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

                                    FORM 10-Q

         (Mark One)

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

               For the quarterly period ended September 30, 2003

                                       OR

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

           For the transition period from ____________ to ____________

                        Commission file number 000-24811

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

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

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

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

                                       N/A
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed from last Report)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X|  No |_|.

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

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

                                             Shares
                                          Outstanding at
               Class                    November 12, 2003
         ----------------               -----------------
           Common Stock,                   13,170,133
         par value, $0.01
<PAGE>

                                TABLE OF CONTENTS

                         PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Consolidated Balance Sheets at September 30, 2003
         and March 31, 2003 ................................................   1

         Consolidated Statements of Income for the Quarter and
         Six Months Ended September 30, 2003 and 2002 ......................   2

         Consolidated Statement of Changes in Stockholders'
         Equity for the Six Months Ended September 30, 2003 ................   3

         Consolidated Statements of Cash Flows for the Six Months
         Ended September 30, 2003 and 2002 .................................   4

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

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations .........................................   9

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ........  17

Item 4.  Controls and Procedures ...........................................  17

                          PART II -- OTHER INFORMATION

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

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

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

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

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

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

         Signatures ........................................................  21


                                       i
<PAGE>

Part 1. - Financial Information
Item 1. Financial Statements

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)         September 30,   March 31,
                                                          2003          2003
                                                      -------------   ---------
Assets
Cash and due from banks                                 $  10,911     $   8,776
Federal funds sold and other overnight deposits            13,739        36,121
                                                        ---------     ---------
    Total cash and cash equivalents                        24,650        44,897
                                                        ---------     ---------
Securities available for sale, at fair value (
  including $31,245 and $29,100 pledged as
  collateral for borrowings under repurchase
  agreements at September 30, 2003 and
  March 31, 2003, respectively)                           357,891       295,048
Loans, net:
  Mortgage loans                                          438,401       428,575
  Consumer loans                                            1,366         1,551
  Allowance for loan losses (Note 5)                       (2,562)       (2,442)
                                                        ---------     ---------
            Total loans, net                              437,205       427,684
                                                        ---------     ---------
 Accrued interest receivable                                3,604         3,678
 Federal Home Loan Bank stock                               5,303         4,141
 Premises and equipment, net                                5,711         5,467
 Deferred income taxes                                      1,490           392
 Goodwill                                                  13,970        13,970
 Other assets                                               1,164           811
                                                        ---------     ---------
            Total assets                                $ 850,988     $ 796,088
                                                        =========     =========

Liabilities and Stockholders' Equity
Liabilities:                                            $ 653,395     $ 604,260
  Deposits
  Borrowings (Note 6)                                      55,000        35,000
  Mortgagors' escrow funds                                  1,948         4,603
  Due to brokers for securities purchased                      --        10,495
  Accrued expenses and other liabilities                    2,865         3,409
                                                        ---------     ---------
            Total liabilities                             713,208       657,767
                                                        ---------     ---------
Stockholders' equity (Note 1):
   Preferred stock ($0.01 par value; 1,000,000
      shares authorized;
      none issued and outstanding)                             --            --
   Common stock ($0.01 par value; 24,000,000
      shares authorized; 13,247,133
      shares issued)                                          132           132
   Additional paid-in capital                              95,573        95,395
   Treasury stock, at cost (77,000 shares
      at September 30, 2003)                               (1,203)           --
   Common stock held by the Employee Stock
      Ownership Plan ("ESOP")                              (6,808)       (7,059)
   Common stock awards under the Recognition
      and Retention Plan ("RRP")                              (28)         (100)
   Retained earnings                                       51,980        49,937
   Accumulated other comprehensive (loss)
      income, net of taxes (Note 7)                        (1,866)           16
                                                        ---------     ---------
            Total stockholders' equity                    137,780       138,321
                                                        ---------     ---------
            Total liabilities and
              stockholders' equity                      $ 850,988     $ 796,088
                                                        =========     =========

See accompanying notes to unaudited consolidated financial statements.


                                       1
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary

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

<TABLE>
<CAPTION>
                                                                              For the Quarter Ended         For the Six Months Ended
                                                                                  September 30,                   September 30,
                                                                             -----------------------        -----------------------
                                                                              2003            2002            2003            2002
                                                                             -------         -------        --------         -------
<S>                                                                          <C>             <C>             <C>             <C>
Interest and Dividend Income
 Loans                                                                       $ 6,490         $ 7,626         $13,259         $15,240
 Mortgage-backed and other securities                                          2,670           2,007           5,507           4,047
 Federal funds sold and other overnight deposits                                  46             127             174             232
 Other earning assets                                                             66              38             123              84
                                                                             -------         -------         -------         -------
 Total interest and dividend income                                            9,272           9,798          19,063          19,603
                                                                             -------         -------         -------         -------

Interest Expense
 Deposits                                                                      2,665           3,102           5,544           6,186
 Borrowings                                                                      384             411             749             827
 Other interest-bearing liabilities                                               18              17              35              37
                                                                             -------         -------         -------         -------
 Total interest expense                                                        3,067           3,530           6,328           7,050
                                                                             -------         -------         -------         -------

 Net interest income                                                           6,205           6,268          12,735          12,553
 Provision for loan losses (Note 5)                                               75              50             125             125
                                                                             -------         -------         -------         -------
 Net interest income after provision for loan losses                           6,130           6,218          12,610          12,428
                                                                             -------         -------         -------         -------

Non-Interest Income
 Service charges and fees                                                        228             211             513             381
 Gain on sale of real estate owned                                                --              13              --              13
                                                                             -------         -------         -------         -------
 Total non-interest income                                                       228             224             513             394
                                                                             -------         -------         -------         -------

Non-Interest Expense
 Compensation and benefits                                                     2,006           1,623           3,998           3,051
 Occupancy and equipment                                                         584             385           1,146             829
 Data processing service fees                                                    189             258             431             487
 Advertising and promotion                                                       137             278             551             426
 Other                                                                           732             665           1,506           1,259
                                                                             -------         -------         -------         -------
 Total non-interest expense                                                    3,648           3,209           7,632           6,052
                                                                             -------         -------         -------         -------

 Income before income tax expense                                              2,710           3,233           5,491           6,770
 Income tax expense                                                            1,060           1,203           2,124           2,579
                                                                             -------         -------         -------         -------
 Net income                                                                  $ 1,650         $ 2,030         $ 3,367         $ 4,191
                                                                             =======         =======         =======         =======

Earnings per share (Note 4)(1):
   Basic earnings per share                                                  $  0.13         $  0.16         $  0.27         $  0.33
                                                                             =======         =======         =======         =======
   Diluted earnings per share                                                $  0.13         $  0.15         $  0.26         $  0.32
                                                                             =======         =======         =======         =======
</TABLE>

(1)   Earnings per share data for the 2002 periods have been adjusted to reflect
      the shares issued in the  second-step  conversion  completed on January 6,
      2003.

