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, 2003

                                       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
              Common Stock,                             February 10, 2004
              -------------                             -----------------
             par value, $0.01                                12,803,133

<PAGE>

                                TABLE OF CONTENTS


                         PART I -- FINANCIAL INFORMATION
                         -------------------------------

Item 1. Financial Statements (Unaudited)

        Consolidated Balance Sheets at December 31, 2003 and
        March 31, 2003.........................................................1

        Consolidated Statements of Income for the Quarter
        and Nine Months Ended December 31, 2003 and 2002.......................2

        Consolidated Statement of Changes in Stockholders' Equity
        for the Nine Months Ended December 31, 2003............................3

        Consolidated Statements of Cash Flows for the Nine Months
        Ended December 31, 2003 and 2002.......................................4

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

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.................................................10

Item 3. Quantitative and Qualitative Disclosures about Market Risk............18

Item 4. Controls and Procedures...............................................18


                         PART II -- OTHER INFORMATION
                         ----------------------------

Item 1. Legal Proceedings.....................................................19

Item 2. Changes in Securities and Use of Proceeds.............................19

Item 3. Defaults upon Senior Securities.......................................19

Item 4. Submission of Matters to a Vote of Security Holders...................19

Item 5. Other Information.....................................................19

Item 6. Exhibits and Reports on Form 8-K......................................19

        Signatures............................................................20


                                       i
<PAGE>

Part 1. - Financial Information
Item 1.  Financial Statements

<TABLE>
<CAPTION>

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)                            December 31,   March 31,
                                                                             2003         2003
                                                                         ------------   ---------
<S>                                                                       <C>          <C>
Assets
Cash and due from banks                                                   $  11,068    $   8,776
Federal funds sold and other overnight deposits                              11,784       36,121
                                                                          ---------    ---------
    Total cash and cash equivalents                                          22,852       44,897
                                                                          ---------    ---------
Securities  available  for sale,  at fair value (including
  $30,113 and $29,100 pledged as collateral for borrowings
  under repurchase agreements at December 31, 2003 and
  March 31, 2003, respectively)                                             356,260      295,048
Loans, net:
  Mortgage loans                                                            462,673      428,575
  Consumer loans                                                              1,417        1,551
  Allowance for loan losses (Note 5)                                         (2,637)      (2,442)
                                                                          ---------    ---------
            Total loans, net                                                461,453      427,684
                                                                          ---------    ---------
 Accrued interest receivable                                                  3,557        3,678
 Federal Home Loan Bank stock                                                 5,303        4,141
 Premises and equipment, net                                                  5,625        5,467
 Deferred income taxes                                                        2,310          392
 Goodwill                                                                    13,970       13,970
 Bank-owned life insurance                                                   10,000         --
 Other assets                                                                 1,612          811
                                                                          ---------    ---------
            Total assets                                                  $ 882,942    $ 796,088
                                                                          =========    =========

Liabilities and Stockholders' Equity
Liabilities:
  Deposits                                                                $ 698,416    $ 604,260
  Borrowings (Note 6)                                                        35,000       35,000
  Mortgagors' escrow funds                                                    5,176        4,603
  Due to brokers for securities purchased                                     9,468       10,495
  Accrued expenses and other liabilities                                      2,791        3,409
                                                                          ---------    ---------
            Total liabilities                                               750,851      657,767
                                                                          ---------    ---------
Stockholders' equity (Note 1):
   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;
      13,247,133 shares issued)                                                 132          132
   Additional paid-in capital                                                95,840       95,395
   Treasury stock, at cost (444,000 shares at December 31, 2003)             (6,929)        --
   Common stock held by the Employee Stock Ownership Plan ("ESOP")           (6,682)      (7,059)
   Common stock awards under the Recognition and Retention Plan ("RRP")        --           (100)
   Retained earnings                                                         52,789       49,937
   Accumulated other comprehensive (loss) income, net of taxes (Note 7)      (3,059)          16
                                                                          ---------    ---------
            Total stockholders' equity                                      132,091      138,321
                                                                          ---------    ---------
            Total liabilities and stockholders' equity                    $ 882,942    $ 796,088
                                                                          =========    =========
</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 Quarter Ended   For the Nine Months Ended
                                                              December 31,             December 31,
                                                         ---------------------   -------------------------
                                                           2003         2002        2003         2002
                                                         -------      -------      -------      -------
<S>                                                      <C>          <C>          <C>          <C>
Interest and Dividend Income
 Loans                                                   $ 6,641      $ 7,527      $19,900      $22,767
 Mortgage-backed and other securities                      3,186        2,130        8,693        6,177
 Federal funds sold and other overnight deposits              46          158          220          390
 Other earning assets                                         --           55          123          139
                                                         -------      -------      -------      -------
 Total interest and dividend income                        9,873        9,870       28,936       29,473
                                                         -------      -------      -------      -------
Interest Expense
 Deposits                                                  2,798        3,025        8,342        9,211
 Borrowings                                                  381          409        1,130        1,236
 Other interest-bearing liabilities                            7           38           42           75
                                                         -------      -------      -------      -------
 Total interest expense                                    3,186        3,472        9,514       10,522
                                                         -------      -------      -------      -------
 Net interest income                                       6,687        6,398       19,422       18,951
 Provision for loan losses (Note 5)                           75           50          200          175
                                                         -------      -------      -------      -------
 Net interest income after provision for loan losse        6,612        6,348       19,222       18,776
                                                         -------      -------      -------      -------
Non-Interest Income
 Service charges and fees                                    252          229          765          610
 Gain on sale of real estate owned                            --           --           --           13
                                                         -------      -------      -------      -------
 Total non-interest income                                   252          229          765          623
                                                         -------      -------      -------      -------
Non-Interest Expense
 Compensation and benefits                                 2,107        1,650        6,105        4,701
 Occupancy and equipment                                     553          495        1,699        1,324
 Data processing service fees                                320          237          751          724
 Advertising and promotion                                   231          328          782          754
 Other                                                       725          620        2,231        1,879
                                                         -------      -------      -------      -------
 Total non-interest expense                                3,936        3,330       11,568        9,382
                                                         -------      -------      -------      -------
 Income before income tax expense                          2,928        3,247        8,419       10,017
 Income tax expense                                        1,133        1,220        3,257        3,799
                                                         -------      -------      -------      -------
 Net income                                              $ 1,795      $ 2,027      $ 5,162      $ 6,218
                                                         =======      =======      =======      =======
Earnings per share (Note 4)(1):
   Basic earnings per share                              $  0.15      $  0.16      $  0.42      $  0.48
                                                         =======      =======      =======      =======
   Diluted earnings per share                            $  0.14      $  0.15      $  0.41      $  0.47
                                                         =======      =======      =======      =======
</TABLE>

(1)  Earnings per share data for the 2002 periods have been  adjusted to reflect
     the shares  outstanding after the completion of the second-step  conversion
     on January 6, 2003.

