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 June 30, 2005

                                       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                                         August 4, 2005
                    -----                                         --------------
                Common Stock,                                         12,298,206
              par value, $0.01

<PAGE>

                                TABLE OF CONTENTS

                         PART I -- FINANCIAL INFORMATION

<TABLE>
<S>                                                                                                             <C>
Item 1. Financial Statements (Unaudited)

        Consolidated Balance Sheets at June 30, 2005
        and March 31, 2005........................................................................................1

        Consolidated Statements of Income for the Three Months Ended June 30, 2005 and 2004.......................2

        Consolidated Statement of Changes in Stockholders' Equity for the Three Months
        Ended June 30, 2005.......................................................................................3

        Consolidated Statements of Cash Flows for the Three Months
        Ended June 30, 2005 and 2004..............................................................................4

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

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk...............................................20

Item 4. Controls and Procedures..................................................................................20

                         PART II -- OTHER INFORMATION

Item 1. Legal Proceedings........................................................................................21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..............................................21

Item 3. Defaults upon Senior Securities..........................................................................21

Item 4. Submission of Matters to a Vote of Security Holders......................................................21

Item 5. Other Information........................................................................................21

Item 6. Exhibits.................................................................................................21

        Signatures...............................................................................................22

</TABLE>


                                       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>
                                                                   June 30,       March 31,
                                                                     2005           2005
                                                                 -----------    -----------
<S>                                                              <C>            <C>
Assets
Cash and due from banks                                          $    10,942    $    11,512
Federal funds sold and other overnight deposits                       43,472         31,095
                                                                 -----------    -----------
     Total cash and cash equivalents                                  54,414         42,607
                                                                 -----------    -----------
Securities:
   Available for sale, at fair value  (including  $32,332 and $37,831 pledged as
       collateral for borrowings  under  repurchase  agreements at June 30, 2005
       and
       March 31, 2005, respectively)                                 261,479        276,154
   Held to maturity, at amortized cost (fair value of
       $83,684 and $78,728 at June 30, 2005 and March 31,
       2005, respectively)                                            84,027         79,489
                                                                 -----------    -----------
            Total securities                                         345,506        355,643
                                                                 -----------    -----------
Loans, net:
  Mortgage loans                                                     611,471        558,662
  Consumer and commercial loans                                        5,096          5,100
  Allowance for loan losses (Note 5)                                  (3,086)        (3,011)
                                                                 -----------    -----------
            Total loans, net                                         613,481        560,751
                                                                 -----------    -----------

 Accrued interest receivable                                           4,350          4,277
 Federal Home Loan Bank stock                                          6,385          5,738
 Premises and equipment, net                                           6,120          6,214
 Goodwill                                                             13,970         13,970
 Bank-owned life insurance                                            10,558         10,464
 Prepaid pension costs                                                 3,107          3,057
 Deferred income taxes                                                 1,526          2,236
 Other assets                                                          1,394          1,993
                                                                 -----------    -----------
            Total assets                                         $ 1,060,811    $ 1,006,950
                                                                 ===========    ===========

Liabilities and Stockholders' Equity
Liabilities:
  Deposits                                                       $   890,191    $   831,768
  Borrowings (Note 6)                                                 35,000         38,000
  Mortgagors' escrow funds                                             5,162          5,264
  Due to brokers for securities purchased                               --            2,513
  Accrued expenses and other liabilities                               2,374          2,245
                                                                 -----------    -----------
            Total liabilities                                        932,727        879,790
                                                                 -----------    -----------
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; 12,298,206
       and 12,377,206 shares outstanding at June 30, 2005
       and March 31, 2005, respectively)                                 136            136
   Additional paid-in capital                                        103,973        103,728
   Treasury stock, at cost (1,337,964 and 1,258,964 shares
       at June 30, 2005 and March 31, 2005, respectively)            (19,360)       (18,131)
   Common stock held by Employee Stock Ownership Plan ("ESOP")        (5,927)        (6,053)
   Unearned stock awards                                              (4,139)        (4,435)
   Retained earnings                                                  54,911         54,638
   Accumulated other comprehensive loss, net of taxes (Note 7)        (1,510)        (2,723)
                                                                 -----------    -----------
            Total stockholders' equity                               128,084        127,160
                                                                 -----------    -----------
            Total liabilities and stockholders' equity           $ 1,060,811    $ 1,006,950
                                                                 ===========    ===========

</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)

                                                            For the Three Months
                                                                  Ended June 30,
                                                           ---------------------
                                                             2005         2004
Interest and Dividend Income
 Loans                                                     $ 8,264       $6,897
 Mortgage-backed and other securities                        3,042        2,792
 Federal funds sold and other overnight deposits               181           59
 Other earning assets                                           67           21
                                                           -------       ------
 Total interest and dividend income                         11,554        9,769
                                                           -------       ------
Interest Expense
 Deposits                                                    4,668        2,941
 Borrowings                                                    361          365
 Other interest-bearing liabilities                              5            5
                                                           -------       ------
 Total interest expense                                      5,034        3,311
                                                           -------       ------
 Net interest income                                         6,520        6,458
 Provision for loan losses (Note 5)                             75           75
                                                           -------       ------
 Net interest income after provision for loan losses         6,445        6,383
                                                           -------       ------
Non-Interest Income
 Service charges and fees                                      275          276
 Income on bank-owned life insurance                            94           76
                                                           -------       ------
 Total non-interest income                                     369          352
                                                           -------       ------
Non-Interest Expense
 Compensation and benefits                                   2,827        2,412
 Occupancy and equipment                                       737          633
 Data processing service fees                                  292          300
 Advertising and promotion                                     338          251
 Other                                                         776          696
                                                           -------       ------
 Total non-interest expense                                  4,970        4,292
                                                           -------       ------
 Income before income tax expense                            1,844        2,443
 Income tax expense                                            720          946
                                                           -------       ------
 Net income                                                $ 1,124       $1,497
                                                           =======       ======
Earnings per share (Note 4):
   Basic earnings per share                                $  0.10       $ 0.13
                                                           =======       ======
   Diluted earnings per share                              $  0.10       $ 0.12
                                                           =======       ======

