SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                -----------------

                                    FORM 10-Q

         (Mark One)

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

                 For the quarterly period ended December 31, 2000

                          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
             (Exact name of registrant as specified in its charter)

          Federal                                              13-4029393
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                 300 Mamaroneck Ave., Mamaroneck, New York 10543
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (914) 698-6400
               (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  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date.

                                                           Shares
                 Class                                 Outstanding at
             --------------                           February 12, 2001
              Common Stock,                           -----------------
              par value, $0.10                            4,874,218



<PAGE>
                                TABLE OF CONTENTS


                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Consolidated Balance Sheets at December 31, 2000
         and March 31, 2000...................................................1

         Consolidated Statements of Income for the Three and
         Nine Months Ended December 31, 2000 and 1999.........................2

         Consolidated Statement of Changes in Stockholders' Equity
         for the Nine Months Ended December 31, 2000..........................3

         Consolidated Statements of Cash Flows for the Nine Months
         Ended December 31, 2000 and 1999.....................................4

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

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations............................................8

Item 3.  Quantitative and Qualitative Disclosures about Market Risk..........14


                          PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings...................................................15

Item 2.  Changes in Securities and Use of Proceeds...........................15

Item 3.  Defaults upon Senior Securities.....................................15

Item 4.  Submission of Matters to a Vote of Security Holders.................15

Item 5.  Other Information...................................................15

Item 6.  Exhibits and Reports on Form 8-K....................................15

         Signatures..........................................................16

                                       i
<PAGE>
Part 1. - Financial Information

Item 1.  Financial Statements
Sound Federal Bancorp and Subsidiary

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                            December 31,             March 31,
                                                                                                2000                   2000
                                                                                        -------------------    -------------------
<S>                                                                                     <C>                    <C>
Assets
 Cash and due from banks........................................................        $           4,729      $           7,567
 Federal funds sold.............................................................                   40,100                 25,000
 Certificates of deposit........................................................                    4,182                 10,075
 Securities:
    Available for sale, at fair value...........................................                  151,583                 62,365
     Held to maturity, at amortized cost (fair value of $29,808
       and $34,799 at December 31, 2000 and March 31, 2000, respectively).......                   30,049                 35,658
                                                                                             ------------           ------------
          Total securities......................................................                  181,632                 98,023
                                                                                             ------------           ------------
 Loans, net:
     Mortgage loans.............................................................                  285,440                181,300
     Consumer loans.............................................................                    1,827                    820
     Allowance for loan losses (Note 5).........................................                   (2,025)                (1,188)
                                                                                             ------------           ------------
          Total loans, net......................................................                  285,242                180,932
                                                                                             ------------           ------------

 Accrued interest receivable....................................................                    3,640                  2,116
 Federal Home Loan Bank stock...................................................                    3,745                  2,195
 Premises and equipment, net....................................................                    5,945                  4,305
 Deferred income taxes..........................................................                    1,134                  1,386
 Goodwill, net (Note 2).........................................................                   14,719                      -
 Other assets...................................................................                    1,861                    745
                                                                                              -----------            -----------
           Total assets.........................................................        $         546,929      $         332,344
                                                                                             ============           ============

Liabilities and Stockholders' Equity
  Liabilities:
      Deposits..................................................................        $         469,459      $         275,772
      Borrowings................................................................                   14,625                     86
      Mortgagors' escrow funds..................................................                    4,781                  2,765
      Accrued expenses and other liabilities....................................                    2,099                  1,032
                                                                                             ------------            -----------
         Total liabilities......................................................                  490,964                279,655
                                                                                             ------------            -----------
  Stockholders' equity:
     Preferred stock ($0.10 par value; 10,000,000 shares
     authorized;                                                                                        -                      -
     none issued and outstanding)...............................................
     Common stock ($0.10 par value; 20,000,000 shares authorized;
       5,212,218 shares issued).................................................                      521                    521
     Additional paid-in capital.................................................                   22,402                 22,415
     Treasury stock, at cost (333,000 shares at December 31, 2000
        and 207,000 shares at March 31,2000)....................................                   (3,193)                (2,069)
     Common stock held by the Employee Stock Ownership Plan ("ESOP")............                   (1,345)                (1,489)
     Common stock awards under the Recognition and Retention Plan ("RRP").......                     (576)                  (721)
     Retained earnings..........................................................                   36,733                 35,234
     Accumulated other comprehensive income (loss), net of taxes (Note 6).......                    1,423                 (1,202)
                                                                                             ------------           ------------
          Total stockholders' equity............................................                   55,965                 52,689
                                                                                             ------------           ------------
          Total liabilities and stockholders' equity............................        $         546,929       $        332,344
                                                                                             ============           ============
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
Sound Federal Bancorp and Subsidiary

<PAGE>

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

<TABLE>
<CAPTION>

                                                                    For the Three Months Ended       For the Nine Months Ended
                                                                          December 31,                     December 31,
                                                                   -----------------------------------------------------------
                                                                    2000            1999                2000            1999
                                                                    ----            ----                ----            ----
<S>                                                             <C>            <C>               <C>             <C>
   Interest and Dividend Income
    Loans...................................................... $      5,533   $      3,219      $     14,089    $      9,051
    Securities.................................................        3,343          1,506             8,158           4,266
    Federal funds sold and certificates of deposit.............          657            526             1,426           1,604

    Other earning assets.......................................          102             44               302             136
                                                                   ---------      ---------         ---------       ---------
    Total interest and dividend income.........................        9,635          5,295            23,975          15,057
                                                                   ---------      ---------         ---------       ---------


