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 June 30, 2008





OR





[  ]
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 August 12, 2008Common
      Stock,  $.01 Par Value
            
            13,018,681









BROOKLYN
      FEDERAL BANCORP, INC.Form
      10-Q Quarterly ReportTable
      of ContentsPART
      I.Page
      NumberItem
      1.
              Financial
      Statements
              1Item
      2.
              Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
              9Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              20Item
      4T.
              Controls
      and Procedures
              20PART
      II.Item
      1.
              Legal
      Proceedings
              21Item
      1A.
              Risk
      Factors
              21Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              21Item
      3.
              Defaults
      Upon Senior Securities
              22Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              22Item
      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
            
            June
      30,
                2008
            
            
            September
      30, 2007Cash
      and due from banks (including interest-earning balances of $5,614
      and
              $2,442,
      respectively)
            
            $
            9,336
            
            
            $
            5,398Certificates
      of deposit
            
            
            1,397
            
            
            
            3,890Securities
      available-for-sale
            
            
            4,300
            
            
            
            4,601Securities
      held-to-maturity:Mortgage-backed
      securities (estimated fair value of $72,044 and $72,030,
              respectively)
            
            
            75,923
            
            
            
            73,352Other
      (estimated fair value of $1 and $2, respectively)
            
            
            1
            
            
            
            2Loans
      held-for-sale
            
            
            110,685
            
            
            
            59,153Loans
      receivable
            
            
            233,030
            
            
            
            227,273Less:
      Allowance for loan losses
            
            
            1,919
            
            
            
            1,806Loans
      receivable, net
            
            
            231,111
            
            
            
            225,467Federal
      Home Loan Bank (“FHLB”) of New York stock, at cost
            
            
            1,966
            
            
            
            1,032Accrued
      interest receivable
            
            
            2,137
            
            
            
            2,305Premises
      and equipment, net
            
            
            2,258
            
            
            
            1,019Bank
      owned life insurance
            
            
            9,040
            
            
            
            8,961Prepaid
      expenses and other assets
            
            
            4,995
            
            
            
            5,254Total
      assets
            
            $
            453,149
            
            
            $
            390,434Liabilities
      and Stockholders’ EquityLiabilities:Deposits:Non-interest-bearing
      deposits
            
            $
            18,536
            
            
            $
            16,000Interest-bearing
      deposits
            
            
            119,215
            
            
            
            108,307Certificates
      of deposit
            
            
            195,134
            
            
            
            162,848Total
      deposits
            
            
            332,885
            
            
            
            287,155Borrowings:Short-term
      FHLB of New York advances
            
            
            24,139
            
            
            
            7,332Long-term
      FHLB of New York advances
            
            
            1,500
            
            
            
            1,939Advance
      payments by borrowers for taxes and insurance
            
            
            1,579
            
            
            
            2,441Accrued
      expenses and other liabilities
            
            
            6,828
            
            
            
            6,308Total
      liabilities
            
            
            366,931
            
            
            
            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 13,089,381 and 13,311,483
              outstanding,
      respectively
            
            
            135
            
            
            
            135Additional
      paid-in capital
            
            
            42,890
            
            
            
            42,758Retained
      earnings - substantially restricted
            
            
            51,734
            
            
            
            48,379Treasury
      shares - at cost, 394,829 shares and 172,727 shares,
      respectively
            
            
            (5,309
            )
            
            
            (2,468
            )Unallocated
      common stock held by employee stock ownership plan
(“ESOP”)
            
            
            (2,592
            )
            
            
            (2,711
            )Unallocated
      shares of the stock-based incentive plan
            
            
            (640
            )
            
            
            (774
            )Accumulated
      other comprehensive loss:Net
      unrealized loss on securities available-for-sale, net of income
      tax
            
            
            —
            
            
            
            (60
            )Total
      stockholders’ equity
            
            
            86,218
            
            
            
            85,259Total
      liabilities and stockholders’ equity
            
            $
            453,149
            
            
            $
            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
                  June
      30,
              
              
              For
      the Nine Months Ended
                  June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Interest
      income:First
      mortgage and other loans
              
              $
              6,034
              
              
              $
              5,821
              
              
              $
              17,575
              
              
              $
              17,849Mortgage-backed
      securities
              
              
              871
              
              
              
