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 September 30, 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
                                                               Outstanding at
                         Class                                November 4, 2004
                     ----------------                         ----------------
                      Common Stock,                              12,577,841
                     par value, $0.01

<PAGE>

                                TABLE OF CONTENTS

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

Item 1. Financial Statements (Unaudited)

         Consolidated Balance Sheets at September 30, 2004
         and March 31, 2004 ...............................................    1

         Consolidated Statements of Income for the Quarter and
         Six Months Ended September 30, 2004 and 2003 .....................    2

         Consolidated Statement of Changes in Stockholders' Equity
         for the Six Months Ended September 30, 2004 ......................    3

         Consolidated Statements of Cash Flows for the Six Months
         Ended September 30, 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 ....................   10

Item 3. Quantitative and Qualitative Disclosures about Market Risk ........   23

Item 4.  Controls and Procedures ..........................................   23

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

Item 1.  Legal Proceedings ................................................   24

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds ......   24

Item 3.  Defaults upon Senior Securities ..................................   24

Item 4.  Submission of Matters to a Vote of Security Holders ..............   24

Item 5.  Other Information ................................................   24

Item 6.  Exhibits .........................................................   24

         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)

<TABLE>
<CAPTION>
                                                                                                         September 30,     March 31,
                                                                                                             2004            2004
                                                                                                         -------------     ---------

<S>                                                                                                       <C>            <C>
Assets
Cash and due from banks                                                                                    $  10,892      $  10,455
Federal funds sold and other overnight deposits                                                               21,307         20,756
                                                                                                           ---------      ---------
     Total cash and cash equivalents                                                                          32,199         31,211
                                                                                                           ---------      ---------
Securities:
   Available for sale, at fair value (including $36,800 and $38,000 pledged as
       collateral for borrowings under repurchase agreements at September 30,
       2004 and March 31, 2004, respectively)                                                                316,972        337,730
   Held to maturity, at amortized cost (fair value of $41,576)                                                41,331             --
                                                                                                           ---------      ---------
            Total securities                                                                                 358,303        337,730
                                                                                                           ---------      ---------
Loans, net:
  Mortgage loans                                                                                             529,974        477,771
  Consumer loans                                                                                               2,526          3,396
  Allowance for loan losses (Note 5)                                                                          (2,862)        (2,712)
                                                                                                           ---------      ---------
            Total loans, net                                                                                 529,638        478,455
                                                                                                           ---------      ---------

 Accrued interest receivable                                                                                   4,018          3,623
 Federal Home Loan Bank stock                                                                                  5,738          5,303
 Premises and equipment, net                                                                                   5,667          5,630
 Goodwill                                                                                                     13,970         13,970
 Bank-owned life insurance                                                                                    10,252         10,085
 Prepaid pension costs                                                                                         2,480          2,547
 Deferred income taxes                                                                                         1,286             --
 Other assets                                                                                                  1,837          1,987
                                                                                                           ---------      ---------
            Total assets                                                                                   $ 965,388      $ 890,541
                                                                                                           =========      =========

Liabilities and Stockholders' Equity
Liabilities:
  Deposits                                                                                                 $ 789,794      $ 708,330
  Borrowings (Note 6)                                                                                         38,000         35,000
  Mortgagors' escrow funds                                                                                     2,407          4,522
  Due to brokers for securities purchased                                                                      4,200          4,000
  Accrued expenses and other liabilities                                                                       1,548          1,630
                                                                                                           ---------      ---------
            Total liabilities                                                                                835,949        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                                                                                103,063        102,637
   Treasury stock, at cost (1,058,329 and 459,297 shares at September 30, 2004 and March 31,
      2004, respectively)                                                                                    (15,071)        (7,150)
   Common stock held by Employee Stock Ownership Plan ("ESOP")                                                (6,304)        (6,556)
   Unearned stock awards                                                                                      (5,026)        (5,618)
   Retained earnings                                                                                          54,069         52,908
   Accumulated other comprehensive (loss) income, net of taxes (Note 7)                                       (1,428)           702
                                                                                                           ---------      ---------
            Total stockholders' equity                                                                       129,439        137,059
                                                                                                           ---------      ---------
            Total liabilities and stockholders' equity                                                     $ 965,388      $ 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 Quarter Ended           For the Six Months Ended
                                                                                September 30,                      September 30,
                                                                            ----------------------          ------------------------
                                                                             2004          2003                 2004          2003
                                                                             ----          ----                 ----          ----
<S>                                                                         <C>           <C>                  <C>           <C>
Interest and Dividend Income
 Loans                                                                      $ 7,354       $ 6,490              $14,251       $13,259
 Mortgage-backed and other securities                                         3,024         2,670                5,816         5,507
 Federal funds sold and other overnight deposits                                 73            46                  132           174
 Other earning assets                                                            34            66                   55           123
                                                                            -------       -------              -------       -------
 Total interest and dividend income                                          10,485         9,272               20,254        19,063
                                                                            -------       -------              -------       -------

Interest Expense
 Deposits                                                                     3,384         2,665                6,325         5,544
 Borrowings                                                                     390           384                  755           749
 Other interest-bearing liabilities                                               5            18                   10            35
                                                                            -------       -------              -------       -------
 Total interest expense                                                       3,779         3,067                7,090         6,328
                                                                            -------       -------              -------       -------

 Net interest income                                                          6,706         6,205               13,164        12,735
 Provision for loan losses (Note 5)                                              75            75                  150           125
                                                                            -------       -------              -------       -------
 Net interest income after provision for loan losses                          6,631         6,130               13,014        12,610
                                                                            -------       -------              -------       -------

Non-Interest Income
 Service charges and fees                                                       220           228                  496           513
 Increase in cash surrender value of bank-owned life insurance                   90            --                  166            --
                                                                            -------       -------              -------       -------
 Total non-interest income                                                      310           228                  662           513
                                                                            -------       -------              -------       -------

