UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





(Mark
One)


[ X ]QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
quarterly period ended June 30, 2008





[   ]TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


For the
transition period from __________ to ___________





Commission
File Number:  0-503777





FLATBUSH
      FEDERAL BANCORP, INC.(Exact
      name of small business issuer as specified in this
  charter)FEDERAL
            11-3700733(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification No.)2146
      NOSTRAND AVENUE, BROOKLYN, NEW YORK  11210(Address
      of principal executive offices)(718)
      859-6800(Issuer’s
      telephone number)(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the 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.  Yes [
X]  No [   ]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large
      Accelerated filer  o
            Accelerated
      fileroNon-accelerated
      filer (Do not check if a smaller reporting company) o
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes [  ]  No
[X]





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes [  ]  No
[  ]





APPLICABLE
ONLY TO CORPORATE ISSUERS


As
of  August
5, 2008  the Registrant had outstanding 2,744,597 shares of
common stock.





FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES





INDEX


PageNumberPART I – FINANCIAL INFORMATIONItem 1:
            Financial StatementsConsolidated Statements of Financial Condition at June 30, 2008
      and December 31, 2007 (Unaudited)
            1Consolidated Statements of Income for the Three months and Six
      months ended June 30, 2008 and 2007 (Unaudited)
            2Consolidated Statements of Comprehensive Income for the Three
      months and Six months ended June 30, 2008 and 2007
      (Unaudited)
            3Consolidated Statements of Cash Flows for the Six months ended
      June 30, 2008 and 2007 (Unaudited)
            4Notes to Consolidated Financial
      Statements  (Unaudited)
            5 –
      7Item 2:
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operation
            8 –
      14Item 3:
            Quantitative and Qualitative Disclosure About Market
      Risk
            14Item 4T:
            Controls and Procedures
            15PART II – OTHER INFORMATIONItem 1:
            Legal Proceedings
            16Item 1A:
            Risk Factors
            16Item 2:
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            16Item 3:
            Defaults upon Senior Securities
            16Item 4:
            Submission of Matters to a Vote of Securities
      Holders
            16-17Item 5:
            Other Information
            17Item 6:
            Exhibits
            17SIGNATURES
            
            18








Index


PARTI – FINANCIAL INFORMATION


ITEM 1 – FINANCIAL STATEMENTS


FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION


(Unaudited)


June
      30,
            
            
            December 31,ASSETS
            
            2008
            
            
            2007Cash
      and amounts due from depository institutions
            
            $
            1,461,123
            
            
            $
            1,830,973Interest
      earning deposits in other banks
            
            
            629,469
            
            
            
            686,607Federal
      Funds sold
            
            
            7,450,000
            
            
            
            2,450,000Cash
      and cash equivalents
            
            
            9,540,592
            
            
            
            4,967,580Investment
      securities held to maturity; fair value of
              $2,000,320
      in 2008 and $6,499,390 in 2007
            
            
            2,000,000
            
            
            
            6,491,188Mortgage-backed
      securities held to maturity; fair value of
              $24,257,743  in
      2008 and $25,205,441 in 2007
            
            
            24,667,320
            
            
            
            25,350,593Loans
      receivable, net of allowance for loan losses of $190,336
              in
      2008 and $202,388 in 2007
            
            
            96,763,489
            
            
            
            101,482,925Premises
      and equipment
            
            
            2,691,408
            
            
            
            2,778,177Federal
      Home Loan Bank of New York stock
            
            
            1,289,400
            
            
            
            1,512,900Accrued
      interest receivable
            
            
            589,113
            
            
            
            698,270Bank
      owned life insurance
            
            
            3,980,837
            
            
            
            3,901,624Other
      assets
            
            
            1,423,819
            
            
            
            1,655,244Total
      assets
            
            $
            142,945,978
            
            
            $
            148,838,501LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilities:Deposits:Non-interest
      bearing
            
            $
            3,827,329
            
            
            $
            3,835,685Interest
      bearing
            
            
            97,678,223
            
            
            
            98,835,840Total
      Deposits
            
            
            101,505,552
            
            
            
            102,671,525Federal
      Home Loan Bank of New York advances
            
            
            23,432,513
            
            
            
            28,252,084Advance
      payments by borrowers for taxes and insurance
            
            
            465,719
            
            
            
            421,399Other
      liabilities
            
            
            1,991,804
            
            
            
            1,931,875Total
      liabilities
            
            
            127,395,588
            
            
            
            133,276,883Stockholders’
      equity:Preferred
      stock $0.01 par value; 1,000,000 shares authorized;
              none
      issued and outstanding
            
            
            ---
            
            
            
            ---Common
      stock $0.01 par value;  authorized 9,000,000
shares;
              issued
      (2008 and 2007) 2,799,657 shares;
              outstanding
      (2008 and 2007)  2,744,597 shares
            
            
            27,998
            
            
            
            27,998Paid-in
      capital
            
            
            12,479,810
            
            
            
            12,441,913Retained
      earnings
            
            
            5,017,438
            
            
            
            5,117,100Unearned
      employees’ stock ownership plan (ESOP) shares
            
            
            (531,168
            )
            
            
            (548,605
            )Treasury
      stock,  55,060 shares
            
            
            (418,650
            )
            
            
            (418,650
            )Accumulated
      other comprehensive loss
            
            
            (1,025,038
            )
            
            
            (1,058,138
            )Total
      stockholders’ equity
            
            
            15,550,390
            
            
            
            15,561,618Total
      liabilities and stockholders’ equity
            
            $
            142,945,978
            
            
            $
            148,838,501


See notes
to consolidated financial statements.


