UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-Q
 
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 For the
quarterly period ended March 31, 2008
 
 OR
  o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 Commission
File Number 000-51208
 
 BROOKLYN FEDERAL BANCORP,
INC.
 (Exact
name of registrant as specified in its charter)
 
 Federal
              20-2659598(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      Number)81 Court Street
      Brooklyn, New York
              11201(Address
      of principal executive offices)
              (Zip
      Code)
 
 Registrant’s
telephone number, including area code (718) 855-8500.
 
 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 12 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 o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 Large
      Accelerated Filer
              o
              Accelerated
      Filer
              oNon-accelerated
      Filer
              o
              Smaller
      Reporting Company
              x
 
 Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).YES o    NO x
  Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the last practicable date.
 
 Class
              Outstanding
      at May 12, 2008Common
      Stock,  $.01 Par Value
              13,226,921
  
  BROOKLYN
FEDERAL BANCORP, INC.
 
 Form
10-Q Quarterly Report
 
 Table
of Contents
 
 
 PART
I.
 
 Page
      NumberItem
      1.
              Financial
      Statements
              1Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              9Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              19Item
      4.
              Controls
      and Procedures
              20PART
      II.Item
      1.
              Legal
      Proceedings
              20Item
      1A.
              Risk
      Factors
              20Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              20Item
      3.
              Defaults
      Upon Senior Securities
              21Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              21Item
      5.
              Other
      Information
              22Item
      6.
              Exhibits
              22Signature
      Page
              23









PART
I
 
 ITEM
1.                      FINANCIAL
STATEMENTS
 
 BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
 (In
thousands, except share and per share amounts)
 (Unaudited)
 
 Assets
              
              March
      31,
                  2008
              
              
              September
      30, 2007Cash
      and due from banks (including interest-earning balances of $2,325 and
      $2,442, respectively)
              
              $
              4,732
              
              
              $
              5,398Certificates
      of deposit
              
              
              3,096
              
              
              
              3,890Securities
      available-for-sale
              
              
              4,630
              
              
              
              4,601Securities
      held-to-maturity:Mortgage-backed
      securities (estimated fair value of $72,425 and $72,030,
      respectively)
              
              
              74,332
              
              
              
              73,352Other
      (estimated fair value of $1 and $2, respectively)
              
              
              1
              
              
              
              2Loans
      held-for-sale
              
              
              81,447
              
              
              
              59,153Loans
      receivable
              
              
              233,792
              
              
              
              227,273Less:
      Allowance for loan losses
              
              
              1,926
              
              
              
              1,806Loans
      receivable, net
              
              
              231,866
              
              
              
              225,467Federal
      Home Loan Bank (“FHLB”) of New York stock, at cost
              
              
              1,733
              
              
              
              1,032Accrued
      interest receivable
              
              
              2,184
              
              
              
              2,305Premises
      and equipment, net
              
              
              1,620
              
              
              
              1,019Bank
      owned life insurance
              
              
              9,155
              
              
              
              8,961Prepaid
      expenses and other assets
              
              
              4,766
              
              
              
              5,254Total
      assets
              
              $
              419,562
              
              
              $
              390,434Liabilities
      and Stockholders’ EquityLiabilities:Deposits:Non-interest-bearing
      deposits
              
              $
              16,513
              
              
              $
              16,000Interest-bearing
      deposits
              
              
              112,391
              
              
              
              108,307Certificates
      of deposit
              
              
              173,869
              
              
              
              162,848Total
      deposits
              
              
              302,773
              
              
              
              287,155Borrowings:Short-term
      FHLB of New York advances
              
              
              20,389
              
              
              
              7,332Long-term
      FHLB of New York advances
              
              
              1,500
              
              
              
              1,939Advance
      payments by borrowers for taxes and insurance
              
              
              2,568
              
              
              
              2,441Accrued
      expenses and other liabilities
              
              
              5,724
              
              
              
              6,308Total
      liabilities
              
              
              332,954
              
              
              
              305,175Stockholders’
      equity:Preferred
      stock, $0.01 par value, 1,000,000 shares authorized;none
      issued
              
              
              —
              
              
              
              —Common
      stock, $0.01 par value, 20,000,000 shares authorized;13,484,210
      and 13,484,210 issued and 13,233,251 and 13,311,483 outstanding,
      respectively
              
              
              135
              
              
              
              135Additional
      paid-in capital
              
              
              42,849
              
              
              
              42,758Retained
      earnings - substantially restricted
              
              
              50,570
              
              
              
              48,379Treasury
      shares - at cost, 250,959 shares and 172,727 shares,
      respectively
              
              
              (3,515
              )
              
              
              (2,468
              )Unallocated
      common stock held by employee stock ownership plan
(“ESOP”)
              
              
              (2,632
              )
              
              
              (2,711
              )Unallocated
      shares of the stock-based incentive plan
              
              
              (685
              )
              
              
              (774
              )Accumulated
      other comprehensive loss:Net
      unrealized loss on securities available-for-sale, net of income
      tax
              
              
              (114
              )
              
              
              (60
              )Total
      stockholders’ equity
              
              
              86,608
              
              
              
              85,259Total
      liabilities and stockholders’ equity
              
              $
              419,562
              
              
              $
              390,434
  See
accompanying notes to consolidated financial statements.


1








BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF INCOME
 (In
thousands, except share and per share amounts)
 (Unaudited)
 
 For
      the Three Months Ended
                  March
      31,
              
              
              For
      the Six Months Ended
                  March
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007Interest
      income:First
      mortgage and other loans
              
              $
              5,815
              
              
              $
              5,962
              
              
              $
              11,541
              
              
              $
              12,028Mortgage-backed
      securities
              
              
              856
              
              
              
              872
              
              
              
              1,659
              
              
              
              1,748Other
      securities and interest-earning assets
              
              
              162
              
              
              
              210
              
              
              
              333
              
              
              
              415Total
      interest income
              
              
              6,833
              
              
              
              7,044
              
              
              
              13,533
              
              
              
              14,191Interest
      expense:Deposits
              
              
              2,394
              
              
              
              2,279
              
              
              
              4,917
              
              
              
              4,445Borrowings
              
              
              187
              
              
              
              379
              
              
              
              304
              
              
              
              996Total
      interest expense
              
              
              2,581
              
              
              
              2,658
              
              
              
              5,221
              
              
              
              5,441Net
      interest income before provision for loan losses
              
              
              4,252
              
              
              
              4,386
              
              
              
              8,312
              
              
              
              8,750Provision
      for (recovery of) loan losses
              
              
              52
              
              
              
              (13
              )
              
              
              120
              
              
              
              4Net
      interest income after provision for (recovery of) loan
    losses
              
              
              4,200
              
              
              
              4,399
              
              
              
              8,192
              
              
              
              8,746Non-interest
      income:Banking
      fees and service charges
              
              
              562
              
              
              
              452
              
              
              
              1,032
              
              
              
              1,065Net
      gain on sale of loans held-for-sale
              
              
              171
              
              
              
              —
              
              
              
              223
              
              
              
              12Other
              
              
              150
              
              
              
              147
              
              
              
              310
              
              
              
              307Total
      non-interest income
              
              
              883
              
              
              
              599
              
              
              
              1,565
              
              
              
              1,384Non-interest
      expense:Compensation
      and fringe benefits
              
              
              1,830
              
              
              
              4,815
              
              
              
              3,716
              
              
              
              6,359Occupancy
      and equipment
              
              
              341
              
              
              
              268
              
              
              
              676
              
              
              
              542Professional
      fees
              
              
              58
              
              
              
              149
              
              
              
              197
              
              
              
              258Data
      processing fees
              
              
              121
              
              
              
              171
              
              
              
              268
              
              
              
              335Other
              
              
              319
              
              
              
              319
              
              
              
              624
              
              
              
              626Total
      non-interest expense
              
              
              2,669
              
              
              
              5,722
              
              
              
              5,481
              
              
              
              8,120Income
      (loss) before income tax expense (benefit)
              
              
              2,414
              
              
              
              (724
              )
              
              
              4,276
              
              
              
              2,010Income
      tax expense (benefit)
              
              
              921
              
              
              
              (407
              )
              
              
              1,610
              
              
              
              639Net
      income (loss)
              
              $
              1,493
              
              
              $
              (317
              )
              
              $
              2,666
              
              
              $
              1,371Earnings
      (loss) per common share:Basic
              
              $
              0.12
              
              
              $
              (0.02
              )
              
              $
              0.21
              
              
              $
              0.10Diluted
              
              $
              0.12
              
              
              $
              (0.02
              )
              
              $
              0.21
              
              
              $
              0.10Average
      common shares outstanding:Basic
              
              
              12,936,440
              
              
              
              13,083,941
              
              
              
              12,944,457
              
              
              
              13,086,165Diluted
              
              
              12,936,440
              
              
              
              13,083,941
              
              
              
              12,944,457
              
              
              
              13,802,232
 
 See
accompanying notes to consolidated financial statements.


