SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

(Mark One)

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

                For the quarterly period ended December 31, 2004

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

           For the transition period from ____________ to ____________

                        Commission file number 000-24811

                           SOUND FEDERAL BANCORP, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                               22-3887679
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

               1311 Mamaroneck Ave., White Plains, New York 10605
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (914) 761-3636
               (Registrant's telephone number including area code)

                                       N/A
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed from 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 Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].

      Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes X No .

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

                                                                 Shares
               Class                                         Outstanding at
         ----------------                                   February 4, 2005
           Common Stock,                                    ----------------
         par value, $0.01                                      12,592,841

<PAGE>

                                TABLE OF CONTENTS

                         PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Consolidated Balance Sheets at December 31, 2004 and
        March 31, 2004.......................................................  1

        Consolidated Statements of Income for the Quarter and
        Nine Months Ended December 31, 2004 and 2003.........................  2

        Consolidated Statement of Changes in Stockholders' Equity
        for the Nine Months Ended December 31, 2004..........................  3

        Consolidated Statements of Cash Flows for the Nine Months
        Ended December 31, 2004 and 2003.....................................  4

        Notes to Unaudited Consolidated Financial Statements.................  5

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations............................................ 11

Item 3. Quantitative and Qualitative Disclosures about Market Risk........... 24

Item 4. Controls and Procedures.............................................. 24

                          PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.................................................... 25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.......... 25

Item 3. Defaults upon Senior Securities...................................... 25

Item 4. Submission of Matters to a Vote of Security Holders.................. 25

Item 5. Other Information.................................................... 25

Item 6. Exhibits............................................................. 25

        Signatures........................................................... 26


                                       i

<PAGE>

Part 1. - FINANCIAL INFORMATION
Item 1.  Financial Statements
Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                        December 31,   March 31,
                                                                                            2004         2004
                                                                                        ------------   ---------
<S>                                                                                      <C>          <C>
Assets
Cash and due from banks                                                                  $  10,493    $  10,455
Federal funds sold and other overnight deposits                                             21,150       20,756
                                                                                         ---------    ---------
     Total cash and cash equivalents                                                        31,643       31,211
                                                                                         ---------    ---------
Securities:
   Available for sale, at fair value (including $36,298 and $38,000 pledged as
       collateral for borrowings under repurchase agreements at December 31, 2004
       and March 31, 2004, respectively)                                                   295,497      337,730
   Held to maturity, at amortized cost (fair value of $69,434)                              69,430         --
                                                                                         ---------    ---------
            Total securities                                                               364,927      337,730
                                                                                         ---------    ---------
Loans, net:
  Mortgage loans                                                                           542,135      477,771
  Consumer loans                                                                             2,757        3,396
  Allowance for loan losses (Note 5)                                                        (2,937)      (2,712)
                                                                                         ---------    ---------
            Total loans, net                                                               541,955      478,455
                                                                                         ---------    ---------
 Accrued interest receivable                                                                 3,857        3,623
 Federal Home Loan Bank stock                                                                5,738        5,303
 Premises and equipment, net                                                                 5,969        5,630
 Goodwill                                                                                   13,970       13,970
 Bank-owned life insurance                                                                  10,373       10,085
 Prepaid pension costs                                                                       2,954        2,547
 Deferred income taxes                                                                       1,091         --
 Other assets                                                                                1,895        1,987
                                                                                         ---------    ---------
            Total assets                                                                 $ 984,372    $ 890,541
                                                                                         =========    =========
Liabilities and Stockholders' Equity
Liabilities:
  Deposits                                                                               $ 802,990    $ 708,330
  Borrowings (Note 6)                                                                       38,000       35,000
  Mortgagors' escrow funds                                                                   6,012        4,522
  Due to brokers for securities purchased                                                    3,916        4,000
  Accrued expenses and other liabilities                                                     2,320        1,630
                                                                                         ---------    ---------
            Total liabilities                                                              853,238      753,482
                                                                                         ---------    ---------
Stockholders' equity:

   Preferred stock ($0.01 par value; 1,000,000 shares authorized; none issued
     and outstanding)                                                                          --           --
   Common stock ($0.01 par value; 24,000,000 shares authorized; 13,636,170
     shares issued)                                                                            136          136
   Additional paid-in capital                                                              103,372      102,637
   Treasury stock, at cost (1,028,329 and 459,297 shares at December 31, 2004
     and March 31, 2004, respectively)                                                     (14,644)      (7,150)
   Common stock held by Employee Stock Ownership Plan ("ESOP")                              (6,178)      (6,556)
   Unearned stock awards                                                                    (4,731)      (5,618)
   Retained earnings                                                                        54,448       52,908
   Accumulated other comprehensive (loss) income, net of taxes (Note 7)                     (1,269)         702
                                                                                         ---------    ---------
            Total stockholders' equity                                                     131,134      137,059
                                                                                         ---------    ---------
            Total liabilities and stockholders' equity                                   $ 984,372    $ 890,541
                                                                                         =========    =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       1
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)

<TABLE>
<CAPTION>
                                                           For the Three Months Ended       For the Nine Months Ended
                                                                   December 31,                    December 31,
                                                           --------------------------       -------------------------
                                                              2004            2003             2004             2003
                                                              ----            ----             ----             ----
<S>                                                         <C>              <C>             <C>              <C>
Interest and Dividend Income
 Loans                                                      $ 7,482          $ 6,641         $ 21,733         $ 19,900
 Mortgage-backed and other securities                         3,101            3,186          $ 8,917            8,693
 Federal funds sold and other overnight deposits                113               46              245              220
 Other earning assets                                            32               --               87              123
                                                            -------          -------         --------         --------
 Total interest and dividend income                          10,728            9,873           30,982           28,936
                                                            -------          -------         --------         --------
Interest Expense
 Deposits                                                     3,677            2,798           10,002            8,342
 Borrowings                                                     371              381            1,126            1,130
 Other interest-bearing liabilities                               5                7               15               42
                                                            -------          -------         --------         --------
 Total interest expense                                       4,053            3,186           11,143            9,514
                                                            -------          -------         --------         --------

 Net interest income                                          6,675            6,687           19,839           19,422
 Provision for loan losses (Note 5)                              75               75              225              200
                                                            -------          -------         --------         --------
 Net interest income after provision for loan losses          6,600            6,612           19,614           19,222
                                                            -------          -------         --------         --------
Non-Interest Income
 Service charges and fees                                       244              252              740              765
 Increase in cash surrender value of bank-owned
   life insurance                                               121              --              287               --
Gain on sales of mortgage loans                                  17              --               17               --
                                                            -------          -------         --------         --------
 Total non-interest income                                      382              252            1,044              765
                                                            -------          -------         --------         --------
Non-Interest Expense
 Compensation and benefits                                    2,538            2,107            7,412            6,105
 Occupancy and equipment                                        673              553            1,967            1,699
 Data processing service fees                                   314              320              878              751
 Advertising and promotion                                      189              231              679              782
 Other                                                          886              725            2,557            2,231
                                                            -------          -------         --------         --------
 Total non-interest expense                                   4,600            3,936           13,493           11,568
                                                            -------          -------         --------         --------

 Income before income tax expense                             2,382            2,928            7,165            8,419
 Income tax expense                                             956            1,133            2,811            3,257
                                                            -------          -------         --------         --------
 Net income                                                 $ 1,426          $ 1,795          $ 4,354          $ 5,162
                                                            =======          =======          =======          =======
Earnings per share (Note 4):
   Basic earnings per share                                 $  0.12          $  0.15          $  0.37          $  0.42
                                                            =======          =======          =======          =======
   Diluted earnings per share                               $  0.12          $  0.14          $  0.36          $  0.41
                                                            =======          =======          =======          =======
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       2
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Nine Months Ended December 31, 2004
(Unaudited)
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                         Accumulated
                                                                      Common                                Other
                                           Additional                  Stock      Unearned               Comprehensive    Total
                                 Common     Paid-In      Treasury     Held By      Stock      Retained      Income     Stockholders'
                                 Stock      Capital       Stock        ESOP        Awards     Earnings      (Loss)        Equity
                                --------   ----------   ----------   ---------   ----------   ---------  ------------  -------------
<S>                             <C>        <C>          <C>          <C>         <C>          <C>          <C>          <C>
Balance at March 31, 2004       $    136   $ 102,637    $  (7,150)   $ (6,556)   $  (5,618)   $  52,908    $     702    $ 137,059
Net income                          --          --           --          --           --          4,354         --          4,354
Other comprehensive loss
  (Note 7)                          --          --           --          --           --           --         (1,971)      (1,971)
                                                                                                                        ---------
  Total comprehensive income        --          --           --          --           --           --           --          2,383
Dividends paid ($0.18 per share)    --          --           --          --           --         (2,177)        --         (2,177)
Purchases of treasury stock
  (627,332 shares)                  --          --         (8,324)       --           --           --           --         (8,324)
Reissuance of treasury stock
   for exercise of stock
   options (58,300 shares)          --          --            830        --           --           (637)        --            193
Tax benefit from exercise of
  stock options                     --           250         --          --           --           --           --            250
Vesting of stock awards             --           (19)        --          --            887         --           --            868
ESOP shares committed to be
  released for allocation           --           504         --           378         --           --           --            882
                                --------   ---------    ---------    --------    ---------    ---------    ---------    ---------
Balance at December 31, 2004    $    136   $ 103,372    $ (14,644)   $ (6,178)   $  (4,731)   $  54,448    $  (1,269)   $ 131,134
                                ========   =========    =========    ========    =========    =========    =========    =========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