              871
              
              
              
              2,530
              
              
              
              2,619Other
      securities and interest-earning assets
              
              
              117
              
              
              
              181
              
              
              
              450
              
              
              
              596Total
      interest income
              
              
              7,022
              
              
              
              6,873
              
              
              
              20,555
              
              
              
              21,064Interest
      expense:Deposits
              
              
              2,331
              
              
              
              2,330
              
              
              
              7,248
              
              
              
              6,775Borrowings
              
              
              134
              
              
              
              325
              
              
              
              438
              
              
              
              1,321Total
      interest expense
              
              
              2,465
              
              
              
              2,655
              
              
              
              7,686
              
              
              
              8,096Net
      interest income before provision for loan losses
              
              
              4,557
              
              
              
              4,218
              
              
              
              12,869
              
              
              
              12,968(Recovery
      of) provision for loan losses
              
              
              (7
              )
              
              
              —
              
              
              
              113
              
              
              
              4Net
      interest income after (recovery of) provision for loan
    losses
              
              
              4,564
              
              
              
              4,218
              
              
              
              12,756
              
              
              
              12,964Non-interest
      income:Banking
      fees and service charges
              
              
              765
              
              
              
              493
              
              
              
              1,797
              
              
              
              1,558Loss
      on impairment of securities available-for-sale
              
              
              (582
              )
              
              
              —
              
              
              
              (582
              )
              
              
              —Net
      gain on sale of loans held-for-sale
              
              
              53
              
              
              
              50
              
              
              
              276
              
              
              
              62Other
              
              
              404
              
              
              
              153
              
              
              
              714
              
              
              
              460Total
      non-interest income
              
              
              640
              
              
              
              696
              
              
              
              2,205
              
              
              
              2,080Non-interest
      expense:Compensation
      and fringe benefits
              
              
              1,909
              
              
              
              2,148
              
              
              
              5,625
              
              
              
              8,507Occupancy
      and equipment
              
              
              376
              
              
              
              253
              
              
              
              1,052
              
              
              
              795Professional
      fees
              
              
              42
              
              
              
              148
              
              
              
              239
              
              
              
              406Data
      processing fees
              
              
              168
              
              
              
              153
              
              
              
              436
              
              
              
              488Other
              
              
              498
              
              
              
              336
              
              
              
              1,122
              
              
              
              962Total
      non-interest expense
              
              
              2,993
              
              
              
              3,038
              
              
              
              8,474
              
              
              
              11,158Income
      before income tax expense
              
              
              2,211
              
              
              
              1,876
              
              
              
              6,487
              
              
              
              3,886Income
      tax expense
              
              
              773
              
              
              
              666
              
              
              
              2,383
              
              
              
              1,305Net
      income
              
              $
              1,438
              
              
              $
              1,210
              
              
              $
              4,104
              
              
              $
              2,581Earnings
      per common share:Basic
              
              $
              0.11
              
              
              $
              0.09
              
              
              $
              0.32
              
              
              $
              0.20Diluted
              
              $
              0.11
              
              
              $
              0.09
              
              
              $
              0.32
              
              
              $
              0.20Average
      common shares outstanding:Basic
              
              
              12,880,591
              
              
              
              13,057,122
              
              
              
              12,917,331
              
              
              
              13,017,562Diluted
              
              
              12,881,091
              
              
              
              13,187,326
              
              
              
              12,921,004
              
              
              
              13,147,766
 
 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 share and 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
              
              
              —
              
              
              
              —
              
              
              
              2,581
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,581Net
      unrealized loss on
                securities
      available-for-sale
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (19
              )
              
              
              (19
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,562Treasury
      stock purchased
                (66,200
      shares)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (969
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (969
              )Allocation
      of ESOP stock
              
              
              —
              
              
              
              46
              
              
              
              —
              
              
              
              —
              
              
              
              119
              
              
              
              —
              
              
              
              —
              
              
              
              165Stock-based
      incentive plan
                expense
      (259,210 shares)
              
              
              3
              
              
              
              4,789
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (953
              )
              
              
              —
              
              
              
              3,839Dividends
      paid on common
                stock,
      $0.06 per share
              
              
              —
              
              
              