1
 Index


FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


Three
      months ended
            
            
            Six
      months endedJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Interest
      IncomeLoans,
      including fees
            
            $
            1,543,956
            
            
            $
            1,745,880
            
            
            $
            3,116,457
            
            
            $
            3,528,401Mortgage-backed
      securities
            
            
            327,459
            
            
            
            356,632
            
            
            
            670,701
            
            
            
            721,742Investments
            
            
            67,231
            
            
            
            120,877
            
            
            
            170,426
            
            
            
            236,271Other
      interest earning assets
            
            
            42,043
            
            
            
            61,537
            
            
            
            86,834
            
            
            
            92,583Totalinterestincome
            
            
            1,980,689
            
            
            
            2,284,926
            
            
            
            4,044,418
            
            
            
            4,578,997Interest
      ExpenseDeposits
            
            
            644,417
            
            
            
            739,025
            
            
            
            1,358,647
            
            
            
            1,426,687Borrowings
            
            
            278,291
            
            
            
            381,693
            
            
            
            587,810
            
            
            
            771,568Total interest
      expense
            
            
            922,708
            
            
            
            1,120,718
            
            
            
            1,946,457
            
            
            
            2,198,255Net Interest
      Income
            
            
            1,057,981
            
            
            
            1,164,208
            
            
            
            2,097,961
            
            
            
            2,380,742Provision
      for loan losses
            
            
            66
            
            
            
            -
            
            
            
            66
            
            
            
            2,056Net
      interest income after provision for loan losses
            
            
            1,057,915
            
            
            
            1,164,208
            
            
            
            2,097,895
            
            
            
            2,378,686Non-interest
      incomeFees
      and service charges
            
            
            34,829
            
            
            
            36,209
            
            
            
            61,707
            
            
            
            72,323BOLI
      income
            
            
            40,018
            
            
            
            37,292
            
            
            
            79,214
            
            
            
            73,458Life
      insurance proceeds
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            500,000Other
            
            
            3,645
            
            
            
            2,179
            
            
            
            4,110
            
            
            
            2,639Total non-interest
      income
            
            
            78,492
            
            
            
            75,680
            
            
            
            145,031
            
            
            
            648,420Non-interest
      expensesSalaries
      and employee benefits
            
            
            580,043
            
            
            
            650,513
            
            
            
            1,150,151
            
            
            
            1,337,585Net
      occupancy expense of premises
            
            
            120,333
            
            
            
            134,186
            
            
            
            246,870
            
            
            
            252,911Equipment
            
            
            123,784
            
            
            
            133,108
            
            
            
            248,264
            
            
            
            264,240Directors’
      compensation
            
            
            54,872
            
            
            
            57,420
            
            
            
            97,445
            
            
            
            383,920Professional
      fees
            
            
            78,666
            
            
            
            78,041
            
            
            
            161,106
            
            
            
            119,843Other
      insurance premiums
            
            
            36,393
            
            
            
            37,870
            
            
            
            73,132
            
            
            
            76,982Other
            
            
            131,315
            
            
            
            145,249
            
            
            
            250,362
            
            
            
            259,583Total non-interest
      expenses
            
            
            1,125,406
            
            
            
            1,236,387
            
            
            
            2,227,330
            
            
            
            2,695,064Income
      before income taxes
            
            
            11,001
            
            
            
            3,501
            
            
            
            15,596
            
            
            
            332,042Income
      taxes (benefit)
            
            
            1,945
            
            
            
            1,406
            
            
            
            4,411
            
            
            
            (53,386
            )Net
      income
            
            $
            9,056
            
            
            $
            2,095
            
            
            $
            11,185
            
            
            $
            385,428Net
      income  per common share – Basic and diluted
            
            $
            0.003
            
            
            $
            0.001
            
            
            $
            0.004
            
            
            $
            0.14Weighted
      average number of shares outstanding – Basic and diluted
            
            
            2,663,345
            
            
            
            2,659,568
            
            
            
            2,662,687
            
            
            
            2,667,358







See notes
to consolidated financial statements.


2
 Index


FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME


(Unaudited)








Three
      months ended June 30,
            
            
            Six
      months ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      Income
            
            $
            9,056
            
            
            $
            2,095
            
            
            $
            11,185
            
            
            $
            385,428Other
      comprehensive income,net
      of income taxes:Benefit
      Plans
            
            
            28,461
            
            
            
            43,147
            
            
            
            56,921
            
            
            
            85,107Deferred
      income taxes
            
            
            (11,251
            )
            
            
            (18,057
            )
            
            
            (23,821
            )
            
            
            (35,617
            )17,210
            
            
            
            25,090
            
            
            
            33,100
            
            
            
            49,490Comprehensive
      income
            
            $
            26,266
            
            
            $
            27,185
            
            
            $
            44,285
            
            
            $
            434,918









































See notes to consolidated financial
statements.


3
 Index








FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


Six
      months ended June 30,2008
            
            
            2007Cash
      flow from operating activities:Net
      income
            
            $
            11,185
            
            
            $
            385,428Adjustments
      to reconcile net income to net cash
              provided
      by (used in) operating activities:Depreciation
      and amortization of premises and equipment
            
            
            91,050
            
            
            
            90,671Net
      amortization (accretion) of (discounts), premiums and
              deferred
      loan fees and costs
            
            
            (52,513
            )
            
            
            8,375Provision
      for loan losses
            
            
            66
            
            
            
            2,056ESOP
      shares committed to be released
            
            
            14,210
            
            
            
            19,338MRP
      amortization
            
            
            20,292
            
            
            
            155,581Stock
      option amortization
            
            
            20,832
            
            
            
            152,362Decrease
      in accrued interest receivable
            
            
            109,157
            
            
            
            11,469Increase
      in cash surrender value of BOLI
            
            
            (79,214
            )
            
            
            (52,225
            )Decrease
      (increase) in other assets
            
            
            207,604
            
            
            
            (90,598
            )Increase
      (decrease) in other liabilities
            
            
            6,004
            
            
            
            (1,016,593
            )Net
      cash  provided by (used in) operating activities
            
            
            348,673
            
            
            
            (334,136
            )Cash
      flow from investing activities:Proceeds
      from calls and maturities of investment securities held to
      maturity
            
            
            4,500,000
            
            
            
            -Principal
      repayments on mortgage-backed securities held to maturity
            
            
            1,847,317
            
            
            
            1,909,447Purchases
      of mortgage-backed securities held to maturity
            
            
            (1,136,263
            )
            
            
            (2,682,323
            )Purchases
      of loan participation interests
            
            
            (2,444,298
            )
            
            
            (2,044,529
            )Net
      change in loans receivable
            
            
            7,179,588
            
            
            
            5,543,478Additions
      to premises and equipment
            
            
            (4,281
            )
            
            
            (34,935
            )Redemption
      of Federal Home Loan Bank of New York stock
            
            
            223,500
            
            
            
            72,700Net
      cash provided by investing activities
            
            
            10,165,563
            
            
            
            2,763,838Cash
      flow from financing activities:Net  (decrease)
      increase in deposits
            
            
            (1,165,973
            )
            
            
            1,539,897Advances
      from Federal Home Loan Bank of New York
            
            
            -
            
            
            