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, 2003
(Unaudited)
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                      Common     Common                Accumulated
                                              Additional               Stock      Stock                  Other          Total
                                      Common    Paid-In   Treasury    Held By     Awards    Retained  Comprehensive  Stockholders'
                                       Stock    Capital    Stock       ESOP      Under RRP  Earnings  (Loss)Income      Equity
                                       ------   -------    -------    -------       ----     -------     -------      ---------
<S>                                    <C>      <C>        <C>        <C>          <C>       <C>         <C>          <C>
Balance at March 31, 2003              $  132   $95,395    $    --    $(7,059)     $(100)    $49,937     $    16      $ 138,321
Net income                                 --        --         --         --         --       5,162          --          5,162
Other comprehensive loss (Note 7)          --        --         --         --         --          --      (3,075)        (3,075)
                                                                                                                      ---------
  Total comprehensive income                                                                                              2,087
Dividends paid ($0.16 per share)           --        --         --         --         --      (1,940)         --         (1,940)
Purchases of treasury stock
  (474,000 shares)                         --        --     (7,400)        --         --          --          --         (7,400)
Resissuance of treasury stock for
  exercise of stock options
  (30,000 shares)                          --        --        471         --         --        (370)         --            101
Tax benefit from exercise of
  stock options                            --       145         --         --         --          --          --            145
Vesting of RRP shares                      --        --         --         --        100          --          --            100
ESOP shares committed to be released
  for allocation                           --       300         --        377         --          --          --            677
                                       ------   -------    -------    -------       ----     -------     -------      ---------
Balance at December 31, 2003           $  132   $95,840    $(6,929)   $(6,682)      $ --     $52,789     $(3,059)     $ 132,091
                                       ======   =======    =======    =======       ====     =======     =======      =========
</TABLE>

                                       3
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)                                                For the Nine Months
(In thousands)                                              Ended December 31,
                                                           -------------------
                                                            2003         2002
                                                           ------       ------
OPERATING ACTIVITIES
  Net income                                            $   5,162     $   6,218
  Adjustments  to  reconcile  net  income to net cash
      provided  by  operating activities:
     Provision for loan losses                                200           175
     Depreciation, amortization and accretion               1,801         1,035
     ESOP and RRP expense                                     777           394
     Income taxes                                            (902)           19
     Other adjustments, net                                  (234)          454
                                                        ---------     ---------
           Net cash provided by operating activities        6,804         8,295
                                                        ---------     ---------
INVESTING ACTIVITIES
  Purchases of securities available for sale             (189,246)     (127,045)
  Proceeds from principal payments, maturities and
     calls of securities available for sale               121,557        63,229
  Disbursements for loan originations in excess of
     principal payments                                   (34,742)      (16,639)
  Proceeds from sales of real estate owned                     --           127
  Purchase of bank-owned life insurance                   (10,000)           --
  Purchase of Federal Home Loan Bank stock                 (1,162)           --
  Purchases of premises and equipment                        (746)         (538)
                                                        ---------     ---------
          Net cash used in investing activities          (114,339)      (80,866)
                                                        ---------     ---------
FINANCING ACTIVITIES
  Net increase in deposits                                 94,156        72,512
  Proceeds from borrowings                                 20,000            --
  Repayment of borrowings                                 (20,000)          (82)
  Increase in stock subscription proceeds                      --        68,134
  Net increase in mortgagors' escrow funds                    573           553
  Purchases of treasury stock                              (7,400)           --
  Proceeds from exercise of stock options                     101            27
  Dividends paid on common stock                           (1,940)         (492)
                                                        ---------     ---------
          Net cash provided by financing activities        85,490       140,652
                                                        ---------     ---------
 (Decrease) increase in cash and cash equivalents         (22,045)       68,081
  Cash and cash equivalents at beginning of period         44,897        26,778
                                                        ---------     ---------
  Cash and cash equivalents at end of period            $  22,852     $  94,859
                                                        =========     =========

SUPPLEMENTAL INFORMATION
  Interest paid                                         $   9,604     $  10,459
  Income taxes paid                                         4,122         2,316
  Loans transferred to real estate owned                       --           171
  Net (decrease) increase in due to brokers for
    securities purchased                                   (1,027)        6,195

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 Offering

     Initial Public Offering

     On October 8, 1998, Sound Federal Bancorp issued shares of its common stock
in connection with a Plan of Reorganization (the "Initial  Reorganization")  and
related  Subscription and Community  Offering (the "Initial  Offering").  In the
Initial  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").

     Sound  Federal  Bancorp  issued a total of  5,212,218  shares of its common
stock,  consisting of 2,810,510  shares (or 53.92%) issued to the Mutual Holding
Company and  2,401,708  shares (or  46.08%)  issued to other  stockholders.  The
shares issued to other stockholders consisted of 192,129 shares purchased by the
Company's  Employee  Stock  Ownership  Plan (the  "ESOP")  using $1.9 million in
proceeds from a loan made by Sound Federal Bancorp;  102,200 shares  contributed
by the Company to  establish  the Sound  Federal  Savings  and Loan  Association
Charitable Foundation (the "Charitable  Foundation");  and 2,107,379 shares sold
for cash of $21.1  million  ($10.00  per share) in the Initial  Offering.  After
deducting offering costs of $1.1 million, the net cash proceeds from the Initial
Offering were $20.0 million.