Non-Interest Expense
 Compensation and benefits                                                    2,462         2,006                4,874         3,998
 Occupancy and equipment                                                        661           584                1,294         1,146
 Data processing service fees                                                   264           189                  564           431
 Advertising and promotion                                                      239           137                  490           551
 Other                                                                          975           732                1,671         1,506
                                                                            -------       -------              -------       -------
 Total non-interest expense                                                   4,601         3,648                8,893         7,632
                                                                            -------       -------              -------       -------

 Income before income tax expense                                             2,340         2,710                4,783         5,491
 Income tax expense                                                             909         1,060                1,855         2,124
                                                                            -------       -------              -------       -------
 Net income                                                                 $ 1,431       $ 1,650              $ 2,928       $ 3,367
                                                                            =======       =======              =======       =======

Earnings per share (Note 4):
   Basic earnings per share                                                 $  0.12       $  0.13              $  0.25       $  0.27
                                                                            =======       =======              =======       =======
   Diluted earnings per share                                               $  0.12       $  0.13              $  0.25       $  0.26
                                                                            =======       =======              =======       =======
</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 Six Months Ended September 30, 2004
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                                                Common
                                                                  Additional                     Stock       Unearned
                                                      Common       Paid-In        Treasury      Held By        Stock
                                                      Stock        Capital         Stock         ESOP          Awards
                                                   ------------ --------------  ------------- ------------- --------------
<S>                                                  <C>         <C>            <C>            <C>           <C>
Balance at March 31, 2004                             $136        $102,637       $ (7,150)      $(6,556)      $(5,618)
Net income                                              --              --             --            --            --
Other comprehensive
  loss (Note 7)                                         --              --             --            --            --
  Total comprehensive income                            --              --             --            --            --
Dividends paid ($0.12 per share)                        --              --             --            --            --
Purchases of treasury stock (627,332 shares)            --              --         (8,324)           --            --
Reissuance of treasury stock for exercise of
   stock options (28,300 shares)                        --              --            403            --            --
Tax benefit from exercise of stock options              --             112             --            --            --
Vesting of stock awards                                 --              --             --            --           592
ESOP shares committed to be released for allocation     --             314             --           252            --
                                                      ----        --------       --------       -------       -------
Balance at September 30, 2004                         $136        $103,063       $(15,071)      $(6,304)      $(5,026)
                                                      ====        ========       ========       =======       =======



                                                                    Accumulated
                                                                      Other          Total
                                                       Retained    Comprehensive  Stockholders'
                                                       Earnings    Income (Loss)     Equity
                                                      ---------    -------------  -------------
Balance at March 31, 2004                             $ 52,908       $   702       $ 137,059
Net income                                               2,928            --           2,928
Other comprehensive
  loss (Note 7)                                             --        (2,130)         (2,130)
                                                                                      ------
  Total comprehensive income                                --            --             798
Dividends paid ($0.12 per share)                        (1,458)           --          (1,458)
Purchases of treasury stock (627,332 shares)                --            --          (8,324)
Reissuance of treasury stock for exercise of
   stock options (28,300 shares)                          (309)           --              94
Tax benefit from exercise of stock options                  --            --             112
Vesting of stock awards                                     --            --             592
ESOP shares committed to be released for allocation         --            --             566
                                                      --------       -------       ---------
Balance at September 30, 2004                         $ 54,069       $(1,428)      $ 129,439
                                                      ========       =======       =========
</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 Six Months Ended
                                                                                                             September 30,
                                                                                                      -----------------------------
                                                                                                        2004                2003
                                                                                                      --------            ---------
<S>                                                                                                   <C>                 <C>
OPERATING ACTIVITIES
  Net income                                                                                          $  2,928            $   3,367
  Adjustments to reconcile net income to net cash provided
      by operating activities:
  Provision for loan losses                                                                                150                  125
  Depreciation, amortization and accretion                                                               1,185                1,131
  ESOP and stock award expense                                                                           1,158                  501
  Income taxes                                                                                             347                  933
  Other adjustments, net                                                                                  (558)              (1,569)
                                                                                                      --------            ---------
           Net cash provided by operating activities                                                     5,210                4,488
                                                                                                      --------            ---------

INVESTING ACTIVITIES
  Purchases of securities:
     Available for sale                                                                                (30,015)            (171,187)
     Held to maturity                                                                                  (38,620)                  --
  Proceeds from principal payments, maturities and calls of securities:
      Available for sale                                                                                42,783               94,436
     Held to maturity                                                                                    1,489                   --
  Net disbursements for loan originations and principal repayments                                     (51,608)             (10,150)
  Purchases of Federal Home Loan Bank stock                                                               (435)              (1,162)
  Purchases of premises and equipment                                                                     (477)                (625)
                                                                                                      --------            ---------
          Net cash used in investing activities                                                        (76,883)             (88,688)
                                                                                                      --------            ---------

FINANCING ACTIVITIES
  Net increase in deposits                                                                              81,464               49,135
  Proceeds from borrowings                                                                               3,000               20,000
  Net decrease in mortgagors' escrow funds                                                              (2,115)              (2,655)
  Purchases of treasury stock                                                                           (8,324)              (1,203)
  Proceeds from exercise of stock options                                                                   94                   --
  Payment of cash dividends on common stock                                                             (1,458)              (1,324)
                                                                                                      --------            ---------
          Net cash provided by financing activities                                                     72,661               63,953
                                                                                                      --------            ---------

  Increase (decrease) in cash and cash equivalents                                                         988              (20,247)
  Cash and cash equivalents at beginning of period                                                      31,211               44,897
                                                                                                      --------            ---------
  Cash and cash equivalents at end of period                                                          $ 32,199            $  24,650
                                                                                                      ========            =========

SUPPLEMENTAL INFORMATION
Interest paid                                                                                         $  7,056            $   6,402
Income taxes paid                                                                                        1,450                2,712
Increase in due to brokers for securities purchased                                                        200               10,495
</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 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. 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. 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 Sound Federal Bancorp, Inc. 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 Sound Federal Bancorp,
Inc. (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.