2






BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 (In
thousands, except for per share amounts)
 (Unaudited)
  Common
      Stock
              
              
              Additional
      Paid-in Capital
              
              
              Retained
      Earnings-Substantially Restricted
              
              
              Treasury
      Stock
              
              
              Unallocated
      Common Stock Held by ESOP
              
              
              Unallocated
      Shares of the Stock-based Incentive Plan
              
              
              Accumulated
      Other Comprehensive Loss
              
              
              TotalBalance
      September 30, 2006
              
              $
              132
              
              
              $
              37,799
              
              
              $
              44,946
              
              
              $
              —
              
              
              $
              (2,870
              )
              
              $
              —
              
              
              $
              (44
              )
              
              $
              79,963Comprehensive
      income:Net
      income
              
              
              —
              
              
              
              —
              
              
              
              1,371
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,371Net
      unrealized loss on securities
                available-for-sale
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (6
              )
              
              
              (6
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,365Treasury
      stock purchased (22,000 shares)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (312
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (312
              )Allocation
      of ESOP stock
              
              
              —
              
              
              
              26
              
              
              
              —
              
              
              
              —
              
              
              
              80
              
              
              
              —
              
              
              
              —
              
              
              
              106Stock-based
      incentive plan expense (259,210 shares)
              
              
              2
              
              
              
              4,113
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (905
              )
              
              
              —
              
              
              
              3,210Dividends
      paid on common stock,$0.03
      per share
              
              
              —
              
              
              
              —
              
              
              
              (125
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (125
              )Balance
      March 31, 2007
              
              $
              134
              
              
              $
              41,938
              
              
              $
              46,192
              
              
              $
              (312
              )
              
              $
              (2,790
              )
              
              $
              (905
              )
              
              $
              (50
              )
              
              $
              84,207Balance
      September 30, 2007
              
              $
              135
              
              
              $
              42,758
              
              
              $
              48,379
              
              
              $
              (2,468
              )
              
              $
              (2,711
              )
              
              $
              (774
              )
              
              $
              (60
              )
              
              $
              85,259Comprehensive
      income:Net
      income
              
              
              —
              
              
              
              —
              
              
              
              2,666
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,666Net
      unrealized loss on securities available-for-sale
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (54
              )
              
              
              (54
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,612Treasury
      stock purchased (78,232 shares)
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (1,047
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (1,047
              )Allocation
      of ESOP stock
              
              
              —
              
              
              
              24
              
              
              
              3
              
              
              
              —
              
              
              
              79
              
              
              
              —
              
              
              
              —
              
              
              
              106Stock-based
      incentive plan expense (259,210 shares)
              
              
              —
              
              
              
              67
              
              
              
              3
              
              
              
              —
              
              
              
              —
              
              
              
              89
              
              
              
              —
              
              
              
              159Dividends
      paid on common stock, $0.12 per share
              
              
              —
              
              
              
              —
              
              
              
              (481
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (481
              )Balance
      March 31, 2008
              
              $
              135
              
              
              $
              42,849
              
              
              $
              50,570
              
              
              $
              (3,515
              )
              
              $
              (2,632
              )
              
              $
              (685
              )
              
              $
              (114
              )
              
              $
              86,608
   See
accompanying notes to consolidated financial statements.


3




BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (In
thousands)
 (Unaudited)
  For
      the Six Months Ended
                  March
      31,2008
              
              
              2007Cash
      flows from operating activities:Net income
              
              $
              2,666
              
              
              $
              1,371Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:ESOP expense
              
              
              103
              
              
              
              106Stock-based
      incentive plan
              
              
              156
              
              
              
              3,210Depreciation and
      amortization
              
              
              127
              
              
              
              156Provision for loan
      losses
              
              
              120
              
              
              
              4Income from bank-owned life
      insurance
              
              
              (180
              )
              
              
              (170
              )Amortization of loan servicing
      rights
              
              
              71
              
              
              
              —Amortization of deferred loan
      fees, net
              
              
              (167
              )
              
              
              (322
              )(Accretion of discount), net of
      amortization of premiums
              
              
              (1
              )
              
              
              7Accretion of discount on
      certificates of deposit
              
              
              —
              
              
              
              (2
              )Originations of loans
      held-for-sale
              
              
              (61,742
              )
              
              
              (17,318
              )Purchases of loans
      held-for-sale
              
              
              (1,495
              )
              
              
              —Proceeds from sales of loans
      held-for-sale
              
              
              28,889
              
              
              
              257Principal repayments on loans
      held-for-sale
              
              
              8,295
              
              
              
              18,416Net gain on sales of loans
      held-for-sale
              
              
              (223
              )
              
              
              (12
              )Decrease increase in accrued
      interest receivable
              
              
              121
              
              
              
              (207
              )Deferred income tax
      benefit
              
              
              (113
              )
              
              
              (1,454
              )Decrease in prepaid expenses and
      other assets
              
              
              713
              
              
              
              256Decrease in accrued expenses and
      other liabilities
              
              
              (584
              )
              
              
              (563
              )Net cash (used in) provided by
      operating activities
              
              
              (23,244
              )
              
              
              3,735Cash
      flows from investing activities:(Originations
      in excess of repayments) repayments in excess of loan
      originations
              
              
              (1,173
              )
              
              
              6,875Purchase
      of loans receivable
              
              
              (1,336
              )
              
              
              —Principal
      repayments on mortgage-backed securities held-to-maturity
              
              
              6,996
              
              
              
              9,293Purchases
      of mortgage-backed securities held-to-maturity
              
              
              (7,975
              )
              
              
              (5,950
              )Maturities
      and principal pay downs of other securities
    held-to-maturity
              
              
              1
              
              
              
              1Purchases
      of securities available-for-sale
              
              
              (121
              )
              
              
              (117
              )Maturities
      of certificates of deposit
              
              
              794
              
              
              
              1,784(Purchase)
      redemption of FHLB of New York stock
              
              
              (701
              )
              
              
              1,426Purchases
      of bank-owned life insurance
              
              
              (14
              )
              
              
              (15
              )Purchases
      of premises and equipment
              
              
              (728
              )
              
              
              (37
              )Net
      cash (used in) provided by investing activities
              
              
              (4,257
              )
              
              
              13,260Cash
      flows from financing activities:Increase
      in deposits
              
              
              15,618
              
              
              
              18,630Net
      decrease in overnight FHLB advances
              
              
              4,900
              
              
              
              (35,300
              )Proceeds
      from FHLB of New York term advances
              
              
              10,000
              
              
              
              25,000Repayments
      of FHLB of New York term advances
              
              
              (2,282
              )
              
              
              (21,386
              )Increase
      (decrease) in advance payments by borrowers for taxes and
      insurance
              
              
              127
              
              
              
              146Purchase
      of treasury stock
              
              
              (1,047
              )
              
              
              (312
              )Payment
      of cash dividend
              
              
              (481
              )
              
              
              (125
              )Net
      cash provided by (used in) financing activities
              
              
              26,835
              
              
              
              (13,347
              )Net
      (decrease) increase in cash and cash equivalents
              
              
              (666
              )
              
              
              3,648Cash
      and cash equivalents-beginning
              
              
              5,398
              
              
              
              4,078Cash
      and cash equivalents-ending
              
              $
              4,732
              
              
              $
              7,726Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
              
              $
              5,235
              
              
              $
              5,452Taxes
              
              
              1,350
              
              
              
              1,805Other:Mortgage
      loans held-to-maturity transferred to held-for-sale
              
              
              1,523
              
              
              
              —Mortgage
      loans held-for-sale transferred to held-to-maturity
              
              
              5,366
              
              
              
              8,257
  See
accompanying notes to consolidated financial statements.