     Second Step Conversion

     On June 13, 2002,  the  respective  Boards of  Directors  of Sound  Federal
Bancorp and the Mutual Holding Company adopted a plan to convert from the mutual
holding form of organization  to a fully public holding  company  structure (the
"Conversion").  The  Conversion was completed on January 6, 2003. As part of the
conversion  the Mutual Holding  Company  merged out of existence.  Sound Federal
Bancorp was  succeeded  by a new  Delaware  corporation  known as Sound  Federal
Bancorp,  Inc (the "Holding Company").  Common shares representing the ownership
interest of the Mutual Holding Company were sold in a subscription  offering and
a community offering.  Common shares owned by public shareholders  (shareholders
other than the Mutual Holding  Company) were converted into the right to receive
new shares of the  Holding  Company's  common  stock  determined  pursuant to an
exchange ratio. Immediately after the Conversion and exchange of existing shares
for new shares, the public  shareholders owned the same aggregate  percentage of
the Holding  Company's  common  stock that they owned  immediately  prior to the
Conversion,  excluding any shares  purchased in the  offering.  As part of these
transactions,  the Bank 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".

     The Holding  Company  sold  7,780,737  shares of common stock at $10.00 per
share in the  offering,  including  622,458  shares  purchased  by the ESOP.  In
addition,  each of the  outstanding  shares  of  common  stock of Sound  Federal
Bancorp  (1,967,782  shares,  net of 444,926 treasury shares) was converted into
2.7667 shares of the Holding Company resulting in 5,444,263  outstanding shares.
A total of 13,225,000  shares were  outstanding  as a result of the offering and
share exchange.


                                       5
<PAGE>

     Net cash proceeds from the offering were as follows (in thousands):

     Total cash proceeds (7,780,737 shares)                     $ 77,807
     Offering costs                                               (1,897)
                                                                --------
        Net offering proceeds                                     75,910
     Assets received from the Mutual Holding Company                 366
                                                                --------
     Increase in common stock and additional paid-in capital      76,276
     Shares purchased by the ESOP (622,458 shares)                (6,225)
                                                                --------
     Net cash proceeds                                          $ 70,051
                                                                ========

     The  Conversion and related  transactions  were accounted for at historical
cost, with no resulting change in the historical  carrying amounts of assets and
liabilities.  Consolidated  stockholders'  equity  increased  by  the  net  cash
proceeds from the  offering.  Share and per share data for all periods have been
adjusted  to  reflect  the  additional  shares  outstanding  as a result  of the
offering and share exchange.

     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 accordance with accounting  principles
generally  accepted  in the United  States of  America  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, 2004.

     The consolidated financial statements have been prepared in conformity with
accounting  principles  generally  accepted in the United States of America.  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, 2003,  included in
the Company's 2003 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 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 common share would have
been adjusted to the following pro forma amounts:


                                       6
<PAGE>

<TABLE>
<CAPTION>

                                                    Quarter Ended         Nine Months Ended
                                                    December 31,              December 31,
                                             -----------------------     -----------------------
                                                2003          2002          2003          2002
                                             ---------     ---------     ---------     ---------
                                                     (In thousands, except per share data)
<S>                                          <C>           <C>           <C>           <C>
Net income, as reported                      $   1,795     $   2,027     $   5,162     $   6,218
Add RRP expense included in reported
   net income, net of related tax effects           17            23            61            67
Deduct RRP and stock option expense
   determined under the fair-value-based
   method, net of related tax effects              (32)          (41)         (111)         (121)
                                             ---------     ---------     ---------     ---------
Pro forma net income                         $   1,780     $   2,009     $   5,112     $   6,164
                                             =========     =========     =========     =========
Earnings per share:
   Basic, as reported                        $    0.15     $    0.16     $    0.42     $    0.48
                                             =========     =========     =========     =========
   Basic, pro forma                          $    0.15     $    0.16     $    0.41     $    0.48
                                             =========     =========     =========     =========
   Diluted, as reported                      $    0.14     $    0.15     $    0.41     $    0.47
                                             =========     =========     =========     =========
   Diluted, pro forma                        $    0.14     $    0.15     $    0.40     $    0.47
                                             =========     =========     =========     =========
</TABLE>

4.   Earnings Per Share

     Earnings per share data for the quarter and nine months ended  December 31,
2002 have been adjusted to reflect the shares  outstanding  after  completion of
the offering and share exchange on January 6, 2003.

     Weighted  average  common  shares  used in  calculating  basic and  diluted
earnings per share for the quarter ended  December 31, 2003 were  12,219,933 and
12,552,442,  respectively.  For the quarter  ended  December 31, 2002,  weighted
average common shares used in calculating  basic and diluted  earnings per share
were 12,914,684 and 13,244,481, respectively.

     For the nine months ended December 31, 2003,  weighted  average shares used
in  calculating  basic and  diluted  earnings  per  share  were  12,360,180  and
12,695,304,  respectively.  For the nine months ended  December  31,  2002,  the
respective weighted average shares were 12,913,177 and 13,217,530.

5.   Allowance for Loan Losses

     The allowance  for loan losses is increased by  provisions  for loan losses
charged to income.  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.


                                       7
<PAGE>

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

<TABLE>
<CAPTION>

                                     Quarter Ended       Nine Months Ended    Year Ended
                                      December 31,          December 31,       March 31,
                                  ------------------    -------------------   ----------
                                    2003       2002        2003       2002      2003
                                  ------------------    -------------------   ----------
                                                     (In thousands)
<S>                               <C>        <C>        <C>         <C>        <C>
Balance at beginning of period    $ 2,562    $ 2,346    $ 2,442     $ 2,221    $ 2,221
Provision for loan losses              75         50        200         175        275
Loans charged off                      --         --         (5)         --        (54)
                                  ------------------    -------------------    -------
Balance at end of period          $ 2,637    $ 2,396    $ 2,637     $ 2,396    $ 2,442
                                  ==================    ===================    =======
</TABLE>

6.   Borrowings

     The Company had the following outstanding  borrowings from the Federal Home
Loan Bank (the "FHLB") at December 31, 2003:

                                                 Coupon Rate     Borrowings
                                                 -----------     ----------
                                                    (Dollars in thousands)
Securities repurchase agreements maturing in:
   January 2008(1)                                  5.42%         $10,000
   December 2008(1)                                 4.72            5,000
   March 2004                                       3.57            7,000
   March 2005                                       4.22            6,000
   March 2006                                       2.27            7,000
                                                                  -------
   Total borrowings                                 4.11%         $35,000
                                                                  =======
Accrued interest payable                                          $   142

     The securities transferred to the FHLB subject to the repurchase agreements
include U.S. Government and agency securities available for sale with a carrying
value of $15.6 million and mortgage-backed  securities available for sale with a
carrying value of $14.5 million.  Accrued interest  receivable on the securities
was $183,000 at December 31, 2003.