See accompanying notes to unaudited consolidated financial statements.


                                       2
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended September 30, 2003
(Unaudited)
(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                          Common   Common                Accumulated
                                                   Additional             Stock     Stock                   Other         Total
                                           Common   Paid-In   Treasury   Held By   Awards    Retained   Comprehensive  Stockholders'
                                           Stock    Capital    Stock       ESOP   Under RRP  Earnings   (Loss)Income      Equity
                                           ------  ---------- --------   -------  ---------  --------   -------------  -------------
<S>                                        <C>      <C>       <C>        <C>        <C>      <C>          <C>          <C>
Balance at March 31, 2003                  $  132   $95,395   $    --    $(7,059)   $(100)   $ 49,937     $    16      $ 138,321
Net income                                     --        --        --         --       --       3,367          --          3,367

Other comprehensive loss (Note 7)              --        --        --         --       --          --      (1,882)        (1,882)
                                                                                                                       ---------
  Total comprehensive income                                                                                               1,485

Dividends paid ($0.10 per share)               --        --        --         --       --      (1,324)         --         (1,324)

Purchases of treasury stock
  (77,000 shares)                              --        --    (1,203)        --       --          --          --         (1,203)

Vesting of RRP shares                          --        --        --         --       72          --          --             72

ESOP shares committed to be
  released for allocation                      --       178        --        251       --          --          --            429
                                           ------   -------   -------    -------    -----    --------     -------      ---------
Balance at September 30, 2003              $  132   $95,573   $(1,203)   $(6,808)   $ (28)   $ 51,980     $(1,866)     $ 137,780
                                           ======   =======   =======    =======    =====    ========     =======      =========
</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)

                                                        For the Six Months Ended
                                                              September 30,
                                                        ------------------------
                                                           2003           2002
                                                        ----------     ---------
OPERATING ACTIVITIES
  Net income                                             $   3,367     $  4,191
  Adjustments to reconcile net income
     to net cash provided
     by operating activities:
     Provision for loan losses                                 125          125
     Depreciation, amortization and accretion                1,131          532
     ESOP and RRP expense                                      501          276
     Income taxes                                             (559)         216
     Other adjustments, net                                    (77)        (565)
                                                         ---------     --------
           Net cash provided by operating
             activities                                      4,488        4,775
                                                         ---------     --------

INVESTING ACTIVITIES                                      (171,187)     (46,561)
  Purchases of securities available for sale
  Proceeds from principal payments, maturities
     and calls of securities available for sale             94,436       39,238
  Disbursements for loan originations in
     excess of principal payments                          (10,150)     (24,986)
  Proceeds from sales of real estate owned                      --          127
  Purchase of Federal Home Loan Bank stock                  (1,162)          --
  Purchases of premises and equipment                         (625)        (502)
                                                         ---------     --------
          Net cash used in investing
            activities                                     (88,688)     (32,684)
                                                         ---------     --------

FINANCING ACTIVITIES
  Net increase in deposits                                  49,135       45,929
  Proceeds from borrowings                                  20,000           --
  Net decrease in mortgagors' escrow funds                  (2,655)      (2,233)
  Purchases of treasury stock                               (1,203)          --
  Issuance of stock pursuant to
    stock option plan                                           --           27
  Dividends paid on common stock                            (1,324)        (313)
                                                         ---------     --------
          Net cash provided by
            financing activities                            63,953       43,410
                                                         ---------     --------

 (Decrease) increase in cash and
   cash equivalents                                        (20,247)      15,501
  Cash and cash equivalents at
    beginning of period                                     44,897       26,778
                                                         ---------     --------
  Cash and cash equivalents at
    end of period                                        $  24,650     $ 42,279
                                                         =========     ========

SUPPLEMENTAL INFORMATION                                 $   6,402     $  7,018
Interest paid
Income taxes paid                                            2,712        2,316
Decrease in due to brokers for
  securities purchased                                      10,495           --
Loans transferred to real estate owned                          --          171

See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>

Sound Federal Bancorp, Inc. and Subsidiary

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Reorganization and Stock Offering

      Initial Public Offering

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

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

      Second Step Conversion

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

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


                                       5
<PAGE>

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

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

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

2. Basis of Presentation

      The consolidated  financial  statements included herein have been prepared
by the Company  without  audit.  In the  opinion of  management,  the  unaudited
consolidated financial statements include all adjustments,  consisting of normal
recurring accruals,  necessary for a fair presentation of the financial position
and results of operations for the periods  presented.  Certain  information  and
footnote disclosures normally included in accordance with accounting  principles
generally  accepted  in the United  States of  America  have been  condensed  or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission;  however,  the Company believes that the disclosures are adequate to
make the  information  presented not misleading.  The operating  results for the
periods  presented are not necessarily  indicative of results to be expected for
any other interim period or for the entire fiscal year ending March 31, 2004.

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

      The unaudited interim  consolidated  financial statements presented herein
should be read in  conjunction  with the annual audited  consolidated  financial
statements of the Company for the fiscal year ended March 31, 2003,  included in
the Company's 2003 Annual Report on Form 10-K.