<TABLE>
<CAPTION>
                                                                             For the Nine Months Ended
                                                                                    December 31,
                                                                          -----------------------------
                                                                             2004               2003
                                                                          ---------           ---------
<S>                                                                       <C>                 <C>
OPERATING ACTIVITIES
  Net income                                                              $   4,354           $   5,162
  Adjustments to reconcile net income to net cash provided
      by operating activities:
  Provision for loan losses                                                     225                 200
  Depreciation, amortization and accretion                                    1,830               1,801
  ESOP and stock award expense                                                1,769                 777
  Income taxes                                                                  525                (902)
  Gain on sales of mortgage loans                                               (17)               --
  Origination of loans held for sale                                           (777)               --
  Proceeds from sales of loans held for sale                                    794                --
  Other adjustments, net                                                       (248)               (234)
                                                                          ---------           ---------
           Net cash provided by operating activities                          8,455               6,804
                                                                          ---------           ---------

INVESTING ACTIVITIES
  Purchases of securities:
     Available for sale                                                     (31,015)           (189,246)
     Held to maturity                                                       (68,620)               --
  Proceeds from principal payments, maturities and calls of securities:
      Available for sale                                                     65,263             121,557
      Held to maturity                                                        3,092                --
  Net disbursements for loan originations and principal repayments          (64,137)            (34,742)
  Purchase of bank-owned life insurance                                        --               (10,000)
  Purchases of Federal Home Loan Bank stock                                    (435)             (1,162)
  Purchases of premises and equipment                                        (1,013)               (746)
                                                                          ---------           ---------
          Net cash used in investing activities                             (96,865)           (114,339)
                                                                          ---------           ---------
FINANCING ACTIVITIES
  Net increase in deposits                                                   94,660              94,156
  Proceeds from borrowings                                                    3,000              20,000
  Repayment of borrowings                                                      --               (20,000)
  Net increase in mortgagors' escrow funds                                    1,490                 573
  Purchases of treasury stock                                                (8,324)             (7,400)
  Proceeds from exercise of stock options                                       193                 101
  Payment of cash dividends on common stock                                  (2,177)             (1,940)
                                                                          ---------           ---------
          Net cash provided by financing activities                          88,842              85,490
                                                                          ---------           ---------

  Increase (decrease) in cash and cash equivalents                              432             (22,045)
  Cash and cash equivalents at beginning of period                           31,211              44,897
                                                                          ---------           ---------
  Cash and cash equivalents at end of period                              $  31,643           $  22,852
                                                                          =========           =========

SUPPLEMENTAL INFORMATION
Interest paid                                                             $  11,102           $   9,604
Income taxes paid                                                             2,270               4,122
Decrease in due to brokers for securities purchased                             (84)             (1,027)
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    Reorganization and Stock Offerings

      On October 8, 1998,  Sound  Federal  Bancorp  issued  shares of its common
stock in connection with a Plan of Reorganization  ("the  "Reorganization")  and
related  Subscription  and  Community  Offering.  In the  Reorganization,  Sound
Federal Savings and Loan Association converted from a federally chartered mutual
savings  association to a federally chartered stock savings  association.  Sound
Federal Savings and Loan Association became the wholly-owned subsidiary of Sound
Federal Bancorp,  which became the  majority-owned  subsidiary of Sound Federal,
MHC (the "Mutual Holding Company").

      On January 6, 2003,  Sound Federal  Bancorp and the Mutual Holding Company
completed its conversion to a fully public holding  company  structure.  At that
time,  the Mutual  Holding  Company  merged into Sound Federal  Savings and Loan
Association,  and no longer exists. Sound Federal Bancorp was succeeded by a new
Delaware corporation named Sound Federal Bancorp,  Inc. (the "Holding Company").
Shares of common stock representing the ownership interest of the Mutual Holding
Company were sold in a subscription  offering and a community  offering.  Shares
owned  by  public  shareholders  (shareholders  other  than the  Mutual  Holding
Company) were converted into the right to receive new shares of Holding  Company
common  stock  determined  pursuant  to an  exchange  ratio.  As part  of  these
transactions,  Sound Federal  Savings and Loan  Association  changed its name to
Sound Federal  Savings (the "Bank"),  which is now a wholly-owned  subsidiary of
the Holding Company.  The Bank and the Holding Company are referred to herein as
"the Company".

2.    Basis of Presentation

      The consolidated  financial  statements included herein have been prepared
by the Company  without  audit.  In the  opinion of  management,  the  unaudited
consolidated financial statements include all adjustments,  consisting of normal
recurring accruals,  necessary for a fair presentation of the financial position
and results of operations for the periods  presented.  Certain  information  and
footnote  disclosures  normally  included  in  conformity  with  U.S.  generally
accepted  accounting  principles have been condensed or omitted  pursuant to the
rules and regulations of the Securities and Exchange  Commission;  however,  the
Company  believes  that the  disclosures  are  adequate to make the  information
presented not misleading.  The operating  results for the periods  presented are
not  necessarily  indicative  of results to be  expected  for any other  interim
period or for the entire fiscal year ending March 31, 2005.

      The  consolidated  financial  statements  have been prepared in conformity
with  U.S.  generally   accepted   accounting   principles.   In  preparing  the
consolidated financial statements,  management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities,  income and
expense.  Actual  results could differ  significantly  from these  estimates.  A
material  estimate that is particularly  susceptible to near-term  change is the
allowance for loan losses, which is discussed in Note 5.

      The unaudited interim  consolidated  financial statements presented herein
should be read in  conjunction  with the annual audited  consolidated  financial
statements of the Company for the fiscal year ended March 31, 2004,  included in
the Company's 2004 Annual Report on Form 10-K.

3.    Stock-Based Compensation

      Statement of Financial  Accounting  Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, encourages the use of a fair-value-based method of
accounting for employee stock compensation  plans, but permits the continued use
of the  intrinsic-value-based  method of  accounting  prescribed  by  Accounting
Principles  Board ("APB")  Opinion  No. 25. Under SFAS  No. 123, the  grant-date


                                       5
<PAGE>

fair value of options is  recognized  as  compensation  expense over the vesting
period.  The  Company  has  elected to  continue to apply APB Opinion No. 25 and
disclose the pro forma information required by SFAS No. 123.

      Had  stock-based  compensation  expense been recognized in accordance with
SFAS No. 123,  the  Company's  net income and earnings per share would have been
adjusted to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                      Three Months Ended        Nine Months Ended
                                                         December 31,              December 31,
                                                 -------------------------    ---------------------
                                                     2004          2003          2004         2003
                                                 -----------    ----------    ----------    -------
                                                        (In thousands, except per share data)
<S>                                              <C>            <C>           <C>           <C>
Net income, as reported                          $     1,426    $    1,795    $    4,354    $ 5,162
Add stock award expense included in reported
   net income, net of related tax effects                181            17           542         61
Deduct stock award and stock option expense
    determined under the fair-value-based
    method, net of related tax effects                  (296)          (32)         (905)      (111)
                                                 -----------    ----------    ----------    -------
Pro forma net income                             $     1,311    $    1,780    $    3,991      5,112
                                                 ===========    ==========    ==========    =======

Earnings per share:

   Basic, as reported                            $      0.12    $     0.15    $     0.37    $  0.42
                                                 ===========    ==========    ==========    =======
   Basic, pro forma                              $      0.11    $     0.15    $     0.34    $  0.41
                                                 ===========    ==========    ==========    =======

   Diluted, as reported                          $      0.12    $     0.14    $     0.36    $  0.41
                                                 ===========    ==========    ==========    =======
   Diluted, pro forma                            $      0.11    $     0.14    $     0.33    $  0.40
                                                 ===========    ==========    ==========    =======
</TABLE>

      In December 2004, the Financial  Accounting  Standards  Board (the "FASB")
issued SFAS No. 123 (revised  2004),  "Share-Based  Payment"  ("SFAS No. 123R"),
which  requires  entities to measure the cost of employee  services  received in
exchange for an award of equity  instruments  based on the grant-date fair value
of the award (with  limited  exceptions).  The cost is  recognized as an expense
over the period  during  which the  employee is  required to provide  service in
exchange for the award,  which is usually the vesting period.  The scope of SFAS
No. 123R  includes the Company's  Incentive  Stock Benefit Plan (the "ISB Plan")
which provides for stock awards and stock option grants.  For stock awards under
the ISB Plan,  the  grant-date  fair value of the shares will be  recognized  as
compensation  expense  on a  straight-line  basis  over the  applicable  vesting
period,  which is the same accounting  previously required under APB Opinion No.
25. For options  granted  under the ISB Plan,  the Company  will  recognize  the
grant-date  fair  value of options as  compensation  expense on a  straight-line
basis over the applicable  vesting  period.  This accounting  treatment  differs
significantly  from the previous  accounting  for fixed stock  options under APB
Opinion  No.  25 which  generally  required  expense  recognition  only when the
exercise  price of the option was less than the market  price of the  underlying
stock on the grant date. As required by SFAS No. 123R, the Company will estimate
the  fair  value of stock  options  on each  grant  date,  using an  appropriate
valuation approach such as the Black-Scholes option pricing model. SFAS No. 123R
did not change  existing  accounting  principles  applicable  to employee  stock
ownership plans.

      SFAS No. 123R applies to all awards  granted after its effective  date and
to awards modified,  repurchased, or cancelled after that date. SFAS No. 123R is
effective as of the  beginning of the first interim or annual  reporting  period
beginning after June 15, 2005 (i.e.,  the quarter  beginning July 1, 2005).  The
standard permits different transition methods. The Company expects to adopt SFAS
No. 123R by  recognizing  compensation  expense  for (i) all new awards  granted
after  July 1, 2005 and (ii) the  portion  of  outstanding  awards for which the
requisite  service  had not  been  rendered  as of July 1,  2005,  based  on the
grant-date  fair value of those awards  calculated  for purposes of SFAS No. 123
pro forma disclosures.  The additional compensation cost for the Company's stock
options  outstanding  at December  31,  2004 that is  expected to be  recognized
during the first twelve months after adoption of SFAS No. 123R is  approximately
$557,000 before taxes.