                                       5
<PAGE>

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 share would have been
adjusted to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                    Three Months Ended                      Six Months Ended
                                                                       September 30,                          September 30,
                                                             -----------------------------------      ------------------------------
                                                                 2004                 2003                2004              2003
                                                             ---------------      --------------      --------------      ----------
                                                                               (In thousands, except per share data)
<S>                                                         <C>                  <C>                 <C>                 <C>
Net income, as reported                                      $         1,431      $        1,650      $        2,928      $   3,367
Add stock award expense included in reported
   net income, net of related tax effects                                180                  22                 361             44
Deduct stock award and stock option expense
    determined under the fair-value-based
    method, net of related tax effects                                  (296)                (40)               (609)           (79)
                                                             ---------------      --------------      --------------      ---------
Pro forma net income                                         $         1,315      $        1,632      $        2,680      $   3,332
                                                             ===============      ==============      ==============      =========

Earnings per share:
   Basic, as reported                                        $          0.12      $         0.13      $         0.25      $    0.27
                                                             ===============      ==============      ==============      =========
   Basic, pro forma                                          $          0.11      $         0.13      $         0.23      $    0.27
                                                             ===============      ==============      ==============      =========

   Diluted, as reported                                      $          0.12      $         0.13      $         0.25      $    0.26
                                                             ===============      ==============      ==============      =========
   Diluted, pro forma                                        $          0.11      $         0.13      $         0.22      $    0.26
                                                             ===============      ==============      ==============      =========
</TABLE>

4.    Earnings Per Share

      Weighted  average  common  shares  used in  calculating  basic and diluted
earnings per share for the three months ended September 30, 2004 were 11,489,126
and 11,760,206, respectively. For the quarter ended September 30, 2003, weighted
average common shares used in calculating  basic and diluted  earnings per share
were 12,390,225 and 12,730,942, respectively.

      For the six months ended September 30, 2004,  weighted average shares used
in  calculating  basic and  diluted  earnings  per  share  were  11,673,803  and
11,948,613,  respectively.  For the six months ended  September  30,  2003,  the
respective weighted average shares were 12,402,521 and 12,740,223.

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


                                       6
<PAGE>

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               Six Months Ended          Year Ended
                                              September 30,                   September 30,            March 31,
                                         -----------------------         -----------------------      ---------
                                          2004            2003            2004            2003          2004
                                         -----------------------         -----------------------      ---------
                                                                         (In thousands)
<S>                                      <C>            <C>              <C>            <C>            <C>
Balance at beginning of period           $2,787         $ 2,492          $2,712         $ 2,442        $ 2,442
Provision for loan losses                    75              75             150             125            275
Charge-offs                                  --              (5)             --              (5)            (5)
                                         -----------------------         -----------------------      ---------
Balance at end of period                 $2,862         $ 2,562          $2,862         $ 2,562        $ 2,712
                                         =======================         =======================      =========
</TABLE>

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 September 30, 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           7,000
June 2005                                            2.47           3,000
March 2006                                           2.27           6,000
March 2007                                           2.65           7,000
                                                                  -------
                                                                  $38,000
                                                                  =======

Weighted average interest rate                                       3.87%
Accrued interest payable                                          $   169

(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 $14.9 million and mortgage-backed  securities available
for sale with a carrying value of $21.9 million.  Accrued interest receivable on
the securities was $249,000 at September 30, 2004.


                                       7
<PAGE>

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     Six Months Ended
                                                       September 30,         September 30,
                                                    ------------------    ------------------
                                                      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    $ 4,689    $(3,536)   $(3,520)   $(3,167)
Related deferred income tax effect                   (1,780)     1,441      1,390      1,285
                                                    -------    -------    -------    -------
Other comprehensive income (loss)                   $ 2,909    $(2,095)   $(2,130)   $(1,882)
                                                    =======    =======    =======    =======
</TABLE>

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

                                                      September 30,   March 31,
                                                          2004           2004
                                                          ----           ----
                                                             (In thousands)
Net unrealized holding (loss) gain on
     securities available for sale                      $(2,377)       $ 1,143
Related deferred income taxes                               949           (441)
                                                        -------        -------
Accumulated other comprehensive (loss) income           $(1,428)       $   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 $800,000 to the
plans in fiscal 2005.  Contributions of $531,000 were made during the six months
ended September 30, 2004.


                                       8
<PAGE>

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

                                           Three Months Ended  Six Months Ended
                                             September 30,       September 30,
                                           ------------------  ----------------
                                            2004      2003      2004      2003
                                           ------    ------    ------    ------
                                                        (In thousands)
Service cost                                $  91     $  65     $ 182     $ 130
Interest cost                                 160       147       320       294
Expected return on plan assets               (225)     (150)     (450)     (300)
Recognized net actuarial loss                  --        15        --        30
Amortization of prior service cost
   and net transition obligations              28         3        56         6
                                            -----     -----     -----     -----
     Net periodic pension expense           $  54     $  80     $ 108     $ 160
                                            =====     =====     =====     =====

      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
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  Six Months Ended
                                              September 30,     September 30,
                                           ----------------    ----------------
                                             2004      2003    2004       2003
                                             -----    -----    -----      ----
                                                       (In thousands)
Service cost                                 $ 16      $ 3     $  32      $ 6
Interest cost                                  24       12        48       24
Recognized net actuarial gain                  (4)      --        (8)      --
Amortization of prior service cost             45       20        90       40
                                             ----      ---     -----      ---
     Net periodic expense                    $ 81      $35     $ 162      $70
                                             ====      ===     =====      ===


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


                                       9
<PAGE>

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  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 $965.4 million at September
30, 2004 as  compared to $890.5  million at March 31,  2004.  The $74.9  million
increase in assets primarily  consisted of a $51.2 million increase in net loans
to $529.6 million and a $20.6 million  increase in securities to $358.3 million.
Our asset growth was funded principally by an $81.5 million increase in deposits
to $789.8 million.