3. Stock-Based Compensation

      Statement of Financial  Accounting  Standards ("SFAS") No. 123, Accounting
for Stock-Based Compensation, encourages the use of a fair-value-based method of
accounting for employee stock compensation  plans, but permits the continued use
of the  intrinsic-value-based  method of  accounting  prescribed  by  Accounting
Principles Board ("APB") Opinion No. 25. Under SFAS No. 123, the grant-date fair
value of options is recognized as compensation  expense over the vesting period.
The Company has elected to continue to apply APB Opinion No. 25 and disclose the
pro forma  information  required by SFAS No. 123. Had  stock-based  compensation
expense been recognized in accordance with SFAS No. 123, the Company's


                                       6
<PAGE>

net income  and  earnings  per common  share  would  have been  adjusted  to the
following pro forma amounts:

<TABLE>
<CAPTION>
                                                                     Quarter Ended                        Six Months Ended
                                                                     September 30,                          September 30,
                                                             ------------------------------        ------------------------------
                                                                 2003              2002               2003               2002
                                                             -----------        -----------        -----------        -----------
                                                                          (In thousands, except per share data)
<S>                                                          <C>                <C>                <C>                <C>
Net income, as reported                                      $     1,650        $     2,030        $     3,367        $     4,191
Add RRP expense included in reported
   net income, net of related tax effects                             22                 22                 44                 44
Deduct RRP and stock option expense
   determined under the fair-value-based
   method, net of related tax effects                                (40)               (40)               (79)               (80)
                                                             -----------        -----------        -----------        -----------
Pro forma net income                                         $     1,632        $     2,012        $     3,332        $     4,155
                                                             ===========        ===========        ===========        ===========
Earnings per share:
   Basic, as reported                                        $      0.13        $      0.16        $      0.27        $      0.33
                                                             ===========        ===========        ===========        ===========
   Basic, pro forma                                          $      0.13        $      0.16        $      0.27        $      0.32
                                                             ===========        ===========        ===========        ===========
   Diluted, as reported                                      $      0.13        $      0.15        $      0.26        $      0.32
                                                             ===========        ===========        ===========        ===========
   Diluted, pro forma                                        $      0.13        $      0.15        $      0.26        $      0.32
                                                             ===========        ===========        ===========        ===========
</TABLE>

4. Earnings Per Share

      Earnings per share data for all periods have been  adjusted to reflect the
additional shares outstanding as a result of the offering and share exchange.

      Weighted  average  common  shares  used in  calculating  basic and diluted
earnings per share for the three months ended September 30, 2003 were 12,390,225
and 12,730,942, respectively. For the quarter ended September 30, 2002, weighted
average common shares used in calculating  basic and diluted  earnings per share
were 12,890,553 and 13,194,847, respectively.

      For the six months ended September 30, 2003,  weighted average shares used
in  calculating  basic and  diluted  earnings  per  share  were  12,402,521  and
12,740,223,  respectively.  For the six months ended  September  30,  2002,  the
respective weighted average shares were 12,888,286 and 13,173,252.

5. Allowance for Loan Losses

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

      Determining the allowance for loan losses involves significant  management
judgments utilizing the best information available.  Those judgments are subject
to further  review by  various  sources,  including  the  Company's  regulators.
Changes in the  allowance  may be  necessary  in the future  based on changes in
economic


                                       7
<PAGE>

and real estate market  conditions,  new  information  obtained  regarding known
problem loans, the identification of additional problem loans and other factors,
certain of which are outside of management's control.

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

<TABLE>
<CAPTION>
                                                          Quarter Ended                   Six Months Ended            Year Ended
                                                          September 30,                    September 30,               March 31,
                                                     -------------------------       --------------------------       ----------
                                                       2003             2002            2003             2002            2003
                                                     --------         --------        --------         --------        --------
                                                                                    (In thousands)
<S>                                                  <C>              <C>             <C>              <C>             <C>
Balance at beginning of period                       $  2,492         $  2,296        $  2,442         $  2,221        $  2,221
Provision for loan losses                                  75               50             125              125             275
Loans charged off                                          (5)              --              (5)              --             (54)
                                                     --------         --------        --------         --------        --------
Balance at end of period                             $  2,562         $  2,346        $  2,562         $  2,346        $  2,442
                                                     ========         ========        ========         ========        ========
</TABLE>

6. Borrowings

      The Company had the following outstanding borrowings from the Federal Home
Loan Bank (the "FHLB") at September 30, 2003:

                                                      Coupon Rate     Borrowings
                                                      -----------     ----------
Securities repurchase agreements maturing in:            (Dollars in thousands)
   January 2008(1)                                       5.42%          $10,000
   December 2008(1)                                      4.72             5,000
   March 2004                                            3.57             7,000
   March 2005                                            4.22             6,000
   March 2006                                            2.27             7,000
Short-term advances maturing in October 2003             1.18            20,000
                                                                        -------
   Total borrowings                                      3.05%          $55,000
                                                                        =======
Accrued interest payable                                                $   165

(1)   Callable Quarterly

      The  securities   transferred  to  the  FHLB  subject  to  the  repurchase
agreements include U.S. Government and agency securities available for sale with
a carrying value of $17.2 million and mortgage-backed  securities  available for
sale with a carrying value of $13.8 million.  Accrued interest receivable on the
securities was $225,000 at September 30, 2003.

7. Comprehensive Income

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


                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 Quarter Ended                  Six Months Ended
                                                                                 September 30,                   September 30,
                                                                            -----------------------         -----------------------
                                                                             2003            2002            2003            2002
                                                                            -------         -------         -------         -------
                                                                                                 (In thousands)
<S>                                                                         <C>             <C>             <C>             <C>
Net unrealized holding (loss) gain arising during
     the period on securities available for sale                            $(3,536)        $   580         $(3,167)        $ 1,603
Related deferred income tax effect                                            1,441            (224)          1,285            (620)
                                                                            -------         -------         -------         -------
Other comprehensive (loss) income                                           $(2,095)        $   356         $(1,882)        $   983
                                                                            =======         =======         =======         =======
</TABLE>

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

                                                       September 30,   March 31,
                                                           2003          2003
                                                       ------------    ---------
                                                            (In thousands)
Net unrealized holding gain on
  securities available for sale                          $   328        $ 3,495
Additional minimum pension liability                      (3,468)        (3,468)
Related deferred income taxes                              1,274            (11)
                                                         -------        -------
Accumulated other comprehensive
  (loss) income                                          $(1,866)       $    16
                                                         =======        =======

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

General

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

Forward-Looking Statements

      When used in this report on Form 10-Q,  the words or phrases  "will likely
result," "are  expected  to," "will  continue,"  "is  anticipated,"  "estimate,"
"project"  or similar  expressions  are  intended to  identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. Such statements reflect our current view with respect to future-looking
events and are  subject  to certain  risks


                                       9
<PAGE>

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.