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 Three Months Ended June 30, 2005
(Unaudited)
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                        Common
                                                                          Additional                     Stock
                                                               Common       Paid-in      Treasury       Held by
                                                                Stock     in Capital       Stock          ESOP
                                                               ------     ----------     ---------      --------
<S>                                                             <C>        <C>           <C>            <C>
Balance at March 31, 2005                                       $136       $103,728      $(18,131)      $(6,053)
Net income                                                       --            --            --            --
Other comprehensive income (Note 7)                              --            --            --            --

  Total comprehensive income                                     --            --            --            --
Dividends paid ($0.065 per share), net of dividends on
   unallocated ESOP shares                                       --            --            --            --
Purchases of treasury stock (87,300 shares)                      --            --          (1,349)         --
Reissuance of treasury stock for exercise of
   stock options (8,300 shares)                                  --            --             120          --
Tax benefit from exercise of stock options                       --              39          --            --
Vesting of stock awards                                          --            --            --            --
ESOP shares committed to be released for allocation              --             206          --             126
                                                                ----       --------      --------       -------
Balance at June 30, 2005                                        $136       $103,973      $(19,360)      $(5,927)
                                                                ====       ========      ========       =======

<CAPTION>

                                                                                     Accumulated
                                                           Unearned                     Other         Total
                                                            Stock       Retained    Comprehensive  Stockholders'
                                                            Awards      Earnings        Loss         Equity
                                                           --------     --------    -------------  -------------
<S>                                                        <C>          <C>           <C>          <C>
Balance at March 31, 2005                                  $(4,435)     $ 54,638      $(2,723)     $ 127,160
Net income                                                    --           1,124         --            1,124
Other comprehensive income (Note 7)                           --            --          1,213          1,213
                                                                                                   ---------
  Total comprehensive income                                  --            --           --            2,337
Dividends paid ($0.065 per share), net of dividends on
   unallocated ESOP shares                                    --            (758)        --             (758)
Purchases of treasury stock (87,300 shares)                   --            --           --           (1,349)
Reissuance of treasury stock for exercise of
   stock options (8,300 shares)                               --             (93)        --               27
Tax benefit from exercise of stock options                    --            --           --               39
Vesting of stock awards                                        296          --           --              296
ESOP shares committed to be released for allocation           --            --           --              332
                                                           -------      --------      -------      ---------
Balance at June 30, 2005                                   $(4,139)     $ 54,911      $(1,510)     $ 128,084
                                                           =======      ========      =======      =========

</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 Three Months Ended
                                                                               June 30,
                                                                      --------------------------
                                                                        2005             2004
                                                                      --------         --------
<S>                                                                   <C>              <C>
Operating Activities
  Net income                                                          $  1,124         $  1,497
  Adjustments to reconcile net income to net
      cash provided by operating activities:
      Provision for loan losses                                             75               75
      Depreciation, amortization and accretion                             582              619
      ESOP and stock award expense                                         628              578
      Income taxes                                                         584                3
     Pension costs                                                         (50)               9
      Other adjustments, net                                               (83)              62
                                                                      --------         --------
          Net cash provided by operating activities                      2,860            2,843
                                                                      --------         --------
Investing Activities
 Purchases of securities:
     Available for sale                                                   --            (30,015)
     Held to maturity                                                  (10,685)          (9,953)
 Proceeds from payments, maturities and calls of securities:
     Available for sale                                                 16,527           23,014
     Held to maturity                                                    3,607             --
 Net disbursements for loan originations and principal repayments      (52,920)         (23,017)
 Purchases of Federal Home Loan Bank stock                                (647)            (435)
 Purchases of premises and equipment                                      (176)            (194)
                                                                      --------         --------
           Net cash used in investing activities                       (44,294)         (40,600)
                                                                      --------         --------
Financing Activities
 Net increase in deposits                                               58,423           37,830
 Proceeds from borrowings                                                 --              3,000
 Repayment of borrowings                                                (3,000)            --
 Net decrease in mortgagors' escrow funds                                 (102)            (569)
 Purchases of treasury stock                                            (1,349)          (8,324)
 Proceeds from exercise of stock options                                    27             --

 Payment of cash dividends on common stock                                (758)            (755)
                                                                      --------         --------
        Net cash provided by financing activities                       53,241           31,182
                                                                      --------         --------
  Increase (decrease) in cash and cash equivalents                      11,807           (6,575)
  Cash and cash equivalents at beginning of period                      42,607           31,211
                                                                      --------         --------
  Cash and cash equivalents at end of period                          $ 54,414         $ 24,636
                                                                      ========         ========
Supplemental Information
  Interest paid                                                       $  5,026         $  3,307
  Income taxes paid                                                        125              870
  Decrease in due to brokers for securities purchased                   (2,513)          (4,000)
                                                                      ========         ========

</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                        4
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Reorganization and Stock Offerings

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

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

2.    Basis of Presentation

      The consolidated  financial  statements included herein have been prepared
by the Company  without  audit.  In the  opinion of  management,  the  unaudited
consolidated financial statements include all adjustments,  consisting of normal
recurring accruals,  necessary for a fair presentation of the financial position
and results of operations for the periods  presented.  Certain  information  and
footnote  disclosures  normally included in annual financial statements prepared
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  applicable  to interim  reporting;  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, 2006.