              —
              
              
              
              (249
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (249
              )Balance
      June 30, 2007
              
              $
              135
              
              
              $
              42,634
              
              
              $
              47,278
              
              
              $
              (969
              )
              
              $
              (2,751
              )
              
              $
              (953
              )
              
              $
              (63
              )
              
              $
              85,311Balance
      September 30, 2007
              
              $
              135
              
              
              $
              42,758
              
              
              $
              48,379
              
              
              $
              (2,468
              )
              
              $
              (2,711
              )
              
              $
              (774
              )
              
              $
              (60
              )
              
              $
              85,259Comprehensive
      income:Net
      income
              
              
              —
              
              
              
              —
              
              
              
              4,104
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              4,104Net
      unrealized loss on
                securities
      available-for-sale
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (281
              )
              
              
              (281
              )Loss
      on impairment of
                securities
      available-for-sale,
                net
      of tax
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              341
              
              
              
              341Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              4,164Treasury
      stock purchased
                (222,102
      shares)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,841
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,841
              )Allocation
      of ESOP stock
              
              
              —
              
              
              
              33
              
              
              
              5
              
              
              
              —
              
              
              
              119
              
              
              
              —
              
              
              
              —
              
              
              
              157Stock-based
      incentive plan
                expense
              
              
              —
              
              
              
              99
              
              
              
              4
              
              
              
              —
              
              
              
              —
              
              
              
              134
              
              
              
              —
              
              
              
              237Dividends
      paid on common
                stock,
      $0.19 per share
              
              
              —
              
              
              
              —
              
              
              
              (758
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (758
              )Balance
      June 30, 2008
              
              $
              135
              
              
              $
              42,890
              
              
              $
              51,734
              
              
              $
              (5,309
              )
              
              $
              (2,592
              )
              
              $
              (640
              )
              
              $
              —
              
              
              $
              86,218
 See
accompanying notes to consolidated financial statements.
  3




BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (In
thousands)
 (Unaudited)
 For
      the Nine Months Ended
                  June
      30,2008
              
              
              2007Cash
      flows from operating activities:Net income
              
              $
              4,104
              
              
              $
              2,581Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:ESOP expense
              
              
              152
              
              
              
              165Stock-based
      incentive plan
              
              
              233
              
              
              
              3,839Depreciation and
      amortization
              
              
              196
              
              
              
              225Provision for loan
      losses
              
              
              113
              
              
              
              4Income from bank-owned life
      insurance
              
              
              (266
              )
              
              
              (255
              )Loss
      on impairment of securities available-for-sale
              
              
              582
              
              
              
              —Amortization of loan servicing
      rights
              
              
              124
              
              
              
              —Amortization of deferred loan
      fees, net
              
              
              (246
              )
              
              
              (396
              )(Accretion of discount), net of
      amortization of premiums
              
              
              (7
              )
              
              
              8Accretion of discount on
      certificates of deposit
              
              
              —
              
              
              
              (3
              )Originations of loans
      held-for-sale
              
              
              (106,609
              )
              
              
              (22,821
              )Purchases of loans
      held-for-sale
              
              
              (1,500
              )
              
              
              —Proceeds from sales of loans
      held-for-sale
              
              
              32,213
              
              
              
              2,225Principal repayments on loans
      held-for-sale
              
              
              20,612
              
              
              
              29,062Net gain on sales of loans
      held-for-sale
              
              
              (276
              )
              
              
              (62
              )Decrease (increase) in accrued
      interest receivable
              
              
              168
              
              
              
              (357
              )Deferred income tax
      benefit
              
              
              (396
              )
              
              
              (1,759
              )Decrease (increase) in prepaid
      expenses and other assets
              
              
              665
              
              
              
              (281
              )Increase in accrued expenses and
      other liabilities
              
              
              520
              
              
              
              876Net cash (used in) provided by
      operating activities
              
              
              (49,618
              )
              
              
              13,051Cash
      flows from investing activities:Loan
      originations in excess of repayments
              
              
              (315
              )
              
              
              (7,234
              )Purchase
      of loans receivable
              
              
              (1,336
              )
              
              
              —Principal
      repayments on mortgage-backed securities held-to-maturity
              
              
              11,370
              
              
              