Financial Condition

      Assets. The Company's total assets amounted to $851.0 million at September
30, 2003 as  compared to $796.1  million at March 31,  2003.  The $54.9  million
increase in total assets is due primarily to a $62.8 million, or 21.3%, increase
in securities  available for sale to $357.9 million, and a $9.5 million increase
in net loans to $437.2 million,  partially offset by a $22.4 million decrease in
federal  funds sold.  The asset growth was funded  primarily by a $49.1  million
increase  in  deposits  to  $653.4  million  and a  $20.0  million  increase  in
borrowings to $55.0  million  partially  offset by a $10.5  million  decrease in
amounts due to brokers for securities purchased.

      Liabilities.  Total deposits were $653.4 million at September 30, 2003, as
compared to $604.3 million at March 31, 2003.  Certificates of deposit increased
$24.8 million to $388.5 million from $363.7  million,  savings and club accounts
increased $9.0 million to $145.8 million from $136.8  million,  and money market
and NOW accounts  increased $15.4 million to $119.1 million from $103.7 million.
Borrowings  increased  $20.0  million to $55.0  million at September 30, 2003 as
compared to $35.0 million at March 31, 2003.

      Stockholders'  Equity.  Total  stockholders'  equity decreased $541,000 to
$137.8  million at September 30, 2003 as compared to $138.3 million at March 31,
2003.  The  decrease  reflects the  purchase of 77,000  shares of the  Company's
common  stock at a cost of $1.2  million,  dividends  paid of $1.3 million and a
decrease in accumulated other  comprehensive  income of $1.9 million,  partially
offset by net income of $3.4  million  and an  increase  in  additional  paid-in
capital  of  $178,000.  The  decrease  in  stockholders'  equity  attributed  to
accumulated  other  comprehensive  income  (loss)  is  primarily  due  to a  net
unrealized holding loss of $3.2 million on securities available for sale, less a
$1.3 million income tax effect.

      In July 2003, we announced the commencement of a stock repurchase  program
to  repurchase up to 530,482 (4%) of our  outstanding  shares of common stock in
order to provide  shares for  reissuance  upon  exercise  of  outstanding  stock
options. The timing of the repurchases will depend on certain factors, including
but not limited  to,  market  conditions  and prices,  the  Company's  liquidity
requirements and alternative uses of the Company's capital.

Comparison of Results of Operations for the Three Months Ended September 30,
2003 and 2002

      Net Income.  Net income  amounted to $1.7 million or diluted  earnings per
share of $0.13 for the quarter  ended  September  30, 2003,  as compared to $2.0
million or diluted  earnings per share of $0.15 for the quarter ended  September
30, 2002.  The decrease in net income for the current  quarter was due primarily
to a $439,000  increase in  non-interest  expense and a $63,000  decrease in net
interest  income,  partially  offset by a  decrease  of  $143,000  in income tax
expense.

      Interest Income.  Interest income  decreased  $526,000 to $9.3 million for
the quarter  ended  September 30, 2003, as compared to the same quarter in 2002.
The  decrease  is due to a 153 basis  point  decrease  in the  average  yield on
interest-earning  assets to 4.64%, partially offset by a $161.6 million increase
in average  interest-earning  assets to $792.1  million during the quarter ended
September  30, 2003 as compared  to $630.5


                                       10
<PAGE>

million  for the same  quarter in the prior  year.  The  increase in the average
balance  of  interest-earning  assets  was due  primarily  to a  $184.8  million
increase in the average balance of securities to $333.0 million partially offset
by a $13.0 million  decrease in the average  balance of loans to $427.2  million
and a  decrease  of $11.2  million in  Federal  funds  sold and other  overnight
deposits to $26.4 million. The increase in average  interest-earning  assets was
funded  principally by deposit growth in the Bank's  branches and the investment
of net proceeds from the Company's stock  offering.  The decrease in the average
yield on interest-earning assets reflects the origination of fixed-rate loans at
lower rates and the downward  repricing  of  adjustable-rate  securities  during
recent periods of declining interest rates.

      Loans.  Interest income on loans decreased $1.1 million, or 14.9%, to $6.5
million for the quarter ended September 30, 2003 as compared to $7.6 million for
the same quarter in 2002.  This decrease is due to a $13.0  million  decrease in
the average balance of loans to $427.2 million and an 84 basis point decrease in
the yield earned to 6.03%.

      The  decrease  in the  loan  portfolio  reflects  higher  refinancing  and
prepayment activity as a result of continued low market interest rates. The Bank
originated  $58.2  million of new loans during the quarter  ended  September 30,
2003 as compared to $37.7  million  for the same  quarter in the prior year.  In
addition,  $65.2 million of the Bank's existing  mortgage loans  refinanced with
the Bank to lower rates during the 2003 quarter.  These loans were originated at
rates lower than the yields being earned on the existing  loan  portfolio.  As a
result,  the average  yield earned on the loan  portfolio  decreased  during the
second quarter of fiscal 2004. The Bank has not historically sold mortgage loans
it originates.

      Mortgage-Backed   and  Other  Securities.   Interest  on   mortgage-backed
securities  increased  $662,000 to $2.1 million for the quarter ended  September
30, 2003, as compared to the same quarter in 2002,  due primarily to an increase
of $140.6 million in the average balance to $245.6 million,  partially offset by
a decrease of 226 basis  points in the average  yield to 3.46%.  The increase in
the average balance of mortgage-backed securities reflects the investment of the
net proceeds  from the  Company's  stock  offering as well as the  investment of
funds from deposit growth.  The decrease in the average yield is a result of the
downward  repricing  of  adjustable  rate  mortgage-backed  securities  and  the
accelerated  amortization  of purchase  premiums as a result of  prepayments  on
mortgage-backed  securities.  In  addition,  new  purchases  of  mortgage-backed
securities are at lower rates than the existing portfolio.