      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, 2005,  included in
the Company's 2005 Annual Report on Form 10-K.

3.    Stock-Based Compensation

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



                                       5
<PAGE>

fair value of options is  recognized  as  compensation  expense over the vesting
period.  The  Company  has  elected to  continue to apply APB Opinion No. 25 and
disclose the pro forma information  required by SFAS No. 123. In accordance with
APB  Opinion  No. 25,  compensation  expense is not  recognized  for fixed stock
options  if the  exercise  price of the  option  equals  the  fair  value of the
underlying  stock on the date of the  grant.  The  fair  value of stock  awards,
measured at the grant date, is recognized as unearned  compensation (a deduction
from stockholders'  equity) and amortized to compensation  expense as the shares
become vested.

      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 June 30,
                                                       -------------------------------------
                                                        2005                         2004
                                                       -------                    ----------
                                                       (In thousands, except per share data)
<S>                                                    <C>                        <C>
Net income, as reported                                $ 1,124                    $   1,497
Add stock award expense included in reported
   net income, net of related tax effects                  180                          181
Deduct stock award and stock option expense
    determined under the fair-value-based
    method, net of related tax effects                    (296)                        (313)
                                                       -------                    ---------
Pro forma net income                                   $ 1,008                    $   1,365
                                                       =======                    =========
Earnings per share:
   Basic, as reported                                  $  0.10                    $    0.13
                                                       =======                    =========
   Basic, pro forma                                    $  0.09                    $    0.12
                                                       =======                    =========
   Diluted, as reported                                $  0.10                    $    0.12
                                                       =======                    =========
   Diluted, pro forma                                  $  0.09                    $    0.11
                                                       =======                    =========

</TABLE>

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

      SFAS No. 123R applies to all awards  granted after its effective  date and
to awards modified,  repurchased, or cancelled after that date. SFAS No. 123R is
effective as of the  beginning of the first annual  reporting  period  beginning
after June 15, 2005 (i.e.,  the Company's  fiscal year beginning April 1, 2006).
The standard permits different  transition methods. The Company expects to adopt
SFAS No. 123R by  recognizing  compensation  expense  for (i) all stock  options
granted  after April 1, 2006 and (ii) the portion of  previously  granted  stock
options for which the  requisite  service  had not been  rendered as of April 1,
2006,  based  on the


                                       6
<PAGE>

grant-date  fair value of those options  calculated for purposes of SFAS No. 123
pro forma disclosures. The additional annual compensation cost for the Company's
stock options  outstanding at June 30, 2005 that is expected to be recognized in
the fiscal year beginning April 1, 2006, as a result of the adoption of SFAS No.
123R, is approximately $557,000 before taxes.

4.    Earnings Per Share

      Weighted  average  common  shares  used in  calculating  basic and diluted
earnings per share for the three months ended June 30, 2005 were  11,383,738 and
11,641,572,  respectively. For the quarter ended June 30, 2004, weighted average
common  shares used in  calculating  basic and diluted  earnings  per share were
11,819,988 and 12,098,542, respectively.

5.    Allowance for Loan Losses

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

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

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

                                          Three Months Ended      Year Ended
                                               June 30,            March 31,
                                        ----------------------    ----------
                                         2005            2004        2005
                                        ----------------------      -------
                                            (In thousands)
Balance at beginning of period          $3,011          $2,712      $ 2,712
Provision for loan losses                   75              75          300
Charge-offs                               --              --             (1)
                                        ----------------------      -------
Balance at end of period                $3,086          $2,787      $ 3,011
                                        ======================      =======


                                       7
<PAGE>

6.    Borrowings

      The Company had the  following  outstanding  borrowings  under  securities
repurchase  agreements  with the Federal Home Loan Bank of New York (the "FHLB")
at June 30, 2005:

                                          Coupon
             Maturity Date                 Rate      Borrowings
             -------------               -------     ---------
                                         (dollars in thousands)
      January 2008(1)                      5.42%      $10,000
      December 2008(1)                     4.72         5,000
      March 2006                           2.27         7,000
      March 2007                           2.65         7,000
      March 2008                           4.13         6,000
                                                      -------
                                                      $35,000
                                                      =======
      Weighted average interest rate                     3.91%
      Accrued interest payable                        $   163

      (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 $13.3 million and mortgage-backed  securities available
for sale with a carrying value of $19.0 million.  Accrued interest receivable on
the securities was $141,000 at June 30, 2005.

