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 SEPTEMBER 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 NOVEMBER 8, 1996
$.01 PAR VALUE 9,778,430

INDEX

PART I - FINANCIAL INFORMATION

Page
Number
ITEM 1. Financial Statements - Unaudited

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

Consolidated Statements of Income for the Three
Months and Nine Months Ended September 30, 1996
and September 30, 1995 4

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

Notes to Consolidated Financial Statements 7-10

ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-21

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings 22

ITEM 2. Changes in Securities 22

ITEM 3. Defaults Upon Senior Securities 22

ITEM 4. Submission of Matters to a Vote of Security Holders 22

ITEM 5. Other Information 22

ITEM 6. Exhibits and Reports on Form 8-K 22

Signatures 23

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

SEPTEMBER 30, DECEMBER 31,
1996 1995

ASSETS
Cash and due from banks .......................................... $ 14,090 $ 14,893
Federal funds sold ............................................... 82,000 71,000
---------- ---------
Cash and cash equivalents ................................... 96,090 85,893

Securities available-for-sale, at estimated fair value ........... 46,444 40,071
Securities held-to-maturity, net (estimated fair value of
$483,351 and $593,991, respectively) ............................ 482,674 592,060
Other investments ................................................ 6,859 6,302
Mortgage loans, net .............................................. 810,044 739,037
Other loans, net ................................................. 28,250 29,208
Premises and equipment, net ...................................... 16,797 15,157
Interest due and accrued ......................................... 10,262 12,907
Real estate held for investment, net ............................. 6,148 6,395
Real estate held for sale and Other real estate ("ORE") .......... 6,021 7,314
Claims receivable, net ........................................... 4,083 8,165
Other assets ..................................................... 5,158 2,686
---------- ----------
Total Assets ........................................ $1,518,830 $1,545,195
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Due to depositors ................................................ $1,151,039 $1,163,446
Advance payments for real estate taxes and insurance ............. 15,560 8,231
Official bank checks outstanding ................................. 6,802 24,392
Accrued expenses and other liabilities ........................... 17,371 9,019
---------- ----------
Total Liabilities .................................. 1,190,772 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; 9,764,381 and 10,504,775 outstanding,
respectively) ................................................... 160 160
Additional paid-in capital ....................................... 163,330 162,566
Retained income, substantially restricted ........................ 285,458 276,317
Net unrealized gain on securities available-for-sale, net of tax . 19,259 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 (6,235,619 and 5,495,225
shares, respectively) ........................................... (136,879) (111,416)
---------- ----------
Total Stockholders' Equity ......................... 328,058 340,107
---------- ----------
Total Liabilities and Stockholders' Equity ......... $1,518,830 $1,545,195
========== ==========

<FN>
See accompanying Notes to the unaudited consolidated financial statements.
</FN>

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

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995

Interest Income
Mortgage loans, net ................................ $17,553 $16,188 $51,435 $48,043
Debt & equity securities, net ...................... 4,783 7,083 16,868 20,636
Collateralized mortgage obligations, net ("CMOs") .. 2,746 2,031 7,546 7,560
Other loans, net ................................... 523 539 1,617 1,734
Mortgage-backed securities, net ("MBS")............. 177 234 574 749
Federal funds sold ................................. 1,166 903 2,771 2,026
------- ------- ------- -------
Total Interest Income ............................ 26,948 26,978 80,811 80,748
------- ------- ------- -------

Interest Expense
Deposits ........................................... 10,060 10,342 30,248 30,390
------- ------- ------- -------
Net Interest Income .............................. 16,888 16,636 50,563 50,358
Provision for Possible Loan Losses ................. 160 160 481 475
Provision for Possible Other Credit Losses ......... - - - 2,040
------- ------- ------- -------
Net Interest Income After Provision for
Possible Credit Losses ........................... 16,728 16,476 50,082 47,843
------- ------- ------- -------

Non-Interest Income
Real estate operations, net ........................ 752 540 1,573 1,026
Loan fees and service charges ...................... 736 561 2,248 1,714
Income on loaned securities ........................ 6 9 37 43
Miscellaneous income................................ 152 33 138 215
------- ------- ------- -------
Total Non-Interest Income ........................ 1,646 1,143 3,996 2,998
------- ------- ------- -------