   Interest Expense
    Deposits...................................................        5,360          2,598            12,693           7,146
     Borrowings................................................          320              2               657               6
     Other interest-bearing liabilities........................           21              9                56              29
                                                                   ---------      ---------         ---------       ---------
    Total interest expense.....................................        5,701          2,609            13,406           7,181
                                                                   ---------     ----------         ---------       ---------

    Net interest income........................................        3,934          2,686            10,569           7,876
    Provision for loan losses (Note 5).........................           50             25               158              75
                                                                   ---------      ---------         ---------       ---------
    Net interest income after provision for loan losses........        3,884          2,661            10,411           7,801
                                                                   ---------      ---------         ---------       ---------

   Non-Interest Income
     Service charges and fees..................................           96             51               239             151
     Gain (loss) on sale of real estate owned..................           50             (5)               28              76
                                                                   ---------      ---------         ---------       ---------
     Total non-interest income.................................          146             46               267             227
                                                                   ---------      ---------         ---------       ---------

   Non-Interest Expense
     Compensation and benefits.................................        1,218            976             3,306           2,507
     Occupancy and equipment...................................          492            233             1,199             661
     Data processing service fees..............................          260            159               427             314
     Advertising and promotion.................................          222            192               522             388
     Goodwill amortization (Note 2)............................          255              -               510               -
     Other.....................................................          421            448             1,342           1,456
                                                                   ---------      ---------         ---------       ---------
     Total non-interest expense................................        2,868          2,008             7,306           5,326
                                                                   ---------      ---------         ---------       ---------

    Income before income tax expense...........................        1,162            699             3,372           2,702
    Income tax expense.........................................          491            250             1,437             965
                                                                   ---------      ---------         ---------       ---------
    Net income................................................. $        671   $        449      $      1,935    $      1,737
                                                                   =========      =========         =========       =========

    Basic and diluted earnings per common share (Note 4)....... $       0.14   $       0.09      $       0.40    $       0.35
                                                                   =========      =========         =========       =========
</TABLE>





See accompanying notes to unaudited consolidated financial statements.

<PAGE>
Sound Federal Bancorp and Subsidiary

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended December 31, 2000  (Unaudited)  (Dollars in thousands,
except per share data)
<TABLE>
<CAPTION>


                                                                                            Common         Common
                                                                Additional                  Stock          Stock
                                                     Common      Paid-In      Treasury     Held By         Awards        Retained
                                                     Stock       Capital       Stock         ESOP        Under RRP       Earnings
                                                     -----       -------       -----         ----        ---------       --------
<S>              <C> <C>                            <C>         <C>           <C>       <C>          <C>              <C>
Balance at March 31, 2000.....................      $ 521       $ 22,415      $(2,069)  $   (1,489)  $      (721)     $   35,234
Net income....................................         --            --           --           --             --           1,935
Other comprehensive income (Note 6)...........         --            --           --           --             --             --

  Total comprehensive income (Note 6).........
Repurchase of common stock (126,000 shares)....        --            --        (1,124)         --             --             --
Dividends paid ($0.21 per share)..............         --            --            --          --             --           (436)
Vesting of RRP shares.........................         --            --            --          --            145             --
ESOP shares committed to be released for
   allocation.................................         --            (13)          --          144            --             --
                                                    ------      --------       ------      -------      --------        -------

Balance at December 31, 2000..................     $   521     $  22,402      $(3,193)  $   (1,345)  $      (576)     $  36,733
                                                    ======      ========       ======      =======      ========        =======
</TABLE>




                                                   Accumulated
                                                      Other            Total
                                                  Comprehensive    Stockholders'
                                                  Income (Loss)       Equity
                                                  -------------       ------
Balance at March 31, 2000.....................   $  (1,202)      $   52,689
Net income....................................         --             1,935
Other comprehensive income (Note 6)...........       2,625            2,625
                                                                    -------
  Total comprehensive income (Note 6).........                        4,560
Repurchase of common stock (126,000 shares)....        --            (1,124)
Dividends paid ($0.21 per share)..............         --              (436)
Vesting of RRP shares.........................         --               145
ESOP shares committed to be released for
   allocation.................................         --               131
                                                  --------          -------

Balance at December 31, 2000..................   $  1,423        $   55,965
                                                  ========          =======


See accompanying notes to unaudited consolidated financial statements.

<PAGE>
Sound Federal Bancorp and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>

                                                                                  For the Nine Months Ended
                                                                                          December 31,
                                                                                  ------------------------------
                                                                                      2000               1999
                                                                                  -------------     ------------
<S>                                                                          <C>                   <C>
OPERATING ACTIVITIES
  Net income............................................................     $         1,935       $      1,737
  Adjustments to reconcile net income to net cash provided
      by operating activities:
      Provision for loan losses.........................................                 158                 75
      Depreciation and amortization.....................................                 255                177
      ESOP and RRP expense..............................................                 276                330
      Income taxes......................................................                 200               (150)
      Goodwill amortization.............................................                 510                  -
      Gain on sale of real estate owned.................................                 (28)               (76)
      Other adjustments, net............................................                (649)              (368)
                                                                                  ----------          ---------
            Net cash provided by operating activities...................               2,713              1,725
                                                                                  ----------          ---------