                                       6
<PAGE>

4.    Earnings Per Share

      Weighted  average  common  shares  used in  calculating  basic and diluted
earnings per share for the three months ended December 31, 2004 were  11,558,608
and 11,815,966,  respectively. For the quarter ended December 31, 2003, weighted
average common shares used in calculating  basic and diluted  earnings per share
were 12,219,933 and 12,552,442, respectively.

      For the nine months ended December 31, 2004,  weighted average shares used
in  calculating  basic and  diluted  earnings  per  share  were  11,662,230  and
11,931,624,  respectively.  For the nine months ended  December  31,  2003,  the
respective weighted average shares were 12,360,180 and 12,695,304.

5.    Allowance for Loan Losses

      The allowance  for loan losses is increased by provisions  for loan losses
charged to income and by  recoveries of prior  charge-offs,  and is decreased by
current  charge-offs.  Losses are charged to the allowance when all or a portion
of a  loan  is  deemed  to be  uncollectible.  Recoveries  of  loans  previously
charged-off  are  credited  to the  allowance  for loan  losses  when  realized.
Management's  periodic  determination  of the  allowance is based on  continuing
reviews  of  the  portfolio,  using  a  consistently-applied   methodology.  The
allowance  for loan  losses  consists  of  losses  that are  both  probable  and
estimable at the date of the financial statements.  In determining the allowance
for loan losses,  management  considers  factors such as the Company's past loan
loss experience,  known risks in the portfolio,  adverse situations  affecting a
borrower's ability to repay, the estimated value of underlying  collateral,  and
current economic conditions.

      Determining the allowance for loan losses involves significant  management
judgments utilizing the best information available.  Those judgments are subject
to further  review by  various  sources,  including  the  Company's  regulators.
Changes in the  allowance  may be  necessary  in the future  based on changes in
economic and real estate market conditions,  new information  obtained regarding
known problem loans, the  identification  of additional  problem loans and other
factors, certain of which are outside of management's control.

      Activity in the  allowance  for loan losses for the periods  indicated  is
summarized as follows:

<TABLE>
<CAPTION>
                                      Three Months Ended               Nine Months Ended      Year Ended
                                          December 31,                   December 31,          March 31,
                                   ------------------------      -------------------------     ---------
                                      2004          2003            2004           2003           2004
                                   ------------------------      -------------------------     ---------
                                                       (In thousands)
<S>                                <C>            <C>            <C>             <C>           <C>
Balance at beginning of period     $   2,862      $   2,562      $   2,712       $   2,442     $   2,442
Provision for loan losses                 75             75            225             200           275
Charge-offs                             --             --             --                (5)           (5)
                                   ------------------------      -------------------------     ---------
Balance at end of period           $   2,937      $   2,637      $   2,937       $   2,637     $   2,712
                                   ========================      =========================     =========
</TABLE>

                                       7
<PAGE>

6.    Borrowings

      The Company had the  following  outstanding  borrowings  under  securities
repurchase  agreements  with the Federal Home Loan Bank of New York (the "FHLB")
at December 31, 2004:

       Maturity Date                       Coupon Rate          Borrowings
       -------------                       -----------          ----------
                                                (dollars in thousands)
January 2008(1)                                5.42%             $ 10,000
December 2008(1)                               4.72                 5,000
March 2005                                     4.22                 6,000
June 2005                                      2.47                 3,000
March 2006                                     2.27                 7,000
March 2007                                     2.65                 7,000
                                                                 --------
                                                                 $ 38,000
                                                                 ========
Weighted average interest rate                                      3.82%
Accrued interest payable                                            $ 171
(1) Callable quarterly

      The  securities   transferred  to  the  FHLB  subject  to  the  repurchase
agreements consist of U.S.  Government and agency securities  available for sale
with a carrying value of $15.3 million and mortgage-backed  securities available
for sale with a carrying value of $21.0 million.  Accrued interest receivable on
the securities was $178,000 at December 31, 2004.

7.    Comprehensive Income (Loss)

      Comprehensive income or loss represents the sum of net income and items of
"other comprehensive income or loss" that are reported directly in stockholders'
equity,  such as the change during the period in the  after-tax  net  unrealized
gain or loss on  securities  available for sale.  The Company  reports its total
comprehensive  income  (loss)  in  the  consolidated  statement  of  changes  in
stockholders' equity.

      The Company's other comprehensive income (loss) is summarized as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended            Nine Months Ended
                                                             December 31,                 December 31,
                                                    -------------------------       ----------------------
                                                       2004         2003               2004         2003
                                                                     (In thousands)

<S>                                                <C>          <C>                  <C>          <C>
Net unrealized holding gain (loss) arising during
    the period on securities available for sale     $    264     $  (1,843)           $  (3,256)   $(5,010)
Related deferred income tax effect                      (105)          650                1,285      1,935
                                                    ---------    ---------            ---------    -------
Other comprehensive income (loss)                   $    159     $  (1,193)           $  (1,971)   $(3,075)
                                                    =========    =========            =========    =======
</TABLE>


                                       8
<PAGE>

      The Company's  accumulated  other  comprehensive  (loss) income,  which is
included in stockholders' equity, is summarized as follows:

                                                        December 31,  March 31,
                                                           2004         2004
                                                        ------------  ---------
                                                            (In thousands)
Net unrealized holding (loss) gain on
     securities available for sale                      $  (2,113)    $  1,143
Related deferred income taxes                                 844         (441)
                                                        ---------     --------
Accumulated other comprehensive (loss) income           $  (1,269)    $    702
                                                        =========     ========


8.    Postretirement Plans

      Pension Plans

      The Company maintains two  non-contributory  defined benefit pension plans
that cover  substantially  all  full-time  employees  who meet  certain  age and
service  requirements.  Benefits are based on the employee's years of accredited
service and average  compensation for the three  consecutive  years that produce
the highest average.  The Company's  funding policy is to contribute the amounts
required  by  applicable   regulations,   although  additional  amounts  may  be
contributed from time to time. The Company expects to contribute $727,000 to the
plans in fiscal 2005. Contributions of $577,000 were made during the nine months
ended December 31, 2004.

      Plan assets are invested in the Guaranteed  Deposit Account ("GDA") of the
General Account at the Connecticut Life Insurance  Company.  The GDA is invested
primarily in publicly-traded and  privately-placed  debt securities and mortgage
loans. The GDA also invests in real estate and equity investments.

      The components of the net periodic expense for the plans were as follows:

                                       Three Months Ended      Nine Months Ended
                                           December 31,           December 31,
                                       ------------------      -----------------
                                        2004       2003        2004        2003
                                       -----      -----       -----       ------
                                                    (In thousands)
Service cost                           $  91      $  65       $ 273       $ 195
Interest cost                            160        147         480         441
Expected return on plan assets          (225)      (150)       (675)       (450)
Recognized net actuarial loss           --           15        --            45
Amortization of prior service cost
   and net transition obligations         28          3          84           9
                                       -----      -----       -----       -----
     Net periodic pension expense      $  54      $  80       $ 162       $ 240
                                       =====      =====       =====       =====

      Director Retirement Plan

      The Company maintains a non-qualified,  unfunded Director  Retirement Plan
which is an amendment and  restatement  of the former  Director  Emeritus  Plan.
Under the Director  Retirement Plan, any person who was a director on January 1,
2004,  who retires or dies after age 70 and who completes 15 years of continuous
service as a director becomes entitled to an annual  retirement  benefit for the
longer of 20 years or his/her lifetime,  equal to the amount of annual fees paid
for  attendance at regular  monthly board meetings  during the preceding  twelve
months,  plus the amount of any annual  stipend  paid to such  director  in that
year.  The Director  Retirement  Plan also provides for benefits in the event of
early retirement or disability.  In the event of a change in control,  directors
will be credited  with years of service as  if they had remained  members of the


                                       9
<PAGE>

Board of  Directors  until age 70 and be entitled to benefits  payable in a lump
sum, at the time of the change in control.  A retired  director will receive the
present  value  of the  remaining  benefit,  paid in a lump sum at the time of a
change in control.

      The components of the net periodic expense for the plan were as follows:

                                       Three Months Ended      Nine Months Ended
                                          December 31,           December 31,
                                       -----------------      ------------------
                                        2004        2003       2004        2003
                                       -----       -----      -----       ------
                                                (In thousands)
Service cost                           $  16       $   3      $  48       $   9
Interest cost                             24          12         72          36
Recognized net actuarial gain             (4)       --          (12)       --
Amortization of prior service cost        45          20        135          60
                                       -----       -----      -----       -----
     Net periodic expense              $  81       $  35      $ 243       $ 105
                                       =====       =====      =====       =====


                                       10
<PAGE>

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

General

      Our principal business has historically  consisted of offering savings and
other  deposits to the general public and using the funds from these deposits to
make loans secured by residential real estate.  Our net income depends primarily
upon our net interest  income,  which is the difference  between interest income
earned  on  interest-earning  assets,  such as loans  and  investments,  and the
interest expense paid on deposits and borrowings.  To a much lesser degree,  our
net income is affected by non-interest  income,  such as banking service charges
and fees.  Net income is also  affected by, among other things,  provisions  for
loan losses and  non-interest  expenses.  Our  principal  non-interest  expenses
consist of compensation and benefits,  occupancy and equipment,  data processing
service  fees,  advertising  and  promotion  and  other  expenses,  such  as ATM
expenses,  professional  fees and  insurance  premiums.  Our net income  also is
affected   significantly  by  general   economic  and  competitive   conditions,
particularly  changes  in market  interest  rates;  government  legislation  and
policies affecting fiscal affairs, housing and financial institutions;  monetary
policies  of the Federal  Reserve  System;  and the  actions of bank  regulatory
authorities.