Non- Interest Expense
Compensation and benefits .......................... 4,208 4,055 12,438 12,728
Occupancy and equipment expenses, net .............. 1,169 1,252 3,771 3,685
Federal deposit insurance premiums ................. 1 (77) 2 1,357
Advertising ........................................ 310 277 889 850
ORE (income)/expense, net of provisions ............ 23 53 (795) 166
Other general and administrative ................... 1,254 1,122 3,988 3,647
------- ------- ------- -------
Total Non-Interest Expense ....................... 6,965 6,682 20,293 22,433
------- ------- ------- -------
Income Before Provision for Income Taxes ........... 11,409 10,937 33,785 28,408
Provision for Income Taxes ......................... 4,847 4,676 14,347 12,149
------- ------- ------- -------
Net Income ......................................... $ 6,562 $ 6,261 $19,438 $16,259
======= ======= ======= =======

Earnings and Cash Dividends Per Share:
Earnings per common and common equivalent share .. $ .64 $ .56 $1.83 $1.46
===== ===== ===== =====
Earnings Per Share Assuming Full Dilution ........ $ .64 $ .56 $1.82 $1.45
===== ===== ===== =====
Cash Dividends ................................... $ .30 $ .25 $ .90 $ .75
===== ===== ===== =====

Weighted Average Number of Shares and Share
Equivalents Outstanding - Primary ................ 10,264 11,140 10,627 11,169
====== ====== ====== ======
Weighted Average Number of Shares and Share
Equivalents Outstanding - Fully Diluted .......... 10,286 11,148 10,657 11,187
====== ====== ====== ======

<FN>
See accompanying Notes to the unaudited consolidated financial statements.
</FN>

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

NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995

Cash flows from operating activities
Net income ........................................................ $ 19,438 $ 16,259
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for possible loan losses ................................ 481 475
Provision for possible other losses ............................... - 2,040
Loss on Nationar capital stock .................................... - 38
Gain on sale from redemption of common stock ...................... (2) -
Decrease in deferred loan fees and discounts, net ................. (430) (449)
Accretion of discount (in excess of) less than amortization
of premium on MBS and CMOs ....................................... (412) 390
Accretion of discount in excess of amortization of
premium on debt securities ....................................... (175) (191)
Depreciation and amortization on premises and equipment ........... 1,312 1,442
Mortgages loans originated for sale ............................... (977) (1,478)
Proceeds from sale of mortgage loans originated for sale .......... 1,083 1,496
Gains on sale of mortgage loans ................................... (12) (18)
Gain on sale of other loans ....................................... (7) (30)
Earned portion of Bank Recognition and Retention Plans stock ...... - 675
Tax benefit for stock plans credited to capital ................... 517 1,542
Decrease in interest due and accrued .............................. 2,645 1,111
Transfer of federal funds sold to Nationar to claims receivable ... - (10,205)
Payments received against Nationar claims ......................... 4,082 -
Gain on sale of other real estate ................................. (705) -
Decrease in official bank checks outstanding ...................... (17,590) (9,501)
Other ............................................................. 3,374 83
-------- --------
Net cash provided by operating activities ....................... 12,622 3,679
-------- --------

Net cash flow from investing activities Loans originated:
Mortgage loans .................................................. (106,104) (45,387)
Other loans ..................................................... (13,671) (20,846)
Purchases of CMOs held-to-maturity ................................ (124,275) (52,997)
Purchases of debt securities held-to-maturity and securities
available-for-sale ............................................... (439,569) (265,021)
Principal payments on:
Mortgage loans .................................................. 33,332 14,807
Other loans ..................................................... 14,350 17,901
CMOs ............................................................ 82,076 203,641
MBS ............................................................. 1,672 1,854
Proceeds from maturities of U.S. Government and federal agency
securities ...................................................... 590,000 215,000
Proceeds from sale of other loans ................................. 317 1,201
Purchases of Federal Home Loan Bank stock ......................... (558) (188)
Proceeds from sale of common stock ................................ 30 -
Purchases of premises and equipment, net of disposals ............. (2,952) (2,092)
Net decrease in real estate held for investment ................... 247 599
Proceeds from sale of ORE ......................................... 2,225 -
Net decrease in investment in real estate held for sale ........... 1,293 1,553
-------- --------
Net cash provided by investing activities ....................... 38,413 70,025
-------- --------
(Continued)