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:

                                                            Three Months Ended
                                                                 June 30,
                                                          ----------------------
                                                            2005          2004
                                                          -------       -------
                                                              (In thousands)
      Net unrealized holding gain (loss) arising during
           the period on securities available for sale    $ 2,022       $(8,209)
      Related deferred income tax effect                     (809)        3,170
                                                          -------       -------
      Other comprehensive income (loss)                   $ 1,213       $(5,039)
                                                          =======       =======


                                       8
<PAGE>

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

                                                June 30,     March 31,
                                                  2005         2005
                                                -------       -------
                                                     (In thousands)
      Net unrealized holding loss on
           securities available for sale        $(2,512)      $(4,534)
      Related deferred income taxes               1,002         1,811
                                                -------       -------
      Accumulated other comprehensive loss      $(1,510)      $(2,723)
                                                =======       =======

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 $225,000 to the
plans in fiscal  2006.  Contributions  of  $154,000  were made  during the three
months ended June 30, 2005.

      Plan assets are invested in the Guaranteed Deposit Fund ("GDF") which is a
group annuity  insurance product issued by Prudential  Retirement  Insurance and
Annuity  Company  ("PRIAC").  Deposits  to the GDF are  deposited  into  PRIAC's
general account.  Payment obligations under the GDF represent an insurance claim
supported by all general  account  assets.  The guarantee from PRIAC is based on
the  claims-paying  ability of PRIAC and not the value of securities held in the
GDF. As such,  the GDF does not operate like a mutual fund,  annuity  product or
other similar  investment.  The GDF is an  intermediate-term,  high-grade  fixed
income portfolio  consisting of commercial  mortgages,  private placement bonds,
publicly traded debt securities and asset-backed securities.

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

                                              Three Months Ended
                                                   June 30,
                                              -----------------
                                              2005        2004
                                              -----       -----
                                                (In thousands)
      Service cost                            $ 115       $  91
      Interest cost                             172         160
      Expected return on plan assets           (231)       (225)
      Recognized net actuarial loss              52          27
      Amortization of prior service cost          1           1
                                              -----       -----
           Net periodic pension expense       $ 109       $  54
                                              =====       =====

      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



                                       9
<PAGE>

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
                                              June 30,
                                         ------------------
                                           2005     2004
                                          -----     ----
                                         (In thousands)
Service cost                              $ 36     $ 16
Interest cost                               29       24
Recognized net actuarial gain               (3)      (4)
Amortization of prior service cost          33       45
                                          -----    -----
     Net periodic expense                 $ 95     $ 81
                                          =====    =====


                                       10
<PAGE>

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

General

      Our principal business has historically  consisted of offering savings and
other  deposits to the general public and using the funds from these deposits to
make loans secured by residential real estate.  Our net income depends primarily
upon our net interest  income,  which is the difference  between interest income
earned  on  interest-earning  assets,  such as loans  and  investments,  and the
interest expense paid on deposits and borrowings.  To a much lesser degree,  our
net income is affected by non-interest  income,  such as banking service charges
and fees.  Net income is also  affected by, among other things,  provisions  for
loan losses and non-interest expense. Our principal non-interest expense 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 and accounting for goodwill.  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.

Financial Condition

      Assets.  The Company's  total assets  amounted to $1.1 billion at June 30,
2005 as compared to $1.0 billion at March 31, 2005.  The $53.9 million  increase
in assets primarily consisted of a $52.7 million increase in net loans to $613.5
million.  Our asset growth was funded principally by a $58.4 million increase in
deposits to $890.2 million.



                                       11
<PAGE>

      Liabilities.  Total  deposits  were $890.2  million at June 30,  2005,  an
increase  of $58.4  million as  compared  to $831.8  million at March 31,  2005.
Certificates  of deposit  increased  $53.4 million to $606.3 million from $552.9
million; savings and club accounts decreased $5.7 million to $144.8 million from
$150.5 million; and money market, NOW and commercial checking accounts increased
$10.7 million to $139.1 million from $128.4  million.  The increase in deposits,
primarily  certificates  of deposit,  reflects  deposit growth in three branches
opened  during fiscal 2005 as well as growth in our existing  branches.  We have
used our certificates of deposit product as a promotional product to attract new
customers to our branches.  We expect to be able to cross-sell other products to
these new  customers as they become  familiar  with our product  offerings.  The
Brookfield branch opened in June 2004, and the Carmel and Bethel branches opened
in February 2005 and March 2005, respectively.  Borrowings totaled $35.0 million
at June 30, 2005 and $38.0 million at March 31, 2005.

      Stockholders'  Equity.  Total  stockholders'  equity increased $924,000 to
$128.1 million at June 30, 2005 as compared to $127.2 million at March 31, 2005.
The increase  reflects net income of $1.1 million and a decrease in  accumulated
other  comprehensive  loss of $1.2 million,  partially  offset by treasury stock
purchases at a cost of $1.3 million and dividends paid of $758,000.

      The accumulated other  comprehensive loss of $1.5 million at June 30, 2005
represents  the after-tax net unrealized  loss on securities  available for sale
($2.5  million  pre-tax).  The  Company  invests  primarily  in  mortgage-backed
securities guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac, as well as U.S.
Government and Agency  securities.  The unrealized  losses at June 30, 2005 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 June 30, 2005.