7.   Comprehensive Income

     Comprehensive  income  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 and minimum  pension  liability
adjustments.  The Company has  reported  its total  comprehensive  income in the
consolidated statement of changes in stockholders' equity.


                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                         Quarter Ended       Nine Months Ended
                                                          December 31,          December 31,
                                                     -------------------     -------------------
                                                       2003        2002       2003         2002
                                                     -------     -------     -------     -------
                                                                     (In thousands)
<S>                                                  <C>         <C>         <C>         <C>
Net unrealized holding (loss) gain arising during
  the period on securities available for sale        $(1,843)    $    68     $(5,010)    $ 1,671
Related deferred income tax effect                       650         (29)      1,935        (649)
                                                     -------     -------     -------     -------
Other comprehensive (loss) income                    $(1,193)    $    39     $(3,075)    $ 1,022
                                                     =======     =======     =======     =======
</TABLE>

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

                                                      December 31,   March 31,
                                                          2003         2003
                                                      ------------   ---------
                                                            (In thousands)
Net unrealized holding (loss) gain on securities
  available for sale                                    $(1,515)     $ 3,495
Additional minimum pension liability                     (3,468)      (3,468)
Related deferred income taxes                             1,924          (11)
                                                        -------      -------
Accumulated other comprehensive (loss) income           $(3,059)     $    16
                                                        =======      =======

                                       9
<PAGE>

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

General

     Our principal  business  consists 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.

Financial Condition

     Assets.  The Company's  total assets amounted to $882.9 million at December
31, 2003 as  compared to $796.1  million at March 31,  2003.  The $86.8  million
increase  in total  assets  is  primarily  due to a $61.2  million  increase  in
securities available for sale to $356.3 million, a $33.8 million increase in net
loans to $461.5  million,  and the purchase of bank-owned  life insurance with a
cash surrender value of $10.0 million.  These increases were partially offset by
a decrease in federal funds sold of $24.3  million.  The asset growth was funded
principally by a $94.2 million increase in deposits to $698.4 million.

     Liabilities.  Total  deposits  were $698.4  million at December 31, 2003 as
compared to $604.3  million at March 31,  2003,  an  increase of $94.1  million.
Certificates  of deposit  increased  $72.5 million to $436.2 million from $363.7
million, savings and club accounts increased $9.1 million to $145.9 million from
$136.8  million,  and money market and NOW accounts  increased  $12.6 million to
$116.3 million from $103.7 million.

     Stockholders'Equity.  Total stockholders'  equity decreased $6.2 million to
$132.1  million at December 31, 2003 as compared to $138.3  million at March 31,
2003.  The decrease  reflects the purchase of treasury  shares at a cost of $7.4
million,  dividends  paid  of  $1.9  million  and a  decrease  of  $3.1  million
attributable to accumulated other comprehensive (loss) income,  partially offset
by net income of $5.2 million, and proceeds and related tax benefits of $246,000
on the reissuance of treasury shares for stock options exercised.  The change in
accumulated other comprehensive  (loss) income reflects a net unrealized holding


                                       10
<PAGE>

loss of $5.0  million on  securities  available  for sale  (less a $1.9  million
income tax effect)  attributable  to a decline in fair value of debt  securities
due to rising long-term interest rates during the nine-month period.

     In July 2003, we announced the commencement of a stock  repurchase  program
to  repurchase up to 530,482 (4%) of our  outstanding  shares of common stock in
order to provide  shares for  reissuance  upon  exercise  of  outstanding  stock
options. The timing of the repurchases depends on certain factors, including but
not  limited  to,  market  conditions  and  prices,   the  Company's   liquidity
requirements and alternative uses of the Company's  capital.  As of December 31,
2003, we repurchased  474,000 shares of the Company's  common stock at a cost of
$7.4  million and  reissued  30,000 of these  shares upon the  exercise of stock
options.

Comparison of Results of Operations for the Quarters Ended December 31, 2003 and
2002

     Net Income.  Net income  amounted to $1.8  million or diluted  earnings per
share of $0.14 for the quarter  ended  December  31,  2003,  as compared to $2.0
million or diluted  earnings per share of $0.15 for the quarter  ended  December
31, 2002.  The decrease in net income for the current  quarter was due primarily
to a $606,000 increase in non-interest expense,  partially offset by an increase
of  $289,000  in net  interest  income and a  decrease  of $87,000 in income tax
expense.

     Interest  Income.  Interest  income was  unchanged  at $9.9 million for the
quarters ended December 31, 2003 and 2002. The average yield on interest-earning
assets  decreased 120 basis points to 4.68% for the quarter  ended  December 31,
2003 as  compared to the same  quarter in 2002,  and was  partially  offset by a
$170.8 million increase in average  interest-earning assets to $837.0 million as
compared to $666.2  million for those same periods.  The increase in the average
balance  of  interest-earning  assets  was due  primarily  to a  $184.5  million
increase  in the average  balance of  securities  to $350.9  million and a $13.9
million  increase in the average balance of loans to $452.1  million,  partially
offset by a decrease of $28.6  million in average  Federal  funds sold and other
overnight  deposits to $28.4 million.  The increase in average  interest-earning
assets was funded  principally by deposit growth in the Bank's  branches and the
investment of net proceeds from the Company's  stock  offering.  The decrease in
the  average  yield on  interest-earning  assets  reflects  the  origination  of
fixed-rate  loans at lower rates, the purchase of securities at 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  decreased  $886,000,  or 11.8%,  to $6.6
million for the quarter ended  December 31, 2003 as compared to $7.5 million for
the same quarter in 2002.  This decrease is due to a 98 basis point  decrease in
the yield earned to 5.83%  partially  offset by a $13.9 million  increase in the
average balance of loans to $452.1 million.