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

NINE MONTHS ENDED
September 30,
1996 1995

Net cash flow from financing activities
Net decrease in due to depositors ................................. (12,407) (46,298)
Increase in advance payments for real estate taxes and insurance .. 7,329 5,397
Proceeds from common stock option exercises ....................... 1,046 1,329
Cash dividends paid to common stockholders ........................ (9,156) (7,990)
Payments to repurchase common stock ............................... (27,650) (4,941)
-------- --------
Net cash used by financing activities ........................... (40,838) (52,503)
-------- --------

Increase in cash and cash equivalents ............................. 10,197 21,201
Cash and cash equivalents at beginning of year .................... 85,893 45,295
-------- --------
Cash and cash equivalents at end of quarter ....................... $ 96,090 $ 66,496
======== ========

<FN>

See accompanying Notes to the unaudited consolidated financial statements.
</FN>

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

1. Basis of Presentation

The financial information for JSB Financial, Inc. (the "Company") as
consolidated with its wholly owned subsidiary Jamaica Savings Bank FSB (the
"Bank") 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. 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. for the year ended
December 31, 1995 and the interim financial statements and notes thereto of the
Company.

2. Adoption of Accounting Standards

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.

3. Impact of New Accounting Standard

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.

Statement 125 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.

Statement 125 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.

Statement 125 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:

September 30, 1996

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

Held-to-Maturity

U.S. Government and federal
agency securities $289,571 $290,074

CMOs 187,156 186,771

MBS 5,947 6,506
Total Securities held-to-Maturity $482,674 $483,351

Carrying/
Fair
Cost Value
Available-for-Sale (In Thousands)

Equity securities:
Common stock $ 11,108 $ 30,559
SLMA* stock 6 1,492
FHLMC* stock 576 14,351
FNMA* stock 2 42
-------- --------
Total equity securities $ 11,692 $ 46,444
======== ========

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

5. Subsequent Events

a. Nationar Developments. The Superintendent of Banks for the State of New York
(the "Superintendent") has applied for judicial approval for the distribution of
final dividends from the Nationar estate pursuant to which the Superintendent
would pay 100% of the accepted claims against the Nationar estate (other than
claims for stock and subordinated debentures of Nationar). The Superintendent's
application is scheduled to be heard by the Court on November 14, 1996, and the
final dividends, if approved, would be distributed within 20 business days after
certain conditions have been met. The Superintendent has announced that, if
authorized by the court, he intends to pay dividends before the end of 1996.

Management, as advised by legal counsel, expects that the Bank will recover
all its remaining claims of $6.1 million against the Nationar estate and that
such recovery will occur by the end of 1996. The Bank's anticipated receipt of
the $6.1 million is expected to result in a $2.0 million recovery to income for
the fourth quarter of 1996 for reserves established during the second quarter of

1995 for then anticipated losses with respect to the Bank's claims against the
Nationar estate. The Bank's ratio of non-performing assets to total assets would
have been reduced from 1.23% to .96% at September 30, 1996, had the Nationar
final dividend then been received.

b. Dividends Declared on the Company's Common Stock. On October 14, 1996, the
Company's Board of Directors declared a $.30 per share dividend on its common
stock. The dividend is to be paid on November 20, 1996, to stockholders of
record on November 6, 1996, and will total approximately $2.9 million.

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

General

JSB Financial, Inc. is a Delaware-chartered holding company. The Company's
assets, which totaled approximately $1.52 billion at September 30, 1996,
included assets totaling $1.4 billion owned by its wholly owned subsidiary,
Jamaica Savings Bank. In addition to the Bank's assets, the Company's earning
assets were comprised of $14.7 million in money market investments deposited in
the Bank, $80.0 million in short-term federal agency securities, and $15.2
million in mortgage loans secured by multi-family rental properties.

Asset Quality

At September 30, 1996, the Bank's non-performing assets, which totaled
$18.7 million, included: non-performing loans of $13.9 million; claims
receivable from Nationar (net of $2.0 million of allowances) of $4.1 million
(see following discussion) and $728,000 of ORE. The $13.9 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 1.23% and 1.50% at September 30, 1996
and December 31, 1995, respectively. (See note 5a to the Unaudited Consolidated
Financial Statements, herein.)

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
contractual principal and interest is uncertain. The ratio of non-performing
loans to total loans was 1.63% and 1.78% (See Non-performing/Non-accrual Table,
herein) at September 30, 1996 and December 31, 1995, respectively.