                                       12
<PAGE>

Comparison of Results of Operations for the Three Months Ended June 30, 2005 and
2004

      Average  Balance  Sheets.  The following  table sets forth average balance
sheets,  average yields and costs,  and certain other  information for the three
months ended June 30, 2005 and 2004. The table  reflects the annualized  average
yield  on   interest-earning   assets  and  the   annualized   average  cost  of
interest-bearing liabilities (derived by dividing the annualized interest income
or  expense  by the  monthly  average  balance  of  interest-earning  assets  or
interest-bearing  liabilities,  respectively),  as  well  as the  net  yield  on
interest-earning  assets. No tax-equivalent  yield adjustments were made, as the
effect  thereof  was  not  material.  Nonaccrual  loans  were  included  in  the
computation of average  balances and therefore have a zero yield. The yields set
forth below include the effect of deferred loan  origination fees and costs, and
purchase  discounts  and  premiums  that are  amortized  or accreted to interest
income.  Interest income on loans for the 2005 and 2004 periods has been reduced
by amortization of net deferred loan origination costs of $115,000 and $258,000,
respectively.  Interest income on mortgage-backed securities has been reduced by
amortization  of purchase  premiums  (net of discounts) of $197,000 and $245,000
for those same respective periods.

<TABLE>
<CAPTION>
                                                                 For the Three Months Ended June 30,
                                           ----------------------------------------------------------------------------
                                                          2005                                   2004
                                           ----------------------------------------------------------------------------
                                             Average                                 Average
                                           Outstanding               Average       Outstanding                Average
                                             Balance     Interest   Yield/Rate       Balance      Interest   Yield/Rate
                                           ----------    --------   ----------     -----------    --------   ----------
                                                                     (Dollars in thousands)
<S>                                        <C>            <C>         <C>           <C>            <C>         <C>
Interest-earning assets:
Loans (1)                                  $  591,103      8,264      5.61%         $ 481,732      6,897       5.74%
Mortgage-backed securities (2)                254,143      2,191      3.46%           251,624      2,158       3.44%
Other securities (2)                           99,576        851      3.43%            84,458        634       3.01%
Federal funds sold and other
overnight deposits (3)                         31,962        181      2.27%            34,483         59       0.69%
Other (4)                                       6,596         67      4.07%             5,776         21       1.46%
                                           ---------------------                    --------------------
Total interest-earning assets                 983,380     11,554      4.71%           858,073      9,769       4.57%
                                                          ------                                   -----
Non-interest earning assets                    47,599                                  45,585
                                           ----------                               ---------
Total assets                               $1,030,979                               $ 903,658
                                           ==========                               =========

Interest-bearing liabilities:
Savings and club accounts                  $  146,717        188      0.51%         $ 150,066        192       0.51%
Money market accounts                          45,558        118      1.04%            45,920         85       0.74%
NOW accounts                                   64,816         61      0.38%            57,335         36       0.25%
Certificates of deposit                       579,804      4,301      2.98%           460,042      2,628       2.29%
Borrowings                                     37,934        361      3.82%            35,066        365       4.18%
Mortgagors' escrow funds                        4,815          5      0.42%             3,851          5       0.52%
                                           ---------------------                    --------------------
Total interest-bearing liabilities            879,644      5,034      2.30%           752,280      3,311       1.77%
                                                          ------                                   -----
Non-interest-bearing liabilities               25,175                                  17,572
                                           ----------                               ---------
Total liabilities                             904,819                                 769,852
Stockholders' equity                          126,160                                 133,806
                                           ----------                               ---------
Total liabilities and
stockholders' equity                       $1,030,979                               $ 903,658
                                           ==========                               =========
Net interest income                                        6,520                                   6,458
                                                          ======                                   =====
Net interest rate spread (5)                                          2.41%                                    2.80%
Net earning assets (6)                     $  103,736                               $ 105,793
                                           ==========                               =========
                                                                                                               3.02%
Net interest margin (7)                                               2.66%
Ratio of interest-earning assets                                                         1.14x
to interest-bearing liabilities                  1.12x

</TABLE>

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

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

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

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

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

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

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

                                       13
<PAGE>

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

                                           For the Three Months Ended June 30,
                                                       2005 vs. 2004
                                         ---------------------------------------

                                         Increase (Decrease) Due to     Total
                                         --------------------------   Increase
                                              Volume        Rate     (Decrease)
                                         ---------------------------------------
                                                       (In thousands)
Interest-earning assets:
Loans                                        $2,382       $(1,015)      $1,367
Mortgage-backed securities                       21            12           33
Other securities                                123            94          217
Federal funds and other overnight deposits      (29)          151          122
Other                                             3            43           46
                                             ------       -------       ------
Total interest-earning assets                 2,500          (715)       1,785
                                             ------       -------       ------
Interest-bearing liabilities:
Savings and club accounts                        (4)           --           (4)
Money market accounts                            (5)           38           33
NOW accounts                                      5            20           25
Certificates of deposit                         784           889        1,673
Borrowings                                      121          (125)          (4)
Mortgagors' escrow funds                          4            (4)          --
                                             ------       -------       ------
Total interest-bearing liabilities              905           818        1,723
                                             ------       -------       ------
Net interest income                          $1,595       $(1,533)      $   62
                                             ======       =======       ======

      Net Income.  Net income  amounted to $1.1 million or diluted  earnings per
share of $0.10 for the quarter  ended June 30, 2005, as compared to $1.5 million
or diluted  earnings  per share of $0.12 for the quarter  ended June 30, 2004, a
decrease  of 24.9% in net  income.  The  decrease  in net income for the quarter
ended  June  30,  2005 is  primarily  attributable  to a  $678,000  increase  in
non-interest  expense,  partially  offset by a $226,000  decrease  in income tax
expense and a $62,000 increase in net interest income.