              14,973Purchases
      of mortgage-backed securities held-to-maturity
              
              
              (13,934
              )
              
              
              (5,950
              )Maturities
      and principal pay downs of other securities
    held-to-maturity
              
              
              1
              
              
              
              2Purchases
      of securities available-for-sale
              
              
              (178
              )
              
              
              (177
              )Maturities
      of certificates of deposit
              
              
              2,493
              
              
              
              2,977(Purchase)
      redemption of FHLB of New York stock
              
              
              (934
              )
              
              
              1,107Purchases
      of bank-owned life insurance
              
              
              (15
              )
              
              
              (15
              )Proceeds
      from bank-owned life insurance
              
              
              202
              
              
              
              —Purchases
      of premises and equipment
              
              
              (1,435
              )
              
              
              (45
              )Net
      cash (used in) provided by investing activities
              
              
              (4,081
              )
              
              
              5,638Cash
      flows from financing activities:Increase
      in deposits
              
              
              45,730
              
              
              
              10,297Net
      increase (decrease) in overnight FHLB advances
              
              
              20,900
              
              
              
              (24,300
              )Proceeds
      from FHLB of New York term advances
              
              
              10,000
              
              
              
              30,000Repayments
      of FHLB of New York term advances
              
              
              (14,532
              )
              
              
              (31,636
              )Decrease
      in advance payments by borrowers for taxes and insurance
              
              
              (862
              )
              
              
              (616
              )Purchase
      of treasury stock
              
              
              (2,841
              )
              
              
              (969
              )Payment
      of cash dividend
              
              
              (758
              )
              
              
              (249
              )Net
      cash provided by (used in) financing activities
              
              
              57,637
              
              
              
              (17,473
              )Net
      increase in cash and cash equivalents
              
              
              3,938
              
              
              
              1,216Cash
      and cash equivalents-beginning
              
              
              5,398
              
              
              
              4,078Cash
      and cash equivalents-ending
              
              $
              9,336
              
              
              $
              5,294Supplemental
      disclosure of cash flow information:Cash
      paid during the period for:Interest
              
              $
              7,715
              
              
              $
              8,114Taxes
              
              
              2,689
              
              
              
              3,450Other:Mortgage
      loans held-to-maturity transferred to held-for-sale
              
              
              1,523
              
              
              
              8,354Mortgage
      loans held-for-sale transferred to held-to-maturity
              
              
              5,383
              
              
              
              8,537
 See
accompanying notes to consolidated financial statements.
  4




BROOKLYN
FEDERAL BANCORP, INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 June
30, 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 nine-month periods ended June 30, 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 Financial Accounting Standards Board (“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, Statement of Financial Accounting Standard,
(“SFAS”) 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. SFAS 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 SFAS 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 EITF 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” effective October 1, 2007.  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
potential impact, if any, that the adoption of SFAS No. 159 will have on
our consolidated financial statements.
  6
 In March
2007, the FASB ratified EITF 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 potential impact, if any, of EITF 06-10 on our
consolidated financial position and results of operations.
 
 In May
2007, the FASB issued 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 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.
 
 Staff
Accounting Bulletin (“SAB”) No. 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 No. 109 revises and
rescinds portions of SAB No. 105, "Application of Accounting Principles to Loan
Commitments."  Specifically, the SAB No. 109 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. SAB No.
109 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 No. 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 No. 109 to have a material impact on its
financial statements.
  7
  SAB
No. 110 amends and replaces Question 6 of Section D.2 of Topic 14,
“Share-Based Payment,” of the SAB 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 No. 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 No.
110 is effective January 1, 2008.  The Company does not expect
SAB No. 110 to have a material impact on its financial statements.
 
 In
February 2008, the FASB issued a 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 SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities—an amendment of FASB Statement No. 133”.  SFAS
No. 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.  SFAS No. 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 No. 133 has
been applied, and the impact that hedges have on an entity’s financial position,
financial performance, and cash flows.  SFAS No. 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.
 
 In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets.”  This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
and Other Intangible Assets”.  The intent of this FSP is to improve
the consistency between the useful life of a recognized intangible asset under
SFAS No. 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS No. 141R, and other GAAP.  This FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited.  The Company is currently evaluating the
potential impact the new pronouncement will have on its consolidated financial
statements.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements.  SFAS No. 162 is effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles.”  The Company is
currently evaluating the potential impact, if any, the new pronouncement will
have on its consolidated financial statements.
 