Loan Delinquency Table

At September 30, 1996 and December 31, 1995, delinquencies in the loan
portfolios were as follows:

61-90 Days 90 Days and Over
Number Principal Number Principal
of balance of balance
loans of loans loans of loans
(Dollars in Thousands)

At September 30, 1996:
Delinquent loans:
Guaranteed 54 $ 223 143 $ 529
Non-guaranteed 9 143 11 13,321(1)
-- ------ --- -------
63 $ 366 154 $13,850
== ====== === =======
Ratio of delinquent loans
to total loans .04% 1.63%
==== =====

At December 31, 1995:
Delinquent loans
Guaranteed 91 $ 476 132 $ 751
Non-guaranteed 10 8,165 8 324
--- ------ --- -------
101 $8,641 140 $ 1,075
=== ====== === =======
Ratio of delinquent loans
to total loans 1.11% .14%
===== ====
<FN>

(1) Includes a $12.8 million underlying cooperative mortgage loan that is
under foreclosure.
</FN>

Non-performing/Non-accrual Table

The following table sets forth information regarding nonaccrual loans and
loans which are 90 days or more delinquent but on which the Bank is accruing
interest at September 30, 1996 and December 31, 1995:

September 30, December 31,
1996 1995

Mortgage loans: (1)
Non-accrual loans (2) $12,753 $20,903
Accruing loans 90 or more days overdue:
Conventional mortgages 559 311
VA and FHA mortgages (3) 332 557
------- -------
Total 891 868
------- -------

Other loans:
Non-accrual loans - -
Accruing 90 or more days overdue:
Student loans 197 194
Consumer loans 9 13
------- -------
Total 206 207
------- -------

Total non-performing loans:
Non-accrual 12,753 20,903
Accruing 90 days or more overdue 1,097 1,075
------- -------
Total $13,850 $21,978
======= =======

Non-accrual loans to total loans 1.51% 2.69%

Accruing loans 90 or more days overdue
to total loans .13 .14

Non-performing loans to total loans (4) 1.63 1.78

<FN>

(1) Mortgage loans include; one-to four-family, multi-family and commercial real
estate mortgage loans.

(2) The December 31, 1995 balance was comprised of two mortgage loans: a $12.8
million underlying cooperative mortgage loan and an $8.2 million multi-family
residential mortgage. At September 30, 1996, only the $12.8 million loan
remained in arrears and under foreclosure.

(3) The Bank's Federal Housing Administration ("FHA") and Veterans
Administration ("VA") loans are guaranteed, seasoned loans. These loans,
including the past due loans, do not present any significant collection risk to
the Bank, and therefore, are presented separately from conventional mortgages.

(4) The 1995 ratio does not include the $8.2 million mortgage loan that was on
non-accrual status, as management does not consider this loan as non-performing
since payments were received through the bankruptcy court.
</FN>

Loan Loss Activity Table

Activity in the allowance for possible loan losses for the mortgage loan
portfolio and the other loan portfolio are summarized for the nine months ended
September 30, 1996 and the year ended December 31, 1995 as follows:

September 30, December 31,
1996 1995
------------- -------
(Dollars in Thousands)

Mortgage Portfolio Loan Loss Allowance:
Balance at beginning of period $4,575 $3,976
Provision for possible loan losses 450 600
Loans charged off - (1)
------ ------
Balance at end of period $5,025 $4,575
====== ======

Ratios:
Net charge-offs to average mortgages - % - %
Allowance for possible loan losses to
net mortgage loans .62% .62%
Allowance for possible loan losses to
mortgage loans delinquent 90 days or more 36.29% 5.28x

Other Loan Portfolio Loss Allowance:
Balance at beginning of period $ 122 $ 109
Provision for possible loan losses 31 36
Loans charged off (26) (43)
Recoveries of loans previously charged off 18 20
------ ------
Balance at end of period $ 145 $ 122
====== ======

Ratios:
Net charge-offs to average other loans .03% .08%
Allowance for possible loan losses to
net other loans .51% .42%
Allowance for possible loan losses to
other loans delinquent 90 days or more 70.31% 58.94%