Forward-Looking Statements

      When used in this report on Form 10-Q,  the words or phrases  "will likely
result," "are  expected  to," "will  continue,"  "is  anticipated,"  "estimate,"
"project"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. Such statements reflect our current view with respect to future-looking
events and are  subject  to certain  risks and  uncertainties  that could  cause
actual results to differ  materially  from  Management's  current  expectations.
Among others, these risks and uncertainties  include changes in general economic
conditions,  changes in policies by regulatory agencies,  hostilities  involving
the United  States,  fluctuations  in  interest  rates,  demand for loans in the
Company's  market area,  changes in the quality or  composition of the Company's
loan and investment portfolios,  changes in accounting  principles,  policies or
guidelines  and other  economic,  competitive,  governmental  and  technological
factors  affecting our operations,  markets and products.  The Company wishes to
caution  readers  not  to  place  undue  reliance  on any  such  forward-looking
statements,  which speak only as of the date made.  The Company wishes to advise
readers  that the factors  listed  above could  affect the  Company's  financial
performance  and could cause the Company's  actual results for future periods to
differ  materially  from its  forward-looking  statements.  We do not  intend to
update these forward-looking statements.

Critical Accounting Policies

      Accounting  policies  considered  particularly  critical to our  financial
results  include the allowance for loan losses,  accounting for goodwill and the
recognition  of  interest  income and  interest  expense.  The  methodology  for
determining  the allowance  for loan losses is considered a critical  accounting
policy  by  management  due  to  the  high  degree  of  judgment  involved,  the
subjectivity  of the  assumptions  utilized and the potential for changes in the
economic environment that could result in changes to the amount of the allowance
for loan  losses  considered  necessary.  Management  considers  accounting  for
goodwill to be a critical policy because  goodwill must be tested for impairment
at least annually using an approach that involves the estimation of fair values.
Estimating  fair values  involves a high degree of judgment and  subjectivity in
the  assumptions  utilized.  Interest  income  on  loans,  securities  and other
interest-earning  assets is accrued  monthly  unless  management  considers  the
collection  of  interest  to be  doubtful.  When loans are placed on  nonaccrual
status  (contractually past due 90 days or more), unpaid interest is reversed by
charging  interest income and crediting an allowance for  uncollected  interest.
Interest  payments  received on nonaccrual loans (including  impaired loans) are
recognized as income unless future collections are doubtful.  Loans are returned
to  accrual  status  when  collectibility  is  no  longer  considered


                                       11
<PAGE>

doubtful  (generally,  when all payments  have been brought  current).  Interest
expense  on  deposits,  borrowings  and other  interest-bearing  liabilities  is
accrued monthly.

Financial Condition

      Assets.  The Company's total assets amounted to $984.4 million at December
31, 2004 as  compared to $890.5  million at March 31,  2004.  The $93.9  million
increase in assets primarily  consisted of a $63.5 million increase in net loans
to $542.0 million and a $27.2 million  increase in securities to $364.9 million.
The increase in securities  consisted of a $69.4 million  increase in securities
classified  as held to  maturity  and a $42.2  million  decrease  in  securities
classified as available  for sale.  In June 2004,  the Company began to classify
substantially  all securities  purchases as held to maturity.  This decision was
based on the size of the portfolio  classified as available for sale relative to
interest-earning  assets  and  stockholders'  equity,  the  Company's  liquidity
position,  which  allows the Company to hold  securities  until  maturity and an
increase in market interest  rates.  As these factors  change,  the Company will
evaluate the classification of future securities purchases.

      Liabilities.  Total  deposits were $803.0 million at December 31, 2004, an
increase  of $94.7  million as  compared  to $708.3  million at March 31,  2004.
Certificates  of deposit  increased  $80.0 million to $525.7 million from $445.7
million; savings and club accounts increased $3.4 million to $151.6 million from
$148.2 million; and money market, NOW and commercial checking accounts increased
$11.3 million to $125.7 million from $114.4 million. The increase in deposits is
due  primarily  to  deposit  growth  in the  Stamford  branch,  which  opened in
September 2003, and the Brookfield branch, which opened in June 2004, as well as
growth in  existing  branches  as a result of  marketing  campaigns.  Borrowings
totaled $38.0 million at December 31, 2004 and $35.0 million at March 31, 2004.

      Stockholders' Equity. Total stockholders' equity decreased $5.9 million to
$131.1  million at December 31, 2004 as compared to $137.1  million at March 31,
2004. The decrease  reflects treasury stock purchases at a cost of $8.3 million,
dividends  paid of $2.2 million and a decrease of $2.0 million  attributable  to
the change in accumulated other comprehensive  income or loss,  partially offset
by net income of $4.4 million.

      The accumulated other  comprehensive  loss of $1.3 million at December 31,
2004  represents the after-tax net unrealized  loss on securities  available for
sale ($2.1 million pre-tax).  The Company invests  primarily in  mortgage-backed
securities guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac, as well as U.S.
Government and Agency  securities.  The  unrealized  losses at December 31, 2004
were caused by increases in market interest rates subsequent to purchase.  There
were no debt securities  past due or securities for which the Company  currently
believes it is not probable  that it will  collect all amounts due  according to
the  contractual  terms of the security.  Because the Company has the ability to
hold securities with unrealized losses until a market price recovery (which, for
debt  securities  may be until  maturity),  the Company did not  consider  these
securities to be other-than-temporarily impaired at December 31, 2004.


                                       12
<PAGE>

Comparison of Results of Operations for the Three Months Ended December 31, 2004
and 2003

      Average  Balance  Sheets.  The following  table sets forth average balance
sheets,  average yields and costs,  and certain other  information for the three
months ended  December  31, 2004 and 2003.  The table  reflects  the  annualized
average  yield on  interest-earning  assets and the  annualized  average cost of
interest-bearing liabilities (derived by dividing the annualized interest income
or  expense  by the  monthly  average  balance  of  interest-earning  assets  or
interest-bearing  liabilities,  respectively),  as  well  as the  net  yield  on
interest-earning  assets. No tax-equivalent  yield adjustments were made, as the
effect  thereof  was  not  material.  Nonaccrual  loans  were  included  in  the
computation of average  balances and therefore have a zero yield. The yields set
forth below include the effect of deferred loan  origination fees and costs, and
purchase  discounts  and  premiums  that are  amortized  or accreted to interest
income. Interest on loans for the 2004 and 2003 periods includes amortization of
net deferred  loan  origination  costs of $136,000 and  $270,000,  respectively.
Interest on  mortgage-backed  securities  includes  amortization of net purchase
premiums of $245,000 and $196,000 for those same respective periods.

<TABLE>
<CAPTION>
                                                             For the Three Months ended December 31,
                                         ----------------------------------------------------------------------------------------
                                                             2004                                        2003
                                         ----------------------------------------------------------------------------------------
                                           Average                                      Average
                                         Outstanding                        Average    Outstaning                       Average
                                           Balance         Interest        Yield/Rate    Balance        Interest       Yield/Rate
                                           -------         --------        ----------    -------        --------       ----------
                                                                    (Dollars in thousands)

<S>                                       <C>                <C>             <C>        <C>               <C>            <C>
Interest-earning assets:
Loans (1)                                 $534,924           7,482           5.55%      $452,145          6,641          5.83%
Mortgage-backed securities (2)             262,272           2,319           3.51%       259,632          2,439          3.73%
Other securities (2)                        95,115             782           3.26%        91,309            747          3.25%
Federal funds sold and other
overnight deposits (3)                      30,436             113           1.47%        28,430             46          0.64%
Other (4)                                    5,871              32           2.16%         5,516           --            0.00%
                                          ------------------------                      -----------------------
Total interest-earning assets              928,618          10,728           4.58%       837,032          9,873          4.68%
                                                          --------                                        -----
Non-interest earning assets                 45,253                                        33,602
                                          --------                                      --------
Total assets                              $973,871                                      $870,634
                                          ========                                      ========

Interest-bearing liabilities:
Savings and club accounts                 $152,068             205           0.53%      $143,754            193          0.53%
Money market accounts                       47,346              97           0.81%        43,184             83          0.76%
NOW accounts                                60,880              38           0.25%        57,258             34          0.24%
Certificates of deposit                    520,719           3,337           2.54%       427,819          2,488          2.31%
Borrowings                                  38,000             371           3.87%        41,459            381          3.65%
Mortgagors' escrow funds                     4,458               5           0.44%         3,739              7          0.74%
                                          ------------------------                      -----------------------
Total interest-bearing liabilities         823,471           4,053           1.95%       717,213          3,186          1.76%
                                                          --------                                        -----
Non-interest-bearing liabilities            21,316                                        17,913
                                          --------                                      --------
Total liabilities                          844,787                                       735,126
Stockholders' equity                       129,084                                       135,508
                                          --------                                      --------
Total liabilities and
stockholders' equity                      $973,871                                      $870,634
                                          ========                                      ========
Net interest income                                          6,675                                        6,687
                                                          ========                                        =====
Net interest rate spread (5)                                                 2.63%                                       2.92%
Net earning assets (6)                    $105,147                                      $119,819
                                          ========                                      ========
Net interest margin (7)                                                      2.85%                                       3.17%
Ratio of interest-earning assets
to interest-bearing liabilities               1.13x                                         1.17x
</TABLE>

(1) Balances are net of the allowance for loan losses.

(2) Average  outstanding  balances are based on amortized cost. As a result, the
average  balances  and yields do not include the effect of changes in fair value
of securities available for sale.

(3) Other overnight deposits represent an interest-earning demand account at the
Federal Home Loan Bank of New York.

(4) Consists  primarily  of Federal Home Loan Bank stock.  The Federal Home Loan
Bank suspended  dividend  payments in October 2003 and resumed paying  quarterly
dividends in January 2004.

(5) Net interest  rate spread  represents  the  difference  between the yield on
average  interest-earning  assets  and  the  cost  of  average  interest-bearing
liabilities.

(6) Net  earning  assets  represent  total  interest-earning  assets  less total
interest-bearing liabilities.

(7) Net interest margin  represents net interest income divided by average total
interest-earning assets.