            1,800,000Repayment
      of advances from Federal Home Loan Bank of New York
            
            
            (4,819,571
            )
            
            
            (734,500
            )Net
      change to short-term borrowings
            
            
            -
            
            
            
            (3,000,000
            )Increase  in
      advance payments by borrowers
              for
      taxes and insurance
            
            
            44,320
            
            
            
            332,778Purchase
      of treasury stock
            
            
            -
            
            
            
            (55,724
            )Net
      cash used in financing activities
            
            
            (5,941,224
            )
            
            
            (117,549
            )Net
      increase in cash and cash equivalents
            
            
            4,573,012
            
            
            
            2,312,153Cash
      and cash equivalents – beginning
            
            
            4,967,580
            
            
            
            4,006,886Cash
      and cash equivalents – ending
            
            $
            9,540,592
            
            
            $
            6,319,039Supplemental
      disclosure of cash flow informationCash
      paid during the year for:Interest
            
            $
            1,955,366
            
            
            $
            2,219,151Income
      taxes
            
            $
            400
            
            
            $
            146,021








See notes
to consolidated financial statements.


4
 Index


FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




(Unaudited)




NOTE
1.  PRINCIPLES OF CONSOLIDATION




The
consolidated financial statements include the accounts of Flatbush Federal
Bancorp, Inc. (the “Company”), the Flatbush Federal Savings and Loan Association
(the “Association”) and the Association’s subsidiary Flatbush REIT,
Inc.  The Company’s business is conducted principally through the
Association.  All significant intercompany accounts and transactions
have been eliminated in consolidation.




NOTE 2.  BASIS OF
PRESENTATION




The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and Regulation S-X and do not include
information or footnotes necessary for a complete presentation of financial
condition, results of operations and cash flows in accordance with U.S.
generally accepted accounting principles.  However, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements have
been included.  The results of operations for the three months and six
months ended June 30, 2008, are not necessarily indicative of the results which
may be expected for the entire year.




NOTE 3.
ENDORSEMENT  SPLIT-DOLLAR LIFE INSURANCE
ARRANGEMENTS




On
January 1, 2008, the Company changed its accounting policy and recognized a
cumulative-effect adjustment to retained earnings totaling $110,846 related to
accounting for certain endorsement split-dollar life insurance arrangements in
connection with the adoption of Emerging Issues Task Force (“EITF”) Issue No.
06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects
of Endorsement Split Dollar Life Insurance Arrangements.”




NOTE 4.  NET
INCOME PER COMMON SHARE




Net
income per common share was computed by dividing net income for the three months
and six months ended June 30, 2008 and 2007 by the weighted average number of
shares of common stock outstanding adjusted for unearned shares of the
ESOP.  Stock options and restricted stock awards granted are
considered common stock equivalents and therefore considered in diluted net
income per share calculations, if dilutive, using the treasury stock method. At
and for the three months and six months ended June 30, 2008, there was no
dilutive effect of stock options (39,423 shares).




NOTE 5.  CRITICAL
ACCOUNTING POLICIES




The
Company considers accounting policies involving significant judgments and
assumptions by management that have, or could have, a material impact on the
carrying value of certain assets or on income to be critical accounting
policies.  Material estimates that are particularly susceptible to
significant changes relate to the determination of the allowance for loan
losses.  Determining the amount of the allowance for loan losses
necessarily involves a high degree of judgment.  Management reviews
the level of the allowance on a quarterly basis, at a minimum, and establishes
the provision for loan losses based on the composition of the loan portfolio,
delinquency levels, loss experience, economic conditions, and other factors
related to the collectibility of the loan portfolio. Management has allocated
the allowance among categories of loan types as well as classification status at
each period-end date.  Assumptions and allocation percentages based on
loan types and classification status have been consistently
applied.  Management regularly evaluates various risk factors related
to the loan portfolio, such as type of loan, underlying collateral and payment
status, and the corresponding allowance allocation percentages.




5
 Index


Although
management believes that it uses the best information available to establish the
allowance for loan losses, future additions to the allowance may be necessary
based on estimates that are susceptible to change as a result of changes in
economic conditions and other factors.  In addition, the regulatory
authorities, as an integral part of their examination process, periodically
review the allowance for loan losses.  Such agencies may require
management to recognize adjustments to the allowance based on their judgments
about information available to them at the time of their
examinations.




NOTE
6.  RETIREMENT PLANS – COMPONENTS OF  NET PERIODIC PENSION
COST




Periodic
pension expense was as follows:




Three
      months ended
            
            
            Six
      months endedJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Service
      Cost
            
            $
            24,151
            
            
            $
            24,814
            
            
            $
            48,302
            
            
            $
            73,056Interest
      Cost
            
            
            82,145
            
            
            
            68,343
            
            
            
            164,290
            
            
            
            141,885Expected
      return on assets
            
            
            (104,895
            )
            
            
            (100,886
            )
            
            
            (209,790
            )
            
            
            (187,277
            )Amortization
      of past service cost
            
            
            (15,799
            )
            
            
            (10,847
            )
            
            
            (31,598
            )
            
            
            (10,847
            )Amortization
      of unrecognized net loss
            
            
            36,497
            
            
            
            31,556
            
            
            
            72,994
            
            
            
            61,925Net
      periodic benefit cost
            
            $
            22,099
            
            
            $
            12,980
            
            
            $
            44,198
            
            
            $
            78,742







Periodic
pension expense for other plans was as
follows:




Three
      months ended
            
            
            Six
      months endedJune
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Service
      Cost/Interest Cost
            
            $
            25,004
            
            
            $
            24,346
            
            
            $
            50,008
            
            
            $
            48,692Amortization
      of unrecognized transition obligation
            
            
            1,134
            
            
            
            4,268
            
            
            
            2,268
            
            
            
            8,536Amortization
      of past service cost
            
            
            5,278
            
            
            
            5,278
            
            
            
            10,556
            
            
            
            10,556Amortization
      of unrecognized net loss
            
            
            1,350
            
            
            
            2,045
            
            
            
            2,700
            
            
            
            4,090Net
      periodic benefit cost
            
            $
            32,766
            
            
            $
            35,937
            
            
            $
            65,532
            
            
            $
            71,874





The
Company expects to contribute $20,000 during 2008 for these retirement
plans.