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 nine months ended September 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 nine months ended 1996 to $106.1 million, from
$45.4 million for the comparative period in 1995. The increase is primarily
reflective of increased originations of loans secured by multi-family
properties. For the nine months ended September 30, 1996, maturities of U.S.
Government and agency securities generated $590.0 million, the most significant
cash inflow from investing activities, followed by principal payments on CMOs of
$82.1 million. The Company used $27.7 million to make repurchases of its common
stock, which represents the largest use of funds for financing activities. In
addition, net deposit outflows of $12.4 million and dividend payments of $9.2
million, contributed to the net cash outflow from financing activities. The
increase in dividend payments reflects the increase in cash dividends paid per
share to $.90 for the first nine months of 1996, compared to $.75 per share for

the first nine months of 1995. The net deposit decline of $12.4 million for the
first nine months of 1996, reflects deposit increases of $4.7 million during the
first quarter, followed by deposit outflows of $3.8 million and $13.3 million
during the second and third quarters, respectively.

The net decrease in deposits of $12.4 million to $1.151 billion at
September 30, 1996, from $1.163 billion at December 31, 1995, reflects decreases
in passbook accounts, money market accounts, demand deposit accounts and
negotiable order of withdrawal (NOW) accounts of $25.9 million, $2.8 million,
$1.5 million and $867,000, respectively. These decreases were substantially
offset by a $17.1 million increase in certificate accounts and a $1.5 million
increase in lease security accounts. Interest rates offered on passbook accounts
remained relatively low compared to alternative short-term investments offered
by the Bank and the investment community. This scenario has caused the trend of
deposit shifts from passbook accounts to short-term certificate accounts and the
slow decline in net deposits to continue. Management continues to monitor
deposit levels and interest rates in conjunction with asset structure and has
evaluated and implemented various strategies to provide for targeted objectives
in various interest rate scenarios. Net interest rate spread, net interest
margin, liquidity, and related asset quality are some of the key measures of
financial performance that management remains focused on. The Bank's assets are
structured such that a gradual decline in deposits, such as the current
scenario, will not adversely affect the Company. The Bank's liquidity ratios
continue to exceed all short and long term minimum regulatory requirements.
Management is focused on providing quality customer service as its main strategy
for maintaining its relationships with its customers. During the past year the
Bank has expanded its range of services to customers, including automated
telephone banking and credit cards to its depositors.

During the third quarter of 1996, the Company continued to repurchase
shares of its common stock under its tenth stock repurchase program (the
"current program"), which began on June 12, 1996. The Company repurchased
415,000 of the 900,000 targeted for repurchase under the current program through
September 30, 1996. During the nine months ended September 30, 1996, the Company
repurchased 845,000 shares of its common stock, under its ninth repurchase
program and the current program, at an aggregate cost of $27.7 million, or an
average price of $32.72 per share. Pursuant to the Company's 1990 stock option
plans, 104,606 shares were reissued from the treasury for option exercises. No
options were exercised pursuant to the Company's 1996 stock option plan.

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 September 30, 1996, were as follows:

Percentage Dollars
(In Thousands)

TANGIBLE CAPITAL
Required 1.50% $ 20,933
Actual 12.95 180,756
----- --------
Excess 11.45% $159,823
===== ========

CORE CAPITAL
Required 3.00% $ 41,867
Actual 12.95 180,756
----- --------
Excess 9.95% $138,889
===== ========

RISK BASED CAPITAL
Required 8.00% $ 72,207
Actual 19.35 174,635
----- --------
Excess 11.35% $102,428
===== ========

New Legislation

a. Deposit Insurance. On September 30, 1996, legislation designed to replenish
the Savings Association Insurance Fund was enacted. This legislation will have a
minimal impact on the Bank's deposit insurance premiums, as the Bank's deposits
are insured through the Federal Deposit Insurance Corporation ("FDIC") - Bank
Insurance Fund ("BIF"). Beginning on January 1, 1997, the FDIC has estimated
that BIF members will pay a portion of the FICO Bonds payment equal to 1.3 basis
points on BIF-insured deposits compared to 6.5 basis points on SAIF insured
deposits and will pay a pro rata share of the FICO payment on the earlier of
January 1, 2000 or the date upon which the last savings association ceases to
exist. It is estimated that the Bank, under this new legislation, will pay an
additional $160,000 per year from 1997 through 1999.

b. Tax Legislation Regarding Bad Debt Reserves. Federal legislation regarding
bad debt recapture was enacted into law on August 20, 1996. The legislation
requires recapture of reserves accumulated after 1987 (the "base year"). The
recapture tax on post 1987 reserves must be paid over a six year period starting
in 1996. The repayment of the tax can be deferred in each of 1996 and 1997 if an
institution originated at least the same average annual principal amount of
mortgage loans that it originated in the six years prior to 1996. Management has
evaluated this legislation and concluded that it will not have a material
adverse impact on the operations of the Company or the Bank. The base year
reserves and supplemental reserve are frozen, not forgiven. These reserves

continue to be segregated, as they are subject to recapture penalty if used for
purposes other than to absorb losses on loans.