                                       13
<PAGE>

      Rate/Volume  Analysis.  The following  table presents the dollar amount of
changes in interest  income and  interest  expense for the major  categories  of
interest-earning  assets and interest-bearing  liabilities,  with respect to (i)
changes  attributable to changes in volume (i.e., changes in balances multiplied
by the prior-period rate) and (ii) changes  attributable to rate (i.e.,  changes
in rate  multiplied  by  prior-period  balances).  For  purposes  of this table,
changes attributable to both rate and volume,  which cannot be segregated,  have
been allocated proportionately to the change due to volume and the change due to
rate.

                                        For the Three Months Ended December 31,
                                                    2004 vs. 2003
                                        ---------------------------------------
                                           Increase (Decrease)
                                                 Due to
                                        ----------------------  Total Increase
                                          Volume        Rate       (Decrease)
                                        -----------------------------------
                                                    (In thousands)

Interest-earning assets:

Loans                                    $  2,672     $ (1,831)    $   841
Mortgage-backed securities                    150         (270)       (120)
Other securities                               33            2          35
Federal funds and other overnight
  deposits                                      3           64          67
Other                                        --             32          32
                                         --------     --------     -------
Total interest-earning assets               2,858       (2,003)        855
                                         --------     --------     -------
Interest-bearing liabilities:
Savings and club accounts                      12         --            12
Money market accounts                           8            6          14
NOW accounts                                    2            2           4
Certificates of deposit                       582          267         849
Borrowings                                   (111)         101         (10)
Mortgage escrow funds                           6           (8)         (2)
                                         --------     --------     -------
Total interest-bearing liabilities            499          368         867
                                         --------     --------     -------
Net interest income                      $  2,359     $ (2,371)    $   (12)
                                         ========     ========     =======

      Net Income.  Net income  amounted to $1.4 million or diluted  earnings per
share of $0.12 for the quarter  ended  December  31,  2004,  as compared to $1.8
million or diluted  earnings per share of $0.14 for the quarter  ended  December
31, 2003, a decrease of 20.6% in net income.  The decrease in net income for the
quarter ended December 31, 2004 is primarily attributable to a $664,000 increase
in non-interest  expense,  partially offset by a $177,000 decrease in income tax
expense.

      Interest Income.  Interest income increased  $855,000 to $10.7 million for
the quarter  ended  December 31, 2004,  as compared to the same quarter in 2003.
The  increase  reflects a $91.6  million  increase  in average  interest-earning
assets to $928.6  million during the quarter ended December 31, 2004 as compared
to $837.0 million for the same quarter in the prior year,  partially offset by a
10 basis  point  decrease  in the average  yield on  interest-earning  assets to
4.58%.  The increase in the average balance of  interest-earning  assets was due
primarily to an $82.8 million increase in net loans to $534.9 million and a $6.4
million  increase in the average balance of total  securities to $357.4 million.
The  increase  in average  interest-earning  assets was  funded  principally  by
deposit  growth in the Bank's  branches.  The  decrease in the average  yield on
interest-earning  assets  reflects the  origination of loans at lower rates than
the existing portfolio, the purchase of securities at


                                       14
<PAGE>

lower  rates  than  the  existing   portfolio  and  the  downward  repricing  of
adjustable-rate securities during recent periods of declining interest rates.

      Loans.  Interest  income  on  loans  increased  $841,000  or 12.7% to $7.5
million for the quarter ended  December 31, 2004 as compared to $6.6 million for
the same quarter in 2003.  This increase is due to an $82.8 million  increase in
the average balance of loans to $534.9 million,  partially  offset by a 28 basis
point decrease in the yield earned to 5.55%. Loans originated during the quarter
ended  December 31, 2004  amounted to $43.0  million.  The decrease in the yield
earned is primarily a result of loan  originations  during the first nine months
of fiscal 2005 and during  fiscal 2004 that were at rates lower than the average
yield  being  earned  on the loan  portfolio  during  those  periods.  As market
interest rates increase, the volume of loans originated may decrease which would
result in slower growth or a decrease in the loan portfolio.

      Mortgage-Backed   and  Other  Securities.   Interest  on   mortgage-backed
securities  totaled  $2.3  million for the quarter  ended  December  31, 2004, a
decrease of $120,000 from the same quarter in 2003. This decrease is due to a 22
basis decrease in the average yield to 3.51%, partially offset by a $2.6 million
increase in the average balance of mortgage-backed  securities to $262.3 million
during the current quarter.

      Interest on other securities increased $35,000 to $782,000 for the quarter
ended  December 31, 2004,  as compared to $747,000 for the same quarter in 2003.
The increase is due to a $3.8 million  increase in the average  balance of other
securities to $95.1 million and a 1 basis point increase in the average yield to
3.26%.

      Federal  Funds Sold and Other  Overnight  Deposits.  For the quarter ended
December 31, 2004,  interest on Federal funds sold and other overnight  deposits
increased $67,000 to $113,000, reflecting a $2.0 million increase in the average
balance to $30.4 million and an 83 basis point  increase in the average yield to
1.47%.

      Other Earning  Assets.  Other earning assets consist  primarily of FHLB of
New York common  stock.  Dividends on FHLB of New York common stock  amounted to
$32,000 for quarter ended December 31, 2004. There was no dividend income in the
quarter  ended  December 31, 2003,  as the FHLB of New York  suspended  dividend
payments in October 2003.  Quarterly  dividend  payments were resumed in January
2004.

      Interest Expense. Interest expense for the quarter ended December 31, 2004
increased $867,000 to $4.1 million,  as compared to $3.2 million for the quarter
ended December 31, 2003.  The average  balance of  interest-bearing  liabilities
increased  $106.3  million to $823.5  million for the quarter ended December 31,
2004 from  $717.2  million  for the same  quarter in the prior  year,  while the
average  cost of these  liabilities  increased  19 basis  points to  1.95%.  The
increase in the average balance of interest-bearing liabilities includes deposit
growth  in the  Stamford  branch,  which  opened  in  September  2003,  and  the
Brookfield branch,  which opened in June 2004, as well as growth in the existing
branches.  The  increase  in the  average  cost of  liabilities  is a result  of
increasing  short-term  market interest rates and an increase in certificates of
deposit  accounts as a  percentage  of total  deposits.  The average  balance of
certificates  of  deposit  represented  63.2% of the  average  balance  of total
interest-bearing  liabilities  for the  quarter  ended  December  31,  2004,  as
compared to 59.7% for the quarter  ended  December  31,  2003.  Certificates  of
deposit are generally  offered at higher rates than savings accounts and we have
used these accounts to attract customers to the new branches.

      Interest  expense on certificates of deposit  amounted to $3.3 million for
the current  quarter as compared to $2.5  million for the same  quarter in 2003.
The increase is due primarily to a $92.9 million increase in the average balance
to $520.7 million from $427.8 million for the same quarter last year,  while the
average cost of certificates of deposit increased 23 basis points to 2.54%.

      Interest on savings accounts  amounted to $205,000 for the current quarter
as compared to $193,000 for the quarter ended  December 31, 2003.  This increase
is the result of an $8.3  million  increase  in the  average  balance of savings
accounts to $152.1  million for the quarter ended  December 31, 2004 as compared
to $143.8  million  for the same  quarter  in 2003,  while the  average  cost of
savings accounts remained unchanged at 0.53%.


                                       15
<PAGE>

      Interest expense on NOW and money market accounts amounted to $135,000 for
quarter ended  December 31, 2004 as compared to $117,000 for the same quarter in
the prior year.  The  average  cost  increased  3 basis  points to 0.49% and the
average balance of these accounts increased $7.8 million to $108.2 million.

      For the quarter ended  December 31, 2004,  interest  expense on borrowings
amounted to $371,000 as compared to $381,000 for the same  quarter in 2003.  The
average  balance of borrowings for the current quarter was $38.0 million and the
average  cost was 3.87%,  an increase of 22 basis  points from the same  quarter
last year.

      Net Interest  Income.  Net interest  income for the quarter ended December
31, 2004 remained  relatively  unchanged at $6.7 million as compared to the same
quarter in the prior year.  The net interest rate spread was 2.63% and 2.92% for
the quarters  ended December 31, 2004 and 2003,  respectively.  The net interest
margin for those  periods was 2.85% and 3.17%,  respectively.  The  decreases in
interest  rate spread and net interest  margin are  primarily  the result of the
effect of mortgage refinancings and lower returns on our investment portfolio as
interest  rates  remained near 40-year  lows.  During the current  quarter,  the
Federal  Reserve  raised the  Federal  funds  rate by 50 basis  points to 2.25%.
However, long term rates have remained substantially  unchanged,  resulting in a
flattening  yield curve.  As  short-term  interest  rates rise,  the cost of our
interest-bearing   liabilities   will   increase   faster   than  the  yield  on
interest-earning  assets which are affected by longer-term  interest rates. As a
result,  our net interest rate spread and net interest margin may decrease.  The
decrease in net interest  rate spread and net interest  margin was also a result
of the  decrease  in the ratio of  interest-earning  assets to  interest-bearing
liabilities  to 1.13x for the quarter ended December 31, 2004 from 1.17x for the
same quarter in 2003,  reflecting  treasury stock purchases and an investment in
bank-owned life insurance ("BOLI").

      In December 2003, the Company  purchased a BOLI product for $10.0 million.
The BOLI purchase was funded from  interest-earning  assets;  however,  the BOLI
asset is classified separately from interest-earning  assets on the consolidated
balance sheet, resulting in a decrease in the ratio of average  interest-earning
assets  to  average  interest-bearing  liabilities.  The  changes  in  the  cash
surrender value of the BOLI are recognized as non-interest income.