      Interest on other securities increased $37,000 to $531,000 for the quarter
ended  September  30, 2003,  as compared to the same  quarter in 2002,  due to a
$44.2  million  increase in the  average  balance of other  securities  to $87.4
million,  partially offset by a 213 basis point decrease in the average yield to
2.41%.  The  decrease in the average  yield is the result of the  continued  low
market interest rates.

      Federal  Funds Sold and Other  Overnight  Deposits.  For the quarter ended
September 30, 2003,  interest on Federal funds sold and other overnight deposits
decreased  $81,000 to  $46,000,  reflecting  an $11.2  million  decrease  in the
average  balance to $26.4  million and a 65 basis point  decrease in the average
yield earned to 0.69%.  The  decrease in the average  yield is the result of the
continued low market interest rates.

      Other  Earning  Assets.  The Company had an  investment of $5.3 million in
FHLB of New  York  common  stock at  September  30,  2003.  The FHLB of New York
reported that it suspended  the October  dividend  payment on this stock.  While
this  announcement had no impact on the Company's  results through September 30,
2003,  earnings before tax for the quarter ending December 31, 2003, compared to
the same quarter a year ago, will be reduced by  approximately  $57,000.  Future
earnings  will be  impacted  to the  extent  the  FHLB  continues  the  dividend
suspension or reduces the dividend amount from that previously paid.

      Interest  Expense.  Interest  expense for the quarter ended  September 30,
2003 totaled  $3.1  million,  as compared to $3.5 million for the quarter  ended
September  30,  2002.  The  average  balance  of  interest-bearing   liabilities
increased  $82.6 million to $666.8  million for the quarter ended  September 30,
2003 from  $584.2  million  for the same  quarter in the prior  year,  while the
average  cost of these  liabilities  decreased  58 basis  points to  1.82%.  The
increase in the average balance of interest-bearing liabilities includes deposit
growth in the Somers  branch,  which  opened in July 2002,  and in the  Stamford
branch,  which  opened in  September  2003,


                                       11
<PAGE>

as well as growth in the existing branches.  The decrease in the average cost of
liabilities  is the result of declining  market  interest  rates  during  recent
periods.

      Interest  expense on time  deposits  totaled  $2.3 million for the current
quarter as compared to $2.6 million for the same  quarter in 2002.  The decrease
is due  primarily  to a 67 basis point  decrease  in the  average  cost to 2.42%
partially  offset by a $48.3  million  increase in the  average  balance of time
deposits to $380.6  million from $332.3  million for the same quarter last year.
The  increase in the average  balance  includes  growth in the Bank's new branch
offices as well as in existing branches.

      Interest  expense on savings  accounts  totaled  $221,000  for the current
quarter as compared to $330,000 for the quarter ended  September 30, 2002.  This
decrease  is the result of a 44 basis  point  decrease  in the  average  cost of
savings  accounts to 0.61% partially  offset by a $19.6 million  increase in the
average balance of savings accounts to $144.7 million.

      Interest  expense  on other  deposits  (NOW  and  money  market  accounts)
amounted to $125,000  for the quarter  ended  September  30, 2003 as compared to
$188,000 for the same quarter in the prior year.  The average cost  decreased 35
basis points to 0.52% and the average  balance of these accounts  increased $8.6
million to $95.3 million.

      For the quarter ended September 30, 2003,  interest  expense on borrowings
amounted to $384,000 as compared to $411,000  for the same  quarter in the prior
year.  The  average  balance of  borrowings  for the  current  quarter was $42.0
million and the average  cost was 3.63%.  For the quarter  ended  September  30,
2002,  the average  balance of borrowings was $35.0 million and the average rate
was 4.66%.

      Net Interest  Income.  Net interest income for the quarter ended September
30, 2003  amounted to $6.2 million,  a $63,000  decrease from the same period in
the prior year.  The  interest  rate spread was 2.82% and 3.77% for the quarters
ended  September 30, 2003 and 2002,  respectively.  The net interest  margin for
those periods was 3.11% and 3.94%, respectively.  The decreases in interest rate
spread  and net  interest  margin  are  primarily  the  result of the  effect of
mortgage  refinancings and lower returns on our investment portfolio as interest
rates  remained at 40 year lows. If interest rates remain at these low levels or
decrease  further,  mortgage  refinancings  may continue to adversely affect the
Company's interest rate spread and net interest margin. The decrease in interest
rate spread and net interest margin was  substantially  offset by an increase in
the ratio of interest-earning assets to interest-bearing liabilities to 1.19 for
the 2003 quarter from 1.08 for the 2002 quarter. This increase was due primarily
to the  investment of proceeds from the Company's  stock  offering  completed in
January 2003 in  connection  with the second step  conversion.  For  information
concerning  the second  step  conversion,  see Note 1 of the Notes to  Unaudited
Consolidated Financial Statements in this report.

      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  90.3% of total loans at September 30, 2003,
are generally  evaluated on an aggregate or "pool" basis. Our allowance for loan
losses is  predominately  determined on a pool basis by applying loss factors to
the current  balances  of the  various  loan  categories.  The loss  factors are
determined  by  management  based  on  an  evaluation  of  our  historical  loss
experience,  delinquency trends,  volume and type of lending conducted,  and the
impact of current economic conditions in our market area.

      The provision for loan losses was $75,000 for the quarter ended  September
30,  2003 as  compared to $50,000 for the  quarter  ended  September  30,  2002.
Non-performing  loans  amounted  to $1.8  million  or 0.40%  of  total  loans at
September 30, 2003, as compared to $876,000 or 0.20% of total loans at September
30, 2002.  The increase in  non-performing  loans is primarily the result of the
delinquency  of one  borrower's  mortgage  and home  equity  loans  which  total
$811,000.  The loans are secured by a single family home with a loan to value of
less than 60%. The allowance  for loan losses  amounted to $2.6 million and $2.4
million at  September


                                       12
<PAGE>

30, 2003 and March 31, 2003,  respectively.  Charge-offs  amounted to $5,000 for
the quarter ended September 30, 2003 (none for the 2002 quarter).

      Non-Interest Income. Non-interest income totaled $228,000 and $224,000 for
the quarters ended  September 30, 2003 and 2002,  respectively.  The increase in
non-interest  income was  primarily  due to higher levels of income from service
charges on deposit  accounts,  late charges on loans and various  other  service
fees.