New York State adopted legislation to reform the franchise taxation of
thrift reserves for loan losses. The act applies to taxable years beginning
after December 31, 1995. The legislation, among other things, "decouples" New
York State's thrift bad debt provisions from the federal tax law, discussed
above. The New York State bad debt deduction will no longer be predicated on the
Federal deduction.

Management has evaluated the new federal and New York State tax
legislation, and does not expect a material adverse impact on the operations or
financial condition of the Company or the Bank as a result of these tax law
changes.

To date, New York City has not changed its law and accordingly will follow
the new federal law discussed above.

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

Net income for the three months ended September 30, 1996, was $6.6 million,
or $.64 per share, compared with $6.3 million, or $.56 per share for the three
months ended September 30, 1995.

Net interest income for the three months ended September 30, 1996, was
$16.9 million, compared to $16.6 million for the three months ended September
30, 1995. This net increase reflects a $282,000 decrease in interest expense,
slightly offset by a $30,000 decrease in interest income. The annualized yield
on interest earning assets increased to 7.53%, compared to 7.45%, for the
quarters ended September 30, 1996 and 1995, respectively; however, average
interest earning assets decreased by $16.7 million. The annualized cost of
interest bearing deposits decreased slightly to 3.57% from 3.65% for the
quarters ended September 30, 1996 and 1995, respectively, and average interest
bearing deposits decreased by $7.2 million. For the quarter ended September 30,
1996, the net interest rate spread and net interest margin increased to 3.96%
and 4.72%, respectively, compared to 3.80% and 4.60%, respectively for the
quarter ended September 30, 1995.

Interest earned on mortgage loans increased by $1.4 million, or 8.4%, to
$17.6 million from $16.2 million, reflecting continued growth in the mortgage
portfolio, partially offset by a decrease in the yield on mortgage loans to
8.71% for the quarter ended September 30, 1996, from 9.20% for the quarter ended
September 30, 1995. During 1996, the Bank continued to sell certain one-to
four-family mortgage loans, without recourse, to FNMA and the State of New York
Mortgage Association ("SONYMA"). During the quarter ended September 30, 1996,
the Bank sold $638,000 in mortgage loans, realizing a net gain of $9,000,
compared to sales of $663,000 during the quarter ended September 30, 1995, which
resulted in a net gain of $3,000.

For the three months ended September 30, 1996, income from debt and equity
securities, net, decreased by $2.3 million, or 32.5%, to $4.8 million from $7.1
million for the three months ended September 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 $157.4 million, or 33.6%, to $311.1
million, compared to $468.5 million for the three months ended September 30,
1995. The annualized yield on the debt and equity security portfolio increased
to 6.15% for the three months ended September 30, 1996 from 6.05% for the three
months ended September 30, 1995. The debt and equity securities portfolio
activity for the current period included purchases of $209.7 million and
maturities of $265.0 million, compared with purchases and maturities of $85.0
million each for the quarter ended September 30, 1995.

For the quarter ended September 30, 1996, income on CMOs increased by
35.2%, to $2.7 million, with an annualized yield of 5.70%, from $2.0 million
with an annualized yield of 4.62% for the quarter ended September 30, 1995.
During the third quarter of 1996, the Bank received principal payments of $28.9
million on CMOs, compared with $64.0 million for the quarter ended September 30,
1995. CMO purchases during the quarter ended September 30, 1996 totaled $30.8
million, compared to purchases of $38.6 million for the quarter ended September
30, 1995. The Bank did not sell any CMOs during either period.

Income on federal funds sold increased by $263,000, or 29.1% to $1.2
million for the quarter ended September 30, 1996 from $903,000 for the quarter
ended September 30, 1995. This increase resulted from an increase in the average
investment in federal funds of $24.2 million to $86.8 million for the current
period, compared with $62.6 million for the quarter ended September 30, 1995.
The annualized yield on federal funds sold decreased to 5.37% for the current
quarter, compared to 5.77% for the quarter ended September 30, 1995.