      Liabilities.  Total deposits were $789.8 million at September 30, 2004, an
increase  of $81.5  million as  compared  to $708.3  million at March 31,  2004.
Certificates of deposit increased $67.4 million to $513.1


                                       10
<PAGE>

million from $445.7 million; savings and club accounts increased $3.1 million to
$151.3  million  from  $148.2  million;  and money  market,  NOW and  commercial
checking accounts increased $11.0 million to $125.4 million from $114.4 million.
Borrowings  totaled  $38.0  million at September  30, 2004 and $35.0  million at
March 31, 2004.

      Stockholders' Equity. Total stockholders' equity decreased $7.7 million to
$129.4  million at September 30, 2004 as compared to $137.1 million at March 31,
2004. The decrease reflects the purchase of shares of our common stock at a cost
of $8.3 million,  dividends  paid of $1.5 million and a decrease of $2.1 million
attributable  to the change in accumulated  other  comprehensive  income (loss),
partially offset by net income of $2.9 million.

      The accumulated other  comprehensive loss of $1.4 million at September 30,
2004  represents the after-tax net unrealized  loss on securities  available for
sale ($2.4 million pre-tax).  The Company invests  primarily in  mortgage-backed
securities  issued by Ginnie Mae,  Fannie Mae and  Freddie  Mac, as well as U.S.
Government and agency  securities.  The unrealized  losses at September 30, 2004
were caused by increases in market yields 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 September 30, 2004.


                                       11
<PAGE>

Comparison  of Results of  Operations  for the Three Months Ended  September 30,
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  September 30, 2004 and 2003.  The table reflects the average yield
on interest-earning assets and the average cost of interest-bearing  liabilities
(derived by dividing  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  adjustments
were  made,  as the  effect  thereof  was not  material.  Nonaccrual  loans were
included in the computation of average  balances,  but have been included in the
table as loans  having a zero  yield.  The yields set forth  below  include  the
effect of deferred loan  origination  fees and cost, and purchase  discounts and
premiums that are amortize or accreted to interest income.

<TABLE>
<CAPTION>
                                                                  For the Three Months Ended September 30,
                                            ---------------------------------------------------------------------------------------
                                                            2004                                          2003
                                            ---------------------------------------------------------------------------------------
                                              Average                        Average      Average                           Average
                                            Outstanding                      Yield/     Outstanding                         Yield/
                                              Balance      Interest           Rate        Balance        Interest           Rate
                                              -------      --------           ----        -------        --------           ----
                                                                            (Dollars in thousands)
<S>                                          <C>             <C>             <C>         <C>               <C>             <C>
Interest-earning assets:
Loans (1)                                     $518,127        7,354           5.63%       $427,197          6,490           6.03%
Mortgage-backed securities (2)                 260,946        2,276           3.46%        245,592          2,139           3.46%
Other securities (2)                            92,852          748           3.20%         87,385            531           2.41%
Federal funds sold and other
overnight deposits (3)                          28,074           73           1.03%         26,438             46           0.69%
Other (4)                                        5,826           34           2.32%          5,517             66           4.75%
                                              --------     --------                        --------      --------
Total interest-earning assets                  905,825       10,485           4.59%        792,129          9,272           4.64%
                                                           --------                                      --------
Non-interest earning assets                     41,063                                      35,854
                                              --------                                    --------
Total assets                                  $946,888                                    $827,983
                                              ========                                    ========

Interest-bearing liabilities:
Savings and club accounts                     $151,682          199           0.52%       $144,677            221           0.61%
Money market accounts                           46,893           93           0.79%         42,084             83           0.78%
NOW accounts                                    58,100           36           0.25%         53,254             42           0.31%
Certificates of deposit                        498,775        3,056           2.43%        380,579          2,319           2.42%
Borrowings                                      38,000          390           4.07%         41,986            384           3.63%
Mortgagors' escrow funds                         4,582            5           0.43%          4,236             18           1.69%
                                              --------     --------                        --------      --------
Total interest-bearing liabilities             798,032        3,779           1.88%        666,816          3,067           1.82%
                                                           --------                                      --------
Non-interest-bearing liabilities                24,295                                      22,046
                                              --------                                    --------
Total liabilities                              822,327                                     688,862
Stockholders' equity                           124,561                                     139,121
                                              --------                                    --------
Total liabilities and
stockholders' equity                          $946,888                                    $827,983
                                              ========                                    ========
Net interest income                                           6,706                                         6,205
                                                              =====                                      ========
Average interest rate spread (5)                                              2.71%                                         2.82%
Net earning assets (6)                        $107,793                                    $125,313
                                              ========                                    ========
Net interest margin (7)                                                       2.94%                                         3.11%
Ratio of interest-earning assets
to interest-bearing liabilities                  1.14x                                        1.19x
</TABLE>

(1)   Balances are net of  construction  loans in process and 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.

      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


                                       12
<PAGE>

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.

<TABLE>
<CAPTION>
                                             For the Three Months Ended September 30,
                                                           2004 vs. 2003
                                           --------------------------------------------
                                           Increase (Decrease) Due to
                                           --------------------------    Total Increase
                                             Volume       Rate             (Decrease)
                                           --------------------------------------------
                                                     (In thousands)
<S>                                          <C>        <C>               <C>
Interest-earning assets:
Loans                                        $ 3,264    $(2,400)          $   864
Mortgage-backed securities                       137         --               137
Other securities                                  35        182               217
Federal funds and other overnight deposits         3         24                27
Other                                             24        (56)              (32)
                                             -------    --------          -------

Total interest-earning assets                  3,463     (2,250)            1,213
                                             -------    --------          -------

Interest-bearing liabilities:
Savings and club accounts                         59        (81)              (22)
Money market accounts                              9          1                10
NOW accounts                                      19        (25)               (6)
Certificates of deposit                          727         10               737
Borrowings                                      (160)       166                 6
Mortgage escrow funds                              9        (22)              (13)
                                             -------    --------          -------

Total interest-bearing liabilities               663         49               712
                                             -------    --------          -------

Net interest income                          $ 2,800    $(2,299)          $   501
                                             =======    =======           =======
</TABLE>


      Net Income.  Net income  amounted to $1.4 million or diluted  earnings per
share of $0.12 for the quarter  ended  September  30, 2004,  as compared to $1.7
million or diluted  earnings per share of $0.13 for the quarter ended  September
30, 2003, a decrease of 13.3% in net income.  The decrease in net income for the
quarter  ended  September  30,  2004 is  primarily  attributable  to a  $953,000
increase in non-interest expense, partially offset by a $501,000 increase in net
interest income and a $151,000 decrease in income tax expense.