4




BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 March
31, 2008
 (Unaudited)
 
 Note
1 - Basis of Presentation
  The unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
with instructions for Form 10-Q.  Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements.  In the opinion of management, all adjustments (all of
which are normal and recurring in nature) considered necessary for a fair
presentation have been included and all significant inter-company balances and
transactions have been eliminated in consolidation.  Operating results
for the three-month and six-month periods ended March 31, 2008 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2008.  The consolidated financial statements for
Brooklyn Federal Bancorp, Inc. (the "Company"), as presented in the Company’s
Form 10-K for the year ended September 30, 2007, should be read in conjunction
with these statements.
  Note
2 - Use of Estimates
  The
preparation of consolidated financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from current estimates. Estimates associated with the allowance for loan losses
and the fair values of securities are particularly susceptible to material
change in the near term.
  Note
3 - Impact of Certain Accounting Pronouncements
  In July
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which
clarifies the accounting for uncertainty in tax positions.  This
Interpretation requires that companies recognize in their financial statements
the impact of a tax position, if that position is more likely than not of being
sustained on audit, based on the technical merits of the
position.  The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006, with the cumulative effect of the change in
accounting principle recorded as an adjustment to opening retained
earnings.  The Company adopted FASB Interpretation 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes” effective October 1,
2007.  The adoption of FIN 48 had no impact on the Company’s financial
condition or results of operations.
 
 In
September 2006, the FASB issued SAFS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value under
Generally Accepted Accounting Principles, and expands disclosures about fair
value measurements. SAFS No. 157 applies to other accounting pronouncements
that require or permit fair value measurements. The new guidance is effective
for financial statements issued for fiscal years beginning after
November 15, 2007, and for interim periods within those fiscal years. We
are currently evaluating the potential impact, if any, of the adoption of SAFS
No. 157 on our consolidated financial position, results of operations and
cash flows.
  5
  In
February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Date
of FASB Statement No. 157,” that permits a one-year deferral in applying
the measurement provisions of Statement No. 157 to non-financial assets and
non-financial liabilities (non-financial items) that are not recognized or
disclosed at fair value in an entity’s financial statements on a recurring basis
(at least annually). Therefore, if the change in fair value of a non-financial
item is not required to be recognized or disclosed in the financial statements
on an annual basis or more frequently, the effective date of application of
Statement 157 to that item is deferred until fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years. This
deferral does not apply, however, to an entity that applied Statement 157 in
interim or annual financial statements prior to the issuance of FSP 157-2.The
Company is currently evaluating the impact, if any, that the adoption of FSP
157-2 will have on the Company’s operating income or net earnings.
 In
September 2006, the FASB's Emerging Issues Task Force (EITF) issued EITF Issue
No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split Dollar Life Insurance Arrangements" ("EITF
06-4").  EITF 06-4 requires the recognition of a liability related to
the postretirement benefits covered by an endorsement split-dollar life
insurance arrangement.  The consensus highlights that the employer
(who is also the policyholder) has a liability for the benefit it is providing
to its employee.  As such, if the policyholder has agreed to maintain
the insurance policy in force for the employee's benefit during his or her
retirement, then the liability recognized during the employee's active service
period should be based on the future cost of insurance to be incurred during the
employee's retirement.  Alternatively, if the policyholder has agreed
to provide the employee with a death benefit, then the liability for the future
death benefit should be recognized by following the guidance in SFAS No. 106 or
Accounting Principals Board (APB) Opinion No. 12, as appropriate.  For
transition, an entity can choose to apply the guidance using either of the
following approaches: (a) a change in accounting principle through retrospective
application to all periods presented or (b) a change in accounting principle
through a cumulative-effect adjustment to the balance in retained earnings at
the beginning of the year of adoption.  EITF 06-4 is effective for
fiscal years beginning after December 15, 2007, with early adoption permitted.
The Company does not believe that the implementation of this guidance will have
a material impact on the Company's consolidated financial
statements.
 
 In
September 2006, the Emerging Issues Task Force reached a conclusion on EITF
Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining
the Amount That Could Be Realized in Accordance with FASB Technical Bulletin
No. 85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). The
scope of EITF 06-5 consists of six separate issues relating to accounting for
life insurance policies purchased by entities protecting against the loss of
“key persons.” The six issues are clarifications of previously issued guidance
on FASB Technical Bulletin No. 85-4. EITF 06-5 is effective for fiscal
years beginning after December 15, 2006. The Company adopted EITF Issue No.
06-5,”Accounting for Purchases of Life Insurance – Determining the Amount That
Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4,
Accounting for Purchases of Life Insurance”.  The adoption of EITF
06-5 had no impact on the Company’s consolidated financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-Including an amendment of FASB
Statement No. 115." SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS No. 159
is effective for our Company October 1, 2008. The Company is evaluating the
impact that the adoption of SFAS No. 159 will have on our consolidated
financial statements.
  6
  In March
2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting
for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF 06-10).
EITF 06-10 provides guidance for determining a liability for the postretirement
benefit obligation as well as recognition and measurement of the associated
asset on the basis of the terms of the collateral assignment agreement. EITF
06-10 is effective for fiscal years beginning after December 15, 2007. The
Company is currently assessing the impact of EITF 06-10 on our consolidated
financial position and results of operations.
   In May
2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 “Definition of
Settlement in FASB Interpretation No. 48” (FSP FIN 48-1). FSP FIN 48-1 provides
guidance on how to determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is
effective retroactively to January 1, 2007. The Company adopted FASB Staff
Position (‘FSP”) FIN 48-1, “Definition of Settlement in FASB Interpretation No.
48” effective October 1, 2007.  The adoption of FSP FIN 48-1 had no
impact on the Company’s financial condition or results of
operations.
 
 In June
2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue
No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards” (“EITF 06-11”). EITF 06-11 states that an entity should
recognize a realized tax benefit associated with dividends on non-vested equity
shares, non-vested equity share units and outstanding equity share options
charged to retained earnings as an increase in additional paid in
capital. The amount recognized in additional paid in capital should be
included in the pool of excess tax benefits available to absorb potential future
tax deficiencies on share-based payment awards. EITF 06-11 should be
applied prospectively to income tax benefits of dividends on equity-classified
share-based payment awards that are declared in fiscal years beginning after
December 15, 2007. The adoption of EITF 06-11 did not have a material
impact on our consolidated financial statements.
 
 FASB
statement No. 141 (R) “Business Combinations” was issued in December of 2007.
This Statement establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. The Statement also provides guidance for recognizing and measuring
the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The guidance will
become effective as of the beginning of a company’s fiscal year beginning after
December 15, 2008.  This pronouncement will impact the Company’s
accounting for business combinations completed after the effective
date.
 
 FASB
statement No. 160 “Non-controlling Interests in Consolidated Financial
Statements—an amendment of ARB No. 51” was issued in December of 2007. This
Statement establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. The
guidance will become effective as of the beginning of a company’s fiscal year
beginning after December 15, 2008. The Company believes that this new
pronouncement will have an immaterial impact on the Company’s financial
statements in future periods.
  7
  Staff
Accounting Bulletin No. 109 (SAB 109), "Written Loan Commitments Recorded at
Fair Value Through Earnings" expresses the views of the staff regarding written
loan commitments that are accounted for at fair value through earnings under
generally accepted accounting principles. To make the staff's views consistent
with current authoritative accounting guidance, the SAB revises and rescinds
portions of SAB No. 105, "Application of Accounting Principles to Loan
Commitments."  Specifically, the SAB revises the SEC staff's views on
incorporating expected net future cash flows related to loan servicing
activities in the fair value measurement of a written loan commitment. The SAB
retains the staff's views on incorporating expected net future cash flows
related to internally developed intangible assets in the fair value measurement
of a written loan commitment. The staff expects registrants to apply the views
in Question 1 of SAB 109 on a prospective basis to derivative loan commitments
issued or modified in fiscal quarters beginning after December 15, 2007. The
Company does not expect SAB 109 to have a material impact on its financial
statements.
 
 Staff
Accounting Bulletin No. 110 (SAB 110) amends and replaces Question 6 of
Section D.2 of Topic 14, “Share-Based Payment,” of the Staff Accounting Bulletin
series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff
regarding the use of the “simplified” method in developing an estimate of
expected term of “plain vanilla” share options and allows usage of the
“simplified” method for share option grants prior to December 31, 2007. SAB
110 allows public companies which do not have historically sufficient experience
to provide a reasonable estimate to continue use of the “simplified” method for
estimating the expected term of “plain vanilla” share option grants after
December 31, 2007.  SAB 110 is effective January 1,
2008.  The Company does not expect SAB 110 to have a material impact
on its financial statements.
 