      Provision for Loan Losses. Management regularly reviews the loan portfolio
and makes  provisions  for loan  losses in  amounts  required  to  maintain  the
allowance  for loan losses in  accordance  with  generally  accepted  accounting
principles.  The  allowance  consists  of  losses  that  are both  probable  and
estimable at the date of the financial statements. The allowance for loan losses
consists of amounts  allocated to specific  nonperforming  loans and to loans in
each major portfolio category. Loan categories such as single-family residential
mortgage loans, which represented 86.4% of total loans at December 31, 2004, are
generally  evaluated on an aggregate or "pool"  basis.  Our  allowance  for loan
losses is  predominately  determined on a pool basis by applying loss factors to
the current  balances  of the  various  loan  categories.  The loss  factors are
determined  by  management  based  on  an  evaluation  of  our  historical  loss
experience,  delinquency trends,  volume and type of lending conducted,  and the
impact of current economic conditions in our market area.

      The provision for loan losses was $75,000 for the quarters  ended December
31, 2004 and 2003.  Non-performing  loans amounted to $734,000 or 0.14% of total
loans at December 31, 2004,  as compared to $1.3 million or 0.28% of total loans
at December 31, 2003. The allowance for loan losses amounted to $2.9 million and
$2.7 million at December 31, 2004 and March 31, 2004,  respectively.  There were
no  charge-offs  or recoveries in the quarters ended December 31, 2004 and 2003.
The increase in the allowance for loan losses is primarily due to an increase in
the origination of adjustable rate mortgage loans, commercial mortgage loans and
commercial  loans  (not  secured by real  estate)  as well as overall  portfolio
growth.

      Non-Interest  Income.  Non-interest income consists principally of service
charges on deposit  accounts,  fees earned on the sale of  investment  products,
late  charges  on loans,  various  other  service  fees and  changes in the cash
surrender  value of the BOLI.  Service  charges and fees  totaled  $244,000  and
$252,000 for


                                       16
<PAGE>

the quarters ended December 31, 2004 and 2003, respectively. The increase in the
cash  surrender  value of the BOLI  amounted to $121,000  for the quarter  ended
December 31, 2004.

      Non-Interest  Expense.  Non-interest  expense totaled $4.6 million for the
quarter  ended  December  31, 2004 as  compared to $3.9  million for the quarter
ended  December  31,  2003.  This  increase is due to  increases  of $431,000 in
compensation  and benefits,  $120,000 in occupancy and  equipment  expense,  and
$161,000 in other non-interest  expense,  partially offset by a $42,000 decrease
in advertising and promotion expense.

      The increase in  compensation  and benefits  expense is due primarily to a
$260,000  increase  in expense  related to stock  awards  made  pursuant  to the
Company's  2004 Stock  Incentive  Plan and a $116,000  increase in  compensation
costs due primarily to  additional  staff to support the growth in the Company's
lending  operations and the addition of the Brookfield  branch,  which opened in
June 2004. At December 31, 2004, we had 124  full-time  equivalent  employees as
compared to 119 at December 31, 2003.  The adoption of SFAS No. 123R will result
in additional compensation costs beginning in the second quarter of fiscal 2006.
See Note 3 of the Notes to Unaudited Consolidated Financial Statements in Item 1
for a  discussion  of SFAS No.  123R,  which  will  result  in a  change  in the
Company's accounting for stock options beginning July 1, 2005.

      Other  non-interest  expense for the current quarter includes  $135,000 of
costs related to the Company's  implementation of the internal control reporting
provisions  of  Section  404 of the  Sarbanes-Oxley  Act of 2002.  There were no
comparable costs in the prior year.

      Income Taxes. Income tax expense amounted to $956,000 and $1.1 million for
the quarters ended December 31, 2004 and 2003,  respectively.  The effective tax
rates for those same periods were 40.1% and 38.7%, respectively.

      In  January  2005,  the  Governor  of  the  State  of  New  York  proposed
legislation that would eliminate the dividends  received  deduction with respect
to dividends  received from certain  subsidiary real estate  investment  trusts.
This  proposed  change in the state tax law would be  effective as of January 1,
2005.  Elimination of the deduction would result in an increase in the Company's
effective tax rate.


                                       17
<PAGE>

Comparison of Results of Operations  for the Nine Months Ended December 31, 2004
and 2003

      Average  Balance  Sheets.  The following  table sets forth average balance
sheets,  annualized  average yields and costs, and certain other information for
the nine months ended December 31, 2004 and 2003. This  information was prepared
on the same basis as the average  balance sheets for the quarterly  period.  See
"Comparison  of Results of  Operations  for the Three Months Ended  December 31,
2004 and  2003".  Interest  on loans  for the  2004  and 2003  periods  includes
amortization  of net deferred loan  origination  costs of $412,000 and $753,000,
respectively.  Interest on mortgage-backed  securities includes  amortization of
net  purchase  premiums  of  $742,000  and  $609,000  for those same  respective
periods.
<TABLE>
<CAPTION>

                                                           For the Nine Months ended December 31,
                                     -------------------------------------------------------------------------------------
                                                      2004                                        2003
                                     -------------------------------------------------------------------------------------
                                       Average                                      Average
                                     Outstanding                   Average         Outstaning                    Average
                                       Balance      Interest      Yield/Rate         Balance     Interest       Yield/Rate
                                       -------      --------      ----------         -------     --------       ----------
                                                                     (Dollars in thousands)
<S>                                    <C>            <C>           <C>              <C>           <C>            <C>
Interest-earning assets:
Loans (1)                              $ 511,669      21,733        5.64%            $ 434,003     19,900         6.09%
Mortgage-backed securities (2)           258,305       6,753        3.47%              239,159      6,725         3.73%
Other securities (2)                      90,827       2,164        3.16%               86,227      1,968         3.03%
Federal funds sold and other
overnight deposits (3)                    30,991         245        1.05%               35,271        220         0.83%
Other (4)                                  5,824          87        1.98%                5,507        123         2.96%
                                       ---------------------                         --------------------
Total interest-earning assets            897,616      30,982        4.58%              800,167     28,936         4.80%
                                                      ------                                       ------
Non-interest earning assets               43,960                                        32,233
                                       ---------                                     ---------
Total assets                           $ 941,576                                     $ 832,400
                                       =========                                     =========
Interest-bearing liabilities:

Savings and club accounts              $ 151,278         596        0.52%            $ 142,757        697         0.65%
Money market accounts                     46,717         275        0.78%               42,177        292         0.92%
NOW accounts                              58,783         110        0.25%               53,031        139         0.35%
Certificates of deposit                  493,267       9,021        2.43%              395,685      7,214         2.42%
Borrowings                                37,029       1,126        4.04%               39,473      1,130         3.80%
Mortgagors' escrow funds                   4,299          15        0.46%                3,883         42         1.44%
                                       ---------------------                         --------------------
Total interest-bearing liabilities       791,373      11,143        1.87%              677,006      9,514         1.87%
                                                      ------                                       ------
Non-interest-bearing liabilities          21,069                                        17,653
                                       ---------                                     ---------
Total liabilities                        812,442                                       694,659
Stockholders' equity                     129,134                                       137,741
                                       ---------                                     ---------
Total liabilities and
stockholders' equity                   $ 941,576                                     $ 832,400
                                       =========                                     =========
Net interest income                                   19,839                                       19,422
                                                      ======                                       ======
Net interest rate spread (5)                                        2.71%                                         2.93%
Net earning assets (6)                 $ 106,243                                     $ 123,161
                                       =========                                     =========
Net interest margin (7)                                             2.93%                                         3.22%
Ratio of interest-earning assets
to interest-bearing liabilities             1.13x                                         1.18x
</TABLE>

(1) Balances are net of the allowance for loan losses.

(2) Average  outstanding  balances are based on amortized cost. As a result, the
average  balances  and yields do not include the effect of changes in fair value
of securities available for sale.

(3) Other overnight deposits represent an interest-earning demand account at the
Federal Home Loan Bank of New York.

(4) Consists primarily of Federal Home Loan Bank stock.

(5) Net interest  rate spread  represents  the  difference  between the yield on
average  interest-earning  assets  and  the  cost  of  average  interest-bearing
liabilities.

(6) Net earning  assets  represent  total  interest-  earning  assets less total
interest-bearing liabilities.

(7) Net interest margin  represents net interest income divided by average total
interest-earning assets.


                                       18
<PAGE>

      Rate/Volume  Analysis.  The following  table presents the dollar amount of
changes in interest  income and  interest  expense for the major  categories  of
interest-earning assets and interest-bearing  liabilities.  This information was
prepared on the same basis as the rate/volume analysis for the quarterly period.
See "Comparison of Results of Operations for the Three Months Ended December 31,
2004 and 2003".

                                         For the Nine Months Ended December 31,
                                                      2004 vs. 2003
                                         --------------------------------------
                                           Increase (Decrease)
                                                 Due to              Total
                                         --------------------       Increase
                                         Volume          Rate      (Decrease)
                                         ------------------------------------
                                                   (In thousands)
Interest-earning assets:
Loans                                    $ 4,062       (2,229)      $ 1,833
Mortgage-backed securities                   680         (652)           28
Other securities                             109           87           196
Federal funds and other overnight
  deposits                                   (41)          66            25
Other                                         10          (46)          (36)
                                         -------       ------       -------
Total interest-earning assets              4,820       (2,774)        2,046
                                         -------       ------       -------
Interest-bearing liabilities:

Savings and club accounts                     62         (163)         (101)
Money market accounts                         42          (59)          (17)
NOW accounts                                  21          (50)          (29)
Certificates of deposit                    1,777           30         1,807
Borrowings                                   (96)          92            (4)
Mortgage escrow funds                          7          (34)          (27)
                                         -------       ------       -------
Total interest-bearing liabilities         1,813         (184)        1,629
                                         -------       ------       -------
Net interest income                      $ 3,007       (2,590)      $   417
                                         =======       ======       =======

      Net Income.  Net income  amounted to $4.4 million or diluted  earnings per
share of $0.36 for the nine months ended  December 31, 2004, as compared to $5.2
million  or  diluted  earnings  per  share of $0.41  for the nine  months  ended
December 31, 2003, a decrease of 15.7% in net income. The decrease in net income
for the nine months ended December 31, 2004 reflects an increase of $1.9 million
in  non-interest  expense,  partially  offset by an  increase of $417,000 in net
interest income and a decrease of $446,000 in income tax expense.