INVESTING ACTIVITIES
   Purchases of securities available for sale...........................              (2,784)           (29,266)
  Proceeds from sales of securities available for sale..................              21,888                  -
  Proceeds from principal payments, maturities and calls of securities..              21,842             17,510
  Disbursements for loan originations...................................             (63,590)           (49,513)
  Principal collection on loans.........................................              25,821             19,215
  Net decrease (increase) in certificates of deposit....................               5,893               (388)
  Cash paid in purchase acquisition, net of cash acquired..............              (33,937)                 -
  Proceeds from sales of real estate owned..............................                 286                309
  Purchases of premises and equipment...................................                (639)            (2,036)
                                                                                  ----------         ----------
                  Net cash used in investing activities.................             (25,220)           (44,169)
                                                                                  ----------         ----------

FINANCING ACTIVITIES
  Net increase in deposits..............................................              41,326             30,269
  Repayment of borrowings...............................................              (5,000)                 -
  Net increase in mortgagors' escrow funds..............................                   3                282
  Purchases of treasury stock...........................................              (1,124)            (2,025)
  Dividends paid on common stock........................................                (436)              (850)
  RRP stock awards funded through stock purchases.......................                   -               (183)
                                                                                  ----------         ----------
            Net cash provided by financing activities...................              34,769             27,493
                                                                                  ----------         ----------

  Increase (decrease) in cash and cash equivalents......................              12,262            (14,951)
  Cash and cash equivalents at beginning of period......................              32,567             49,482
                                                                                  ----------         ----------
  Cash and cash equivalents at end of period............................       $      44,829      $      34,531
                                                                                  ==========         ==========

SUPPLEMENTAL INFORMATION
  Interest paid.........................................................       $      13,596      $       7,020
  Income taxes paid.....................................................               1,043              1,543
   Liability for RRP awards not yet funded through stock purchases......                   -                778
   Loans transferred to real estate owned...............................                 291                124
                                                                                  ==========         ==========
   Acquisition accounted for by the purchase method:
      Fair value of assets acquired, including goodwill of $15,231......       $     212,850      $           -
      Fair value of liabilities assumed.......................................      (174,081)                 -
                                                                                  ----------         ----------
      Cash paid in acquisition................................................ $      38,769      $           -
                                                                                  ==========         ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.


<PAGE>
Sound Federal Bancorp and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       Reorganization and Stock Offering

         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  (the   "Offering").   In  the
Reorganization,   Sound  Federal  Savings  and  Loan  Association  (the  "Bank")
converted from a federally  chartered mutual savings  association to a federally
chartered  stock savings  association  (the  "Conversion").  The Bank became the
wholly-owned   subsidiary   of  Sound   Federal   Bancorp,   which   became  the
majority-owned  subsidiary of Sound Federal, MHC (the "Mutual Holding Company").
Collectively,  Sound Federal Bancorp and the Bank are referred to herein as "the
Company".

         Sound Federal Bancorp issued a total of 5,212,218  shares of its common
stock in the  Reorganization  and Offering,  consisting of 2,810,510  shares (or
53.92%)  issued to the Mutual Holding  Company and 2,401,708  shares (or 46.08%)
issued to other stockholders.  The shares issued to other stockholders consisted
of 192,129 shares purchased by the Company's  Employee Stock Ownership Plan (the
"ESOP")  using  $1.9  million  in  proceeds  from a loan  made by Sound  Federal
Bancorp;  102,200  shares  contributed  by the  Company to  establish  the Sound
Federal Savings and Loan  Association  Charitable  Foundation  (the  "Charitable
Foundation");  and 2,107,379  shares sold for cash of $21.1 million  ($10.00 per
share) in the Offering.  The Charitable  Foundation  was  established to provide
funding  to  support   charitable  and   not-for-profit   causes  and  community
development  activities in the Company's market area.  After deducting  offering
costs of $1.1  million,  the net cash  proceeds  from the  Offering  were  $20.0
million.

  2.     Acquisition

         On July 18, 2000, the Company  consummated its acquisition of Peekskill
Financial Corporation ("Peekskill").  Peekskill and its wholly-owned subsidiary,
First Federal Savings Bank,  merged with and into the Bank, with the Bank as the
surviving entity (the "Acquisition").  Peekskill's stockholders received $22 per
share in cash.  The  transaction  was  valued  at  approximately  $41.7  million
including the "in-the-money"  portion of outstanding stock options.  At the time
of the  Acquisition,  Peekskill  had total  assets of $201.5  million  and total
deposits  of  $152.4  million  (historical   carrying  amounts  before  purchase
accounting adjustments).

         The  Acquisition  was  accounted  for  using  the  purchase  method  of
accounting and,  accordingly,  the assets acquired and liabilities  assumed were
recorded by the Company at their fair values at the consummation  date.  Related
operating  results  are  included  in  the  Company's   consolidated   financial
statements for periods after the consummation  date. The excess of the Company's
total  acquisition  cost  over the fair  value of the net  assets  acquired,  or
"goodwill", has been recognized as an intangible asset and is being amortized to
expense  over a period  of 15 years.  Goodwill  resulting  from the  Acquisition
totaled $15.2  million,  and the related  amortization  expense was $255,000 and
$510,000 for the three and nine months ended December 31, 2000, respectively.

3.       Basis of Presentation

         The  consolidated   financial  statements  included  herein  have  been
prepared  by the  Company  without  audit.  In the  opinion of  management,  the
unaudited consolidated financial statements include all adjustments,  consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position  and  results  of  operations  for  the  periods   presented.   Certain
information  and  footnote  disclosures  normally  included in  accordance  with
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, 2001.

         The consolidated  financial statements have been prepared in conformity
with accounting  principles  generally accepted in the United States of America.
In preparing the consolidated  financial  statements,  management is required to
make  estimates  and  assumptions  that affect the  reported  amounts of assets,
liabilities,  income and expense. Actual results could differ significantly from
these  estimates.  An estimate that is  particularly  susceptible to significant
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,  2000,
included in the Company's 2000 Annual Report.