      Interest  Income.  Interest income increased $1.2 million to $10.5 million
for the quarter  ended  September  30, 2004,  as compared to the same quarter in
2003.   The   increase   reflects   a  $113.7   million   increase   in  average
interest-earning assets to $905.8 million during the quarter ended September 30,
2004 as  compared  to $792.1  million  for the same  quarter in the prior  year,
partially  offset  by  a  5  basis  point  decrease  in  the  average  yield  on
interest-earning  assets  to 4.59%.  The  increase  in the  average  balance  of
interest-earning  assets was due  primarily to a $90.9  million  increase in net
loans to $518.1 million and a $20.8 million  increase in the average  balance of
securities to $353.8 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 declining interest rates.


                                       13
<PAGE>

      Loans.  Interest  income  on  loans  increased  $864,000  or 13.3% to $7.4
million for the current quarter as compared to $6.5 million for the same quarter
in 2003. This increase is due to a $90.9 million increase in the average balance
of loans to $518.1 million, partially offset by a 40 basis point decrease in the
yield earned to 5.63%.

      We  originated  $57.5  million  of new  loans  during  the  quarter  ended
September 30, 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 quarter ended
September  30, 2004.  The yield on the loan  portfolio  may decrease  further as
market interest rates rise.  However,  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  September  30, 2004, an
increase of $137,000 from the same quarter in 2003. This increase is due a $15.4
million increase in the average balance of mortgage-backed  securities to $260.9
million  during the current  quarter.  The  increase  in the average  balance of
mortgage-backed securities is primarily a result of investing funds from deposit
growth.

      Interest  on other  securities  increased  $217,000  to  $748,000  for the
quarter  ended  September 30, 2004, as compared to $531,000 for the same quarter
in 2003. The increase is due to a $5.5 million  increase in the average  balance
of other  securities  to $92.9  million  and a 79 basis  point  increase  in the
average yield to 3.20%.

      Federal  Funds Sold and Other  Overnight  Deposits.  For the quarter ended
September 30, 2004,  interest on Federal funds sold and other overnight deposits
increased $27,000 to $73,000,  reflecting a $1.6 million increase in the average
balance to $28.1  million  and a 34 basis point  increase  in the average  yield
earned to 1.03%.

      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
$34,000 for quarter ended September 30, 2004 as compared to $66,000 for the same
quarter in 2003.

      Interest  Expense.  Interest  expense for the quarter ended  September 30,
2004  increased  $712,000 to $3.8  million,  as compared to $3.1 million for the
quarter  ended  September  30,  2003.  The average  balance of  interest-bearing
liabilities  increased  $131.2  million to $798.0  million for the quarter ended
September  30, 2004 from $666.8  million for the same quarter in the prior year,
while the average cost of these  liabilities  increased 6 basis points to 1.88%.
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 the
increase certificates of deposit accounts as a percentage of total deposits. The
average  balance of  certificates  of deposit  represented  62.5% of the average
balance of total  interest-bearing  liabilities  for the quarter  ended June 30,
2004, as compared to 57.1% for the quarter ended June 30, 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 $3.1 million for
the current  quarter as compared to $2.3  million for the same  quarter in 2003.
The  increase  is due  primarily  to a $118.2  million  increase  in the average
balance to $498.8  million  from $380.6  million for the same quarter last year,
while the average cost of certificates of deposit remained  virtually  unchanged
at 2.43%.

      Interest on savings accounts  amounted to $199,000 for the current quarter
as compared to $221,000 for the quarter ended  September 30, 2003. This decrease
is the  result  of a 9 basis  point  decrease  in the  average  cost of  savings
accounts to 0.52% offset  partially  by a $7.0  million  increase in the average
balance of savings  accounts to $151.7  million for the quarter ended  September
30, 2004 as compared to $144.7 million for the same quarter in 2003.


                                       14
<PAGE>

      Interest expense on NOW and money market accounts amounted to $129,000 for
quarter ended September 30, 2004 as compared to $125,000 for the same quarter in
the prior year.  The  average  cost  decreased  4 basis  points to 0.49% and the
average balance of these accounts increased $9.7 million to $105.0 million.

      For the quarter ended September 30, 2004,  interest  expense on borrowings
amounted to $390,000 as compared to $384,000 for the same  quarter in 2003.  The
average  balance of borrowings for the current quarter was $38.0 million and the
average  cost was 4.07%,  an increase of 44 basis  points from the same  quarter
last year.

      Net Interest  Income.  Net interest income for the quarter ended September
30, 2004 amounted to $6.7 million,  a $501,000 increase from the same quarter in
the prior year.  The  interest  rate spread was 2.71% and 2.82% for the quarters
ended  September 30, 2004 and 2003,  respectively.  The net interest  margin for
those periods was 2.94% and 3.11%, 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 75 basis points to 1.75%. 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 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 1.14x for the quarter
ended  September  30, 2004 from 1.19x 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. 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. For the
quarter  ended  September  30,  2004,  non-interest  income  related to the BOLI
amounted to $90,000.

      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  86.5% of total loans at September 30, 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 September
30, 2004 and 2003,  respectively.  Non-performing  loans amounted to $963,000 or
0.18% of total loans at September 30, 2004, as compared to $1.8 million or 0.40%
of total loans at September 30, 2003. The allowance for loan losses  amounted to
$2.9  million  and $2.7  million  at  September  30,  2004 and March  31,  2004,
respectively.  There were no  charge-offs  or  recoveries  in the quarter  ended
September  30, 2004.  For the quarter  ended  September  30,  2003,  charge-offs
amounted  to $5,000 (no  recoveries).  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.