 In
February 2008, the FASB issued a FASB Staff Position (FSP) FAS 140-3,
“Accounting for Transfers of Financial Assets and Repurchase Financing
Transactions.” This FSP addresses the issue of whether or not these transactions
should be viewed as two separate transactions or as one "linked" transaction.
The FSP includes a "rebuttable presumption" that presumes linkage of the two
transactions unless the presumption can be overcome by meeting certain criteria.
The FSP will be effective for fiscal years beginning after November 15, 2008 and
will apply only to original transfers made after that date; early adoption will
not be allowed. The Company is currently evaluating the potential impact the new
pronouncement will have on its consolidated financial statements.
 
 In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”
(Statement 161).  Statement 161 requires entities that utilize
derivative instruments to provide qualitative disclosures about their objectives
and strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  Statement 161 also requires entities to disclose
additional information about the amounts and location of derivatives located
within the financial statements, how the provisions of SFAS 133 has been
applied, and the impact that hedges have on an entity’s financial position,
financial performance, and cash flows.  Statement 161 is effective for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged.  The Company is currently evaluating the
potential impact the new pronouncement will have on its consolidated financial
statements.
 
 8
  ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 Forward-Looking
Statements
  When used
in this quarterly report and in future filings by the Company with the
Securities and Exchange Commission, in the Company’s press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases, “anticipate,”
“would be,” “will allow,” “intends to,” “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimated,” “projected,” or similar
expressions are intended to identify “forward looking
statements.”  Such statements are subject to risks and uncertainties,
including but not limited to 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, changes in the
position of banking regulators on the adequacy of the Company’s allowance for
loan losses, and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected.
  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, and advise
readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investing activities, and competitive and regulatory
factors, could affect the Company’s financial performance and could cause the
Company’s actual results for future periods to differ materially from those
anticipated or projected.
  The
Company does not undertake, and specifically disclaims any obligation, to update
any forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.
  General
  The
Company’s results of operations depend mainly on its net interest income, which
is the difference between the interest income earned on its loan and investment
portfolios and interest expense paid on its deposits and borrowed
funds.  Results of operations are also affected by fee income from
banking operations, provisions for loan losses, gains (losses) on sales of loans
and securities available-for-sale and other miscellaneous income.  The
Company’s non-interest expenses consist primarily of compensation and employee
benefits, office occupancy, technology, marketing, general administrative
expenses and income tax expense.
  The
Company’s results of operations are also significantly affected by general
economic and competitive conditions, particularly with respect to changes in
interest rates, government policies and actions of regulatory authorities.
Future changes in applicable laws, regulations or government policies may
materially affect the Company’s financial condition and results of
operations.
  Critical
Accounting Policies
  We
consider accounting policies that require management to exercise significant
judgment or discretion or make significant assumptions that have, or could have,
a material impact on the carrying value of certain assets or on income, to be
critical accounting policies.  We consider the following to be our
critical accounting policies:
  9
  Allowance for
Loan Losses.The allowance for loan
losses is the estimated amount considered necessary to cover credit losses
inherent in the loan portfolio at the balance sheet date.  The
allowance is established through the provision for loan losses, which is charged
against income.  In determining the allowance for loan losses,
management makes significant estimates and has identified this policy as one of
the most critical for Brooklyn Federal Savings Bank (the "Bank").  The
methodology for determining the allowance for loan losses is considered a
critical accounting policy by management due to the high degree of judgment
involved, the subjectivity of the assumptions utilized and the potential for
changes in the economic environment that could result in changes to the amount
of the recorded allowance for loan losses.
 
 As a
substantial amount of our loan portfolio is collateralized by real estate,
appraisals of the underlying value of property securing loans are critical in
determining the amount of the allowance required for specific
loans.  Assumptions for appraisals are instrumental in determining the
value of properties.  Overly optimistic assumptions or negative
changes to assumptions could significantly impact the valuation of a property
securing a loan and the related allowance determined.  The assumptions
supporting such appraisal valuations are carefully reviewed by management to
determine that the resulting values reasonably reflect amounts realizable on the
related loans.
 
 Management
performs a quarterly evaluation of the adequacy of the allowance for loan
losses.  Consideration is given to a variety of factors in
establishing this estimate including, but not limited to, current economic
conditions, delinquency statistics, geographic and industry concentrations, the
adequacy of the underlying collateral, the financial strength of the borrower,
results of internal and external loan reviews and other relevant
factors.  This evaluation is inherently subjective, as it requires
material estimates that may be susceptible to significant revision based on
changes in economic and real estate market conditions.
 
 The
analysis of the allowance for loan losses has two
components:  specific and general allocations.  Specific
allocations are made for loans that are determined to be
impaired.  Impairment is measured by determining the present value of
expected future cash flows or, for collateral-dependent loans, the fair value of
the collateral adjusted for market conditions and selling
expenses.  The general allocation is determined by segregating the
remaining loans by type of loan, risk weighting (if applicable) and payment
history.  We also analyze historical loss experience, delinquency
trends, general economic conditions and geographic and industry
concentrations.  This analysis establishes factors that are applied to
the loan groups to determine the amount of the general
allocations.  Actual loan losses may be significantly more than the
allowance for loan losses we have established which could have a material
negative effect on our financial results.
 
 Deferred Income
Taxes.  We use the asset and liability method of accounting for
income taxes.  Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  If current available information raises doubt
as to the realization of the deferred tax assets, a valuation allowance is
established.  We consider the determination of this valuation
allowance to be a critical accounting policy because of the need to exercise
significant judgment in evaluating the amount and timing of recognition of
deferred tax liabilities and assets, including projections of future taxable
income.  These judgments and estimates are reviewed on a continual
basis as regulatory and business factors change.  A valuation
allowance for deferred tax assets may be required if the amount of taxes
recoverable through loss carry-back declines, or if we project lower levels of
future taxable income.  Such a valuation allowance would be
established through a charge to income tax expense, which would adversely affect
our operating results.




10




Business
Strategy
  Our
business strategy is to operate as a well-capitalized and profitable community
bank dedicated to providing quality customer service.  Our business
strategy historically has been to emphasize one- to four-family residential
mortgage lending.  While we will continue to engage in this type of
lending, management has determined to broaden the range of our products and
services to enhance profitability, consistent with safety and
soundness.  In recent years, we have significantly expanded our
multi-family, commercial real estate, construction and land
lending.  We have also introduced additional products and services,
such as debit cards and internet banking.  We cannot assure you that
we will successfully implement our business strategy.
 