      Interest  Income.  Interest income increased $1.8 million to $11.6 million
for the quarter ended June 30, 2005, as compared to $9.8 million for the quarter
ended June 30, 2004. The increase  reflects a $125.3 million increase in average
interest-earning assets to $983.4 million during the quarter ended June 30, 2005
as compared to $858.1  million for the same quarter in 2004 and a 14 basis point
increase in the average yield on interest-earning  assets to 4.71%. The increase
in the average balance of interest-earning  assets was due primarily to a $109.4
million  increase in net loans to $591.1 million and a $17.6 million increase in
the average  balance of total  securities  to $353.7  million.  The  increase in
average  interest-earning assets was funded principally by deposit growth in the
Bank's branches.  The increase in the average yield on  interest-earning  assets
reflects the purchase of securities at higher rates than the existing  portfolio
and increased  yields earned on Federal funds as a result of recent increases in
short-term market interest rates.



                                       14
<PAGE>

      Loans.  Interest income on loans increased $1.4 million, or 19.8%, to $8.3
million for the quarter  ended June 30, 2005 as compared to $6.9 million for the
same quarter in 2004.  This increase is due to a $109.4 million  increase in the
average balance of loans to $591.1 million, partially offset by a 13 basis point
decrease  in the yield  earned to 5.61%.  The  decrease  in the yield  earned is
primarily a result of loan  originations  during fiscal years 2005 and 2004 that
were at rates lower than the average  yield being  earned on the loan  portfolio
during those periods.  Loans  originated  during the quarter ended June 30, 2005
amounted to $82.9 million. As market interest rates increase,  our average yield
on loans should  continue to increase,  however loan  originations  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 $2.2 million for the quarter ended June 30, 2005, an increase
of $33,000 from the same quarter in 2004.  The increase is due to a $2.5 million
increase in the average balance of mortgage-backed  securities to $254.1 million
and a 2 basis point  increase in the average  yield to 3.46%  during the current
quarter.

      Interest  on other  securities  increased  $217,000  to  $851,000  for the
quarter  ended June 30,  2005,  as compared to $634,000  for the same quarter in
2004. The increase is due to a $15.1 million  increase in the average balance of
other  securities to $99.6 million and a 42 basis point  increase in the average
yield to 3.43%.

      Federal  Funds Sold and Other  Overnight  Deposits.  For the quarter ended
June 30,  2005,  interest  on Federal  funds sold and other  overnight  deposits
increased  $122,000 to $181,000,  reflecting  a 158 basis point  increase in the
average  yield to 2.27%,  partially  offset by a $2.5  million  decrease  in the
average balance to $32.0 million.  The increase in the average yield is a result
of increases by the Federal Reserve in the Federal funds rate.

      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
$66,000  for  quarter  ended June 30,  2005 as  compared to $21,000 for the same
quarter in 2004.

      Interest  Expense.  Interest  expense for the quarter  ended June 30, 2005
increased  $1.7  million to $5.0  million,  as compared to $3.3  million for the
quarter ended June 30, 2004. The average balance of interest-bearing liabilities
increased  $127.3  million to $879.6 million for the quarter ended June 30, 2005
as compared to $752.3  million for the same  quarter in 2004,  while the average
cost of these  liabilities  increased 53 basis points to 2.30%.  The increase in
the average balance of interest-bearing  liabilities  includes deposit growth in
the new branches as well as growth in the existing branches. The increase in the
average cost of liabilities is a result of increasing short-term market interest
rates and an increase in  certificates  of deposit  accounts as a percentage  of
total deposits. The average balance of certificates of deposit represented 65.9%
of the average  balance of total  interest-bearing  liabilities  for the quarter
ended June 30, 2005,  as compared to 61.2% for the quarter  ended June 30, 2004.
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 $4.3 million for
the current  quarter as compared to $2.6  million for the same  quarter in 2004.
The  increase  is due  primarily  to a $119.8  million  increase  in the average
balance to $579.8  million from $460.0 million for the same quarter in the prior
year,  while the average  cost of  certificates  of deposit  increased  69 basis
points to 2.98%.

      Interest on savings accounts  amounted to $188,000 for the current quarter
as compared  to  $192,000  for the quarter  ended June 30,  2004.  This  average
balance of savings  accounts  decreased  $3.4 million to $146.7  million for the
quarter  ended June 30, 2005 as compared to $150.1  million for the same quarter
in 2004, while the average cost of savings accounts remained unchanged at 0.51%.

      Interest expense on NOW and money market accounts amounted to $179,000 for
quarter  ended June 30, 2005 as compared to $121,000 for the same quarter in the
prior year.  The average cost increased 18 basis points to 0.65% and the average
balance of these accounts increased $7.1 million to $110.4 million.



                                       15
<PAGE>

      For the  quarter  ended June 30,  2005,  interest  expense  on  borrowings
amounted to $361,000 as compared to $365,000 for the same  quarter in 2004.  The
average  balance of borrowings for the current quarter was $37.9 million and the
average cost was 3.82%, a decrease of 36 basis points from the same quarter last
year.