Interest expense on deposits decreased by 2.7%, to $10.1 million for the
quarter ended September 30, 1996, compared to $10.3 million for the quarter
ended September 30, 1995. This net decrease reflects the decrease in average

interest bearing deposits of $7.2 million, to $1.126 billion for the three
months ended September 30, 1996, compared to $1.133 billion for the three months
ended September 30, 1995. The cost of interest bearing deposits decreased
slightly to 3.57% from 3.65% from the comparative quarter.

The provision for possible loan losses remained unchanged. There were no
provisions made for possible other credit losses during the quarter ended
September 30, 1996 or September 30, 1995. Management regularly evaluates the
quality and performance of the Company's asset portfolios, and thereby assesses
the adequacy of loss allowances.

Total non-interest income for the three months ended September 30, 1996,
increased to $1.6 million from $1.1 million, a net increase of $503,000, or
44.0%. The net change in non-interest income is comprised of: (1) a net increase
from real estate operations of $212,000, which reflects a $437,000 retroactive
property tax refund received for a property that was sold during 1994, partially
offset by a $193,000 decrease in gains on sales of cooperative apartments to
$131,000, compared to $324,000 for the quarter ended September 30, 1995; (2) a
$175,000 increase in loan fees and service charges resulting primarily from an
increase in prepayment penalties and (3) a $119,000 increase in miscellaneous
income resulting primarily from a refund for medical and dental insurance
premiums for 1994 and 1995.

Non-interest expense increased by $283,000, or 4.2%, to $7.0 million during
the quarter ended September 30, 1996, from $6.7 million for the quarter ended
September 30, 1995. FDIC premiums were $1,000, compared to a refund of $77,000
during the 1995 quarter. 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. As a result of recent legislation, during
years 1997 through 1999, it is expected that the Bank will pay an additional
premium of $160,000 per year for FICO Bond payments. (See "New Legislation",
herein.)

The provision for income taxes increased by $171,000, or 3.7%, to $4.8
million for the three months ended September 30, 1996, from $4.7 million for the
three months ended September 30, 1995. This increase is reflective of the
increase in pretax income.

Comparison of Operating Results for the Nine Months Ended
September 30, 1996 and 1995

Net income for the nine months ended September 30, 1996, was $19.4 million,
or $1.83 per share, compared with $16.3 million, or $1.46 per share for the nine
months ended September 30, 1995.

Net interest income for the nine months ended September 30, 1996 was $50.6
million, compared to $50.4 million for the nine months ended September 30, 1995.
The increase of $205,000, reflects a decrease of $142,000 in interest expense
and an increase of $63,000 in interest income. The annualized yield on interest
earning assets increased to 7.46% from 7.37%, for the nine months ended
September 30, 1996 and 1995, respectively, while the average balance decreased
by $27.8 million. For the year to date period ended September 30, 1996, the net
interest rate spread and net interest margin were 3.90% and 4.67%, respectively,
compared to 3.83% and 4.60%, respectively for the year to date period ended
September 30, 1995.

Interest earned on mortgage loans increased by $3.4 million, or 7.1%, to
$51.4 million for the nine months ended September 30, 1996, compared to $48.0
million for the comparative 1995 period, reflecting continued growth in the
mortgage portfolio. This increase was partially offset by a decrease in the
mortgage portfolio yield to 8.75% for the nine months ended September 30, 1996,
from 9.24% for the nine months ended September 30, 1995. During 1996, the Bank
continued to sell certain mortgage loans, without recourse, to FNMA and SONYMA.
During the nine months ended September 30, 1996, the Bank sold $977,000 in
mortgage loans, realizing a net gain of $12,000, compared to sales of $1.5
million during the nine months ended September 30, 1995, which resulted in a net
gain of $18,000.

For the nine months ended September 30, 1996, income on debt and equity
securities, net, decreased by $3.8 million, or 18.3%, to $16.9 million from
$20.6 million for the nine months ended September 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 $80.6 million, or 17.7%, to $374.4
million, compared to $455.0 million for the nine months ended September 30,
1995. The annualized yield on the debt and equity security portfolio decreased
slightly to 6.01% from 6.05% for the comparative period, respectively. The debt
and equity securities portfolio activity for the current period included
purchases of $440.0 million and maturities of $590.0 million compared with
purchases of $265.0 million and maturities of $215.0 million for the nine months
ended September 30, 1995.