4.       Earnings Per Share

          Weighted  average  common  shares used in  calculating  both basic and
diluted earnings per share were 4,766,212 for the three months and 4,788,280 for
the nine months ended December 31, 2000.  The  application of the treasury stock
method did not result in incremental  common equivalent shares or otherwise have
a dilutive  effect on earnings  per share for these  periods.  For the three and
nine months ended  December 31, 1999,  weighted  average  common  shares used in
calculating basic earnings per share were 4,813,259 and 4,974,235, respectively.
For the three and nine months ended December 31, 1999,  weighted  average shares
used in  calculating  diluted  earnings per share were  4,814,277 and 4,979,463,
respectively,  and included  common stock  equivalents of 1,018 shares and 5,228
shares, respectively.

5.       Allowance for Loan Losses

         The  allowance  for loan losses is  increased  by  provisions  for loan
losses  charged to income and  decreased  by  charge-offs  (net of  recoveries).
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 evaluation of the
adequacy of the allowance is based on the Company's past loan experience,  known
and inherent  risks in the  portfolio,  adverse  situations  that may affect the
borrowers' ability to repay, the estimated value of underlying  collateral,  and
current  economic  conditions.  Management  believes that the allowance for loan
losses is adequate to absorb probable losses in the existing loan portfolio.

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

         Activity in the allowance for loan losses for the periods  indicated is
summarized as follows:
<TABLE>
<CAPTION>

                                             Three Months Ended              Nine Months Ended              Year Ended
                                                 December 31,                      December 31,             March 31,
                                       ------------------------------  ------------------------------       ---------
                                            2000            1999            2000           1999                2000
                                       -------------   -------------   -------------  ------------             ----
                                                               (in thousands)
<S>                                    <C>             <C>             <C>            <C>                <C>
Balance at beginning of period....     $     1,946     $     1,144     $     1,188    $     1,094        $      1,094
Provision for loan losses.........              50              25             158             75                 100
Allowance transferred in Acquisition           --              --              784            --                  --
Mortgage loans charged off........             --              --             (134)           --                   (6)
Recoveries........................              29             --               29            --                  --
                                       -----------     -----------     -----------    -----------      --------------
Balance at end of period..........     $     2,025     $     1,169     $     2,025    $     1,169        $      1,188
                                         =========       =========       =========      =========        ============
</TABLE>

6.       Comprehensive Income (Loss)

           The  Company's  other  comprehensive  income  (loss)  represents  net
unrealized  holding  gains and losses  arising  during the period on  securities
available for sale, net of related income taxes, as follows:

                                                                      Other
                                 Pre-Tax           Tax            Comprehensive
                              Income (Loss)       Effect          Income (Loss)
Three Months Ended:          --------------   --------------    ----------------
                                              (in thousands)
   December 31, 2000         $      1,998     $      (772)      $       1,226
   December 31, 1999                 (570)            219                (351)

Nine Months Ended:
   December 31, 2000                4,343          (1,718)              2,625
   December 31, 1999               (1,847)            742              (1,105)



         Total comprehensive  income (net income and other comprehensive  income
or loss)  amounted  to $1.9  million  and  $98,000  for the three  months  ended
December 31, 2000 and 1999, respectively,  and $4.6 million and $632,000 for the
nine months ended December 31, 2000 and 1999, respectively.

         The Company's  accumulated other comprehensive  income (loss), which is
included in stockholders'  equity,  represents the unrealized gain on securities
available  for sale of $2.3  million  less  related  income taxes of $909,000 at
December 31, 2000, and the  unrealized  loss of $2.0 million less related income
taxes of $809,000 at March 31, 2000.

<PAGE>

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

General

         The  financial  condition  and results of operations of the Company are
primarily  dependent upon those of the Bank. The Bank's  principal  business has
historically  consisted  of offering  savings and other  deposits to the general
public  and  using the  funds  from  such  deposits  to make  loans  secured  by
residential real estate.  The Company's  results of operations  depend primarily
upon its net  interest  income,  which is the  difference  between the  interest
income  earned  on its loan and  securities  portfolios  and its cost of  funds,
consisting  primarily of the interest paid on its  deposits.  Net income is also
affected by, among other  things,  provisions  for loan losses and  non-interest
expense.  The  Company's  principal  operating  expenses,  other  than  interest
expense,  consist of compensation and benefits,  occupancy and equipment,  other
general  and  administrative  expenses,  and  goodwill  amortization.  Operating
results are also  significantly  affected 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 Board; and the actions of
bank regulatory authorities.

         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 are subject to certain risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical results and those presently  anticipated or projected.  Among others,
these risks and  uncertainties  include  changes in economic  conditions  in the
Company's market area, changes in policies by regulatory agencies,  fluctuations
in  interest  rates,   demand  for  loans  in  the  Company's  market  area  and
competition.  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. The
Company  does not  undertake,  and  specifically  declines  any  obligation,  to
publicly  release  the  result  of  any  revisions  which  may  be  made  to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

Acquisition

         On July 18, 2000, the Company  consummated its acquisition of Peekskill
Financial Corporation ("Peekskill").  Peekskill and its wholly-owned subsidiary,
First Federal Savings Bank,  merged with and into the Bank, with the Bank as the
surviving  entity (the  "Acquisition").  As further  described  in Note 2 to the
unaudited  consolidated financial statements in Item 1, the acquisition has been
accounted for using the purchase method of accounting and, accordingly,  related
operating  results  are  included  in  the  Company's   consolidated   financial
statements for periods after the acquisition date.