     The Bank  originated  $53.1  million of new loans during the quarter  ended
December 31, 2003 as compared to $59.4 million for the same quarter in the prior
year.  In  addition,  $25.8  million  of  the  Bank's  existing  mortgage  loans
refinanced  with the Bank to lower rates  during the 2003  quarter.  These loans
were originated at rates lower than the yields being earned on the existing loan
portfolio. As a result, the average yield earned on the loan portfolio continued
to decline  during  the  current  quarter.  The Bank has not  historically  sold
mortgage loans it originates.

     Mortgage-Backed   and  Other   Securities.   Interest  on   mortgage-backed
securities increased $795,000 to $2.4 million for the quarter ended December 31,
2003,  as compared to the same quarter in 2002,  due primarily to an increase of
$139.6 million in the average balance to $259.6 million,  partially  offset by a
decrease of 170 basis points in the average yield to 3.73%.  The increase in the
average balance of mortgage-backed securities reflects the investment of the net
proceeds from the Company's  stock  offering as well as the  investment of funds
from  deposit  growth.  The  decrease  in the  average  yield is a result of the
downward  repricing  of  adjustable  rate  mortgage-backed  securities  and  the
accelerated  amortization  of purchase  premiums as a result of  prepayments  on
mortgage-backed  securities.  In  addition,  new  purchases  of  mortgage-backed
securities are at lower rates than the average yield of the existing portfolio.

     Interest on other securities increased $261,000 to $747,000 for the quarter
ended  December 31, 2003, as compared to the same quarter in 2002, due primarily
to a $44.9 million  increase in the average balance of


                                       11
<PAGE>

other securities to $91.3 million, partially offset by a 91 basis point decrease
in the average  yield to 3.25%.  The decrease in the average yield is the result
of the continued low market interest rates.

     Federal  Funds Sold and Other  Overnight  Deposits.  For the quarter  ended
December 31, 2003,  interest on Federal funds sold and other overnight  deposits
decreased  $112,000  to  $46,000,  reflecting  a $28.6  million  decrease in the
average  balance to $28.4  million and a 46 basis point  decrease in the average
yield earned to 0.64%.  The  decrease in the average  yield is the result of the
continued low market interest rates.  The decrease in the average balance is due
primarily  to the  reinvestment  of funds  received in the stock  offering  into
higher yielding investments.

     Other Earning Assets. The Company had an investment of $5.3 million in FHLB
of New York common stock at December 31,  2003.  The FHLB of New York  suspended
the  October  dividend  payment on this stock and,  as a result,  the  Company's
earnings before tax were reduced by approximately  $57,000 for the quarter ended
December 31, 2003 as compared to the same quarter a year ago. The FHLB announced
in January 2004 that it had declared a current  dividend  that was less than the
amounts  previously  paid. For the Company,  the current  quarterly  dividend is
approximately $19,000.

     Interest Expense.  Interest expense for the quarter ended December 31, 2003
totaled $3.2 million, as compared to $3.5 million for the quarter ended December
31, 2002. The average balance of  interest-bearing  liabilities  increased $95.9
million to $717.2  million for the quarter  ended  December 31, 2003 from $621.3
million for the same quarter in the prior year,  while the average cost of these
liabilities  decreased  44 basis  points to 1.76%.  The  increase in the average
balance of  interest-bearing  liabilities  includes deposit growth in the Somers
branch,  which opened in July 2002, and in the Stamford branch,  which opened in
September 2003, as well as growth in the existing branches.  The decrease in the
average cost of  liabilities  is the result of declining  market  interest rates
during recent periods.

     Interest  expense on time  deposits  totaled  $2.5  million for the current
quarter as compared to $2.6 million for the same  quarter in 2002.  The decrease
is due  primarily  to a 55 basis point  decrease  in the  average  cost to 2.31%
partially  offset by a $72.7  million  increase in the  average  balance of time
deposits to $427.8  million from $355.1  million for the same quarter last year.
The  increase in the average  balance  includes  growth in the Bank's new branch
offices as well as in existing branches.

     Interest  expense on savings  accounts  totaled  $193,000  for the  current
quarter as compared to $296,000 for the quarter  ended  December 31, 2002.  This
decrease  is the result of a 40 basis  point  decrease  in the  average  cost of
savings  accounts to 0.53% partially  offset by a $17.7 million  increase in the
average balance of savings accounts to $143.8 million.

     Interest expense on other deposits (NOW and money market accounts) amounted
to $117,000 for the quarter ended  December 31, 2003 as compared to $165,000 for
the same quarter in the prior year.  The average cost  decreased 27 basis points
to 0.46% and the average  balance of these accounts  increased  $10.9 million to
$103.4 million.

     For the quarter  ended  December 31, 2003,  interest  expense on borrowings
amounted to $381,000 as compared to $409,000  for the same  quarter in the prior
year.  The  average  balance of  borrowings  for the  current  quarter was $41.5
million and the average cost was 3.65%. For the quarter ended December 31, 2002,
the average  balance of  borrowings  was $35.0  million and the average rate was
4.64%.

     Net Interest Income. Net interest income for the quarter ended December 31,
2003 amounted to $6.7 million,  a $289,000  increase from the same period in the
prior year.  The interest rate spread was 2.92% and 3.66% for the quarters ended
December  31, 2003 and 2002,  respectively.  The net  interest  margin for those
periods was 3.17% and 3.81%, 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  at 40 year  lows.  If  interest  rates  remain at these low  levels or
decrease  further,  mortgage  refinancings  may continue to adversely affect the
Company's interest rate spread and net interest margin. The decrease in interest
rate spread and net interest margin was  substantially  offset by an increase in
the ratio of interest-earning assets to interest-bearing liabilities to 1.17 for
the 2003 quarter from 1.07 for the


                                       12
<PAGE>

2002 quarter. This increase was due primarily to the investment of proceeds from
the Company's  stock offering  completed in January 2003 in connection  with the
second step conversion.  For information  concerning the second step conversion,
see Note 1 of the Notes to Unaudited  Consolidated  Financial Statements in this
report.