NOTE 7.  RECENT
ACCOUNTING PRONOUNCEMENTS





In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No. 133”
(Statement 161).  Statement 161 requires entities that utilize
derivative instruments to provide qualitative disclosures about their objectives
and strategies for using such  instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  Statement 161 also requires entities to disclose
additional information about the amounts and location of derivatives located
within the financial statements, how the provisions of SFAS 133 have been
applied, and the impact that hedges have on an entity’s financial statements,
financial performance, and cash flows. Statement 161 is effective for fiscal
years and  interim periods beginning after November 15, 2008, with
early application encouraged.   The Company is currently
evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.





In
February 2008, the FASB issued a FASB Staff Position (FSP) FAS 140-3,
“Accounting for Transfers of Financial Assets and Repurchase Financing
Transactions.”  This FSP addresses the issue of whether or not these
transactions should be viewed as two separate transactions or as one “linked”
transaction.  The FSP includes a “rebuttable presumption” that
presumes linkage of the two transactions unless the presumption can be overcome
by meeting


6
 Index


certain
criteria.  The FSP will be effective for fiscal years beginning after
November 15, 2008 and will apply only to original transfers made after that
date: early adoption will not be allowed.  The Company is currently
evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.








In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This Statement identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements.  This statement is effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles.”  The Company is
currently evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.


















































7
 Index








ITEM
2


FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES


MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATION


Forward-Looking
Statements




This Form
10-Q may include certain forward-looking statements based on current management
expectations.  The Company’s actual results could differ materially
from those management expectations.  Factors that could cause future
results to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, changes in tax policies,
rates and regulations of federal, state and local tax authorities, changes in
interest rates, deposit flows, the cost of funds, demand for loan products,
demand for financial services, competition, changes in the quality or
composition of loan and investment portfolios of the Company, changes in
accounting principles, policies or guidelines, and other economic, competitive,
governmental and technological factors affecting the Company’s operations,
markets, products, services and prices.




Comparison
of Financial Condition at June 30, 2008 and December 31, 2007




The
Company’s total assets as of June 30, 2008 were $142.9 million compared to
$148.8 million at December 31, 2007, a decrease of $5.9 million, or
4.0%.  Cash and cash equivalents increased $4.5 million, or 90.0%, to
$9.5 million at June 30, 2008 from $5.0 million at December 31,
2007.  Loans receivable decreased $4.7 million, or 4.6%, primarily due
to slower loan demand along with increased construction loan payoffs, to $96.8
million at June 30, 2008 from $101.5 million at December 31, 2007.
Mortgage-backed securities decreased $684,000, or 2.7%, to $24.7 million at June
30, 2008 from $25.4 million as of December 31, 2007. Investment securities
decreased $4.5 million, or 69.2%, primarily due to security calls during the
period, to $2.0 million as of June 30, 2008 from $6.5 million as of December 31,
2007.





Total
deposits decreased $1.2 million, or 1.2%, to $101.5 million at June 30, 2008
from $102.7 million at  December 31, 2007.  As of June
30, 2008, borrowings from the Federal Home Loan Bank of New York (“FHLB”) were
$23.4 million compared to $28.3 million as of December 31, 2007, a decrease of
$4.9 million, or 17.3%.





Total
stockholders’ equity decreased $12,000 to $15.6 million at June 30, 2008 from
$15.6 million at December 31, 2007.





On August
30, 2007, the Company approved a stock repurchase program and
authorized  the repurchase of up to 50,000 shares of the Company’s
outstanding shares of common stock. Stock repurchases are made from time to time
and may be effected through open market purchases, block trades and in privately
negotiated transactions.  Repurchased stock will be held as treasury
stock and will be available for general corporate purposes.  During
the quarter ended June 30, 2008, the Company did not repurchase any shares. As
of June 30, 2008, under the current  program 5,060 shares were
acquired at a weighted average price of $5.67 per share.





Comparison
of Operating Results for the Three Months Ended June 30, 2008 and June 30,
2007




General.Net
income increased by $7,000, to $9,000 for the quarter ended June 30, 2008 from
$2,000 for the same quarter in 2007.  The increase in net income for
the quarter was primarily due to decreases of $95,000 in  interest
expense on deposits, $103,000 in interest expense on borrowings from the FHLB of
New York and $111,000 in  non-interest expenses, and an increase of
$2,000 on non-interest income. These decreases were partially offset by a
decrease of $304,000 in interest income.





Interest Income.
Interest income decreased $304,000, or 13.3%, to $2.0 million for the quarter
ended June 30, 2008 from $2.3 million for the quarter ended June 30 2007. The
decrease in interest income can be primarily attributed to a lower interest
earning asset base combined with a lower average yield.  For the three
months ended June 30, 2008, the average balance of $133.5 million in
interest-earning assets earned an average




8
 Index


yield of
5.94% compared to an average yield of 6.33% on an average balance of $144.4
million for the three months ended June 30, 2007.




Interest
income on loans decreased $202,000, or 11.6%, to $1.5 million for the quarter
ended June 30, 2008 from $1.7 million for the same quarter in
2007.  The average balance of loans decreased $7.0 million to $97.0
million for the quarter ended June 30, 2008 from $104.0 million for the quarter
ended June 30, 2007.  The average yield on loans decreased by 34 basis
points to 6.37% for the quarter ended June 30, 2008 from 6.71% for the quarter
ended June 30, 2007.




Interest
income on mortgage-backed securities decreased $30,000, or 8.4%, to $327,000 for
the quarter ended June 30, 2008 from $357,000 for the quarter ended June 30,
2007.  The average balance of mortgage-backed securities decreased
$2.2 million to $24.5 million for the quarter ended June 30, 2008 from $26.7
million for the quarter ended June 30, 2007.  The average yield
increased by one basis point to 5.35% for the quarter ended June 30, 2008 from
5.34% for the same period in 2007.




Interest
income on investment securities decreased $54,000, or 44.6%, to $67,000 for the
quarter ended June 30, 2008 from $121,000 for the quarter ended June 30,
2007.    The average balance of investment securities
decreased by $5.3 million to $3.3 million for the quarter ended June 30, 2008
from $8.6 million for the quarter ended June 30, 2007.  As a partial
offset, the average yield on investment securities increased 245 basis points to
8.10%, primarily due to a higher dividend received on FHLB stock, for the
quarter ended June 30, 2008 from an average yield of 5.65% for the quarter ended
June 30, 2007.