                                       15
<PAGE>

      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  $220,000  and
$228,000 for the quarters ended September 30, 2004 and 2003,  respectively.  The
change in the cash  surrender  value of the BOLI  amounted  to  $90,000  for the
quarter ended September 30, 2004.

      Non-Interest  Expense.  Non-interest  expense totaled $4.6 million for the
quarter  ended  September  30, 2004 as compared to $3.6  million for the quarter
ended  September  30,  2003.  This  increase is due to  increases of $456,000 in
compensation and benefits,  $77,000 in occupancy and equipment expense,  $75,000
in data processing service fees,  $102,000 in advertising and promotion expense,
and $243,000 in other non-interest expense.

      The increase in  compensation  and benefits 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 $163,000 increase in compensation costs. The increase
in compensation costs is due primarily to additional staff to support the growth
in the  Company's  lending  operations  and the  addition  of the  Stamford  and
Brookfield branches, which opened in September 2003 and June 2004, respectively.
The increase in occupancy  and  equipment  expense is primarily due to these new
branch locations.

      Other  non-interest  expense for the current quarter includes  $135,000 of
costs related to the Company's  implementation  of the provisions of Section 404
of the Sarbanes-Oxley Act of 2002.

      Income Taxes. Income tax expense amounted to $909,000 and $1.1 million for
the quarters ended September 30, 2004 and 2003, respectively.  The effective tax
rates for those same periods were 38.8% and 39.1%, respectively.

                                       16
<PAGE>

Comparison of Results of Operations for the Six Months Ended  September 30, 2004
and 2003

      Average  Balance  Sheets.  The following  table sets forth average balance
sheets,  average  yields and costs,  and certain other  information  for the six
months ended September 30, 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  September 30,
2004 and 2003".

<TABLE>
<CAPTION>
                                               For the Six Months Ended September 30,
                                    ----------------------------------------------------------
                                                2004                            2003
                                    ----------------------------------------------------------
                                      Average           Average    Average             Average
                                    Outstanding          Yield/  Outstanding            Yield/
                                      Balance  Interest   Rate     Balance    Interest   Rate
                                      -------  --------   ----     -------    --------   ----
                                                       (Dollars in thousands)
<S>                                 <C>        <C>       <C>     <C>          <C>      <C>
Interest-earning assets:
Loans (1)                            $499,979   14,251    5.69%   $424,890     13,259   6.22%
Mortgage-backed securities (2)        256,307    4,434    3.45%    228,862      4,287   3.74%
Other securities (2)                   88,673    1,382    3.11%     83,675      1,220   2.91%
Federal funds sold and other
overnight deposits (3)                 31,269      132    0.84%     38,726        174   0.90%
Other (4)                               5,800       55    1.89%      5,503        123   4.46%
                                     --------   ------            --------   --------
Total interest-earning assets         882,028   20,254    4.58%    781,656     19,063   4.86%
                                                ------                       --------
Non-interest earning assets            43,313                       33,975
                                     --------                     --------
Total assets                         $925,341                     $815,631
                                     ========                     ========

Interest-bearing liabilities:
Savings and club accounts            $150,880      391    0.52%   $142,252        504   0.71%
Money market accounts                  46,402      178    0.77%     41,670        209   1.00%
NOW accounts                           57,722       72    0.25%     50,913        104   0.41%
Certificates of deposit               479,469    5,684    2.36%    379,581      4,727   2.48%
Borrowings                             36,541      755    4.12%     38,443        749   3.89%
Mortgagors' escrow funds                4,218       10    0.47%      3,955         35   1.77%
                                     -------- --------            --------   --------
Total interest-bearing liabilities    775,232    7,090    1.82%    656,814      6,328   1.92%
                                              --------                       --------
Non-interest-bearing liabilities       20,950                       21,076
                                     --------                     --------
Total liabilities                     796,182                      677,890
Stockholders' equity                  129,159                      137,741
                                     --------                     --------
Total liabilities and
stockholders' equity                 $925,341                     $815,631
                                     ========                     ========
Net interest income                             13,164                         12,735
                                              ========                         ======
Average interest rate spread (5)                          2.76%                         2.94%
Net earning assets (6)               $106,796                     $124,842
                                     ========                     ========
Net interest margin (7)                                   2.98%                         3.25%
Ratio of interest-earning assets
to interest-bearing liabilities          1.14x                                   1.19x
</TABLE>

(1)   Balances are net of  construction  loans in process and 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.


                                       17
<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  September
30, 2004 and 2003".

                                          For the Six Months Ended September 30,
                                                         2004 vs. 2003
                                          --------------------------------------

                                           Increase (Decrease) Due to    Total
                                          ---------------------------  Increase
                                             Volume      Rate         (Decrease)
                                          -------------------------------------
                                                       (In thousands)
Interest-earning assets:
Loans                                        $ 3,708    $(2,716)      $   992
Mortgage-backed securities                       895       (748)          147
Other securities                                  75         87           162
Federal funds and other overnight deposits       (31)       (11)          (42)
Other                                             18        (86)          (68)
                                             -------    -------       -------

Total interest-earning assets                  4,665     (3,474)        1,191
                                             -------    -------       -------

Interest-bearing liabilities:
Savings and club accounts                         79       (192)         (113)
Money market accounts                             53        (84)          (31)
NOW accounts                                      33        (65)          (32)
Certificates of deposit                        1,577       (620)          957
Borrowings                                       (78)        84             6
Mortgage escrow funds                              7        (32)          (25)
                                             -------    -------       -------

Total interest-bearing liabilities             1,671       (909)          762
                                             -------    -------       -------

Net interest income                          $ 2,994    $(2,565)      $   429
                                             =======    =======       =======

      Net Income.  Net income  amounted to $2.9 million or diluted  earnings per
share of $0.25 for the six months ended  September 30, 2004, as compared to $3.4
million  or  diluted  earnings  per  share of  $0.26  for the six  months  ended
September  30,  2003,  a decrease  of 13.0% in net income.  The  decrease in net
income for the six months ended  September 30, 2004 reflects an increase of $1.3
million in non-interest expense,  partially offset by an increase of $429,000 in
net interest income and a decrease of $269,000 in income tax expense.

