfolio is owned and managed by an unrelated
correspondent bank, which assumes the risk of any loss. Fee income generated by
the New York Cash Exchange ("NYCE") increased by $13,000 for the three months
ended June 30, 1996, related to increased transaction volume, compared to the
same quarter in 1995. Effective June 26, 1996, the Bank began accepting, through
NYCE, PLUS System Incorporated (issuer of PLUS cards) transactions and on June
28, 1996, Cirrus System Incorporated (issuer of Cirrus cards) transactions at
all of the Bank's automated teller machines. Presently, the timing and amount of
fee income that will be generated from accepting these transactions cannot be
estimated.

Non-interest expense decreased by $1.9 million, or 24.0%, to $6.1 million
during the quarter ended June 30, 1996, from $8.0 million for the quarter ended
June 30, 1995. ORE generated income of $790,000 for the three months ended June
30, 1996, verses an expense of $60,000 for the three months ended June 30, 1995.
This income reflects a pretax gain of $705,000 recognized on the sale of a
property acquired through foreclosure during the first quarter of 1996. The
$705,000 gain includes recoveries of $529,000 for legal fees, expensed in prior
periods, incurred in connection with the foreclosure process. Federal Deposit
Insurance Corporation ("FDIC") premiums decreased by $717,000 for the three
months ended June 30, 1996, compared to the three months ended June 30, 1995.
For 1996, it is expected that the Bank will pay $2,000 in FDIC premiums, the

statutory minimum, provided the Bank Insurance Fund remains at its targeted
capital level.

The provision for income taxes increased by $1.8 million, or 55.9%, to $5.0
million for the three months ended June 30, 1996, from $3.2 million for the
three months ended June 30, 1995. This increase is reflective of the increase in
pretax income.

Comparison of Operating Results for the Six Months Ended
June 30, 1996 and 1995

Net income for the six months ended June 30, 1996, was $12.9 million, or
$1.19 per share, compared with $10.0 million, or $.89 per share for the six
months ended June 30, 1995.

Net interest income for the six months ended June 30, 1996 and 1995,
remained steady at $33.7 million. The annualized yield on interest earning
assets increased to 7.43% from 7.33%, for the six months ended June 30, 1996 and
1995, respectively. The annualized cost of interest bearing deposits increased
to 3.56% from 3.48% for the six months ended June 30, 1996 and 1995,
respectively. For the year to date period ended June 30, 1996, the net interest
rate spread and net interest margin were 3.87% and 4.65%, respectively, compared
to 3.85% and 4.60%, respectively for the year to date period ended June 30,
1995.

Income earned on mortgage loans increased by $2.0 million, or 6.4%, to
$33.9 million for the six months ended June 30, 1996, compared to $31.9 million
for the comparative 1995 period, reflecting continued growth in this portfolio.
This increase was partially offset by a decrease in the mortgage portfolio yield
to 8.78% for the six months ended June 30, 1996, from 9.25% for the six months
ended June 30, 1995. During 1996, the Bank continued to sell mortgage loans,
without recourse, to FNMA and SONYMA. During the six months ended June 30, 1996,
the Bank sold $339,000 in mortgage loans, realizing a net gain of $3,000,
compared to sales of $815,000 during the six months ended June 30, 1995, which
resulted in a net gain of $15,000.

For the six months ended June 30, 1996, income on debt and equity
securities, net, decreased by $1.5 million, or 10.8%, to $12.1 million from
$13.6 million for the six months ended June 30, 1995. This decrease is the
result of a decrease in the average investment in U.S. Government and federal
agency securities and other investments of $42.2 million, or 9.4%, to $406.1
million, compared to $448.3 million for the six months ended June 30, 1995. The
annualized yield on the debt and equity security portfolio decreased to 5.95%
from 6.05% for the comparative period, respectively. The debt and equity
securities portfolio activity for the current period included purchases of
$229.9 million and maturities of $325.0 million compared with purchases of
$180.0 million and maturities of $130.0 million for the six months ended June
30, 1995.