Interest
income on other interest-earning assets, primarily interest-earning deposits and
federal funds sold, decreased $20,000, or 32.3%, to $42,000 for the quarter
ended June 30, 2008 from $62,000 for the quarter ended June 30,
2007.   The average yield on other interest earning assets
decreased by 283 basis points to 1.94% for the quarter ended June 30, 2008 from
4.77% for the quarter ended June 30, 2007. As a partial offset, the average
balance of other interest earning assets increased $3.5 million to $8.7 million
for the quarter ended June 30, 2008 from $5.2 million for the quarter ended June
30, 2007.




Interest
Expense.Total interest expense, comprised of interest
expense on deposits and interest expense on FHLB borrowings, decreased $198,000,
or 17.7%, to $923,000 for the quarter ended June 30, 2008 from $1.1 million for
the quarter ended June 30, 2007. The average balance of interest-bearing
liabilities decreased $10.7 million to $121.9 million for the quarter ended June
30, 2008 from $132.6 million for the quarter ended June 30, 2007. The average
cost of interest-bearing liabilities decreased by 35 basis points to 3.03% for
the quarter ended June 30, 2008 from 3.38% for the quarter ended June 30,
2007.




Interest
expense on deposits decreased $95,000, or 12.9%, to $644,000 for the quarter
ended June 30, 2008 from $739,000 for the quarter ended June 30,
2007.  The average cost of interest-bearing deposits decreased by 23
basis points to 2.64% for the quarter ended June 30, 2008 from 2.87% for the
quarter ended June 30, 2007, reflecting the declining trend of interest rates on
deposits.  The average balance of interest-bearing deposits decreased
$5.2 million to $97.8 million for the quarter ended June 30, 2008 from $103.0
million for the quarter ended June 30, 2007.




Interest
expense on FHLB borrowings decreased $103,000, or 27.0%, to $278,000 for the
quarter ended June 30, 2008, from $381,000 for the quarter ended June 30,
2007.  The average balance of FHLB borrowings decreased $5.5 million
to $24.1 million for the quarter ended June 30, 2008, from $29.6 million for the
quarter ended June 30, 2007. The average cost of FHLB borrowings decreased by 54
basis points to 4.62% for the quarter ended June 30, 2008, from 5.16% for the
quarter ended June 30, 2007.




Net Interest
Income.Net interest income decreased $106,000, or 9.1%, to
$1.1 million for the quarter ended June 30, 2008 from $1.2 million for the same
quarter in 2007.  The interest rate spread was 2.91% for the quarter
ended June 30, 2008 compared to 2.95% for the quarter ended June 30, 2007, a
decrease of four basis points.  Interest margin for the quarter ended
June 30, 2008 was 3.17% compared to 3.22% for the quarter ended June 30, 2007, a
decrease of five basis points.  The decrease in interest rate spread
and interest margin can be attributed primarily to the  decrease in
the average balance and average yield of loans receivable, the decrease in the
average balance of investment securities and the decrease in the average yield
of other interest-earning assets.




9
 Index


Provision for Loan
Losses.The Company establishes provisions for loan losses,
which are charged to operations, at a level necessary to absorb known and
inherent losses that are both probable and reasonably estimable at the date of
the financial statements.  In evaluating the level of the allowance
for loan losses, management considers historical loss experience, the types of
loans and the amount of loans in the loan portfolio, adverse situations that may
affect the borrower’s ability to repay, the estimated value of any underlying
collateral, and prevailing economic conditions.  This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available or as future events
change.  Based on the evaluation of these factors, a provision of $66
was recorded for the three months ended June 30, 2008.  For the three
months ended June 30, 2007, no provision was recorded.  The provision
for loan losses was established to address probable and estimable losses in the
loan portfolio.  The level of the allowance at June 30, 2008 is based
on estimates, and the ultimate losses may vary from the
estimates.  Non-performing loans increased to $494,000, or 0.35% of
total assets as of June 30, 2008, from $72,000 or 0.04% of total assets as of
June 30, 2007. As of June 30, 2008, the non-performing loan total included one
1-4 residential loan of $487,000 which, at quarter-end did not warrant a
specific provision for loan loss.




Non-Interest
Income.Non-interest income increased $2,000, to $78,000 for
the quarter ended June 30, 2008 from $76,000 for the quarter ended June 30,
2007.  This was primarily attributable to the increase from BOLI
income of $3,000.




Non-Interest Expenses.  Non-interest expenses decreased $111,000, or 9.0%, to $1.1
million for the quarter ended June 30, 2008 from $1.2 million for the quarter
ended June 30, 2007.  The net decrease of $111,000 in non-interest
expense is primarily attributable to decreases to salaries and employee
benefits, directors’ compensation, net occupancy expense of premises, equipment,
other insurance premiums, and other expenses. Salaries and employee benefits
decreased $71,000 to $580,000 for the three months ended June 30, 2008, from
$651,000 for the three months ended June 30, 2007, primarily due to the
reduction in staff.




Income Tax
Expense.  The provision for income taxes increased $1,000, to
$2,000 for the quarter ended June 30, 2008 from  $1,000 for the same
quarter in 2007.




Comparison
of Operating Results for the Six Months Ended June 30, 2008 and June 30,
2007




General.Net
income decreased by $374,000, to $11,000 for the six months ended June 30, 2008
from $385,000 for the same six months in 2007.  The decrease in net
income for the six months was primarily due to  decreases of $535,000
in total interest income, and $503,000 in non-interest income, and an increase
of $58,000 in  income taxes. These were partially offset by decreases
of $68,000 in interest expense on deposits, $184,000 in interest expense on FHLB
borrowings, $468,000 in non-interest expenses and $2,000 in provision for loan
losses.





Interest Income.
Interest income decreased $535,000 or 11.7%, to $4.0 million for the six months
ended June 30, 2008 from $4.6 million for the six months ended June 30 2007. The
decrease in interest income can be primarily attributed to a lower interest
earning asset base combined with a lower average yield.  For the six
months ended June 30, 2008 the average balance of $134.9 million in
interest-earning assets earned an average yield of 5.99% compared to an average
yield of 6.33% on an average balance of $144.7 million for the six months ended
June 30, 2007.




Interest
income on loans decreased $412,000, or 11.7%, to $3.1 million for the six months
ended June 30, 2008 from $3.5 million for the same six months in
2007.  The average balance of loans decreased $7.3 million to $98.0
million for the six months ended June 30, 2008 from $105.3 million for the six
months ended June 30, 2007.  The average yield on loans decreased by
34 basis points to 6.36% for the six months ended June 30, 2008 from
6.70% for the six months ended June 30, 2007.