Financial Condition

         The  Company's  total  assets  increased  by $214.6  million  to $546.9
million at December 31, 2000 from $332.3  million at March 31,  2000,  primarily
due to the  Acquisition.  At the time of the  Acquisition,  Peekskill  had total
assets of $201.5  million.  The increase in total assets  primarily  reflects an
$83.6  million  increase  in  securities  to $181.6  million,  a $104.3  million
increase  in net  loans  to  $285.2  million  and a $14.7  million  increase  in
goodwill. The goodwill resulted from the Acquisition and is being amortized over
15 years.  Total  deposits  amounted to $469.5  million at December 31, 2000, an
increase of $193.7 million  compared to $275.8 million at March 31, 2000. At the
time of the Acquisition,  Peekskill had total deposits of $152.4 million.  Total
stockholders'  equity  increased  $3.3 million to $56.0  million at December 31,
2000, as compared to $52.7 million at March 31, 2000.
Results of Operations

         General.  Net income amounted to $671,000 or $0.14 per common share for
the quarter ended December 31, 2000, as compared to $449,000 or $0.09 per common
share for the quarter  ended  December 31, 1999.  The increase in net income for
the current quarter was due primarily to a $1.2 million increase in net interest
income,  substantially  offset by an $860,000 increase in non-interest  expenses
and a $241,000 increase in income tax expense.

         For the nine months ended  December 31,  2000,  net income  amounted to
$1.9 million or $0.40 per common share, as compared to $1.7 million for the same
period in the prior year.  Net interest  income  increased  $2.7 million for the
nine  months  ended  December  31,  2000 as compared to the same period in 1999,
substantially  offset by a $2.0 million increase in non-interest  expenses and a
$472,000 increase in income tax expense.

         The results for both the 2000  quarter and  nine-month  period  reflect
increases in income and expense largely attributable to the Acquisition,  as the
related  operating  results are included for the full quarter and  approximately
six months for the year-to-date amounts.

         The results for both the 1999 quarter and nine-month  period included a
pre-tax charge of $193,000  attributable  to the Sound Federal  Savings and Loan
Association  Recognition and Retention Plan (the "RRP"),  as a full 20% of total
RRP shares were vested  during the  quarter,  compared to RRP expense of $48,000
and $145,000,  respectively,  for the quarter and nine months ended December 31,
2000.

         Net Interest Income. Net interest income for the quarter ended December
31, 2000 amounted to $3.9 million,  a $1.2 million increase from the same period
in the prior year. The interest rate spread was 2.90% and 2.94% for the quarters
ended  December 31, 2000 and 1999,  respectively.  The net  interest  margin for
those  periods  was 3.17% and 3.46%,  respectively.  For the nine  months  ended
December 31, 2000, net interest  income amounted to $10.6 million as compared to
$7.9 million for the prior year. The interest rate spread for those same periods
remained  unchanged  at 2.97%.  The net  interest  margin was 3.29% for the nine
months ended December 31, 2000 as compared to 3.53% for the same period in 1999.

         The  decreases  in net  interest  margin  are  primarily  a result of a
decrease   in  the  ratio  of   interest-earning   assets  to   interest-bearing
liabilities,  to 1.04 for the quarter ended  December 31, 2000 from 1.16 for the
same quarter in the prior year. For the nine months ended December 31, 2000, the
ratio was 1.08 as compared to 1.18 in the prior  year.  The lower  ratios in the
current year reflect higher levels of non-earning  assets  (primarily  goodwill)
and the use of earning assets to fund stock repurchases.

         Interest  Income.  Interest  income  totaled  $9.6  million  during the
quarter ended  December 31, 2000 as compared to $5.3 million for the same period
in the prior year. This increase is due to a $190.2 million  increase in average
interest-earning  assets to $497.7 million during the quarter ended December 31,
2000 as compared to $307.5  million for the same quarter in the prior year,  and
by an 85 basis point increase in the average yield on interest-earning assets to
7.68%.  The increase in the average balance of  interest-earning  assets was due
primarily  to  the   Acquisition.   The   increase  in  the  average   yield  on
interest-earning  assets  reflects  fixed-rate  loan growth and  adjustable-rate
security  repricings  during periods of rising interest rates  (particularly the
first half of calendar 2000), as well as higher-yielding  securities recorded in
the  Acquisition.  For the nine months ended December 31, 2000,  interest income
totaled  $24.0  million as compared to $15.1  million for the same period in the
prior year.  This  increase is due to a $130.5  million  increase in the average
balance  of  interest-earning  assets to  $426.5  million  and a 71 basis  point
increase in the yield earned to 7.46%.

         Loans. Interest income on loans increased $2.3 million or 71.9% to $5.5
million for the current quarter as compared to $3.2 million for the same quarter
in 1999.  This  increase  is due to a $107.2  million  increase  in the  average
balance of loans to $275.8  million and a 39 basis  point  increase in the yield
earned to 7.96%. For the nine months ended December 31, 2000, interest income on
loans  increased  $5.0  million or 55.7% to $14.1  million as  compared  to $9.1
million for the same period in 1999.  This  increase is due to an $83.5  million
increase in the average  balance of loans to $241.6 million and a 14 basis point
increase in the yield earned to 7.74%.

          The  growth  of the loan  portfolio  is  principally  a result  of the
Acquisition  (Peekskill had net loans of $67.3 million at the acquisition date),
as well as  efforts  by the  Company to expand  its loan  products  offered  and
markets served and the strong demand for fixed rate loans (the Company's primary
mortgage loan product).