For the six months ended June 30, 1996, income on CMOs decreased by 13.2%,
to $4.8 million, compared to $5.5 million for the six months ended June 30,
1995. This decrease is reflective of the decrease in the average investment in
the CMO portfolio of $78.4 million, or 30.9%, partially offset by an increase in
the CMO portfolio yield to 5.47% from 4.36% for the comparative six month
period. During the six months ended June 30, 1996, the Bank received principal
payments of $53.2 million on CMOs, compared with $139.6 million for the six

months ended June 30, 1995. CMO purchases during the first six months of 1996
totaled $93.5 million, compared to $14.4 million for the comparative 1995
period. During the current six month period, an increased number of CMOs meeting
the Bank's investment guidelines became available on the secondary market.

Income on federal funds sold increased by $482,000, or 42.9%, to $1.6
million for the six months ended June 30, 1996, from $1.1 million for the six
months ended June 30, 1995. This increase resulted from an increase in the
average investment in federal funds of $21.9 million, to $60.2 million for the
current period, compared with $38.3 million for the six months ended June 30,
1995. This increase was partially offset by a decrease in the annualized yield
on federal funds sold to 5.33% for the current six month period, compared to
5.87% for the six month period ended June 30, 1995.

Interest expense increased by $140,000, to $20.2 million for the six months
ended June 30, 1996, compared to $20.0 million for the six months ended June 30,
1995. This net increase reflects the impact of higher interest rates partially
offset by lower deposit levels, during the comparative quarters. Average
interest bearing deposits decreased by $17.1 million, or 1.5%, to $1,133.7
million for the six months ended June 30, 1996, compared to $1,150.8 million for
the six months ended June 30, 1995. The cost of interest bearing deposits
increased to 3.56% from 3.48% for the comparative six month periods.

The provision for possible loan losses remained relatively unchanged at
$321,000 for the six months ended June 30, 1996, compared to $315,000 for the
same period in 1995. Management regularly evaluates the quality and performance
of the mortgage and other loan portfolios, and thereby assesses the adequacy of
the loan loss allowance. Based upon management's assessments of the loan
portfolios, no specific loan loss provisions were considered necessary during
the six months ended June 30, 1996.

The six month period ended June 30, 1995, included a provision for possible
other losses of $2.0 million; no such provision was made during the 1996 period.
This specific provision, made during the 1995 period, reflects the valuation
allowance established against the $10.0 million of federal funds sold to and the
$200,000 cash on deposit with Nationar. (See Note 5 to the Unaudited
Consolidated Financial Statements.)

Total non-interest income for the six months ended June 30, 1996, increased
to $2.4 million from $1.9 million, or 26.7%. The change in non-interest income
is comprised of: (1) a $359,000 increase in loan fees and service charges
resulting primarily from an increase in prepayment penalties on commercial
mortgages; (2) a $335,000 increase from real estate operations related to the
sale of cooperative apartments and (3) a $196,000 decrease in miscellaneous
income, which is reflective of a non-recurring medical insurance premium refund
of $130,000 received during the first quarter of 1995.

To expand fee income, the Bank began a campaign during the fourth quarter
of 1995 to issue Visa and MasterCard credit cards. During the six months ended
June 30, 1996, the Bank recognized $23,000 in fee income related to these credit
cards. The amounts and timing of future fee income related to credit cards
remains uncertain, as this is a new product for the Bank. The credit card
portfolio is owned and managed by an unrelated correspondent bank, which assumes
the risk of any loss. Fee income generated by NYCE increased by $29,000 for the

six months ended June 30, 1996, related to increased transaction volume,
compared to the same quarter in 1995.

Non-interest expense decreased by $2.4 million, or 15.4%, to $13.3 million
for the first six months of 1996 compared to $15.7 million for the first six
months of 1995. For 1996, it is expected that the Bank will pay $2,000 in FDIC
premiums, the statutory minimum, provided the insurance fund remains at its
targeted capital level. As a result, FDIC premiums decreased by $1.4 million for
the six months ended June 30, 1996, compared to the six months ended June 30,
1995. ORE generated income of $818,000 for the six months ended June 30, 1996,
verses an expense of $113,000 for the six months ended June 30, 1995. This
income reflects a pretax gain of $705,000 recognized on the sale of a property
acquired through foreclosure during the first quarter of 1996. The $705,000 gain
includes the recovery of $529,000 for legal fees, expensed in prior periods,
that were incurred in connection with the foreclosure process. Compensation and
benefits expense decreased by $443,000, to $8.2 million for the six months ended
June 30, 1996, compared to $8.7 million for the comparative 1995 period. This
decrease is primarily reflective of the $675,000 decrease in expense related to
the Bank Recognition and Retention Plans, as the final distributions were
allocated during June 1995. The $209,000 increase in other general and
administrative expense is comprised primarily of increases in legal fees related
to two properties that were under foreclosure during the six months ended June
30, 1996. The $169,000 increase in office occupancy and equipment expense, from
$2.4 million to $2.6 million, reflects the impact of the renovations to the
Company's headquarters. The renovations, which began during 1995, are continuing
through 1996. The costs of the renovations will primarily be reflected through
depreciation expense over the useful life of the improvements and assets. This
is the first major renovation project since the building's completion in 1974.