      Net Interest  Income.  Net interest  income for the quarter ended June 30,
2005  remained  relatively  unchanged  at $6.5  million as  compared to the 2004
quarter. The net interest rate spread was 2.41% and 2.80% for the quarters ended
June 30, 2005 and 2004, respectively.  The net interest margin for those periods
was 2.66% and 3.02%, 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. Since July 2004, the Federal Reserve raised the Federal funds rate
by 225 basis  points to 3.25%.  However,  long  term  rates  have only  begun to
increase,  resulting in a flattening  yield curve. As short-term  interest rates
increased,  the cost of our interest-bearing  liabilities  increased faster than
the yield on interest-earning  assets which are affected by longer-term interest
rates. The decrease in net interest rate spread and net interest margin was also
a  result  of  the  decrease  in  the  ratio  of   interest-earning   assets  to
interest-bearing  liabilities  to 1.12x for the quarter ended June 30, 2005 from
1.14x for the same quarter in 2004.

      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  85.3% of total loans at June 30, 2005, 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 June 30,
2005 and 2004.  Non-performing  loans amounted to $2.2 million or 0.36% of total
loans at June 30,  2005,  as compared to $1.7 million or 0.34% of total loans at
June 30, 2004. At March 31, 2005,  non-performing  loans amounted to $580,000 or
0.10% of total  loans.  The  increase  in  non-performing  loans in the  current
quarter is due primarily to the  delinquencies  of two  borrowers.  The loans to
these  borrowers  are secured by  mortgages  on  single-family  residences.  The
allowance for loan losses  amounted to $3.1 million and $3.0 million at June 30,
2005 and March 31, 2005,  respectively.  There were no charge-offs or recoveries
in the quarters  ended June 30, 2005 and 2004. 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.  Adjustable-rate  mortgage
loans can involve greater credit risk than fixed-rate  loans because as interest
rates  increase,  the  underlying  payments  by  the  borrower  increase,   thus
increasing  the  risk  of  default  by the  borrower.  At  the  same  time,  the
marketability of the underlying  collateral may be adversely  affected by higher
interest rates.  At June 30, 2005,  adjustable rate loans accounted for 41.5% of
total loans as compared to 37.8% at March 31, 2005.

      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 bank-owned life insurance ("BOLI").  Service charges and fees
totaled  $275,000 and  $276,000  for the quarters  ended June 30, 2005 and 2004,
respectively.  The increase in the cash surrender  value of the BOLI amounted to
$94,000 and $76,000 for those same respective periods.

      Non-Interest  Expense.  Non-interest  expense totaled $5.0 million for the
quarter  ended June 30, 2005 as compared to $4.3  million for the quarter  ended
June 30,  2004.  This  increase is  primarily  due to  increases  of $415,000 in
compensation and benefits expense,  $104,000 in occupancy and equipment



                                       16
<PAGE>

expense,  $87,000 in  advertising  and  promotion  expense  and $80,000 in other
non-interest  expense. The increases include costs attributable to the three new
branches opened during fiscal 2005.

      The  increase in  compensation  and benefits  expense  includes a $236,000
increase in compensation  costs due primarily to additional staff to support the
growth in the Company's  lending  operations  and the new branches.  At June 30,
2005, we had 135 full-time  equivalent  employees as compared to 118 at June 30,
2004. The adoption of SFAS No. 123R will result in additional compensation costs
with respect to stock options beginning April 1, 2006, as described in Note 3 of
the Notes to Unaudited Consolidated Financial Statements in Item 1.

      Income Taxes. Income tax expense amounted to $720,000 and $946,000 for the
quarters ended June 30, 2005 and 2004, respectively. The effective tax rates for
those same periods were 39.0% and 38.7%, respectively. The 23.9% decrease in the
income tax expense for the quarter  ended June 30, 2005  primarily  reflects the
24.5% decrease in pre-tax income.


                                       17
<PAGE>

Liquidity and Capital Resources

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

      The Company's primary investing activities are the origination of mortgage
loans,  and the purchase of  short-term  investments,  government  agency bonds,
mortgage-backed  securities  and  collateralized  mortgage  obligations.   These
activities are funded  primarily by deposit  growth and principal  repayments on
loans,  mortgage-backed  securities and other investment securities.  During the
three months ended June 30, 2005,  the Company  originated  loans totaling $82.9
million and purchased  $10.7 million of  securities.  These  disbursements  were
funded  by  $20.1  million  in  principal  payments,  maturities  and  calls  of
securities and $30.3 million in loan principal repayments. During the year ended
March 31, 2005,  the Company  originated  $207.9  million of loans and purchased
$113.3 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 June 30, 2005, the Company had  outstanding  loan  commitments of $86.0
million. The Company anticipates that it will have sufficient funds available to
meet its current loan  commitments.  Certificates of deposit scheduled to mature
in one year or less from  June 30,  2005,  totaled  $393.1  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
June 30,  2005,  the Bank  exceeded  all of the OTS minimum  regulatory  capital
requirements,   and  was  classified  as  a  well-capitalized   institution  for
regulatory purposes.



                                       18
<PAGE>

      The following table sets forth the capital position of the Bank as of June
30, 2005 and March 31,  2005.  The actual  capital  amounts and ratios set forth
below are for the Bank only and, accordingly,  do not include additional capital
retained by the Holding Company.