         Mortgage-Backed  Securities.  Interest  on  mortgage-backed  securities
increased  $1.7 million to $2.5 million for the quarter ended  December 31, 2000
due  primarily  to an  increase  of $82.3  million  in the  average  balance  of
mortgage-backed securities to $138.3 million and an increase of 138 basis points
in the average yield to 7.23%. Interest on mortgage-backed  securities increased
$3.3  million to $5.7  million for the nine months  ended  December 31, 2000 due
primarily  to  an  increase  of  $51.2   million  in  the  average   balance  of
mortgage-backed securities to $107.8 million and an increase of 126 basis points
in the average yield to 7.05%.  The higher average  balances in the current year
reflect securities acquired in the Acquisition.

         Other Securities.  Interest on other securities  increased  $142,000 to
$822,000  for the  quarter  ended  December  31,  2000,  as compared to the same
quarter in 1999, due to a $2.5 million  increase in the average balance of other
securities to $45.1 million and an 89 basis point  increase in the average yield
earned to 7.23%. Interest on other securities increased $638,000 to $2.4 million
for the nine months ended December 31, 2000 as compared to the nine months ended
December 31, 1999 due to a $5.3 million increase in the average balance of other
securities to $42.9 million and a 118 basis point  increase in the average yield
earned to 7.53%.  The  higher  average  balances  in the  current  year  reflect
securities  acquired in the  Acquisition,  net of sales of securities which were
made in order to fund a portion of the Acquisition.

         Federal  Funds.  For the quarter ended  December 31, 2000,  interest on
Federal funds increased $130,000 to $484,000, reflecting a $3.8 million increase
in the average  balance to $29.0 million,  and a 106 basis point increase in the
average yield earned to 6.63%.  Interest on Federal funds  decreased  $77,000 to
$1.0  million for the nine months  ended  December  31, 1999 as compared to $1.1
million for the same period in 1999,  resulting from a $6.2 million  decrease in
the average balance to $22.7 million,  which was partially  offset by a 94 basis
point increase in the average yield earned to 6.04%.  The lower level of Federal
funds in the current year reflects the  utilization  of certain of the Company's
liquid assets to fund a portion of the Acquisition cost.

         Interest  Expense.  Interest expense for the quarter ended December 31,
2000 totaled  $5.7  million,  as compared to $2.6 million for the quarter  ended
December 31, 1999. The average balance of interest-bearing liabilities increased
$211.8  million to $478.0  million for the quarter ended  December 31, 2000 from
$266.2  million for the same  quarter in the prior year and the average  cost of
these liabilities  increased 89 basis points to 4.78%. For the nine months ended
December 31, 2000,  interest expense totaled $13.4 million,  as compared to $7.2
million for the nine months  ended  December 31,  1999.  The average  balance of
interest-bearing  liabilities increased $144.9 million to $396.7 million for the
nine months ended  December  31, 2000 from $251.8  million in the prior year and
the average cost of these  liabilities  increased 71 basis points to 4.49%.  The
increase in  interest-bearing  liabilities is due primarily to the  Acquisition.
The  increase  in the  cost  of  interest-bearing  liabilities  is a  result  of
borrowings  that were assumed in the  Acquisition,  an increase in the amount of
time deposits in relation to total deposits and, to a lesser extent, an increase
in interest rates during  calendar year 2000. Time deposits carry interest rates
that are higher  than other  deposit  accounts.  For the quarter and nine months
ended  December 31, 2000,  the average  balance of time  deposits  accounted for
62.1% and 61.6%,  respectively,  of average total  deposits as compared to 60.7%
and 58.8% for the same respective periods in the prior year.

         Interest  expense on time deposits totaled $4.4 million for the current
quarter as compared to $2.1 million for the same  quarter in 1999.  The increase
is due  primarily to a $123.2  million  increase in the average  balance of time
deposits to $283.4 million from $160.2 million in the same quarter last year and
a 96 basis  point  increase in the  average  cost to 6.10%.  Interest on savings
accounts  amounted to $665,000  for the current  quarter as compared to $317,000
for the quarter ended December 31, 1999. The average balance of savings accounts
increased  $47.8  million to $108.1  million and the average  cost  increased 35
basis points to 2.44%.  Interest expense on other deposits (NOW and money market
accounts)  amounted to $336,000 for quarter ended  December 31, 2000 as compared
to $205,000 for the same quarter in the prior year. The average balance of these
accounts increased $21.8 million to $65.1 million and the average cost increased
17 basis points to 2.05%.

         For the quarter  ended  December 31, 2000,  interest paid on borrowings
amounted  to  $320,000  as  compared  to $2,000 in the prior  year.  The average
balance of borrowings for the quarter was $17.1 million and the average cost was
7.43%.  For the  quarter  ended  December  31,  1999,  the  average  balance  of
borrowings  was  $86,000  and the  average  cost  was  9.23%.  The  increase  in
borrowings  consists  of FHLB  advances  that were a  component  of  Peekskill's
capital management strategy and that were assumed in the Acquisition.

         Interest  expense on time  deposits  totaled $10.0 million for the nine
months  ended  December 31, 2000 as compared to $5.5 million for the same period
in 1999. The increase is due to an $88.3 million increase in the average balance
of time  deposits  and a 67 basis point  increase in the average  cost to 5.67%.
Interest on savings accounts  amounted to $1.9 million for the current period as
compared to $938,000  for the nine months ended  December 31, 1999.  The average
balance of savings  accounts  increased  $29.9  million to $90.0 million and the
average  cost  increased  66 basis  points to 2.73%.  Interest  expense on other
deposits  (NOW and money  market  accounts)  amounted to  $792,000  for the nine
months  ended  December  31, 2000 as compared to $675,000 for the same period in
the prior year. The average balance of these accounts increased $14.1 million to
$56.7 million and the average cost decreased 25 basis points to 1.85%.