      Interest  Income.  Interest income increased $2.1 million to $31.0 million
for the nine months ended  December 31, 2004,  as compared to $28.9  million for
the same  period in 2003.  The  increase  reflects a $97.4  million  increase in
average  interest-earning  assets to $897.6 million during the nine months ended
December 31, 2004 as compared to $800.2 million for the same period in the prior
year,  partially  offset by a 22 basis point  decrease  in the average  yield on
interest-earning  assets  to 4.58%.  The  increase  in the  average  balance  of
interest-earning  assets was due  primarily to a $77.7  million  increase in net
loans to $511.7 million and a $23.7 million  increase in the average  balance of
total securities to $349.1 million,  partially offset by a $4.3 million decrease
in average Federal funds sold and other overnight deposits to $31.0 million. The
increase in average  interest-earning  assets was funded  principally by deposit
growth  in  the  Bank's   branches.   The  decrease  in  the  average  yield  on
interest-earning  assets  reflects the  origination of loans at lower rates than
the  existing  portfolio,  the  purchase of  securities  at lower rates than the
existing  portfolio  and the downward  repricing of  adjustable-rate  securities
during recent periods of low market interest rates.


                                       19
<PAGE>

      Loans.  Interest  income on loans  increased $1.8 million or 9.2% to $21.7
million for the nine months ended December 31, 2004 as compared to $19.9 million
for the same period in 2003. This increase is due to a $77.7 million increase in
the average balance of loans to $511.7 million,  partially  offset by a 45 basis
point decrease in the yield earned to 5.64%.

      We  originated  $163.0  million of new loans  during the nine months ended
December 31, 2004.  These loans were  originated at rates lower than the average
yield being earned on the existing loan portfolio.  As a result,  the decline in
average  yield  earned on the loan  portfolio  continued  during the nine months
ended December 31, 2004.  The yield on the loan  portfolio may decrease  further
until interest rates on loan products begin to rise.  However, as these interest
rates increase,  the volume of loans  originated may decrease which would result
in slower growth or a decrease in the loan portfolio.

      Mortgage-Backed   and  Other  Securities.   Interest  on   mortgage-backed
securities  increased $28,000 to $6.8 million for the nine months ended December
31, 2004,  as compared to $6.7 million for the same period in 2003.  The average
balance of mortgage-backed  securities increased $19.1 million to $258.3 million
during the nine months ended December 31, 2004,  partially  offset by a decrease
of 26 basis  points in the average  yield to 3.47%.  The increase in the average
balance of  mortgage-backed  securities is primarily a result of investing funds
from  deposit  growth.  The  decrease  in the  average  yield is a result of the
downward  repricing  of  adjustable  rate  mortgage-backed  securities  and  new
purchases  of  mortgage-backed  securities  that  are at  lower  rates  than the
existing portfolio.

      Interest on other  securities  increased  $196,000 to $2.2 million for the
nine months ended  December  31, 2004,  as compared to $2.0 million for the same
period in 2003.  The increase is due to a 13 basis point increase in the average
yield to 3.16% and a $4.6  million  increase  in the  average  balance  of other
securities to $90.8 million.

      Federal Funds Sold and Other Overnight Deposits. For the nine months ended
December 31, 2004,  interest on Federal funds sold and other overnight  deposits
increased  $25,000 to  $245,000,  reflecting  a 22 basis  point  increase in the
average yield earned to 1.05%,  partially  offset by a $4.3 million  decrease in
the average balance to $31.0 million.

      Other  Earning  Assets.  The Company had an  investment of $5.7 million in
FHLB of New  York  common  stock  at  December  31,  2004.  The FHLB of New York
suspended the October 2003 dividend payment on this stock. The FHLB announced in
January 2004 that it was resuming a quarterly dividend but for amounts less than
the amounts previously paid. Dividends on FHLB of New York common stock amounted
to $82,000 for nine months  ended  December 31, 2004 as compared to $121,000 for
the same period in 2003.

      Interest Expense.  Interest expense for the nine months ended December 31,
2004 increased $1.6 million to $11.1 million as compared to $9.5 million for the
same  period  in 2003.  The  average  balance  of  interest-bearing  liabilities
increased  $114.4  million to $791.4  million for the nine months ended December
31,  2004 from $677.0  million for the same period in the prior year,  while the
average cost of these liabilities  remained  unchanged at 1.87%. The increase in
the average balance of interest-bearing  liabilities  includes deposit growth in
the Stamford branch,  which opened in September 2003, and the Brookfield branch,
which opened in June 2004, as well as growth in the existing branches.

      Interest  expense on certificates of deposit  amounted to $9.0 million for
the current  period as compared to $7.2 million for the same period in 2003. The
increase is due primarily to a $97.6 million  increase in the average balance of
time  deposits to $493.3  million  from $395.7  million for the same period last
year, and a 1 basis point increase in the average cost to 2.43%. The increase in
the average balance  includes growth in the Bank's new branch offices as well as
in existing branches.

      Interest on savings  accounts  amounted to $596,000 for the current period
as compared to  $697,000  for the nine months  ended  December  31,  2003.  This
decrease is the result of a 13 basis point decrease in the


                                       20
<PAGE>

average cost of savings  accounts to 0.52%  offset  partially by an $8.5 million
increase in the average  balance of savings  accounts to $151.3  million for the
nine months ended  December 31, 2004 as compared to $142.8  million for the same
period in 2003.

      Interest expense on NOW and money market accounts amounted to $385,000 for
the nine months  ended  December  31, 2004 as compared to $431,000  for the same
period in the prior year.  The average  cost  decreased 12 basis points to 0.48%
and the average  balance of these  accounts  increased  $10.3  million to $105.5
million.

      For the nine months ended December 31, 2004 and 2003,  interest expense on
borrowings  amounted to $1.1 million.  The average balance of borrowings for the
nine  months  ended  December  31, 2004 was $37.0  million and the average  cost
increased 24 basis points to 4.04% as compared to the same period in 2003.

      Net  Interest  Income.  Net  interest  income  for the nine  months  ended
December 31, 2004 amounted to $19.8 million,  a $417,000  increase from the same
period in the prior year.  The interest  rate spread was 2.71% and 2.93% for the
nine months  ended  December 31, 2004 and 2003,  respectively.  The net interest
margin for those  periods was 2.93% and 3.22%,  respectively.  The  decreases in
interest  rate spread and net interest  margin are  primarily  the result of the
effect of mortgage refinancings and lower returns on our investment portfolio as
interest  rates  remained near 40-year lows. As interest rates rise, the cost of
our  interest-bearing  liabilities  will  increase  faster  than  the  yield  on
interest-earning  assets.  As a result,  our net  interest  rate  spread and net
interest  margin may  decrease.  The  decrease in  interest  rate spread and net
interest   margin  was  also  a  result  of  the   decrease   in  the  ratio  of
interest-earning  assets to  interest-bearing  liabilities to 1.13x for the nine
months  ended  December  31,  2004  from  1.18x  for the  same  period  in 2003,
reflecting treasury stock purchases and an investment in BOLI.

      Provision for Loan Losses.  The provision for loan losses was $225,000 and
$200,000  for the nine months ended  December  31, 2004 and 2003,  respectively.
Non-performing  loans  amounted  to $734,000 or 0.14% of total loans at December
31,  2004,  as compared to $1.3  million or 0.28% of total loans at December 31,
2003. The allowance for loan losses amounted to $2.9 million and $2.7 million at
December 31, 2004 and March 31, 2004, respectively. There were no charge-offs or
recoveries for the nine months ended December 31, 2004.  Charge-offs amounted to
$5,000 for the nine months ended December 31, 2003. There were no recoveries for
this period.  The increase in the  allowance for loan losses is primarily due to
an increase in the  origination of adjustable  rate mortgage  loans,  commercial
mortgage  loans and  commercial  loans (not  secured by real  estate) as well as
overall portfolio growth.

      Non-Interest  Income.  Service  charges  and  fees  totaled  $740,000  and
$765,000 for the nine months ended December 31, 2004 and 2003, respectively. The
increase in the cash  surrender  value of the BOLI  amounted to $287,000 for the
nine months ended December 31, 2004.

      Non-Interest  Expense.  Non-interest expense totaled $13.5 million for the
nine months ended  December  31, 2004 as compared to $11.6  million for the nine
months ended  December 31, 2003.  This increase is due primarily to increases of
$1.3 million in compensation  and benefits,  $268,000 in occupancy and equipment
expense,  $127,000  in data  processing  service  fees,  and  $326,000  in other
non-interest expense,  partially offset by a decrease of $103,000 in advertising
and promotion expense.

      The  increase  in  compensation  and  benefits  expense for the nine month
period is due  primarily  to a $779,000  increase  in  expense  related to stock
awards and a $431,000 increase in compensation costs.

      The increase in occupancy  and  equipment  expense is primarily due to the
addition of the Stamford and Brookfield branches, which opened in September 2003
and June 2004,  respectively.  The decrease in advertising and promotion expense
is primarily  due to the timing of the  marketing  campaigns  for the new branch
locations.


                                       21
<PAGE>

      Other  non-interest  expense for the nine months  ended  December 31, 2004
includes  $270,000  of costs  related  to the  Company's  implementation  of the
provisions  of  Section  404 of the  Sarbanes-Oxley  Act of 2002.  There were no
comparable costs in the same period a year ago.

      Income Taxes. Income tax expense amounted to $2.8 million and $3.3 million
for the nine  months  ended  December  31,  2004  and  2003,  respectively.  The
effective tax rates for those same periods were 39.2% and 38.7%, respectively.