The provision for income taxes increased by $2.0 million, or 27.1%, to $9.5
million for the six months ended June 30, 1996 from $7.5 million for the six
months ended June 30, 1995. This increase is reflective of the increase in
pre-tax income.

PART II - OTHER INFORMATION

ITEM 1. Legal proceedings

The Bank is a defendant in several lawsuits arising out of the normal
conduct of business. In the opinion of management, after consultation with legal
counsel, the ultimate outcome of these matters is not expected to have a
material adverse effect on the Company's results of operations, business
operations or the consolidated financial condition of the Company.

ITEM 2. Changes in securities (Not Applicable)

ITEM 3. Defaults upon Senior Securities (Not Applicable)

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

At the Annual Meeting of Stockholders held on May 14, 1996, present in
person or by proxy were 9,304,517 of 10,331,611 shares of Common Stock
of JSB Financial, Inc. entitled to vote at such meeting.

Resolution I. All nominees to serve as a Director on the Company's
Board were elected as follows*:

For Withheld
------------ -------------
Joseph C. Cantwell 8,907,620 396,897
James E. Gibbons, Jr. 8,952,570 351,947
Edward P. Henson 8,955,520 348,997
Paul R. Screvane 8,951,620 352,897

*There were no broker non-votes.

The continuing directors were: Park T. Adikes, Joseph J. Blaine,
Howard J. Dirkes Jr., Alfred F. Kelly, Richard W. Meyer and Arnold B.
Pritcher.

Resolution II. Ratification of the appointment of KPMG Peat Marwick
LLP, as independent auditors for the year ending December 31, 1996, as
follows*:

For: 9,142,478
Against: 107,375
Abstain: 54,664

*There were no broker non-votes.

Resolution III. Approval of the JSB Financial, Inc., 1996 Stock Option
Plan, as follows:

For: 5,248,738
Against: 2,260,688
Abstain: 202,420

Broker non-votes totaled 1,592,671.

Resolution IV. Stockholder proposal, as set forth in the proxy
statement, as follows:

For: 1,569,278
Against: 5,695,065
Abstain: 322,443

Broker non-votes totaled 1,717,731.

ITEM 5. Other information (Not Applicable)

ITEM 6. Exhibits and Reports on Form 8-K

Page
Number
------
(a) Exhibits

3.01 Articles of Incorporation (1)
3.02 By-laws (2)
11.00 Computation of Earnings Per Share 24
27.00 Financial Data Schedule 25

(b) Reports on Form 8-K (Not Applicable)

(1) Incorporated herein by reference to Exhibits filed with the
Registration Statement on Form S-1, Registration No. 33-33821.

(2) Incorporated herein by reference to Exhibits filed with the Form 10-Q
for the Quarter Ended March 31, 1996.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Quarterly Report on the Form
10-Q for the quarter ended June 30, 1996, to be signed on its behalf by the
undersigned, thereunto duly authorized.

JSB Financial, Inc.
(By)

/s/ Park T. Adikes
--------------
Park T. Adikes
Chief Executive Officer

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

DATE: August 9, 1996 /s/ Park T. Adikes
-------------- --------------
Chief Executive Officer

DATE: August 9, 1996 /s/ Thomas R. Lehmann
-------------- -----------------
Thomas R. Lehmann
Vice President
Chief Financial Officer

Exhibit Index
-------------

Exhibit No. Identification of Exhibit
----------- -------------------------

11.00 Statement Re: Computation of Per Share Earnings

27.00 Financial Data Schedule