         For the nine months ended  December 31,  2000,  interest on  borrowings
amounted  to  $657,000  as  compared  to $6,000 in the prior  year.  The average
balance of borrowings  for the current  nine-month  period was $11.2 million and
the  average  cost  was  7.75%,  again  reflecting  borrowings  assumed  in  the
Acquisition.

         Provision  for Loan Losses.  The  provision for loan losses was $50,000
for the quarter  ended  December 31, 2000 as compared to $25,000 for the quarter
ended  December 31,  1999.  For the nine months  ended  December  31, 2000,  the
provision  for loan  losses was  $158,000  as  compared  to $75,000 for the same
period in the prior year. Non-performing loans amounted to $1.6 million or 0.54%
of total loans at December 31,  2000,  as compared to $809,000 or 0.46% of total
loans at December  31,  1999.  The  allowance  for loan losses  amounted to $2.0
million and $1.2 million at December 31, 2000 and March 31, 2000,  respectively.
The  increase  in the  allowance  for loan  losses is  primarily a result of the
Acquisition.  There were no  charge-offs in the quarters ended December 31, 2000
and 1999.  Charge-offs,  net of  recoveries,  amounted to $105,000  for the nine
months  ended  December  31, 2000 (none for the nine months  ended  December 31,
1999).

         In  determining   the  adequacy  of  the  allowance  for  loan  losses,
management   considers   historical   loan   loss   experience,   the  level  of
non-performing  loans,  the  volume and type of lending  conducted  and  general
economic conditions in the Company's market area. Although the Company maintains
its  allowance  for loan losses at a level which it  considers to be adequate to
provide for probable  losses on existing  loans,  there can be no assurance that
such losses will not exceed the current estimated amounts.  As a result,  higher
provisions  for loan  losses may be  necessary  in future  periods  which  would
adversely affect operating results.

         Non-Interest  Income.  Non-interest income totaled $146,000 and $46,000
for the quarters  ended December 31, 2000 and 1999,  respectively.  For the nine
months  ended  December  31,  2000 and 1999,  non-interest  income  amounted  to
$267,000 and $227,000, respectively. Non-interest income consists principally of
service  charges on deposit  accounts,  late charges on loans and various  other
service  fees.  Service  fees  amounted to $96,000 and $51,000 for the  quarters
ended  December  31,  2000 and 1999,  respectively.  For the nine  months  ended
December  31, 2000 and 1999,  service fees  amounted to $239,000  and  $151,000,
respectively. The quarter and nine months ended December 31, 2000 included gains
on the sale of real  estate  owned of  $50,000  and  $28,000,  respectively,  as
compared to a $5,000 loss and a $76,000 gain for the  respective  periods in the
prior year.

         Non-Interest Expense. Non-interest expense totaled $2.9 million for the
quarter  ended  December  31, 2000 as  compared to $2.0  million for the quarter
ended December 31, 1999. This increase is due primarily to increases of $242,000
in  compensation  and  benefits,  $259,000 in  occupancy  and  equipment  costs,
$101,000 in data processing  service fees, $30,000 in advertising and promotion,
and $255,000 in goodwill amortization.

         For the nine months  ended  December  31,  2000,  non-interest  expense
totaled  $7.3  million as compared to $5.3  million for the same period in 1999.
This  increase is due  primarily to increases  of $799,000 in  compensation  and
benefits, $538,000 in occupancy and equipment costs, $113,000 in data processing
service  fees,  $134,000 in  advertising  and promotion and $510,000 in goodwill
amortization,  partially  offset by a $114,000  decrease  in other  non-interest
expenses.

         The  increases  in  non-interest  expenses  are  due  primarily  to the
Acquisition,  as well as  continuing  internal  growth.  In  addition to ongoing
expenses  attributable to the acquired operations,  non-interest expense for the
quarter and nine months ended  December 31, 2000 includes  $87,000 and $216,000,
respectively,  in costs related to the conversion of Peekskill's data processing
system to the Bank's data processing  system and customer service costs incurred
during the conversion process.

         Income Taxes.  Income tax expense amounted to $491,000 and $250,000 for
the quarters ended December 31, 2000 and 1999,  respectively.  The effective tax
rates for those same  periods were 42.3% and 35.8%,  respectively.  For the nine
months  ended  December 31, 2000 and 1999,  income tax expense  amounted to $1.4
million  and  $965,000,  respectively.  The  effective  tax rates for those same
periods were 42.6% and 35.7%,  respectively.  The higher  effective tax rates in
the current year are primarily due to the amortization of goodwill, which is not
deductible for tax purposes.


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 Bank is required to  maintain  an average  daily  balance of liquid
assets as a percentage of net  withdrawable  deposit  accounts  plus  short-term
borrowings  as defined by the  regulations  of the Office of Thrift  Supervision
("OTS").  The minimum required  liquidity ratio is currently 4%. At December 31,
2000, the Bank's liquidity ratio under OTS regulations was approximately 21.9%.