     In  December  2003,  the  Company  purchased a  bank-owned  life  insurance
("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  accompanying  Consolidated  Balance Sheet. As a
result, the ratio of average interest-earning assets to average interest-bearing
liabilities is expected to decrease in future  periods.  The changes in the cash
surrender  value of the BOLI will be  recognized  as  non-interest  income.  The
Company's  interest rate spread and net interest margin may decrease as a result
of the financial statement classification of the BOLI asset and related 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 87.1% of total loans at December 31, 2003, 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 quarter  ended  December
31,  2003 as  compared  to $50,000 for the  quarter  ended  December  31,  2002.
Non-performing  loans  amounted  to $1.3  million  or 0.28%  of  total  loans at
December 31,  2003,  as compared to $795,000 or 0.18% of total loans at December
31, 2002.  The increase in  non-performing  loans is primarily the result of the
delinquency  of one  borrower's  mortgage  and home  equity  loans  which  total
$812,000.  The loans are secured by a single  family  home with a  loan-to-value
ratio of less than 60%. The allowance  for loan losses  amounted to $2.6 million
and $2.4 million at December 31, 2003 and March 31,  2003,  respectively.  There
were no  charge-offs  for  the  quarters  ended  December  31,  2003  and  2002,
respectively.

     Non-Interest Income.  Non-interest income totaled $252,000 and $229,000 for
the quarters  ended  December 31, 2003 and 2002,  respectively.  The increase in
non-interest  income was  primarily  due to higher levels of income from service
charges on deposit  accounts,  late charges on loans and various  other  service
fees.

     Non-Interest  Expense.  Non-interest  expense  totaled $3.9 million for the
quarter  ended  December  31, 2003 as  compared to $3.3  million for the quarter
ended December 31, 2002. This increase is due primarily to increases of $457,000
in  compensation  and  benefits,  $58,000 in occupancy  and  equipment  expense,
$83,000 in data  processing  service  fees and  $105,000  in other  non-interest
expense,  partially offset by a decrease of $97,000 in advertising and promotion
expense.

     The increase in  compensation  and benefits is primarily  due to a $192,000
increase in  compensation  costs and a $109,000  increase in ESOP  expense.  The
increase in compensation expense is due primarily to normal salary increases and
increases in staff to support the growth in the Company's lending operations and
for the  Stamford  branch,  which  opened  in  September  2003.  Our  full  time
equivalent   employees  were  119  and  103  at  December  31,  2003  and  2002,
respectively.  The  increase in ESOP  expense  reflects  the  increase in shares
committed to be released for allocation following the second-step conversion and
the  increase  in the  market  value of those  shares.  Compensation  expense is
recognized  for the ESOP  equal to the fair  value  of  shares  committed  to be
released for allocation to participant accounts. The difference between the fair
value at that  time and the  ESOP's  original  acquisition  cost is  charged  or
credited to stockholders'  equity (additional paid-in capital).  For the quarter
ended December 31, 2003, the difference  credited to equity amounted to $122,000
as compared to $92,000 for the same period in 2002.


                                       13
<PAGE>

     The increase in occupancy  and  equipment  expense is primarily  due to the
Company's new corporate office which opened in April 2003.

     Income Taxes.  Income tax expense amounted to $1.1 million and $1.2 million
for the quarters ended December 31, 2003 and 2002,  respectively.  The effective
tax rates for those same periods were 38.7% and 37.6%, respectively.

Comparison of Results of Operations  for the Nine Months Ended December 31, 2003
and 2002

     Net Income.  Net income  amounted to $5.2  million or diluted  earnings per
share of $0.41 for the nine months ended  December 31, 2003, as compared to $6.2
million or diluted  earnings per share of $0.47 for the same period in the prior
year. The decrease in net income for the nine months ended December 31, 2002 was
due to an increase of $2.2 million in non-interest expense,  partially offset by
increases of $471,000 in net interest income and $142,000 in non-interest income
and a decrease of $542,000 in income tax expense.

     Interest Income.  Interest income totaled $28.9 million for the nine months
ended December 31, 2003, as compared to $29.5 million for the same period in the
prior year. The decrease in interest  income reflects a 138 basis point decrease
in the average yield on interest-earning  assets to 4.80% from 6.18%,  partially
offset by an increase of $166.8  million in average  interest-earning  assets to
$800.2  million as compared  to $633.3  million for the same period in the prior
year.  The increase in the average  balance of  interest-earning  assets was due
primarily to  increases  of $173.2  million in  securities  available  for sale,
partially  offset by a $6.0  million  decrease  in federal  funds sold and other
overnight  deposits  and a $1.0 million  decrease in loans.  The decrease in the
average yield on interest-earning  assets reflects the origination of fixed-rate
loans at lower  rates,  the  purchase  of  securities  at lower  rates  than the
existing  portfolio  and the downward  repricing of  adjustable-rate  securities
during recent periods of declining interest rates.

     Loans.  For the nine months ended  December 31,  2003,  interest  income on
loans amounted to $19.9 million as compared to $22.8 million for the same period
in the prior year.  This  decrease  was due to a decrease of $1.0 million in the
average balance of loans to $434.0 million and an 86 basis point decrease in the
yield earned to 6.09% from 6.95%.

     The  decrease in the loan  portfolio is  principally  a result of increased
principal  prepayments as a result of continued low market  interest  rates.  We
originated $158.1 million of new loans during the nine months ended December 31,
2003. In addition,  $126.7 million of existing  mortgage  loans were  refinanced
with us. These loans were originated at rates lower than the yields being earned
on the existing loan portfolio. As a result, the decline in average yield earned
on the loan  portfolio  continued in the first nine months of fiscal  2004.  The
yield on the loan  portfolio may decrease  further until market  interest  rates
begin to increase.

     Mortgage-Backed   and  Other   Securities.   Interest  on   mortgage-backed
securities for the nine months ended December 31, 2003 increased $2.0 million to
$6.7  million as compared to $4.7 million for the same period in the prior year.
The increase was due to an increase of $131.6 million in the average  balance to
$239.2 million partially offset by a decrease of 203 basis points in the average
yield  to  3.73%  from  5.76%.   The   increase   in  the  average   balance  of
mortgage-backed  securities reflects the investment of the net proceeds from the
Company's stock offering as well as the investment of funds from deposit growth.
The  decrease  in the average  yield is a result of the  downward  repricing  of
adjustable rate mortgage-backed  securities and the accelerated  amortization of
purchase premiums as a result of prepayments on mortgage-backed  securities.  In
addition,  new purchases of  mortgage-backed  securities are at lower rates than
the existing portfolio.