 Highlights of our business strategy are
as follows:
  ●
              Remaining a Community Oriented
      Institution.  We were established in Brooklyn, New York
      in 1887, and we have been operating continuously since that
      time.  We have been, and continue to be, committed to meeting
      the financial needs of the communities in which we operate, and we are
      dedicated to providing quality personal service to our
      customers.  Although historically our principal business
      activity has been accepting deposits from the public and using those funds
      to originate one- to four-family mortgage loans, in recent years we have
      been originating a wider variety of residential and commercial real estate
      loan products to meet the needs of our customers.  If such loans
      do not satisfy our criteria for retention in our loan portfolio, they
      generally can be sold in the secondary market.●
              Continuing to Increase Our
      Multi-Family, Commercial Real Estate, Construction and Land
      Lending.  Historically, we have emphasized one- to
      four-family residential lending within our market area.  While
      one- to four-family loan originations remain an important form of loans
      because of our expertise with this type of lending, in the past five years
      we have emphasized the origination of loans secured by multi-family
      properties, commercial real estate, construction and land loans as a means
      of increasing our interest and fee income and meeting the lending needs of
      our customers.  Multi-family, commercial real estate,
      construction and land lending generally expose a lender to greater credit
      risk than loans secured by one- to four-family real estate.  The
      repayment of multi-family, commercial real estate, construction and land
      loans depends upon the business and financial condition of the borrower
      and, in the case of construction loans, on the economic viability of
      projects financed.  Consequently we, like other financial
      institutions, generally charge higher rates of interest for these types of
      loans compared to one- to four-family residential
loans.●
              Managing Our Interest Rate
      Risk.  With long-term interest rates at low levels, we
      have managed our interest rate risk by maintaining a portion of our assets
      in short-term liquid assets, such as cash and due from banks, short-term
      investment securities and mortgage-related securities that provide
      significant cash flows.  This strategy positioned us to reinvest
      our short-term liquid assets in higher yielding loans and investments once
      interest rates begin to rise.  During the recent period of
      declining short-term interest rates, we have been able to maintain a
      market level of interest income on our short-term liquid assets, while
      still utilizing a portion of our liquidity to purchase security
      investments and redeploying the excess repayments of those investments to
      loan originations.  Continuing to maintain our current level of
      short-term liquid assets, however, generates less interest income than
      would have been generated if we had invested in longer-term loans and
      investments.  At March 31, 2008, $4.7 million, or 1.1% of our
      assets, was invested in cash and due from banks, and $3.2 million, or 0.8%
      of our assets, was invested in certificates of deposit and securities that
      mature within three years.●
              Facilitate Growth Through De
      Novo Branching.  We have established financial,
      geographic and other criteria to evaluate potential new branch offices in
      our market area.  The Bank opened its fifth branch office,
      located in Commack, New York on April 30, 2008.  We will
      continue to review potential branch sites; there can be no assurance as to
      whether or when we will open another such office.●
              Maintaining High Asset
      Quality.  We have focused on improving and maintaining
      strong asset quality by following conservative underwriting criteria, and
      primarily originating loans secured by real
  estate.
  11
  Comparison
of Financial Condition at March 31, 2008 and September 30, 2007
  Total
Assets.  Total assets increased by $29.1 million, or 7.5%, to
$419.5 million at March 31, 2008, from $390.4 million at September 30,
2007.  This increase was primarily due to increases in securities
held-to-maturity, loans held-for-sale and loans receivable, net, offset in part
by decreases in cash and due from banks, investments in certificates of deposit
investments and other assets.
  Cash and Due from
Banks.Cash and due from banks decreased $666,000, or 12.3%,
to $4.7 million at March 31, 2008, from $5.4 million at September 30,
2007.
  Investment in
Certificates of Deposit.  Certificates of deposit decreased
$794,000, or 20.4%, to $3.1 million at March 31, 2008, from $3.9 million at
September 30, 2007.  The decrease in these short-term investments was
due to certificate maturities.
  Securities.Investments
in securities, which represent securities available-for-sale and securities
held-to-maturity, increased $1.0 million, or 1.3%, to $79.0 million at
March 31, 2008, from $78.0 million at September 30, 2007.  This
increase was primarily due to purchases of mortgage-backed securities of $8.0
million and an increase in securities available-for-sale of approximately
$29,000, offset by repayments in mortgage-backed securities of approximately
$7.0 million.
  Net
Loans.  Net loans before allowance for loan losses, which
includes loans held-for-sale, increased $28.8 million, or 10.1%, to
$315.2 million at March 31, 2008, from $286.4 million at September 30,
2007, primarily due to increases in commercial real estate loans of $24.4
million, multi-family loans of $8.6 million and one-to four-family loans of $7.3
million, offset by decreases of $8.3 million in construction loans, $3.0 million
in land loans and $43,000 in consumer and other loans.  Net deferred
fees increased approximately $109,000.
  At March
31, 2008, loans receivable in non-accrual status were approximately $16,000,
which represented one loan.  This non-accrual loan is secured by a
multi-family apartment building and the Bank has established a specific loss
allowance for this loan totaling $16,000 and classified this loan as doubtful at
March 31, 2008.
  12
  The Bank
had one multi-family loan, located in Brooklyn, New York, with an outstanding
principal of $726,000 classified as substandard at March 31,
2007.  The property suffered structural damage due to construction at
an adjoining lot.  Management placed the loan on substandard status
due to concerns about the property damage and the borrower’s ability to make
future contractual payments.  Subsequent to March 31, 2007, the
structural damage was corrected, the borrower completed renting the remaining
apartments, the Bank procured an appraisal indicating a value of approximately
$1.9 million and refinanced the property with a $926,000 loan.  During
the quarter ended March 31, 2008 this loan has been taken off of the substandard
classification and is performing in accordance with the loan note.
 
 On the
basis of management’s review of classified assets, at March 31, 2008, we
classified $10.1 million of our assets as special mention representing two
commercial real estate loans.  The first commercial real estate loan
of $6.8 million has an appraised value of $13.2 million.  The second
commercial real estate loan of $3.3 million has an appraised value of $6.6
million.  The maturity date on the second loan was February 1, 2008
and is past maturity.  The Bank does not expect a loss on these
special mention classified loans.
 
 The
Company had reported, in prior quarterly and annual reports, on another
commercial real estate loan of $1.6 million on waterfront property located in
Whitestone, New York, that had an appraised value of $18.9 million and was over
90 days past due and still accruing.  The Bank did not expect a loss
on this classified loan, and during the quarter ended March 31, 2008 the owner
of this property secured other financing and paid the Bank in full.
 
 Federal Home Loan
Bank of New York Stock.FHLB of New York stock increased
$701,000, or 67.9%, to $1.7 million at March 31, 2008.  At September
30, 2007 our FHLB stock investment balance was $1.0 million.  This
increase was primarily due to increased activity with the FHLB of New York,
which requires additional purchases of FHLB stock.
  Bank Owned Life
Insurance, Prepaid Expenses and Other Assets.Prepaid expenses
and other assets, bank owned life insurance, premises and equipment, net and
accrued interest receivable increased $186,000, or 1.1%, to $17.7 million at
March 31, 2008, from $17.5 million at September 30, 2007. This increase was
mainly due to increases in premises and equipment of approximately $601,000 and
bank owned life insurance of approximately $194,000, offset in part by decreases
in accrued interest receivable of $121,000 and prepaid expenses and other assets
of $488,000.
  Deposits.  Deposits
increased by $15.6 million, or 5.4%, to $302.8 million at March 31, 2008, from
$287.2 million at September 30, 2007.  The increase was primarily due
to the Bank’s competitive rates offered on its deposit products.
  Borrowed
Funds.  Total funds borrowed from the FHLB of New York,
increased $12.6 million, or 136.1%, to $21.9 million at March 31, 2008, from
$9.3 million at September 30, 2007. The primary reason for the increase was the
utilization of this type of financing to fund the mortgage loan
production.
  Accrued Expenses
and Other Liabilities.  Accrued expenses and other liabilities
decreased $584,000, or 9.3%, to $5.7 million at March 31, 2008, from $6.3
million at September 30, 2007.  This decrease was primarily due to
decreases in accounts payable of approximately $921,000, unprocessed banking
liabilities of $79,000 and accrued expenses of $356,000, offset in part by
increases in taxes payable of $134,000, mortgage loan related deposit payables
of $563,000 and Supplemental Executive Retirement Plan (“SERP”) accruals of
$75,000.
  13
  Stockholders’
Equity.Stockholders’ equity increased by $1.3 million,
or 1.6%, to $86.6 million at March 31, 2008, from $85.3 million at
September 30, 2007.  The primary reason for the increase is the result
of net income for the period, offset in part by purchases of treasury stock of
approximately $1.0 million, pursuant to the Company’s stock repurchase plans and
payment of cash dividends on common stock outstanding of $481,000.
  Liquidity and
Capital Resources.The Company maintains liquid assets at
levels it considers adequate to meet its liquidity needs.  The Company
adjusts its liquidity levels to fund deposit outflows, pay real estate taxes on
mortgage loans, repay its borrowings and to fund loan
commitments.  The Company also adjusts liquidity as appropriate to
meet asset and liability management objectives.
 
 The Company’s primary sources of
liquidity are deposits, amortization and prepayment of loans and mortgage-backed
securities, maturities of investment securities and other short-term
investments, and earnings and funds provided from operations, as well as access
to FHLB of New York advances.  While scheduled principal repayments on
loans and mortgage-backed securities are a relatively predictable source of
funds, deposit flows and loan prepayments are greatly influenced by market
interest rates, economic conditions, and rates offered by the Company’s
competition.  The Company sets the interest rates on its deposits to
maintain a desired level of total deposits.  In addition, the Company
invests excess funds in short-term interest-earning assets, which provide
liquidity to meet lending requirements.
 