<TABLE>
<CAPTION>
                                                                             OTS Requirements
                                                      -----------------------------   ------------------------
                                                                                         Classification as
                                 Bank Actual           Minimum Capital Adequacy           Well Capitalized
                        ----------------------------  -----------------------------   ------------------------
                           Amount         Ratio           Amount         Ratio           Amount        Ratio
                        ----------------------------  -----------------------------   ------------------------
                                                        (Dollars in thousands)
<S>                        <C>              <C>           <C>             <C>          <C>             <C>
June 30, 2005
-------------
Tangible capital          $103,124          9.9%         $15,701          1.5%
Tier I (core) capital      103,124          9.9           41,870          4.0          $52,338         5.0%
Risk-based capital:
     Tier I                103,124         21.7           19,031          4.0           28,547         6.0
     Total                 106,210         22.3           38,063          8.0           47,579        10.0

March 31, 2005
--------------
Tangible capital          $101,814         10.3%         $14,888          1.5%
Tier I (core) capital      101,814         10.3           39,703          4.0          $49,627         5.0%
Risk-based capital:
     Tier I                101,814         22.9           17,729          4.0           26,591         6.0
     Total                 104,825         23.6           35,455          8.0           44,319        10.0

</TABLE>

Accounting Standards

      In May 2005, the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections," which replaces APB Opinion No. 20, "Accounting  Changes," and SFAS
No. 3,  "Reporting  Accounting  Changes in Interim  Financial  Statements,"  and
changes the  requirements  for the  accounting  for and reporting of a change in
accounting  principle.  SFAS  No.  154  applies  to  all  voluntary  changes  in
accounting principle and to changes required by an accounting pronouncement when
the pronouncement does not include specific transition provisions.  SFAS No. 154
requires retrospective  application of a change in accounting principle to prior
periods' financial statements unless it is impracticable to determine either the
period-specific  effects or the cumulative effect of the change. APB Opinion No.
20 previously  required that most voluntary  changes in accounting  principle be
recognized  by including the  cumulative  effect of the change in net income for
the period of the change in accounting  principle.  SFAS No. 154 carries forward
without  change the guidance  contained in APB Opinion No. 20 for  reporting the
correction of an error in previously issued financial statements and a change in
accounting  estimate.  SFAS No. 154 also  carries  forward  the  guidance in APB
Opinion No. 20 requiring  justification  of a change in accounting  principle on
the basis of preferability. SFAS No. 154 is effective for accounting changes and
corrections  of errors made in fiscal years  beginning  after December 15, 2005,
with early  adoption  permitted.  The Company's  adoption of SFAS No. 154 is not
expected to have an impact on its financial condition or results of operations.

      See Note 3 of the Notes to Unaudited  Consolidated Financial Statements in
Item 1 for a discussion  of SFAS No. 123R,  which will result in a change in the
Company's accounting for stock options beginning April 1, 2006.

      On  September  30,  2004,  the FASB issued  Staff  Position No. EITF Issue
03-1-1,  "Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning
of Other-Than-Temporary  Impairment and Its Application to Certain Investments,"
which delayed the effective date of the  measurement  and  recognition  guidance
contained in Emerging  Issues Task Force  ("EITF") Issue No. 03-1. As originally
issued,  EITF  Issue No.  03-1  provided  guidance  for  evaluating  whether  an
investment  is  other-than-temporarily  impaired  and  was to be  effective  for
other-than-temporary  impairment evaluations made in reporting periods beginning
after June 15, 2004 (July 1, 2004 for the Company).  On June 29, 2005,  the FASB
directed  its staff to issue  Staff  Position  No.  FAS 115-1,  "The  Meaning of
Other-Than-Temporary  Impairment and Its  Application  to Certain



                                       19
<PAGE>

Investments,"  which will  supercede  EITF Issue No. 03-1 and be  effective  for
impairment  analyses  conducted in periods  beginning  after September 15, 2005.
Staff  Position  No. FAS 115-1 will  replace the guidance in EITF Issue No. 03-1
with    references    to   existing    authoritative    literature    concerning
other-than-temporary  impairments and clarify that an investor should  recognize
an   impairment   loss  no  later   than   when   the   impairment   is   deemed
other-than-temporary,  even if a decision  to sell the  investment  has not been
made.  The Company does not expect that the issuance of Staff Position No. 115-1
will have a material impact on its financial condition or results of operations.


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 June 30, 2005,  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 three  months ended June 30,  2005,  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 June 30,  2005 (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 to ensure that information required to be
disclosed in the reports the Company files and submits under the Exchange Act is
recorded, processed,  summarized and reported as and when required and that such
information  is  accumulated  and  communicated  to management as appropriate to
allow timely decisions regarding required disclosure.

      There were no changes in the  Company's  internal  control over  financial
reporting  during  the  period  covered  by this  report  that  have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.


                                       20
<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 June 30, 2005 is summarized below:

<TABLE>
<CAPTION>

                                                                           Total number of shares     Maximum number of
                                                                             purchased under a       shares that may yet
                                Total number of       Average price          publicly announced       be purchased under
                               shares purchased       paid per share         repurchase plan (1)     repurchase plan (1)
                               ----------------       --------------         -------------------     -------------------
<S>                                 <C>                     <C>                   <C>                     <C>
April 1-April 30                       --                    --                     --                     408,844
May 1-May 31                        87,300                  15.46                 87,300                   321,544
June1-June 30                          --                    --                     --                     321,544
</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.

Item 3. Defaults upon Senior Securities

      None

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

      None

Item 5. Other Information

      None

Item 6. Exhibits

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


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


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


                                       21
<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

August 8, 2005



                                       22