      Non-Interest  Expense.  Non-interest  expense totaled $3.6 million for the
quarter  ended  September  30, 2003 as compared to $3.2  million for the quarter
ended  September  30,  2002.  This  increase is due  primarily  to  increases of
$383,000 in  compensation  and  benefits,  $199,000 in occupancy  and  equipment
expense and $67,000 in other non-interest expense, partially offset by decreases
of $69,000 in data  processing  service  fees and  $141,000 in  advertising  and
promotion expense.

      The increase in  compensation  and benefits is primarily due to a $216,000
increase in  compensation  costs and a $115,000  increase in ESOP  expense.  The
increase in compensation expense is due primarily to normal salary increases and
increases in staff to support the growth in the Company's lending operations and
for the  Stamford  branch,  which  opened  in  September  2003.  Our  full  time
equivalent  employees  were  114  and  103  at  September  30,  2003  and  2002,
respectively.  The  increase in ESOP  expense  reflects  the  increase in shares
committed to be released for allocation following the second-step conversion and
the  increase  in the  market  value of those  shares.  Compensation  expense is
recognized  for the ESOP  equal to the fair  value  of  shares  committed  to be
released for allocation to participant accounts. The difference between the fair
value at that  time and the  ESOP's  original  acquisition  cost is  charged  or
credited to stockholders' equity. For the quarter ended September 30, 2003, this
difference  amounted to a credit of $106,000 as compared to $69,000 for the same
period in 2002.

      Income Taxes. Income tax expense amounted to $1.1 million and $1.2 million
for the quarters ended September 30, 2003 and 2002, respectively.  The effective
tax rates for those same periods were 39.1% and 37.2%, respectively.

Comparison of Results of Operations for the Six Months Ended September 30, 2003
and 2002

      Net Income.  Net income  amounted to $3.4 million or diluted  earnings per
share of $0.26 for the six months ended  September 30, 2003, as compared to $4.2
million or diluted  earnings per share of $0.32 for the same period in the prior
year. The decrease in net income for the six months ended September 30, 2002 was
due to an increase of $1.6 million in non-interest expense,  partially offset by
increases of $182,000 in net interest income and $119,000 in non-interest income
and a decrease of $455,000 in income tax expense.

      Interest Income.  Interest income totaled $19.1 million for the six months
ended  September  30, 2003,  as compared to $19.6 million for the same period in
the prior  year.  The  decrease in  interest  income  reflects a 148 basis point
decrease in the average  yield on  interest-earning  assets to 4.86% from 6.34%,
partially  offset by an increase of $165.3  million in average  interest-earning
assets to $781.7  million as compared  to $616.4  million for the same period in
the prior year. The increase in the average balance of  interest-earning  assets
was due  primarily to increases of $167.6  million in  securities  available for
sale and $5.4  million  in  federal  funds  sold and other  overnight  deposits,
partially  offset by an $8.5  million  decrease  in loans.  The  decrease in the
average yield on interest-earning  assets reflects the origination of fixed-rate
loans and the  repricing  of our  adjustable-rate  securities  portfolio  during
periods of declining interest rates.

      Loans.  For the six months ended  September 30, 2003,  interest  income on
loans amounted to $13.3 million as compared to $15.2 million for the same period
in the prior year.  This  decrease  was due to a decrease of $8.5 million in the
average  balance of loans to $424.9 million and a 79 basis point decrease in the
yield earned to 6.22% from 7.01%.

      The decrease in the loan  portfolio is  principally  a result of increased
principal  prepayments as a result of continued low market  interest  rates.  We
originated $102.5 million of new loans during the six months ended September 30,
2003. In addition,  $100.9 million of existing  mortgage  loans were  refinanced
with us. These loans were originated at rates lower than the yields being earned
on the existing loan portfolio. As a


                                       13
<PAGE>

result,  the decline in average yield earned on the loan portfolio  continued in
the  first  six  months of fiscal  2004.  The  yield on the loan  portfolio  may
decrease further until market interest rates begin to increase.

      Mortgage-Backed   and  Other  Securities.   Interest  on   mortgage-backed
securities for the six months ended September 30, 2003 increased $1.3 million to
$4.3  million as compared to $3.0 million for the same period in the prior year.
The increase was due to an increase of $127.6 million in the average  balance to
$228.9 million partially offset by a decrease of 222 basis points in the average
yield  to  3.74%  from  5.96%.   The   increase   in  the  average   balance  of
mortgage-backed  securities reflects the investment of the net proceeds from the
Company's stock offering as well as the investment of funds from deposit growth.
The  decrease  in the average  yield is a result of the  downward  repricing  of
adjustable rate mortgage-backed  securities and the accelerated  amortization of
purchase premiums as a result of prepayments on mortgage-backed  securities.  In
addition,  new purchases of  mortgage-backed  securities are at lower rates than
the existing portfolio.

      For the six months ended September 30, 2003,  interest on other securities
increased  $198,000 to $1.2  million as  compared  to $1.0  million for the same
period in the prior year.  The increase was due to an increase of $39.9  million
in the average  balance to $83.7 million for the six months ended  September 30,
2003, partially offset by a decrease in the average yield of 175 basis points to
2.91% from 4.66%.

      Federal Funds Sold and Other Overnight Deposits.  For the six months ended
September  30,  2003,  interest on federal  funds and other  overnight  deposits
decreased  $58,000 to  $174,000,  reflecting  a 49 basis  point  decrease in the
average yield to 0.90%,  partially  offset by an increase of $5.4 million in the
average  balance to $38.7  million.  The  decrease in the  average  yield is the
result of the continued low market interest rates.

      Interest  Expense.  For the six months ended September 30, 2003,  interest
expense on interest-bearing  liabilities  decreased $722,000 to $6.3 million, as
compared to $7.1  million  for the six months  ended  September  30,  2002.  The
decrease in interest expense was due to a 53 basis point decrease in the average
cost of these  liabilities to 1.92% from 2.45%,  partially offset by an increase
of $83.6  million in the  average  balance of  interest-bearing  liabilities  to
$656.8 million.