      Interest  Income.  Interest income increased $1.2 million to $20.3 million
for the six months ended  September  30, 2004,  as compared to $19.1 million for
the same period in 2003.  The  increase  reflects a $100.4  million  increase in
average  interest-earning  assets to $882.0  million during the six months ended
September  30,  2004 as  compared  to $781.7  million for the same period in the
prior year,  partially  offset by a 28 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 $75.1  million  increase in net
loans to $500.0 million and a $32.4 million  increase in the average  balance of
securities to $345.0  million,  partially  offset by a $7.5 million  decrease in
average  Federal funds sold and other overnight  deposits to $31.3 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.


                                       18
<PAGE>

      Loans.  Interest  income  on  loans  increased  $992,000  or 7.5% to $14.3
million for the six months ended September 30, 2004 as compared to $13.3 million
for the same period in 2003. This increase is due to a $75.1 million increase in
the average balance of loans to $500.0 million,  partially  offset by a 53 basis
point decrease in the yield earned to 5.69%.

      We  originated  $120.0  million of new loans  during the six months  ended
September 30, 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 six months ended
September 30, 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 $147,000 to $4.4 million for the six months ended September
30, 2004,  as compared to $4.3 million for the same period in 2003.  The average
balance of mortgage-backed  securities increased $27.4 million to $256.3 million
during the six months ended September 30, 2004,  partially  offset by a decrease
of 29 basis  points in the average  yield to 3.45%.  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  $162,000 to $1.4 million for the
six months ended  September  30, 2004,  as compared to $1.2 million for the same
period in 2003.  The increase is due to a 20 basis point increase in the average
yield to 3.11% and a $5.0  million  increase  in the  average  balance  of other
securities to $88.7 million.

      Federal Funds Sold and Other Overnight Deposits.  For the six months ended
September 30, 2004,  interest on Federal funds sold and other overnight deposits
decreased $42,000 to $132,000, reflecting a $7.5 million decrease in the average
balance to $31.3  million  and a 6 basis point  decrease  in the  average  yield
earned to 0.84%.  The  decrease  in the  average  yield is the result of the low
market interest rates during the first half of fiscal 2005.

      Other  Earning  Assets.  The Company had an  investment of $5.7 million in
FHLB of New  York  common  stock at  September  30,  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 $51,000 for six months ended  September  30, 2004 as compared to $121,000 for
the same period in 2003.

      Interest Expense.  Interest expense for the six months ended September 30,
2004 increased $762,000 to $7.1 million as compared to $6.3 million for the same
period in 2003. The average balance of  interest-bearing  liabilities  increased
$118.4  million to $775.2  million for the six months ended  September  30, 2004
from $656.8  million  for the same  period in the prior year,  while the average
cost of these  liabilities  decreased 10 basis points to 1.82%.  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
decrease in the average cost of liabilities is the result of low market interest
rates during recent periods.

      Interest  expense on certificates of deposit  amounted to $5.7 million for
the current  period as compared to $4.7 million for the same period in 2003. The
increase is due primarily to a $99.9 million  increase in the average balance of
time  deposits to $479.5  million  from $379.6  million for the same period last
year,  offset  partially  by a 12 basis point  decrease  in the average  cost to
2.36%.  The increase in the average  balance  includes  growth in the Bank's new
branch offices as well as in existing branches.


                                       19
<PAGE>

      Interest on savings  accounts  amounted to $391,000 for the current period
as  compared to $504,000  for the six months  ended  September  30,  2003.  This
decrease  is the result of a 19 basis  point  decrease  in the  average  cost of
savings  accounts to 0.52% offset  partially by an $8.6 million  increase in the
average  balance of savings  accounts to $150.9 million for the six months ended
September 30, 2004 as compared to $142.3 million for the same period in 2003.

      Interest expense on NOW and money market accounts amounted to $250,000 for
six months ended  September 30, 2004 as compared to $313,000 for the same period
in the prior year.  The average cost  decreased 19 basis points to 0.48% and the
average balance of these accounts increased $11.5 million to $104.1 million.

      For the six months ended September 30, 2004 and 2003,  interest expense on
borrowings amounted to $755,000 and $749,000,  respectively. The average balance
of  borrowings  for the current  period was $36.5  million and the average  cost
increased 23 basis points to 4.12% as compared to the same period in 2003.

      Net  Interest  Income.  Net  interest  income  for  the six  months  ended
September 30, 2004 amounted to $13.2 million,  a $429,000 increase from the same
period in the prior year.  The interest  rate spread was 2.76% and 2.94% for the
six months ended  September  30, 2004 and 2003,  respectively.  The net interest
margin for those  periods was 2.98% and 3.25%,  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 1.14x for the six
months  ended  September  30,  2004  from  1.19x  for the same  period  in 2003,
reflecting  treasury  stock  purchases and an  investment  in BOLI.  For the six
months  ended  September  30,  2004,  non-interest  income  related  to the BOLI
amounted to $166,000.

      Provision for Loan Losses.  The provision for loan losses was $150,000 for
each of the six-month periods ended September 30, 2004 and 2003.  Non-performing
loans  amounted to $963,000 or 0.18% of total loans at September  30,  2004,  as
compared to $1.8  million or 0.40% of total loans at  September  30,  2003.  The
allowance for loan losses amounted to $2.9 million and $2.7 million at September
30,  2004 and  March  31,  2004,  respectively.  There  were no  charge-offs  or
recoveries for the six months ended September 30, 2004.  Charge-offs amounted to
$5,000 for the six months ended September 30, 2003. There were no recoveries for
this same 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  $496,000  and
$513,000 for the six months ended September 30, 2004 and 2003, respectively. The
change in the cash surrender  value of the BOLI amounted to $166,000 for the six
months ended September 30, 2004.