 A portion of the Company’s liquidity
consists of cash and due from banks, which are a product of its operating,
investing and financing activities.  At March 31, 2008,
$4.7 million, or 1.1%, of the Company’s assets was invested in cash and due
from banks.  The Company’s primary recurring sources of cash are
principal repayments on loans, proceeds from the calls and maturities of
investment securities, principal repayments of mortgage-backed securities and
increases in deposit accounts.  Currently, the Company sells a portion
of the longer-term mortgage loans, and the Company syndicates and sells
participation interests in portions of its multi-family, commercial real estate,
construction and land loans.  Such activity is expected to continue so
long as it meets the Company’s operational and financial needs.  In
addition, the Company invests excess funds in short-term interest-earning assets
and other assets, which provide liquidity to meet the Company’s lending
requirements.  At March 31, 2008 investments in certificates of
deposit and short-term investment securities (maturing in less than three years)
totaled $3.2 million, or 0.8%, of the Company’s assets.  As of March
31, 2008, the Company had $21.9 million in borrowings outstanding from the FHLB
of New York and access to additional FHLB of New York advances.
 
 At March 31, 2008, the Company had
approximately $176.2 million in commitments to originate loans and unused lines
of credit outstanding, which included $18.9 million in undisbursed construction
loans, $4.2 million in one- to four-family loans, $946,000 in unused home equity
lines of credit, $50.0 million in commercial real estate lines of credit
and $102.2 million to originate multi-family and nonresidential mortgage
loans.  The Bank had a stand by letter of credit commitment of
approximately $2.1 million.  The Bank had a commitment to purchase a
held- to-maturity security for approximately $3.1 million.  The Bank
had a one- to four-family loan committed to sell of approximately $215,000 at
March 31, 2008.  Certificates of deposit due within one year of March
31, 2008 totaled $130.3 million, or 74.9% of certificates of
deposit.  If these maturing deposits do not remain with the Company,
the Company will be required to seek other sources of funds, including other
certificates of deposit and borrowings.  Depending on market
conditions, the Company may be required to pay higher rates on such deposits or
other borrowings than the Company currently pays on the certificates of deposit
due on or before March 31, 2009.  Management believes, however, based
on past experience that a significant portion of its certificates of deposit
will remain with the Company.  The Company has the ability to attract
and retain deposits by adjusting the interest rates offered.
  14
  The following table sets forth the
Bank’s capital position at March 31, 2008, as compared to the minimum regulatory
capital requirements:
  Actual
              
              
              Minimal
      Capital
                Requirements
              
              
              To
      be well Capitalized
                Under
      Prompt
                Corrective
      Actions
                ProvisionsAmount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio(Dollars
      in thousands)Total
      risk-based capital(To
      risk-weighted assets)
              
              $
              74,521
              
              
              
              24.4
              %
              
              $
              24,469
              
              
              
              8.0
              %
              
              $
              30,587
              
              
              
              10.0
              %Tier
      1 risk-based capital(To
      risk-weighted assets)
              
              
              72,611
              
              
              
              23.7
              
              
              
              12,235
              
              
              
              4.0
              
              
              
              18,352
              
              
              
              6.0Tangible
      capital(To
      tangible assets)
              
              
              72,611
              
              
              
              17.4
              
              
              
              6,264
              
              
              
              1.5
              
              
              
              N/A
              
              
              
              N/ATier
      1 leverage (core) capital(To
      adjusted tangible assets)
              
              
              72,611
              
              
              
              17.4
              
              
              
              12,528
              
              
              
              3.0
              
              
              
              20,880
              
              
              
              5.0
 
 Off-Balance
Sheet Arrangements
 
 The following table set forth the
Bank’s commercial commitments at March 31, 2008:
 
 Commitment
      Expiration by PeriodOff-Balance Sheet
    Arrangements
              
              Total
              
              
              One
      Year
                or
      less
              
              
              More
      than One Year Through Three Years
              
              
              More
      Than
                Three
      Years
                through
      Five
                Years
              
              
              More
      Than
                Five
      Years(In
      thousands)To
      originate loans
              
              $
              146,859
              
              
              $
              146,859
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —Stand
      by letter of credit
              
              
              2,140
              
              
              
              2,140
              
              
              
              —
              
              
              
              —
              
              
              
              —Unused
      lines of credit
              
              
              29,294
              
              
              
              29,294
              
              
              
              —
              
              
              
              —
              
              
              
              —To
      purchase securities
              
              
              3,065
              
              
              
              3,065
              
              
              
              —
              
              
              
              —
              
              
              