     For the nine months ended December 31, 2003,  interest on other  securities
increased  $460,000 to $2.0  million as  compared  to $1.5  million for the same
period in the prior year.  The increase was due to an increase of $41.6  million
in the average  balance to $86.2 million for the nine months ended  December 31,
2003, partially offset by a decrease of 146 basis points in the average yield to
3.03% from 4.49%.

     Federal Funds Sold and Other Overnight Deposits.  For the nine months ended
December  31,  2003,  interest  on federal  funds and other  overnight  deposits
decreased  $170,000 to  $220,000,  reflecting  a 42 basis


                                       14
<PAGE>

point  decrease in the average  yield to 0.83% and a decrease of $6.0 million in
the average  balance to $35.3 million.  The decrease in the average yield is the
result of the continued low market interest rates.

     Interest  Expense.  For the nine months ended  December 31, 2003,  interest
expense on interest-bearing  liabilities  decreased $985,000 to $9.5 million, as
compared to $10.5  million for the nine months  ended  December  31,  2002.  The
decrease in interest expense was due to a 50 basis point decrease in the average
cost of these  liabilities to 1.87% from 2.37%,  partially offset by an increase
of $87.4  million in the  average  balance of  interest-bearing  liabilities  to
$677.0 million.

     For  the  nine  months  ended  December  31,  2003,   interest  expense  on
certificates of deposit amounted to $7.2 million as compared to $7.7 million for
the same  period in the prior  year.  The  decrease  was due to a 62 basis point
decrease  in the  average  cost to 2.42%,  partially  offset by a $59.7  million
increase in the average  balance of certificates of deposit to $395.7 million as
compared to $336.0 million for the same period in the prior year.

     For the nine months ended December 31, 2003,  interest on savings  accounts
decreased $239,000 to $697,000 as compared to the same period in the prior year.
The  average  cost of  savings  accounts  decreased  36  basis  points  to 0.65%
partially  offset by an  increase  of $19.5  million in the  average  balance of
savings accounts to $142.8 million.

     For the nine months  ended  December 31,  2003,  interest  expense on other
deposits amounted to $430,000 as compared to $568,000 for the same period in the
prior year.  The average  cost of these  accounts  decreased  27 basis points to
0.60%, partially offset by an increase of $8.3 million in the average balance of
these accounts to $95.2 million.

     For the nine months ended December 31, 2003, interest expense on borrowings
was $1.1  million as compared  to $1.2  million for the same period in the prior
year. The decrease in interest expense was due to an 89 basis points decrease in
the average  cost of  borrowings  to 3.80%,  partially  offset by a $4.5 million
increase in the average balance of borrowings to $39.5 million.

     Net  Interest  Income.  For the nine months ended  December  31, 2003,  net
interest  income  amounted to $19.4 million as compared to $19.0 million for the
same period in the prior year.  The interest rate spread was 2.93% and 3.82% and
the net  interest  margin was 3.22% and 3.98% for the  respective  periods.  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 at 40 year lows.  If interest
rates remain at these low levels or decrease further,  mortgage refinancings may
continue to adversely affect the Company's interest rate spread and net interest
margin.  The  decrease  in  interest  rate  spread and net  interest  margin was
substantially  offset by an increase in the ratio of interest-earning  assets to
interest-bearing liabilities to 1.18 for the nine months ended December 31, 2003
from 1.07 for the comparable 2002 period. This increase was due primarily to the
investment  of net  proceeds  from the  Company's  stock  offering  completed in
January 2003.

     Provision  for Loan Losses.  The provision for loan losses was $200,000 for
nine months ended  December 31, 2003 as compared to $175,000 for the same period
in the prior year.  Non-performing  loans  amounted to $1.3  million or 0.28% of
total  loans at  December  31,  2003,  as compared to $795,000 or 0.18% of total
loans at December 31, 2002.  The increase in  non-performing  loans is primarily
the result of the  delinquency of one borrower's  mortgage and home equity loans
which  total  $812,000.  The loans are  secured by a single  family  home with a
loan-to-value  ratio of less than 60%. The allowance for loan losses amounted to
$2.6  million or 0.57% of total loans at December  31, 2003 and $2.4  million or
0.57% of total loans at March 31, 2003.  Charge-offs  amounted to $5,000 for the
nine months ended December 31, 2003 (none for same period in 2002).

     Non-Interest Income. Non-interest income for the nine months ended December
31, 2003  totaled  $765,000 as  compared to $623,000  for the nine months  ended
December 31, 2002.  The increase in  non-interest  income was  primarily  due to
higher levels of income from service charges on deposit  accounts,  late charges
on loans and various other service fees.


                                       15
<PAGE>

     Non-Interest  Expense.  For  the  nine  months  ended  December  31,  2003,
non-interest expense increased $2.2 million to $11.6 million as compared to $9.4
million for the same period in the prior year.  This  increase was due primarily
to increases of $1.4 million in compensation and benefits, $375,000 in occupancy
and equipment expense and $352,000 in other non-interest expense.

     The increase in  compensation  and benefits is primarily  due to a $652,000
increase in  compensation  costs and a $373,000  increase in ESOP  expense.  The
increase in compensation expense is due primarily to normal salary increases and
increases in staff to support the growth in the Company's lending operations and
for the Somers branch, which opened in July 2002, and the Stamford branch, which
opened in September 2003. The increase in ESOP expense  reflects the increase in
shares  committed to be released for  allocation as a result of the  second-step
conversion  and the increase in the market value of those  shares.  Compensation
expense is recognized  for the ESOP equal to the fair value of shares  committed
to be released for allocation to participant  accounts.  The difference  between
the fair value at that time and the ESOP's original  acquisition cost is charged
or credited to  stockholders'  equity.  For the nine months  ended  December 31,
2003,  the  difference  credited  to equity  amounted to $300,000 as compared to
$204,000 for the same period in 2002.