For the nine months ended September 30, 1996, income on CMOs remained
relatively stable, decreasing by $14,000, compared to the nine months ended
September 30, 1995. This decrease is reflective of the decrease in the average
investment in the CMO portfolio of $46.6 million, or 20.5%, partially offset by
an increase in the CMO portfolio yield to 5.55% from 4.42% for the comparative
nine month period. During the nine months ended September 30, 1996, the Bank
received principal payments of $82.1 million on CMOs, compared with $203.6
million for the nine months ended September 30, 1995. CMO purchases during the
first nine months of 1996 totaled $124.3 million, compared to $53.0 million for
the comparative 1995 period. During the current nine 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 $745,000, or 36.8%, to $2.8
million for the nine months ended September 30, 1996, from $2.0 million for the
nine months ended September 30, 1995. This increase resulted from an increase in
the average investment in federal funds of $22.7 million, to $69.1 million for
the current period, compared with $46.4 million for the nine months ended
September 30, 1995. This increase was partially offset by a decrease in the
annualized yield on federal funds sold to 5.35% for the current nine month
period, compared to 5.82% for the nine month period ended September 30, 1995.

Interest expense on deposits decreased by $142,000, to $30.2 million for
the nine months ended September 30, 1996, compared to $30.4 million for the nine
months ended September 30, 1995. This net decrease reflects the impact of lower
deposit levels slightly offset by higher interest rates during the comparative
quarters. Average interest bearing deposits decreased by $13.8 million, or 1.2%,
to $1,131.1 million for the nine months ended September 30, 1996, compared to
$1,144.9 million for the nine months ended September 30, 1995. The cost of
interest bearing deposits increased slightly to 3.57% from 3.54% for the
comparative nine month periods.

The provision for possible loan losses remained relatively stable,
increasing to $481,000 for the nine months ended September 30, 1996, compared to
$475,000 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 established during
the nine months ended September 30, 1996.

The nine month period ended September 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 5a to the Unaudited
Consolidated Financial Statements.)

Total non-interest income for the nine months ended September 30, 1996,
increased to $4.0 million from $3.0 million, or 33.3%. The change in
non-interest income is comprised of: (1) a net increase from real estate
operations of $547,000. This net increase is primarily reflective of a $437,000
retroactive property tax refund received for a property that was sold during
1994; and (2) a $534,000 increase in loan fees and service charges resulting
primarily from an increase in prepayment penalties.

To expand fee income, the Bank began a campaign during the fourth quarter
of 1995 to issue Visa and MasterCard credit cards. During the nine months ended
September 30, 1996, the Bank recognized $29,000 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 New York Cash Exchange (i.e. NYCE)
increased by $37,000, to $189,000 for the nine months ended September 30, 1996,
related to increased transaction volume, compared to the same quarter in 1995.

Non-interest expense decreased by $2.1 million, or 9.5%, to $20.3 million
for the first nine months of 1996 compared to $22.4 million for the first nine
months of 1995. FDIC premiums decreased to $2,000, compared to $1.4 million
during the 1995 quarter. 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. As a result of recent legislation, during
years 1997 through 1999, it is expected that the Bank will pay an additional
premium of $160,000 per year, for FICO bond payments. ORE generated income of
$795,000 for the nine months ended September 30, 1996, verses an expense of
$166,000 for the nine months ended September 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 a net of $290,000, to $12.4 million for the nine months
ended September 30, 1996, compared to $12.7 million for the comparative 1995
period. The net decrease reflects a net cost decrease for several of the
Company's benefit plans, partially offset by a $247,000 or a 2.6% increase in
salary expense. The $341,000 increase in other general and administrative
expense is comprised primarily of increases in legal fees related to foreclosure
proceedings against two properties.

The provision for income taxes increased by $2.2 million, or 18.1%, to
$14.3 million for the nine months ended September 30, 1996 from $12.1 million
for the nine months ended September 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 (Not Applicable)

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 25
27.00 Financial Data Schedule 26-27

(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 September 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: November 12, 1996 /s/ Park T. Adikes
Park T. Adikes
Chief Executive Officer

DATE: November 12, 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