      Non-Interest  Expense.  Non-interest  expense totaled $8.9 million for the
six months  ended  September  30, 2004 as  compared to $7.6  million for the six
months ended  September 30, 2003. This increase is due primarily to increases of
$876,000 in  compensation  and  benefits,  $148,000 in occupancy  and  equipment
expense,  $133,000  in data  processing  service  fees,  and  $165,000  in other
non-interest expense.

      The increase in  compensation  and benefits is due primarily to a $520,000
increase in expense  related to stock awards made pursuant to the Company's 2004
Stock Incentive Plan and a $315,000 increase in compensation costs. The increase
in compensation costs is due primarily to additional staff to support the growth
in the  Company's  lending  operations  and the  addition  of the  Stamford  and
Brookfield branches, which opened in September 2003 and June 2004, respectively.
The increase in occupancy  and  equipment  expense is primarily due to these new
branch locations.


                                       20
<PAGE>

      Other  non-interest  expense for the  current  six-month  period  includes
$135,000 of costs related to the Company's  implementation  of the provisions of
Section 404 of the Sarbanes-Oxley Act of 2002.

      Income Taxes. Income tax expense amounted to $1.9 million and $2.1 million
for the six  months  ended  September  30,  2004  and  2003,  respectively.  The
effective tax rates for those same periods were 38.8% 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,
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.  During the six months ended  September  30,  2004,  the
Company  originated loans totaling $120.0 million and purchased $68.6 million of
securities.  These  disbursements  were  funded by $44.3  million  in  principal
payments, maturities and calls of securities and $69.2 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 September 30, 2004,  the Company had  outstanding  loan  commitments of
$83.6  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  September  30, 2004,  totaled  $293.4  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
September 30, 2004, the Bank exceeded all of the OTS minimum  regulatory capital
requirements,   and  was  classified  as  a  well-capitalized   institution  for
regulatory purposes.


                                       21
<PAGE>

      The  following  table sets forth the  capital  position  of the Bank as of
September 30, 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.

                                                       OTS Requirements
                                             ---------------  -----------------
                                             Minimum Capital  Classification as
                             Bank Actual        Adequacy      Well Capitalized
                          -----------------  ---------------  -----------------
                           Amount    Ratio   Amount    Ratio   Amount   Ratio
                          -----------------  ---------------  ----------------
                                          (Dollars in thousands)
September 30, 2004
Tangible capital          $ 98,592   10.4%   $14,224    1.5%  $47,412    5.0%
Tier I (core) capital       98,592   10.4     37,931    4.0    56,895    6.0
Risk-based capital:
     Tier I                 98,592   23.5
     Total                 101,454   24.1     33,626    8.0    42,032   10.0

March 31, 2004
Tangible capital          $ 95,143   10.9%   $13,071    1.5%  $43,571    5.0%
Tier I (core) capital       95,143   10.9     34,858    4.0    52,285    6.0
Risk-based capital:
     Tier I                 95,143   24.3
     Total                  97,855   25.0     31,377    8.0    39,221   10.0

Proposed Accounting Standards

      On September 30, 2004, the Financial  Accounting  Standards Board ("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  delay  will be  superseded  concurrent  with the final
issuance of Staff  Position No. EITF Issue 03-1-a,  which is expected to provide
implementation  guidance on matters such as impairment  evaluations for declines
in value  caused by  increases  in interest  rates  and/or  sector  spreads.  As
previously noted, the Company's unrealized losses on securities are attributable
to these  rate-related  factors.  The  impact  of the  final  issuance  of Staff
Position No. EITF 03-1-a on the  Company's  financial  condition  and results of
operations cannot be determined at the present time.

      In March 2004, the FASB issued an Exposure Draft, "Share-Based Payment, an
amendment  of FASB  Statements  No.  123 and 95." The  Exposure  Draft  proposes
changes  in  accounting  that would  replace  existing  requirements  under FASB
Statement No. 123 and Accounting  Principles  Board Opinion No. 25,  "Accounting
for Stock Issued to  Employees."  Under the proposal,  all forms of  share-based
payments to employees,  including  employee stock options,  would be treated the
same as other forms of  compensation  by  recognizing  the  related  cost in the
income  statement.  The expense of the award would generally be measured at fair
value  at the  grant  date  and  recognized  over the  vesting  period.  Current
accounting  literature  relating to so-called  fixed plan employee stock options
permits an  election  to  disclose  the  associated  expense in the notes to the
financial  statements without recognition in the income statement.  The proposal
would permit  either  prospective  or  retrospective  adoption and  presently is
proposed to be effective for public companies beginning July 1, 2005.


                                       22
<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 September  30,  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 six months ended September 30, 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 September 30, 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.


                                       23
<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 September 30, 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>
July 1-July 31                        --                     --                     --                    658,844
August 1-August 31                    --                     --                     --                    658,844
September 1-September 30              --                     --                     --                    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 September 30, 2004.

Item 3. Defaults upon Senior Securities

      None

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

The Company held its Annual  Meeting of  Stockholders  on August 12,  2004.  The
purpose of the meeting was the  election of three  directors  of the Company and
the  ratification of the appointment of KPMG LLP as auditors for the Company for
the fiscal year ending March 31, 2005. The results of the votes were as follows:

      Proposal 1 - Election of Directors

                                              For                 Withheld
                                        --------------         --------------
                  Joseph Dinolfo          11,356,175               552,333
                  Eldorus Maynard         10,788,050             1,120,458
                  Samuel T.Telerico       11,414,460               494,048

      Proposal 2 - Ratification of Appointment of KPMG LLP

                       For                  Against                Abstain
                  -------------          -------------          -------------
                    11,759,692              57,788                 91,027

Item 5. Other Information

      None


                                       24
<PAGE>

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

November 5, 2004


                                       26