Interest
income on mortgage-backed securities decreased $51,000, or 7.1%, to $671,000 for
the six months ended June 30, 2008 from $722,000 for the six months ended June
30, 2007.  The average balance of mortgage-backed securities decreased
$2.0 million to $24.7 million for the six months ended June 30, 2008 from $26.7
million for the six months ended June 30, 2007.  The average yield
increased by two basis points to 5.42% for the six months ended June 30, 2008
from 5.40% for the same period in 2007.




10
 Index


Interest
income on investment securities decreased $66,000, or 28.0%, to $170,000 for the
six months ended June 30, 2008 from $236,000 for the six months ended June 30,
2007.  The average balance of investment securities decreased by $4.0
million to $4.6 million for the six months ended June 30, 2008 from $8.6 million
for the six months ended June 30, 2007.  As a partial
offset, the average yield on investment securities increased 198 basis points to
7.48%, primarily due to a higher dividend received on FHLB stock, for the six
months ended June 30, 2008 from an average yield of 5.50% for the six months
ended June 30, 2007.




Interest
income on other interest-earning assets, primarily interest-earning deposits and
federal funds sold, decreased $6,000, or 6.5%, to $87,000 for the six months
ended June 30, 2008 from $93,000 for the six months ended June 30, 2007.
The  average yield on other interest earning assets decreased by 232
basis points to 2.26% for the six months ended June 30, 2008 from 4.58% for the
six months ended June 30, 2007. As a partial offset, the average balance of
other interest earning assets increased $3.7 million to $7.7 million for the six
months ended June 30, 2008 from $4.0 million for the six months ended June 30,
2007.




Interest
Expense.Total interest expense, comprised of interest
expense on deposits and interest expense on FHLB borrowings, decreased $252,000,
or 11.5%, to $1.9 million for the six months ended June 30, 2008 from $2.2
million for the six months ended June 30, 2007. The average balance of
interest-bearing liabilities decreased $9.1 million to $123.6 million for the
six months ended June 30, 2008 from $132.7 million for the six months ended June
30, 2007. The average cost of interest-bearing liabilities decreased by 16 basis
points to 3.15% for the six months ended June 30, 2008 from 3.31% for the six
months ended June 30, 2007.




Interest
expense on deposits decreased $68,000, or 4.8%, to $1.4 million for the six
months ended June 30, 2008 from $1.4 million for the six months ended June 30,
2007.  The average cost of interest-bearing deposits decreased by two
basis points to 2.77% for the six months ended June 30, 2008 from 2.79% for the
six months ended June 30, 2007. The average balance of interest-bearing deposits
decreased $4.4 million to $98.0 million for the six months ended June 30, 2008
from $102.4 million for the six months ended June 30, 2007.




Interest
expense on FHLB borrowings decreased $184,000, or 23.8%, to $588,000 for the six
months ended June 30, 2008, from $772,000 for the six months ended June 30,
2007.  The average balance of FHLB borrowings decreased $4.7 million
to $25.6 million for the six months ended June 30, 2008, from $30.3 million for
the six months ended June 30, 2007. The average cost of FHLB borrowings
decreased by 50 basis points to 4.60% for the six months ended June 30, 2008,
from 5.10% for the six months ended June 30, 2007.




Net Interest
Income.Net interest income decreased $283,000, or 11.9%, to
$2.1 million for the six months ended June 30, 2008 from $2.4 million for the
same six months in 2007.  The interest rate spread was 2.84% for the
six months ended June 30, 2008 compared to 3.02% for the six months ended June
30, 2007, a decrease of 18 basis points.  Interest margin for the six
months ended June 30, 2008 was 3.11% compared to 3.29% for the six months ended
June 30, 2007, a decrease of 18 basis points.  The decrease in
interest rate spread and interest margin can be attributed primarily to the
decrease in the average balance and average yield of loans
receivable,  the decrease in the average balance of investment
securities and the decrease in the average yield of other interest-earning
assets.




Provision for Loan
Losses.The Company establishes provisions for loan losses,
which are charged to operations, at a level necessary to absorb known and
inherent losses that are both probable and reasonably estimable at the date of
the financial statements.  In evaluating the level of the allowance
for loan losses, management considers historical loss experience, the types of
loans and the amount of loans in the loan portfolio, adverse situations that may
affect the borrower’s ability to repay, the estimated value of any underlying
collateral, and prevailing economic conditions.  This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available or as future events
change.  Based on the evaluation of these factors, a provision of $66
was recorded for the six months ended June 30, 2008.  For the six
months ended June 30, 2007, a provision of $2,000 was recorded.  The
provision for loan losses was established to address probable and estimable
losses in the loan portfolio.  The level of the allowance at June 30,
2008 is based on estimates, and the ultimate losses may vary from the
estimates.  Non-performing loans increased to $494,000, or 0.35% of
total assets as of June 30, 2008, from $72,000 or 0.04% of total assets as of
June 30, 2007. As of June 30, 2008, the non-performing loan total included one
1-4 residential loan of $487,000 which, at this time, did not warrant a specific
provision for loan loss.




11
 Index







Non-Interest
Income.Non-interest income decreased $503,000, to $145,000
for the six months ended June 30, 2008 from $648,000 for the six months ended
June 30, 2007.  This was primarily attributable to the life insurance
proceeds of $500,000 received during the six months ended June 30, 2007 and a
decrease in fees and service charges of $10,000.  As a partial offset,
income from BOLI increased by $6,000.




Non-Interest Expenses.  Non-interest expenses decreased $468,000, or 17.4%, to $2.2
million for the six months ended June 30, 2008 from $2.7 million for the six
months ended June 30, 2007.  The net decrease of $468,000 in
non-interest expense is primarily attributable to decreases to salaries and
employee benefits, directors’ compensation, net occupancy expense of premises,
equipment, other insurance premiums and other expenses, which were partially
offset by increases in professional fees. Directors’ compensation decreased by
$287,000 to $97,000 for the six months ended June 30, 2008, from $384,000 for
the six months ended June 30, 2007. The decrease is primarily attributed to the
one-time accrual of $221,000 for the accelerated vesting of stock options and
restricted stock due to the death of former Flatbush Federal Bancorp Inc. CEO
and President, Anthony J. Monteverdi, the one-time accrual of $35,000 for the
accelerated vesting of stock options and restricted stock due to the retirement
of director John F. Antoniello during the six months ended June 30, 2007,
and  the reduction of outside directors to five during the six months
ended June 30, 2007. Salaries and employee benefits decreased $188,000 to $1.1
million for the six months ended June 30, 2008, from $1.3 million for the six
months ended June 30, 2007, primarily due to the reduction in
staff.  Professional fees increased $41,000 to $161,000 for the six
months ended June 30, 2008, from $120,000 for the six months ended June 30,
2007, primarily due to the additional fees for the compliance with the
Sarbanes-Oxley Act, Section 404.