              —Total
              
              $
              181,358
              
              
              $
              181,358
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
  Comparison
of Operating Results for the Three Months Ended March 31, 2008 and
2007
  Net
Income.  Net income increased $1.8 million, to $1.5 million for
the three months ended March 31, 2008, from net loss of $317,000 for the three
months ended March 31, 2007.  The primary reasons for the increase
were decreases in non-interest expense of approximately $3.1 million, a $77,000
decrease in interest expense and an increase in non-interest income of $284,000,
offset in part by increases in the loan loss provisions of $65,000
and income tax provisions of $1.3 million and a decrease in interest income
of $211,000.
  15
  Net Interest
Income Before Provision for Loan Losses.Net interest income
before provision for loan losses decreased by $134,000, or 3.1%, to
$4.3 million for the three months ended March 31, 2008, from
$4.4 million for the three months ended March 31, 2007.  The
decrease in net interest income resulted primarily from a decrease of 20 basis
points in the Bank’s net interest rate spread to 3.50% for the three months
ended March 31, 2008, from 3.70% for the three months ended March 31,
2007.  The average balance of interest-earning assets increased $11.0
million, or 2.9%, to $396.0 million for the three months ended March 31, 2008
from $385.0 million for the three months ended March 31, 2007 while the yield of
interest- earnings assets decreased 42 basis points to 6.90% for the three
months ended March 31, 2008 from 7.32% for the three months ended March 31,
2007.  The average balance of interest-bearing liabilities increased
$9.7 million, or 3.3%, to $303.4 million for the three months ended March 31,
2008 from $293.7 million for the three months ended March 31, 2007 while the
cost of interest-bearing liabilities decreased 22 basis points to 3.40% for the
three months ended March 31, 2008 from 3.62% for the three months ended March
31, 2007.  The Bank’s net interest margin decreased 27 basis points to
4.29% for the three months ended March 31, 2008 compared to 4.56% for the three
months ended March 31, 2007.
  Interest
Income.  Interest income decreased $211,000, or 3.0%, to $6.8
million for the three months ended March 31, 2008, from $7.0 million for
the three months ended March 31, 2007.  Interest income on loans
decreased by $147,000, or 2.5%, to $5.8 million for the three months ended March
31, 2008, from $6.0 million for the three months ended March 31,
2007.  The primary reasons for the decrease in interest income on
loans were decreases of $218,000 in multi-family and commercial real estate loan
income and $245,000 in construction loan income, offset it part by increases in
interest income in one- to four-family loan income of $311,000 and other loan
income of $5,000.  The average balance of the loan portfolio increased
by $20.4 million, or 7.1%, to $306.9 million for the three months ended March
31, 2008, from $286.5 million for the three months ended March 31, 2007. The
average yield on loans decreased 74 basis points to 7.58% for the three months
ended March 31, 2008, from 8.32% for the three months ended March 31, 2007.
Interest income on security investments and other interest-earning assets
decreased by $64,000, or 5.9%, to $1.0 million for the three months ended March
31, 2008, from $1.1 million for the three months ended March 31,
2007.  The decrease in interest income on security investments and
other interest-earning assets was primarily due to a reduction in the average
balance of $9.3 million, or 9.5%, to $89.1 million at March 31, 2008 from $98.4
million at March 31, 2007, offset by an increase of 17 basis points in the
average yield to 4.57% for the quarter ended March 31, 2008, compared to the
average yield of 4.40% for the quarter ended March 31, 2007.
  Interest
Expense.Interest expense decreased $77,000, or 2.9%, to $2.6
million for the three months ended March 31, 2008, from $2.7 million for
the three months ended March 31, 2007.  Interest expense on deposits
increased $115,000, or 5.0%, to $2.4 million at March 31, 2008, from $2.3
million at March 31, 2007.  Interest expense on FHLB of New York
borrowings decreased $192,000, or 50.7%, to $187,000 at March 31, 2008, from
$379,000 at March 31, 2007.  The decrease was primarily the result of
a decrease in the average balance in FHLB of New York borrowings of $8.5 million
and its decrease in cost of 158 basis points, offset in part by an increase in
average balance of interest-bearing deposits of $18.2 million and its decreased
cost of 6 basis points.  In addition, the average cost of total
interest-bearing liabilities decreased 22 basis points to 3.40% for the three
months ended March 31, 2008, from 3.62% for the three months ended March 31,
2007.
  Provision for
Loan Losses.The Bank’s provision for loan losses increased
$65,000 to $52,000 for the three months ended March 31, 2008, from a recovery of
$13,000 for the three months ended March 31, 2007.  Management
believes the established loan loss reserves are adequate.  The
allowance for loan losses as of March 31, 2008 represented 0.61% of total loans,
compared to 0.63% of total loans as of March 31, 2007.
  16
  Non-interest
Income.  Non-interest income increased by $284,000, or 47.4%,
to $883,000 for the three months ended March 31, 2008, from $599,000 for the
three months ended March 31, 2007.  The increase was primarily due to
increases in net gain on sale of loans held-for-sale of $171,000, loan fees of
$112,000 and bank owned life insurance of $4,000, offset in part by decreases in
deposit related fees of $2,000 and $1,000 of miscellaneous fees.
  Non-interest
Expense.  Non-interest expense decreased by $3.0 million, or
53.4%, to $2.7 million for the three months ended March 31, 2008, from $5.7
million for the three months ended March 31, 2007.  The decrease
resulted primarily from a decrease of  $3.0 million in compensation
and fringe benefits, which included decreases in the Company’s stock-based
incentive plan of $3.1 million, supplemental executive retirement plan of
$25,000, and pension and ESOP expense of $4,000, offset in part by increases in
salaries of $125,000 and miscellaneous officer and employee expenses of $59,000.
The Company also experienced increased costs in occupancy and equipment of
$73,000, offset in part by decreases in professional fees of $91,000 and data
processing fees of $50,000.
  Income Taxes.Income tax expense increased $1.3 million, to $921,000 for the three
months ended March 31, 2008, from a benefit of $407,000 for the three months
ended March 31, 2007.  The primary reason for this increase is
increased income before provision for income taxes.  The effective
income tax rate of the Company for the three months ended March 31, 2008, was
38.2% and for the three months ended March 31, 2007 the effective income tax
benefit was 56.2%.
  Comparison
of Operating Results for the Six Months Ended March 31, 2008 and
2007
  Net
Income.  Net income increased by $1.3 million, or 94.5%, to
$2.7 million for the six month period ended March 31, 2008, from $1.4 million
for the same period in 2007.  The primary reasons for the increase in
net income were a $2.6 million decrease in non-interest expense, a decrease in
interest expense of $220,000 and an increase in non-interest income of $181,000,
offset in part by increases in provision for income taxes of $971,000, provision
for loan losses of $116,000 and a reduction in interest income of
$658,000.
  Net Interest
Income Before Provision for Loan Losses.Net interest income
decreased by $438,000, or 5.0%, to $8.3 million for the six month period ended
March 31, 2008, from approximately $8.8 million for the same period in
2007.  This decrease was primarily due to a 20 basis point decrease in
the Bank’s net interest rate spread to 3.44% for the six months ended March 31,
2008, from 3.64% for the six months ended March 31, 2007.  The average
balance of interest-earnings assets decreased approximately $1.5 million, or
0.4%, to a $387.9 million for the six months ended March 31, 2008,
from  $389.4 million for the six months ended March 31, 2007 while the
yield of interest-earnings assets decreased 31 basis points to 6.98% for the six
months ended March 31, 2008, from 7.29% for thesix
months ended March 31, 2007.  The average balance of interest-bearing
liabilities decreased approximately $2.7 million, or 0.9%, to $295.1 million for
the six months ended March 31, 2008, from $297.8 million for the six months
ended March 31, 2007, while the cost of interest-bearing liabilities decreased
11 basis points to 3.54% for the six months ended March 31, 2008, from 3.65% for
the six months ended March 31, 2007.  The Bank’s net interest margin
decreased 20 basis points to 4.29% for the six months ended March 31, 2008, from
4.49% for the six months end March 31, 2007.
  Interest
Income.Interest income decreased $658,000, or 4.6%, to $13.5
million for the six months ended March 31, 2008, from $14.2 million for the six
months ended March 31, 2007.  The decrease was due to decreases in
interest income from multi-family and commercial loans of $563,000, construction
loans of $549,000, mortgage back securities of $89,000 and other interest
earning assets of $82,000, offset in part by increased interest income on one-to
four- family and other loans of $625,000.  The yield on the mortgage
loan portfolio decreased 63 basis points to 7.69% for the six months ended March
31, 2008, from 8.31% for the six months ended March 31, 2007.  The
yield on investment securities and other interest-earning assets increased 22
basis points to 4.55% for the six months ended March 31, 2008, from 4.33% for
the six months ended March 31, 2007.  The average yield on total
interest-earning assets decreased by 31 basis points to 6.98% for the six months
ended March 31, 2008 from 7.29% for the six months ended March 31,
2007.
  17
  Interest
Expense.Interest expense decreased $220,000, or 4.0%, to $5.2
million for the six months ended March 31, 2008, from $5.4 million for the six
months ended March 31, 2007.  The decrease in interest expense
reflected an 11 basis point decrease in the cost of interest-bearing liabilities
to 3.54% for the six months ended March 31, 2008, from 3.65% for the six months
ended March 31, 2007 as well as a $2.7 million decrease in average
balances.  The decrease in interest expense reflected lower market
interest rates on the Bank’s borrowings with the FHLB of New York during the six
months ended March 31, 2008, compared to the six months ended March 31,
2007.  Interest expense on savings accounts decreased by $43,000, or
12.8%, to $293,000 for the six months ended March 31, 2008 from $336,000 for the
six months ended March 31, 2007, as the average cost on savings accounts
remained at 1.00% for the six months ended March 31, 2008 and
2007.  The average balance of savings accounts decreased $8.7 million,
or 12.9%, to $58.4 million for the six months ended March 31, 2008, from $67.1
million for the six months ended March 31, 2007.  Interest expense on
Money Market and NOW accounts increased $350,000, or 94.1% to $722,000 for the
six months ended March 31, 2008, from $372,000 for the six months ended March
31, 2007, as the average cost on these deposits increased 40 basis points to
2.63% for the six months ended March 31, 2008, from 2.23% for the six months
ended March 31, 2007 while the average balances increased $21.5 million, or
64.4%, to $54.9 million for the six months ended March 31, 2008, from $33.4
million for the six months ended March 31, 2007.  Interest expense on
certificates of deposit increased by $165,000, or 4.4%, to $3.9 million for the
six months ended March 31, 2008, from $3.7 million for the six months ended
March 31, 2007, as the average cost on certificates of deposit increased by two
basis points to 4.69% for the six months ended March 31, 2008, from 4.67% for
the six months ended March 31, 2007. The average balance of certificates of
deposit increased  $6.4 million, or 4.0%, to $166.3 million for the
six months ended March 31, 2008, from $159.9 million for the six months ended
March 31, 2007.   Interest expense on Federal Home Loan Bank
advances decreased by $692,000, or 69.5%, to $304,000 for the six months ended
March 31, 2008, from $996,000 for the six months ended March 31, 2007, as the
average Federal Home Loan Bank advances decreased by $22.0 million, or 58.8%, to
$15.4 million for the six months ended March 31, 2008, from $37.4 million for
the six months ended March 31, 2007.  The average cost on these
borrowings decreased 138 basis points to 3.95% for the six months ended March
31, 2008, from 5.33% for the six months ended March 31, 2007.
  Provision for
Loan Losses.Our provision for loan losses increased $116,000
to $120,000 for the six months ended March 31, 2008, compared to $4,000 for the
six months ended March 31, 2007.  The increase is due to the
originations in higher risk loans, as well as the performance of the loan
portfolio.   Our non-performing loans in non-accrual status
totaled $16,000 and $115,000 at March 31, 2008 and March 31, 2007,
respectively.  The allowance for loan losses at March 31, 2008,
represented 0.61% of total loans, compared to 0.63% of total loans at March 31,
2007.
  Non-interest
Income.  Non-interest income increased by $181,000, or 13.1% to
$1.6 million for the six months ended March 31, 2008, from $1.4 million for
the six months ended March 31, 2007.  The increase was primarily due
to increases of $211,000 in net gain on sale of loans held-for-sale
and  $3,000 in other income, offset by a decrease in banking fess and
service charges of $33,000.  The increase in the net gain on sale of
loans available-for-sale was due to increased sale of loans and servicing rights
associated with such sales.  The increase in other income was
primarily due to a $10,000 increase in bank owned life insurance, offset in part
by a reduction in other miscellaneous income of $7,000.  The decrease
in banking fees and service charges was primarily the result of decreased other
loan fees of approximately $129,000 and a reduction in deposit related fees of
approximately $7,000, offset in part by increased syndication fees of
approximately $103,000.
  18
  Non-interest
Expense.  Non-interest expense decreased $2.6 million, or
32.5%, to $5.5 million for the six months ended March 31, 2008, compared to
$8.1 million for the six months ended March 31, 2007.  The largest
component of the decrease was in compensation and fringe
benefits.  Compensation and fringe benefits decreased approximately
$2.6 million, or 41.6%, to $3.7 million for the six months ended March 31, 2008,
from $6.3 million for the six months ended March 31, 2007.  This
decrease was primarily due to the decrease in stock-based incentive plan expense
of $3.1 million and the supplemental executive retirement plan of $116,000,
offset by increases in compensation of $417,000, which included general salary
increases for officers and employees and hiring of staff, health care expenses,
ESOP expense of $18,000 and other miscellaneous employee expenses of
$93,000.  In addition, professional fees decreased $61,000, data
processing fees decreased $67,000 and other miscellaneous expenses decreased
approximately $2,000, which is comprised of advertising and public relations,
insurance and other expense, offset in part by an increase in occupancy and
equipment expense of $134,000.
  Income
Taxes.Income tax expense increased $971,000, or 152.0%, to
$1.6 million for the six months ended March 31, 2008, from $639,000 for the six
months ended March 31, 2007.  This increase was primarily due to
increased income before taxes.  The effective tax rate was 37.7% for
the six months ended March 31, 2008, as compared 31.8% for the six months ended
March 31, 2007.
  ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 The
majority of the Company’s assets and liabilities are monetary in
nature.  Consequently, the Company’s most significant form of market
risk is interest rate risk.  The Company’s assets, consisting
primarily of mortgage loans, have longer maturities than the Company’s
liabilities, consisting primarily of deposits.  As a result, a
principal part of the Company’s business strategy is to manage interest rate
risk and reduce the exposure of its net interest income to changes in market
interest rates.  Accordingly, the Company’s board of directors has
approved guidelines for managing the interest rate risk inherent in its assets
and liabilities, given the Company’s business strategy, operating environment,
capital, liquidity and performance objectives.  Senior management
monitors the level of interest rate risk on a regular basis and the audit
committee of the board of directors meets as needed to review the Company’s
asset/liability policies and interest rate risk position.
  The
Company seeks to manage its interest rate risk in order to minimize the exposure
of its earnings and capital to changes in interest rates.  During the
low interest rate environment that has existed in recent years, the Company has
implemented the following strategies to manage its interest rate risk: (i)
maintaining a high level of short-term liquid assets invested in cash and cash
equivalents, short-term securities and mortgage-related securities that provide
significant cash flows; (ii) generally selling longer-term mortgage loans;
and (iii) lengthening the average term of the Bank’s certificates of
deposit.  By investing in short-term, liquid instruments, the Company
believes it is better positioned to react to increases in market interest
rates.  However, investments in shorter-term securities and cash and
cash equivalents generally bear lower yields than longer-term
investments.  Thus, during the recent decreasing interest rate
environment, the Bank’s strategy of investing in liquid instruments has resulted
in lower levels of interest income than would have resulted from investing in
longer-term loans and investments.  Management intends to lengthen the
maturity of the Company’s earning-assets as interest rates increase, which in
turn should result in a higher yielding portfolio of interest-earning
assets.  There have been no material changes in the Company’s interest
rate risk since September 30, 2007.
  19
 