     The increase in occupancy and equipment expense is primarily due to the two
new branch  locations and the  Company's  new  corporate  office which opened in
April 2003.

     Income Taxes. For the nine months ended December 31, 2003 and 2002,  income
tax  expense  amounted  to $3.3  million  and $3.8  million,  respectively.  The
effective tax rates for those same periods were 38.7% and 37.9%, 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,
adjustable-rate   mortgage-backed   securities  and  fixed-rate   collateralized
mortgage  obligations.  These  activities are funded primarily by deposit growth
and  principal  repayments  on  loans,   mortgage-backed  securities  and  other
investment securities.  For the nine months ended December 31, 2003, the Company
originated  loans  totaling  $158.1  million  and  purchased  $189.2  million of
securities.  These  disbursements  were  funded by $121.6  million in  principal
payments,  maturities  and  calls  of  securities  and  $123.4  million  in loan
principal repayments.  For the year ended March 31, 2003, the Company originated
$216.3 million of loans and purchased $229.7 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 Federal  Home Loan Bank of New York
under an available line of credit.

     At December 31, 2003, the Company had outstanding loan commitments of $72.6
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, 2003, totaled $313.9 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


                                       16
<PAGE>

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 multiply 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, 2003, the Bank exceeded all of the OTS minimum  regulatory  capital
requirements,   and  was  classified  as  a  well-capitalized   institution  for
regulatory purposes.

     The  following  table sets  forth the  capital  position  of the Bank as of
December 31, 2003 and March 31, 2003. The actual capital  amounts and ratios set
forth below are for the Bank only and,  accordingly,  do not include  additional
capital retained by Sound Federal Bancorp, Inc.

<TABLE>
<CAPTION>
                                                               OTS Requirements
                                             ----------------------------------------------------
                                                                           Classification as Well
                              Bank Actual    Minimum Capital Adequacy          Capitalized
                         ------------------  ------------------------      ----------------------
                          Amount      Ratio       Amount     Ratio          Amount      Ratio
                         ------------------  ------------------------      ----------------------
                                               (Dollars in thousands)
<S>                      <C>          <C>        <C>          <C>           <C>           <C>
December 31, 2003
Tangible capital         $92,596      10.7%      $12,929      1.5%          $43,096       5.0%
Tier I (core) capital     92,596      10.7        34,477      4.0            51,715       6.0
Risk-based capital:
     Tier I               92,596      23.9
     Total                95,233      24.6        31,028      8.0            38,785      10.0

March 31, 2003
Tangible capital         $87,313      11.3%      $11,604      1.5%          $38,679       5.0%
Tier I (core) capital     87,313      11.3        30,944      4.0            46,415       6.0
Risk-based capital:
     Tier I               87,313      23.5
     Total                89,755      24.2        29,698      8.0            37,123      10.0
</TABLE>

Recent Accounting Pronouncements

     In December 2003, the Financial  Accounting Standards Board ("FASB") issued
FASB  Interpretation  No.  46  (revised),  Consolidation  of  Variable  Interest
Entities ("FIN 46R"), which addresses how a business  enterprise should evaluate
whether it has a controlling financial interest in an entity through means other
than voting rights and,  accordingly,  should  consolidate the variable interest
entity ("VIE"). FIN 46R replaces FASB Interpretation No. 46, which was issued in
January  2003.  As a public  company  that is not a small  business  issuer  (as
defined in applicable SEC regulations), the Company is required to apply FIN 46R
to variable  interests  generally  as of March 31,  2004 and to  special-purpose
entities as of December 31, 2003. For any VIE's that must be consolidated  under
FIN 46R that were created before January 1, 2004,  the assets,  liabilities  and
noncontrolling  interests  of the VIE  initially  would  be  measured  at  their
carrying amounts and any difference  between the net amount added to the balance
sheet and any previously recognized interest would be recorded as the cumulative
effect of an  accounting  change.  If  determining  the carrying  amounts is not
practicable, fair value at the date FIN 46R first applies may be used to measure
the assets, liabilities and noncontrolling interest of the VIE. The Company held
no interests in  special-purpose  entities as of December 31, 2003.  Adoption of
FIN 46R with  respect to other  types of VIE's in the quarter  ending  March 31,
2004 is not expected to have a significant effect on the Company's  consolidated
financial statements.

     In December  2003, the FASB also issued  Statement of Financial  Accounting
Standards No. 132  (revised),  Employers'  Disclosures  about Pensions and Other
Postretirement  Benefits ("SFAS No. 132R"). This standard prescribes  employers'
disclosures about pension plans and other postretirement benefit plans, but does
not change the measurement or recognition of those plans.  SFAS No. 132R retains
and revises the disclosure  requirements  contained in the original standard. It
also requires additional disclosures about the assets,


                                       17
<PAGE>

obligations,  cash  flows,  and net  periodic  benefit  cost of defined  benefit
pension plans and other  postretirement  benefit plans. As a public company, the
Company will be required to provide substantially all of the revised disclosures
beginning with its March 31, 2004  consolidated  financial  statements.  Certain
disclosures will also be required in the Company's interim financial  statements
beginning with the quarter ending June 30, 2004.

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,  2003,  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 quarter  ended  December  31,  2003,  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, 2003 (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.


                                       18
<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. Changes in Securities and Use of Proceeds

     None

Item 3. Defaults upon Senior Securities

     None

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

     The Company held a Special Meeting of Stockholders on February 4, 2004. The
purpose of the meeting was to  consider  and act upon the  approval of the Sound
Federal  Bancorp,  Inc. 2004  Incentive  Stock Benefit Plan.  The results of the
votes were as follows:

        For                     Against                        Abstain
  -----------               -------------                    -----------
   6,755,409                  1,042,504                         94,077

Item 5. Other Information

     None

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibit  10.1  -  Supplemental   Executive   Agreement  -  Richard  P.
          McStravick

     (b)  Exhibit 10.2 - Supplemental Executive Agreement - Anthony J. Fabiano

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

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

     (e)  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.

     (f)  Reports on Form 8-K

          a.   The Company  filed a Form 8-K on January 29, 2004 that  contained
               the Company's  news release  announcing  earnings for the quarter
               and nine months ended December 31, 2003.


                                       19
<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 11, 2004


                                       20