Income Tax
Expense.  The provision for income taxes increased $57,000, to
$4,000 for the six months ended June 30, 2008 from a benefit of $53,000 for the
same six months in 2007.




Liquidity
and Capital Resources




The
Association is required to maintain levels of liquid assets under the Office of
Thrift Supervision (the “OTS”) regulations sufficient to ensure the
Association’s safe and sound operation.  The Association’s liquidity
averaged 11.46% during the month of June 2008.  The Association
adjusts its liquidity levels in order to meet funding needs for deposit
outflows, payment of real estate taxes from escrow accounts on mortgage loans,
repayment of borrowings, when applicable, and loan funding commitments. The
Association also adjusts its liquidity level as appropriate to meet its
asset/liability objectives.




The
Association’s primary sources of funds are deposits, borrowings, amortization
and prepayments of loans and mortgage-backed securities, maturities of
investment securities and funds provided from operations.  While
scheduled loan and mortgage-backed securities amortization and maturing
investment securities are a relatively predictable source of funds, deposit
flows and loan and mortgage-backed securities prepayments are greatly influenced
by market interest rates, economic conditions and competition.




The
Association’s liquidity, represented by cash and cash equivalents, is a product
of its operating, investing and financing activities.




The
primary sources of investing activity are lending and the purchase of investment
securities and mortgage-backed securities.  Net loans totaled $96.8
million and $101.5 million at June 30, 2008 and December 31, 2007,
respectively.  Mortgage-backed and investment securities held to
maturity totaled $26.7 million and $31.8 million at June 30, 2008 and
December 31, 2007, respectively.  In addition to funding new
loans and mortgage-backed and investment securities purchases through operating
and financing activities, such activities were funded by principal repayments on
existing loans, mortgage-backed securities, maturities of investment securities
and advances from the FHLB.




Liquidity
management is both a daily and long-term function of business
management.  Excess liquidity is generally invested in short-term
investments, such as federal funds and interest-bearing deposits.  If
the Association requires funds beyond its ability to generate them internally,
borrowing agreements exist with the FHLB which




12
 Index


provides
an additional source of funds.  At June 30, 2008, the Company had
$23.4 million in advances from the FHLB, and had a remaining available borrowing
limit of $53.8 million.  At December 31, 2007, advances from the FHLB
totaled $28.3 million.




The
Association anticipates that it will have sufficient funds available to meet its
current loan commitments and obligations.  At June 30, 2008, the
Association had outstanding commitments to originate or purchase loans
of  $7.0 million.  Certificates of deposit scheduled to
mature in one year or less at June 30, 2008, totaled $44.9
million.  Management believes that, based upon its experience and the
Association’s deposit flow history, a significant portion of such deposits will
remain with the Association.




Under OTS
regulations, three separate measurements of capital adequacy (the “Capital
Rule”) are required.  The Capital Rule requires each savings
institution to maintain tangible capital equal to at least 1.5% and core capital
equal to 4.0% of its adjusted total assets.  The Capital rule further
requires each savings institution to maintain total capital equal to at least
8.0% of its risk-weighted assets.




The
following table sets forth the Association’s capital position at June 30, 2008,
as compared to the minimum regulatory capital requirements:




Actual
            
            Minimal
      Capital
              Requirements
            Under
      Prompt
              Corrective
      Actions
              ProvisionsAmount
            
            
            Ratio
            
            Amount
            Ratio
            Amount
            Ratio(Dollars
      in Thousands)Total
      Capital
            
            $
            15,987
            
            
            
            21.6
            %
            $>5,923
            >8.0%
            $>7,404
            >10.0%(to
      risk-weighted assets)Tier
      1 Capital
            
            
            15,807
            
            
            
            21.4
            %
            >
      -
            >
      -
            >4,443
            >  6.0%(to
      risk-weighted assets)Core
      (Tier 1) Capital
            
            
            15,891
            
            
            
            11.2
            %
            >
      5,689
            >4.0%
            >7,111
            >  5.0%(to
      adjusted total assets)Tangible
      Capital
            
            
            15,891
            
            
            
            11.2
            %
            >
      2,133
            >1.5%
            >-
            >-(to
      adjusted total assets)





Management
of Interest Rate Risk




The
ability to maximize net interest income largely depends upon maintaining a
positive interest rate spread during periods of fluctuating market interest
rates.  Interest rate sensitivity is a measure of the difference
between amounts of interest-earning assets and interest-bearing liabilities
which either reprice or mature within a given period of time.  The
difference, or the interest rate repricing “gap”, provides an indication of the
extent to which an institution’s interest rate spread will be affected by
changes in interest rates.  A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets.  Generally, during a period of rising interest
rates, a negative gap within shorter maturities would adversely affect net
interest income, while a positive gap within shorter maturities would result in
an increase in net interest income, and during a period of falling interest
rates, a negative gap within shorter maturities would result in an increase in
net interest income while a positive gap within shorter maturities would result
in a decrease in net interest income.




The
Association’s current investment strategy is to maintain an overall securities
portfolio that provides a source of liquidity and that contributes to the
Association’s overall profitability and asset mix within given quality and
maturity considerations.




13
 Index


Net
Portfolio Value




The
Association’s interest rate sensitivity is monitored by management through the
use of the OTS model which estimates the change in the Association’s net
portfolio value (“NPV”) over a range of interest rate scenarios.  NPV
is the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts.  The NPV ratio, under any interest rate
scenario, is defined as the NPV in that scenario divided by the market value of
assets in the same scenario. The OTS produces its analysis based upon data
submitted on the Association’s quarterly Thrift Financial Reports. The following
table sets forth the Association’s NPV as of March 31, 2008, the most recent
date the Association’s NPV was calculated by the OTS.