 8
 In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating
Securities.”  This FSP clarifies that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common
shareholders.  Awards of this nature are considered participating
securities and the two-class method of computing basic and diluted earnings per
share must be applied.  This FSP is effective for fiscal years
beginning after December 15, 2008.  The Company is currently
evaluating the potential impact, if any, the new pronouncement will have on its
consolidated financial statements.
 
 In June
2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (EITF
07-5).  EITF 07-5 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions.  It also clarifies the
impact of foreign currency denominated strike prices and market-based employee
stock option valuation instruments on the evaluation.  EITF 07-5 is
effective for fiscal years beginning after December 15, 2008.  The
Company is currently evaluating the potential impact, if any, the new
pronouncement will have on its consolidated financial statements.
 
 In June
2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements” (EITF 08-3). EITF 08-3 provides
guidance for accounting for nonrefundable maintenance deposits.  It
also provides revenue recognition accounting guidance for the
lessor.  EITF 08-3 is effective for fiscal years beginning after
December 15, 2008.  The Company is currently evaluating the potential
impact, if any, the new pronouncement will have on its consolidated financial
statements.
 
 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.
  9
  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:
 
 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.
 
 10
 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.
 
 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.
  11
  ·
              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 lower
      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 June 30, 2008, $9.3 million, or 2.1% of our
      assets, was invested in cash and due from banks, and $1.5 million, or 0.3%
      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.
  Comparison
of Financial Condition at June 30, 2008 and September 30, 2007
  Total
Assets.  Total assets increased by $62.7 million, or 16.1%, to
$453.1 million at June 30, 2008, from $390.4 million at September 30,
2007.  This increase was primarily due to increases in cash and due
from banks, securities held-to-maturity, loans held-for-sale and loans
receivable, net, FHLB stock and other assets, offset in part by decreases in
investments in certificates of deposit investments and securities available-for
sale.
  12
  Cash and Due from
Banks.Cash and due from banks increased $3.9 million, or
73.0%, to $9.3 million at June 30, 2008, from $5.4 million at September 30,
2007.  The increase was primarily due to increased volume of deposited
checks and the funding of loans prior to closing.
  Investment in
Certificates of Deposit.  Certificates of deposit decreased
$2.5 million, or 64.1%, to $1.4 million at June 30, 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 $2.2 million, or 2.9%, to $80.2 million at June
30, 2008, from $78.0 million at September 30, 2007.  This increase was
primarily due to purchases of mortgage-backed securities of $13.9 million and
available for sale securities of $178,000, offset by repayments in
mortgage-backed securities of approximately $11.4 million and an
initial $582,000 impairment charge taken on the Bank’s investment in a
mutual fund that invests primarily in agency and private label mortgage
backed securities. The market values of the fund’s holdings have been steadily
decreasing which has caused a corresponding decrease in the fund’s net asset
value.  In addition, the fund has recently implemented a temporary
prohibition on cash redemptions, lessening the ability of the Bank to dispose of
its remaining $4.3 million investment in this asset.  The Company will
continue to evaluate this investment and if the market value of such
investment declines further and remains depressed for a substantial period
of time, the Company will evaluate the investment for other-than-temporary
impairment at that time.
  Net
Loans.  Net loans before allowance for loan losses, which
includes loans held-for-sale, increased $57.3 million, or 20.0%, to
$343.7 million at June 30, 2008, from $286.4 million at September 30, 2007,
primarily due to increases in commercial real estate loans of $35.0 million,
multi-family loans of $17.5 million, one-to four-family loans of $7.4 million
and land loans of $2.5 million, offset by decreases of $4.7 million in
construction loans and $38,000 in consumer and other loans.  Net
deferred fees increased approximately $320,000.
  At June
30, 2008, loans receivable in non-accrual status were approximately $6,000,
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 $6,000 and classified this loan as doubtful at
June 30, 2008.
  On the
basis of management’s review of classified assets, at June 30, 2008, we
classified $1.9 million of our assets as special mention representing one
construction real estate loan with an appraised value of $5.3
million.  Management classified this loan as special mention due to
slow progress in construction.
 