         The primary investing  activities of the Company are the origination of
loans and the  purchase of  securities.  For the  quarter and nine months  ended
December 31, 2000, the Company originated loans totaling $21.1 million and $63.6
million, respectively. For the year ended March 31, 2000, the Company originated
$62.5 million of loans.  For both the quarter and nine months ended December 31,
2000, the Company  purchased $2.8 million of securities.  The Company  purchased
$35.2  million of  securities  during the year ended March 31,  2000,  including
$29.3 million  during the nine months ended  December 31, 1999.  During the nine
months ended  December 31, 2000,  the Company sold $21.9  million of  securities
available for sale. These securities were part of Peekskill's portfolio and were
recorded  by the  Company at their fair value in  accordance  with the  purchase
method  of  accounting.  The  securities  were sold by the  Company  immediately
thereafter and, as a result of the fair value  adjustment,  there was no gain or
loss  on the  sale.  Cash  paid  in the  Acquisition,  net of  Peekskill's  cash
acquired, was $33.7 million.

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

         At December 31, 2000, the Company had outstanding  loan  commitments of
$39.6  million.  The  Company  anticipates  that it will have  sufficient  funds
available  to meet its current  loan  commitments.  Time  deposits  scheduled to
mature in one year or less from  December  31,  2000,  totaled  $223.8  million.
Management believes that a significant portion of such deposits will remain with
the Company.

         The  Bank  is  subject  to  certain  minimum  leverage,   tangible  and
risk-based  capital  requirements  established  by regulations of the OTS. These
regulations   require  savings   associations  to  meet  three  minimum  capital
standards:  a tangible  capital  ratio  requirement  of 1.5% of total  assets as
adjusted under the OTS regulations; a leverage ratio requirement of 4.0% of core
capital  to  such  adjusted  total  assets;   and  a  risk-based  capital  ratio
requirement  of 8.0% of core  and  supplementary  capital  to  total  risk-based
assets.  The OTS prompt corrective action regulations impose a 4.0% core capital
requirement for categorization as an "adequately  capitalized" thrift and a 5.0%
core capital  requirement for  categorization  as a "well  capitalized"  thrift.
Goodwill and most other intangible assets are deducted in determining regulatory
capital  for  purposes  of all  capital  ratios.  In  determining  the amount of
risk-weighted  assets for  purposes of the  risk-based  capital  requirement,  a
savings association must compute its risk-based assets by multiplying its assets
and certain  off-balance  sheet items by  risk-weights,  which range from 0% for
cash and obligations  issued by the United States  Government or its agencies to
100%  for  consumer  and  commercial  loans,  as  assigned  by the  OTS  capital
regulations.  At December  31,  2000,  the Bank  exceeded all of the OTS minimum
regulatory  capital  requirements,  and  was  classified  as a  well-capitalized
institution for regulatory purposes.

         The following  table sets forth the capital  position of the Bank as of
December 31, 2000 and March 31, 2000. The actual capital  amounts and ratios set
forth below are for the Bank only and,  accordingly,  do not include  additional
capital  retained by Sound Federal  Bancorp.  The decreases in the Bank's actual
capital  amounts and ratios at December 31, 2000  compared to March 31, 2000 are
primarily  attributable to the deduction of goodwill from regulatory capital and
the increase in the Bank's total assets caused by the Acquisition.
<TABLE>
<CAPTION>


                                                                                 OTS Requirements
                                                                   -------------------------------------------
                                                                    Minimum Capital         Classification as
                                             Bank Actual               Adequacy              Well Capitalized
                                        --------------------      --------------------      ------------------
                                         Amount       Ratio        Amount       Ratio        Amount     Ratio
                                         ------       -----        ------       -----        ------     -----
                                                                 (Dollars in thousands)
<S>                                       <C>         <C>          <C>          <C>     <C>             <C>
December 31, 2000
Tangible capital....................  $   32,844      6.1 %    $    8,066       1.5 %
Tier I (core) capital...............      32,844      6.1          21,510       4.0     $    26,888     5.0 %
Risk-based capital:
   Tier I...........................      32,844     14.1                                    13,950     6.0
   Total............................      34,869     15.0          18,600       8.0          23,250    10.0

March 31, 2000
Tangible capital....................  $   45,786     13.7 %     $   5,007       1.5 %
Tier I (core) capital...............      45,786     13.7          13,353       4.0     $    16,690     5.0 %
Risk-based capital:
   Tier I...........................      45,786     32.9                                     8,352     6.0
   Total............................      46,909     33.7          11,136       8.0          13,920    10.0
</TABLE>

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, is also subject to risks associated with the local economy.
The Company does not own any trading  assets.  At December 31, 2000, the Company
did not have any hedging  transactions in place, such as interest rate swaps and
caps. The Company's  interest rate risk management  program focuses primarily on
evaluating and managing the composition of the Company's  assets and liabilities
in the context of various interest rate scenarios.  Factors beyond  management's
control,  such as market interest rates and competition,  also have an impact on
interest income and interest expense.

         During the quarter ended  December 31, 2000,  there were no significant
changes in the Company's assessment of market risk.

<PAGE>
Part II--OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company is not involved in any pending legal proceedings other than
routine legal  proceedings  occurring in the ordinary  course of business.  Such
routine  legal  proceedings  in the  aggregate  are believed by management to be
immaterial to the Company's financial condition and results of operations.

Item 2.  Changes in Securities and Use of Proceeds

         None

Item 3.  Defaults upon Senior Securities

         None

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

         None


Item 5.  Other Information

         None


Item 6.  Exhibits and Reports on Form 8-K

         None


<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
                                                --------------------------------
                                                (Registrant)





                                       By:      /s/ Anthony J. Fabiano
                                                --------------------------------
                                                Anthony J. Fabiano
                                                Duly Authorized and Chief
                                                Financial and Accounting Officer
February 13, 2001