Change
      in
              
              Net
      Portfolio Value
              
              Net
      Portfolio Value as a
                  Percentage
      of Present Value of
                  AssetsInterest
      Rates
                (basis
      points)
              
              Estimated
                NPV
              
              Amount
      of
                  Change
              
              Percent
      of
                  Change
              
              NPV
      Ratio
              
              Change
      in Basis
                  Points(Dollars
      in Thousands)+300
              
              
              $
              11,574
              
              
              $
              (6,252
              )
              
              
              (35
              %)
              
              
              8.14
              %
              
              
              -360+200
              
              
              
              14,047
              
              
              
              (3,780
              )
              
              
              (21
              %)
              
              
              9.64
              %
              
              
              -210+100
              
              
              
              16,329
              
              
              
              (1,498
              )
              
              
              ( 8
              %)
              
              
              10.95
              %
              
              
              -
      79+
      50
              
              
              
              17,210
              
              
              
              (617
              )
              
              
              (
      3
              %)
              
              
              11.43
              %
              
              
              -
      310
              
              
              
              17,827
              
              
              
              —
              
              
              
              —
              
              
              
              11.74
              %
              
              
              —-
      50
              
              
              
              18,049
              
              
              
              222
              
              
              
              1
              %
              
              
              11.82
              %
              
              
              + 8-100
              
              
              
              18,047
              
              
              
              220
              
              
              
              1
              %
              
              
              11.77
              %
              
              
              + 3





Certain
shortcomings are inherent in the methodology used in the above interest rate
risk measurement.  Modeling changes in net portfolio value require
making certain assumptions that may or may not reflect the manner in which
actual yields and costs respond to changes in market interest
rates.  In this regard, the net portfolio value table presented
assumes that the composition of interest-sensitive assets and liabilities
existing at the beginning of a period remains constant over the period being
measured, and assumes that a particular change in interest rates is reflected
uniformly across the yield curve regardless of the duration or repricing of
specific assets and liabilities.  Accordingly, although the net
portfolio value table provides an indication of the Association’s interest rate
risk exposure at a particular point in time, such measurements are not intended
to and do not provide a precise forecast of the effect of changes in market
interest rates on its net interest income and will differ from actual
results.




ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk




As a
smaller reporting company, the company is not required to provide the
information required of this item.






14
 Index




ITEM 4T.
FLATBUSH FEDERAL BANCORP, INC. AND SUBSIDIARIES CONTROLS AND
PROCEDURES







As of the
end of the period covered by this report, based on an evaluation of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities and Exchange Act of 1934), each of the Chief
Executive Officer and the Chief Financial Officer of the Company has concluded
that the Company’s disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in its Exchange Act
reports is recorded, processed, summarized and reported within the applicable
time periods specified by the SEC’s rules and forms.




There
were no significant changes in the Company’s internal controls or in any other
factors which could significantly affect those controls subsequent to the date
of the most recent evaluation of the June 30, 2008 internal controls by the
Company, including any corrective actions with regard to any significant
deficiencies or material weaknesses.




15
 Index


FLATBUSH
FEDERAL BANCORP, INC. AND SUBSIDIARIES





PART II – OTHER INFORMATION








ITEM 1.
Legal Proceedings





The
Company is not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business, which involve
amounts in the aggregate believed by management to be immaterial to the
financial condition of the Company and the Association.





ITEM
1A.Risk Factors





A
smaller reporting company is not required to provide the information required of
this item.





ITEM 2.
Unregistered Sales of Equity Securities and Use of
Proceeds





On June
30, 2005, the Board of Directors approved a stock repurchase program and
authorized the repurchase of up to 50,000 shares of the Company's outstanding
shares of common stock. On August 30, 2007, the Company approved a second stock
repurchase program and authorized  the repurchase of up to 50,000
shares of the Company’s outstanding shares of common stock.  Stock
repurchases will be made from time to time and may be effected through open
market purchases, block trades and in privately negotiated transactions.
Repurchased stock will be held as treasury stock and will be available for
general corporate purposes. As of June 30, 2008, 53,720 total shares have been
repurchased by the Company. No shares were repurchased in the quarter ended June
30, 2008. These total repurchased shares do not include the stock dividend
shares of 1,340 which, along with the repurchased shares, are held as Treasury
stock.





Company
      Purchases of Common StockPeriod
            Total
      number
              of
      shares
              purchased
            Average
      price
              paid
      per share
            Total
      number of
              shares
              purchased
      as
              part
      of publicly
              announced
              plans
      or
              programs
            Maximum
              number
      (or
              approximate
              dollar
      value) of
              shares
      that may
              yet
      be purchased
              under
      the plans or
              programsApril
      1, 2008 through April 30, 2008
            -
            -
            53,720
            46,280May
      1, 2008 through May 31, 2008
            -
            -
            53,720
            46,280June
      1, 2008 through June 30, 2008
            -
            -
            53,720
            46,280





ITEM 3.
Defaults Upon Senior Securities





Not
applicable.





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





At the
Company’s Annual Meeting held on April 24, 2008, shareholders of the Company
considered and voted on the following:





1.
            The
      election of directors:
            FOR
            %
            WITHOLD
            %Jesus
      R. Adia
            2,358,221
            95.8
            104,593
            4.2Alfred
      S. Pantaleone
            2,356,425
            95.7
            106,389
            4.3Michael
      J. Lincks
            2,358,966
            95.8
            103,848
            4.2


16
 Index


Director
Adia was elected to a one year term and Directors Pantaleone and Lincks were
elected to three year terms.  The following directors terms of office
continued after the Annual meeting: D. John Antoniello, Charles J. Vorbach and
Patricia A. McKinley.





2.    
The ratification of the appointment of Beard Miller Company LLP as independent
auditors of the  Company for the year ending December 31,
2008.





FOR
            %
            AGAINST
            %
            ABSTAIN
            %2,391,513
            97.2
            69,332
            2.8
            1,969
            0.1





ITEM 5.
Other Information








None











ITEM 6.
Exhibits





The
following Exhibits are filed as part of this report.





11.0
            Computation
      of earnings per share


31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (filed herewith).


31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley
      Act of 2002 (filed herewith).


32.1
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (filed
herewith).





17
 Index


SIGNATURES





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











FLATBUSH
      FEDERAL BANCORP, INC.Date:   August 14,
      2008
            By:
            /s/
      Jesus R. AdiaJesus
      R. AdiaPresident
      andChief
      Executive OfficerDate:   August 14,
      2008
            By:
            /s/  John
      S. LotardoJohn
      S. LotardoExecutive
      Vice President and ChiefFinancial
      Officer














18