      For  the  six  months  ended  September  30,  2003,  interest  expense  on
certificates of deposit amounted to $4.7 million as compared to $5.1 million for
the same  period in the prior  year.  The  decrease  was due to a 66 basis point
decrease  in the  average  cost to 2.48%,  partially  offset by a $53.2  million
increase in the average  balance of certificates of deposit to $379.6 million as
compared to $326.4 million for the same period in the prior year.

      For the six months ended September 30, 2003,  interest on savings accounts
decreased $136,000 to $504,000 as compared to the same period in the prior year.
The  average  cost of  savings  accounts  decreased  34  basis  points  to 0.71%
partially  offset by an  increase  of $20.4  million in the  average  balance of
savings accounts to $142.3 million.

      For the six months ended  September  30, 2003,  interest  expense on other
deposits amounted to $313,000 as compared to $403,000 for the same period in the
prior year.  The average  cost of these  accounts  decreased  27 basis points to
0.67%, partially offset by an increase of $7.4 million in the average balance of
these accounts to $92.6 million.

      For  the  six  months  ended  September  30,  2003,  interest  expense  on
borrowings was $749,000 as compared to $827,000 for the same period in the prior
year. The decrease in interest expense was due to a decrease in the average cost
of  borrowings of 83 basis points to 3.89%,  partially  offset by a $3.5 million
increase in the average balance of borrowings to $38.4 million.

      Net Interest  Income.  For the six months ended  September  30, 2003,  net
interest  income  amounted to $12.7 million as compared to $12.6 million for the
same period in the prior year.  The interest rate spread was 2.94% and 3.89% and
the net  interest  margin was 3.25% and 4.06% for the  respective  periods.  The
decreases in interest  rate spread and net  interest  margin are  primarily  the
result  of  the  effect  of  mortgage  refinancings  and  lower  returns  on our
investment  portfolio as interest  rates  remained at 40 year lows.  If interest
rates remain at


                                       14
<PAGE>

these low levels or decrease  further,  mortgage  refinancings  may  continue to
adversely affect the Company's interest rate spread and net interest margin. The
decrease  in  interest  rate spread and net  interest  margin was  substantially
offset   by  an   increase   in  the   ratio  of   interest-earning   assets  to
interest-bearing liabilities to 1.19 for the six months ended September 30, 2003
from 1.08 for the comparable 2002 period. This increase was due primarily to the
investment  of net  proceeds  from the  Company's  stock  offering  completed in
January 2003.

      Provision for Loan Losses.  The provision for loan losses was $125,000 for
each of the six month periods. Non-performing loans amounted to $1.8 million, or
0.40%, of total loans at September 30, 2003, as compared to $876,000,  or 0.20%,
of total loans at September 30, 2002.  The increase in  non-performing  loans is
primarily  the result of the  delinquency  of one  borrower's  mortgage and home
equity loans which total $811,000. The loans are secured by a single family home
with a loan to value of less than 60%. The allowance for loan losses amounted to
$2.6 million or 0.58% of total loans at  September  30, 2002 and $2.3 million or
0.53% of total loans at March 31, 2003.  Charge-offs  amounted to $5,000 for the
six months ended September 30, 2003 (none for same period in 2002).

      Non-Interest  Income.   Non-interest  income  for  the  six  months  ended
September  30, 2003 totaled  $513,000 as compared to $394,000 for the six months
ended September 30, 2002, and included service fees of $513,000 and $381,000 for
the respective periods. The increase in non-interest income was primarily due to
higher levels of income from service charges on deposit  accounts,  late charges
on loans and various other service fees.

      Non-Interest  Expense.  For the  six  months  ended  September  30,  2003,
non-interest  expense increased $1.5 million to $7.6 million as compared to $6.1
million for the same period in the prior year.  This  increase was due primarily
to increases of $947,000 in compensation and benefits, $317,000 in occupancy and
equipment expense, $125,000 in advertising and promotion expense and $247,000 in
other non-interest expense.

      The increase in  compensation  and benefits is primarily due to a $460,000
increase in  compensation  costs and a $225,000  increase in ESOP  expense.  The
increase in compensation expense is due primarily to normal salary increases and
increases in staff to support the growth in the Company's lending operations and
for the Somers branch, which opened in July 2002, and the Stamford branch, which
opened in September 2003. The increase in ESOP expense  reflects the increase in
shares  committed to be released for  allocation as a result of the  second-step
conversion  and the increase in the market value of those  shares.  Compensation
expense is recognized  for the ESOP equal to the fair value of shares  committed
to be released for allocation to participant  accounts.  The difference  between
the fair value at that time and the ESOP's original  acquisition cost is charged
or credited to  stockholders'  equity.  For the six months ended  September  30,
2003, this  difference  amounted to a credit of $178,000 as compared to $108,000
for the same period in 2002.

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

      Income  Taxes.  For the six months ended  September  30, 2003,  income tax
expense amounted to $2.1 million and $2.6 million,  respectively.  The effective
tax rates for those same periods were 38.7% and 38.1%, respectively.

Liquidity and Capital Resources

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

      The Company's primary investing activities are the origination of mortgage
loans,  and the purchase of  short-term  investments,  government  agency bonds,
adjustable-rate   mortgage-backed   securities  and  fixed-rate   collateralized
mortgage  obligations.  These  activities are funded primarily by deposit growth
and  principal


                                       15
<PAGE>

repayments on loans, mortgage-backed securities and other investment securities.
For the six months  ended  September  30,  2003,  the Company  originated  loans
totaling  $102.5  million and  purchased  $171.2  million of  securities.  These
disbursements were funded by $94.4 million in principal payments, maturities and
calls of securities and $92.3 million in loan principal repayments. For the year
ended  March 31,  2003,  the  Company  originated  $216.3  million  of loans and
purchased $229.7 million of securities.

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

      At September 30, 2003,  the Company had  outstanding  loan  commitments of
$79.1  million.  The  Company  anticipates  that it will have  sufficient  funds
available  to meet its current  loan  commitments.  Time  deposits  scheduled to
mature in one year or less from  September  30, 2003,  totaled  $268.5  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 multiply its assets and certain  off-balance  sheet items by  risk-weights,
which  range  from 0% for cash  and  obligations  issued  by the  United  States
Government  or its  agencies  to 100% for  consumer  and  commercial  loans,  as
assigned  by the OTS  capital  regulations.  At  September  30,  2003,  the Bank
exceeded  all of the  OTS  minimum  regulatory  capital  requirements,  and  was
classified as a well-capitalized institution for regulatory purposes.