 ITEM
      4.
              CONTROLS
      AND PROCEDURES
  An
evaluation was performed under the supervision and with the participation of the
Company’s management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as
of March 31, 2008.  Based on such evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and regulations
and are operating in an effective manner.
  No change
in the Company’s internal controls over financial reporting (as defined in
Rules 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934)
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
  PART
II - OTHER INFORMATION
 
 ITEM
      1.
              LEGAL
      PROCEEDINGS
  There is
no material pending legal proceedings to which the Company or its subsidiaries
is a party other than ordinary routine litigation incidental to their respective
businesses.
  ITEM
      1A.
              RISK
      FACTORS
 
 There are
no material changes to the risk factors as previously disclosed in the Company’s
Form 10-K for the year ended September 30, 2007 as filed with the SEC on
December 31, 2007.
  ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 
 (c) The
Company repurchased Common Stock in the quarter ended March 31,
2008.  On August 14, 2007, the Board of Directors approved its second
stock repurchase program, which authorized the repurchase of up to $2.0 million
of the Company’s outstanding shares of common stock.  The second stock
repurchase program was completed in March 2008.  On March 18, 2008,
the Board of Directors approved a third stock repurchase program, which
authorized the repurchase of up to $3.0 million of the Company’s outstanding
shares of common stock.  Stock repurchases will be made from time to
time and may be effected through open market purchases, block trades and in
privately negotiated transactions. Repurchased stock will be held as treasury
stock and will be available for general corporate purposes. As of March 31,
2008, 250,959 total shares have been repurchased with repurchases in the quarter
described in the following table:
 
 20
 
 Company
      Purchases of Common StockPeriod
              
              Total
                  number
      of
                  shares
                  purchased
              
              
              Average
                  price
      paid
                  per
      share
              
              
              Total
      number
                  of
      shares
                  purchased
      as
                  part
      of
                  publicly
                  announced
                  plans
      or
                  programs
              
              
              Approximate
                  dollar
      value of
                  shares
      that
                  may
      yet be
                  purchased
                  under
      the plans
                  or
      programsJanuary
      1, 2008 through January 31, 2008
              
              
              14,120
              
              
              $
              12.75
              
              
              
              230,272
              
              
              $
              257,934February
      1, 2008 through February 29, 2008
              
              
              4,800
              
              
              $
              13.42
              
              
              
              235,072
              
              
              $
              193,535March
      1, 2008 through March 31, 2008
              
              
              15,887
              
              
              $
              13.12
              
              
              
              250,959
              
              
              $
              2,984,872
 
  ITEM
      3.
              DEFAULTS
      UPON SENIOR SECURITIES
  None.
  ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS
  The
Annual Meeting of Stockholders was held on February 19, 2008. The matters
considered and voted on by the Company’s stockholders at the annual meeting and
the vote of the stockholders were as follows:
  Matter 1. The election of
directors, each for a three-year term.
 
 NAME
              FOR
              %
              WITHHOLD
              %Daniel
      O. Reich
              12,450,482
              98.1
              240,186
              1.9John
      C. Gallin
              12,450,932
              98.1
              239,736
              1.9
  The
election of a director, for a two-year term.
 
 NAME
              FOR
              %
              WITHHOLD
              %Robert
      A. Zito
              12,508,832
              98.6
              181,836
              1.4
 
 The
election of a director, for a one-year term.
 
 NAME
              FOR
              %
              WITHHOLD
              %Arthur
      R. Williams
              12,556,876
              98.9
              133,792
              1.1
  21
  Directors
John A. Loconsolo, Angelo J. Di Lorenzo and Vincent E. Caccese continued in
their respective terms of office following the Annual Meeting of
Stockholders.
 
 Matter 2. The ratification of
the appointment of Beard Miller Company LLP as the independent auditors of the
Company for the fiscal year ending September 30, 2008.
 
 FOR
              %
              AGAINST
              %
              ABSTAIN
              %12,632,679
              99.6
              48,966
              0.4
              9,023
              –
 
  ITEM
      5.
              OTHER
      INFORMATION
  None.
  ITEM
      6.
              EXHIBITS
  11
              Computation
      of Earnings Per Share31.1
              Certification
      of Chief Executive Officer Pursuant to Rule
      13a-14(a)/15d-14(a)31.2
              Certification
      of Chief Financial Officer Pursuant to Rule
      13a-14(a)/15d-14(a)32.1
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
              Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.
 
 22
  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.
 
  BROOKLYN
      FEDERAL BANCORP, INC.(Registrant)Date:  May
      14, 2008
              
              /s/ Angelo J. Di LorenzoAngelo
      J. Di LorenzoVice
      Chairman and Chief Executive OfficerDate:  May
      14, 2008
              
              /s/ Ralph WaltherRalph
      WaltherVice
      President andChief
      Financial Officer






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