Liquidity and Capital Resources

      The Company's  primary  sources of funds are  deposits,  the proceeds from
principal and interest payments on loans and mortgage-backed securities, and the
proceeds  from  maturities  of  investments.   While  maturities  and  scheduled
amortization of loans and securities are a predictable source of funds,  deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.

      The Company's primary investing activities are the origination of mortgage
loans,  and the purchase of  short-term  investments,  government  agency bonds,
mortgage-backed  securities  and  collateralized  mortgage  obligations.   These
activities are funded  primarily by deposit  growth and principal  repayments on
loans,  mortgage-backed  securities and other investment securities.  During the
nine months ended  December  31, 2004,  the Company  originated  loans  totaling
$163.0 million and purchased  $99.6 million of securities.  These  disbursements
were funded by $68.4  million in  principal  payments,  maturities  and calls of
securities and $99.8 million in loan principal repayments. During the year ended
March 31, 2004,  the Company  originated  $186.7  million of loans and purchased
$198.7 million of securities.

      Liquidity management for the Company is both a daily and long-term process
which is part of the Company's  overall  management  strategy.  Excess funds are
generally  invested  in  short-term   investments  such  as  Federal  funds  and
certificates  of deposit.  In the event that the Bank should require  additional
sources  of funds,  it could  borrow  from the FHLB under an  available  line of
credit.

      At December 31, 2004,  the Company had  outstanding  loan  commitments  of
$73.8  million.  The  Company  anticipates  that it will have  sufficient  funds
available  to meet its current  loan  commitments.  Time  deposits  scheduled to
mature in one year or less from  December  31,  2004,  totaled  $242.6  million.
Management believes that a significant portion of such deposits will remain with
the Company.

      The Bank is subject to certain minimum  leverage,  tangible and risk-based
capital  requirements  established by regulations of the OTS. These  regulations
require savings associations to meet three minimum capital standards: a tangible
capital  ratio  requirement  of 1.5% of total  assets as adjusted  under the OTS
regulations;  a  leverage  ratio  requirement  of 4.0% of core  capital  to such
adjusted  total assets;  and a risk-based  capital ratio  requirement of 8.0% of
core and  supplementary  capital  to total  risk-based  assets.  The OTS  prompt
corrective  action  regulations  impose  a 4.0%  core  capital  requirement  for
categorization  as an  "adequately  capitalized"  thrift and a 5.0% core capital
requirement for categorization as a "well capitalized" thrift. Goodwill and most
other  intangible  assets are  deducted in  determining  regulatory  capital for
purposes of all  capital  ratios.  In  determining  the amount of  risk-weighted
assets for purposes of the risk-based capital requirement, a savings association
must  compute  its  risk-based  assets by  multiplying  its assets  and  certain
off-balance  sheet  items  by  risk-weights,  which  range  from 0% for cash and
obligations  issued by the United States  Government or its agencies to 100% for
consumer and commercial  loans, as assigned by the OTS capital  regulations.  At
December 31, 2004, the Bank exceeded all of the OTS minimum  regulatory  capital
requirements,   and  was  classified  as  a  well-capitalized   institution  for
regulatory purposes.


                                       22
<PAGE>

      The  following  table sets forth the  capital  position  of the Bank as of
December 31, 2004 and March 31, 2004. The actual capital  amounts and ratios set
forth below are for the Bank only and,  accordingly,  do not include  additional
capital retained by the Holding Company.

<TABLE>
<CAPTION>
                                                                           OTS Requirements
                                                      -------------------------------------------------------
                                                                                          Classification as
                                 Bank Actual           Minimum Capital Adequacy            Well Capitalized
                        -------------------------     --------------------------        ---------------------
                           Amount           Ratio       Amount             Ratio          Amount        Ratio
                        -------------------------     --------------------------        ---------------------
                                                      (Dollars in thousands)
<S>                     <C>                 <C>       <C>                   <C>         <C>             <C>
December 31, 2004
-----------------
Tangible capital        $  100,340          10.4%     $    14,509           1.5%
Tier I (core) capital      100,340          10.4           38,693           4.0         $ 48,365        5.0%
Risk-based capital:
     Tier I                100,340          23.5           17,091           4.0           25,637         6.0
     Total                 103,277          24.2           34,182           8.0           42,728        10.0

March 31, 2004
--------------
Tangible capital        $   95,143          10.9%     $    13,071           1.5%
Tier I (core) capital       95,143          10.9           34,858           4.0         $ 43,571        5.0%
Risk-based capital:
     Tier I                 95,143          24.3           15,689           4.0           23,533         6.0
     Total                  97,855          25.0           31,377           8.0           39,221        10.0
</TABLE>

Accounting Standards

      See Note 3 of the Notes to Unaudited  Consolidated Financial Statements in
Item 1 for a discussion  of SFAS No. 123R,  which will result in a change in the
Company's accounting for stock options beginning July 1, 2005.

      On  September  30,  2004,  the FASB issued  Staff  Position No. EITF Issue
03-1-1,  "Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning
of Other-Than-Temporary  Impairment and Its Application to Certain Investments,"
which delays the effective date for the  measurement  and  recognition  guidance
contained in Emerging  Issues Task Force ("EITF") Issue No. 03-1. EITF Issue No.
03-1   provides    guidance   for   evaluating    whether   an   investment   is
other-than-temporarily   impaired  and  was   originally  to  be  effective  for
other-than-temporary  impairment evaluations made in reporting periods beginning
after June 15, 2004 (July 1, 2004 for the  Company).  The delay in the effective
date for the measurement and  recognition  guidance  contained in EITF Issue No.
03-1  does  not  suspend  the  requirement  to  recognize   other-than-temporary
impairments  as required by existing  authoritative  literature.  The disclosure
guidance in paragraphs 21 and 22 of EITF Issue 03-1 remains effective.  The FASB
also  issued a  proposal,  Staff  Position  No.  EITF Issue  03-1-a,  to provide
implementation  guidance on matters such as impairment  evaluations for declines
in  value  caused  by  increases  in  interest  rates  and/or  sector   spreads.
Subsequently,  the FASB announced that it would begin a full  reconsideration of
authoritative   literature  relating  to   other-than-temporary   impairment  of
securities.  The  impact  of this  reconsideration  on the  Company's  financial
condition and results of operations cannot be predicted at the present time.


                                       23
<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

      The Company's most  significant form of market risk is interest rate risk,
as the majority of the Company's assets and liabilities are sensitive to changes
in interest rates. The Company's assets consist primarily of fixed rate mortgage
loans, which have longer maturities than the Company's liabilities which consist
primarily  of  deposits.  The  Company's  mortgage  loan  portfolio,  consisting
primarily of loans secured by residential  real property  located in Westchester
County,  New York and Fairfield  County,  Connecticut,  is also subject to risks
associated with the local economy.  The Company does not own any trading assets.
At December  31,  2004,  the Company  did not have any hedging  transactions  in
place,  such as interest rate swaps and caps.  The Company's  interest rate risk
management  program focuses primarily on evaluating and managing the composition
of the Company's  assets and liabilities in the context of various interest rate
scenarios.  Factors beyond management's  control,  such as market interest rates
and competition, also have an impact on interest income and interest expense.

      During the nine months ended December 31, 2004,  there were no significant
changes in the Company's assessment of market risk.

Item 4. Controls and Procedures

      The Company's management,  including the Chief Executive Officer and Chief
Financial  Officer,  evaluated the  effectiveness of the design and operation of
the Company's  disclosure  controls and procedures (as defined in Rule 13a-14(c)
under the Securities  Exchange Act of 1934, as amended) (the "Exchange  Act") as
of December 31, 2004 (the "Evaluation  Date").  Based upon that evaluation,  the
Company's management,  including the Chief Executive Officer and Chief Financial
Officer,  concluded  that, as of the Evaluation  Date, the Company's  disclosure
controls and procedures  were effective in timely  alerting them to any material
information relating to the Company and its subsidiaries required to be included
in the Company's Exchange Act filings.

      There were no significant  changes made in the Company's internal controls
or in other  factors that could  significantly  affect these  internal  controls
during the period covered by this report.


                                       24
<PAGE>

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.  Such
routine  legal  proceedings  in the  aggregate  are believed by management to be
immaterial to the Company's financial condition and results of operations.

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

      Information  regarding Company purchases of its equity securities  (common
stock) during the three months ended December 31, 2004 is summarized below:

<TABLE>
<CAPTION>
                                                                       Total number of
                                                                      shares purchased       Maximum number of
                                                                      under a publicly      shares that may yet
                           Total number of    Average price paid    announced repurchase    be purchased under
                          shares purchased        per share               plan (1)          repurchase plan (1)
                          ----------------    ------------------    --------------------    -------------------
<S>                              <C>                <C>                     <C>                  <C>
October 1-October 31             --                 --                      --                   658,844
November 1-November 30           --                 --                      --                   658,844
December 1-December 31           --                 --                      --                   658,844
</TABLE>

(1) On June 11,  2004,  the  Company  announced  a program to  repurchase  up to
658,844 shares of its common stock.  This program has no expiration  date. There
were no purchases under this program through December 31, 2004.

Item 3. Defaults upon Senior Securities

      None

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

      None

Item 5. Other Information

      None

Item 6. Exhibits

      (a)   Exhibit 31.1 - Certification of Chief Executive  Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002.

      (b)   Exhibit 31.2 - Certification of Chief Financial  Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002.

      (c)   Exhibit 32.1 - Certification  pursuant to 18 U.S.C. Section 1350, as
                           adopted pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002.


                                       25
<PAGE>

                                   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.

                                         Sound Federal Bancorp, Inc.
                                         ---------------------------
                                         (Registrant)

                                     By: /s/ Anthony J. Fabiano
                                         ----------------------
                                         Anthony J. Fabiano
                                         Duly Authorized and Chief Financial and
                                         Accounting Officer

February 8, 2005

                                       26