      The  following  table sets forth the  capital  position  of the Bank as of
September 30, 2003 and March 31, 2003. The actual capital amounts and ratios set
forth below are for the Bank only and,  accordingly,  do not include  additional
capital retained by Sound Federal Bancorp, Inc.

<TABLE>
<CAPTION>
                                                                                                 OTS Requirements
                                                                              ----------------------------------------------------
                                                                                     Minimum                Classification as Well
                                                       Bank Actual               Capital Adequacy                Capitalized
                                                ------------------------      ----------------------       -----------------------
                                                 Amount           Ratio        Amount         Ratio         Amount          Ratio
                                                --------         -------      --------       -------       --------        -------
                                                                         (Dollars in thousands)
<S>                                             <C>               <C>         <C>               <C>        <C>                <C>
September 30, 2003
Tangible capital                                $90,776           10.8%       $12,580           1.5%       $41,932            5.0%
Tier I (core) capital                            90,776           10.8         33,547           4.0         50,318            6.0
Risk-based capital:
     Tier I                                      90,776           24.6
     Total                                       93,338           25.3         29,543           8.0         36,928           10.0

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


                                       16
<PAGE>

Recent Accounting Standards and Interpretations

      SFAS No. 149,  Amendment of Statement  133 on Derivative  Instruments  and
Hedging  Activities,  was  issued in April 2003 to clarify  the  application  of
certain  aspects of the accounting for these  instruments  and  activities.  The
adoption of SFAS No. 149, which is generally  effective for  transactions  after
June 30, 2003, did not affect our consolidated financial statements.

      SFAS  No.  150,   Accounting  for  Certain   Financial   Instruments  with
Characteristics  of Both  Liabilities and Equity,  was issued in May 2003. Under
the  Statement,   certain   freestanding   financial   instruments  that  embody
obligations  for the  issuer  and that are now  classified  in  equity,  must be
classified as liabilities (or as assets in some circumstances).  Generally, SFAS
No.150 is effective for financial instruments entered into or modified after May
31, 2003 and is otherwise effective at the beginning of the first interim period
beginning  after June 15,  2003.  Adoption of this  standard  did not affect our
consolidated financial statements.

      In January  2003,  the FASB issued FIN No. 46,  Consolidation  of Variable
Interest  Entities,  to  provide  guidance  on the  identification  of  entities
controlled  through means other than voting  rights.  FIN No. 46 specifies how a
business  enterprise should evaluate its interests in a variable interest entity
to determine whether to consolidate that entity. A variable interest entity must
be  consolidated  by its primary  beneficiary if the entity does not effectively
disperse  risks among the parties  involved.  A public  company  with a variable
interest in an entity created  before  February 1, 2003 must apply FIN No. 46 to
that  variable  interest  in the first  interim or annual  period  ending  after
December  15,  2003.  The  adoption  of FIN  No.  46 is not  expected  to have a
significant effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

      The Company's most  significant form of market risk is interest rate risk,
as the majority of the Company's assets and liabilities are sensitive to changes
in interest rates. The Company's assets consist primarily of fixed rate mortgage
loans, which have longer maturities than the Company's liabilities which consist
primarily  of  deposits.  The  Company's  mortgage  loan  portfolio,  consisting
primarily of loans secured by residential  real property  located in Westchester
County,  New York and Fairfield  County,  Connecticut,  is also subject to risks
associated with the local economy.  The Company does not own any trading assets.
At September  30,  2003,  the Company did not have any hedging  transactions  in
place,  such as interest rate swaps and caps.  The Company's  interest rate risk
management  program focuses primarily on evaluating and managing the composition
of the Company's  assets and liabilities in the context of various interest rate
scenarios.  Factors beyond management's  control,  such as market interest rates
and competition, also have an impact on interest income and interest expense.

      During the quarter  ended  September 30, 2003,  there were no  significant
changes in the Company's assessment of market risk.

Item 4. Controls and Procedures

      The Company's management,  including the Chief Executive Officer and Chief
Financial  Officer,  evaluated the  effectiveness of the design and operation of
the Company's  disclosure  controls and procedures (as defined in Rule 13a-14(c)
under the Securities  Exchange Act of 1934, as amended) (the "Exchange  Act") as
of September 30, 2003 (the "Evaluation Date").  Based upon that evaluation,  the
Company's management,  including the Chief Executive Officer and Chief Financial
Officer,  concluded  that, as of the Evaluation  Date, the Company's  disclosure
controls and procedures  were effective in timely  alerting them to any material
information relating to the Company and its subsidiaries required to be included
in the Company's Exchange Act filings.


                                       17
<PAGE>

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


                                       18
<PAGE>

Part II--OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 2. Changes in Securities and Use of Proceeds

      None

Item 3. Defaults upon Senior Securities

      None

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

      The Company held its Annual  Meeting of  Stockholders  on August 14, 2003.
The purpose of the meeting was the  election of three  directors  of the Company
and the  ratification of the appointment of KPMG LLP as auditors for the Company
for the fiscal  year  ending  March 31,  2004.  The results of the votes were as
follows:

      Proposal 1 - Election of Directors

                                                   For             Withheld
                                                   ---             --------
      Donald H. Heithaus                       11,152,068          449,377
      Joseph A. Lanza                          11,167,519          433,926
      Roberta I. Bernhardt                     10,971,762          629,683

      Proposal 2 - Ratification of Appointment of KPMG LLP

                              For               Against            Abstain
                          ----------            -------            -------
                          11,453,248            114,039             34,158

Item 5. Other Information

      None

Item 6.  Exhibits and Reports on Form 8-K

      (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.


                                       19
<PAGE>

      (d) Reports on Form 8-K

          The  Company  filed a Form 8-K on July 29,  2003  that  contained  the
          Company's news release announcing  earnings for the quarter and fiscal
          year ended March 31, 2003.

          The Company filed a Form 8-K on September 15, 2003 that  contained the
          Company's  news  release  announcing  that  management  was  making  a
          presentation to investors.


                                       20
<PAGE>

                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

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

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

November 12, 2003


                                       21