 Management
has classified one commercial real estate loan of $6.8 million with an appraised
value of $13.2 million as substandard.  This loan was classified as
special mention at March 31, 2008.  The reason for the classification
was due to the borrower’s history of making late contractual
payments.
 
 During
the quarter ended June 30, 2008 a commercial loan for $3.3 million, which we
classified as special mention at March 31, 2008, the Bank was repaid in full by
the borrower, in regard to principal, interest and related fees.
  13
 Federal Home Loan
Bank of New York Stock.FHLB of New York stock increased
$934,000, or 90.5%, to approximately $2.0 million at June 30,
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.Bank owned life insurance increased $79,000, or
0.9%, to $9.0 million at June 30, 2008, from $8.9 million at September 30,
2007.  This increase was mainly due to a premium payment of $15,000
and cash surrender value increase of $266,000, offset in part by proceeds of
approximately $202,000.
  Prepaid Expenses
and Other Assets.Prepaid expenses and other assets, premises
and equipment, net and accrued interest receivable increased $812,000, or 9.5%,
to $9.4 million at June 30, 2008, from $8.6 million at September 30, 2007. This
increase was mainly due to an increase in premises and equipment of
approximately $1.2 million, offset in part by decreases in accrued interest
receivable of $168,000 and prepaid expenses and other assets of
$259,000.
  Deposits.  Deposits
increased by $45.7 million, or 15.9%, to $332.9 million at June 30, 2008, from
$287.2 million at September 30, 2007.  The increase was primarily due
to the Bank’s opening of its fifth branch in Commack, Suffolk County, New York
on April 30, 2008 and competitive rates offered on its deposit
products.
  Borrowed
Funds.  Total funds borrowed from the FHLB of New York,
increased approximately $16.3 million, or 176.6%, to $25.6 million at June 30,
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
increased $520,000, or 8.2%, to $6.8 million at June 30, 2008, from $6.3 million
at September 30, 2007.  This increase was primarily due to increases
in mortgage related deposit payables of approximately $1.0 million and
Supplemental Executive Retirement Plan (“SERP”) accruals of $100,000, offset in
part by reductions in accounts payable of approximately $376,000, unprocessed
banking liabilities of $155,000 and accrued expenses of $79,000.
  Stockholders’
Equity.Stockholders’ equity increased by $959,000, or
1.1%, to $86.2 million at June 30, 2008, from $85.3 million at September
30, 2007.  The primary reason for the increase is the results of net
income for the period, offset in part by purchases of treasury stock of
approximately $2.8 million, pursuant to the Company’s stock repurchase plans and
payment of cash dividends on common stock outstanding of $758,000.
  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.
 
 14
 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 June 30, 2008,
$9.3 million, or 2.1%, of the Company’s assets were 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 June 30, 2008 investments in certificates of deposit
and short-term investment securities (maturing in less than three years) totaled
$1.5 million, or 0.3%, of the Company’s assets.  As of June 30, 2008,
the Company had $25.6 million in borrowings outstanding from the FHLB of New
York and access to additional FHLB of New York advances.
 
 At June 30, 2008, the Company had
approximately $215.0 million in commitments to originate loans and unused lines
of credit outstanding, which included $38.5 million in undisbursed construction
loans, $3.5 million in one- to four-family loans, $1.1 million in unused home
equity lines of credit, $37.0 million in commercial real estate lines of
credit and $132.7 million to originate multi-family and nonresidential mortgage
loans.  The Bank had a stand by letter of credit commitment of
approximately $2.1 million.  Certificates of deposit due within one
year of June 30, 2008 totaled $157.5 million, or 80.7% 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 June 30, 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.
 
 The following table sets forth the
Bank’s capital position at June 30, 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)
              
              $
              76,070
              
              
              
              22.6
              %
              
              $
              26,906
              
              
              
              8.0
              %
              
              $
              33,632
              
              
              
              10.0
              %Tier
      1 risk-based capital(To
      risk-weighted assets)
              
              
              74,157
              
              
              
              22.0
              
              
              
              13,453
              
              
              
              4.0
              
              
              
              20,179
              
              
              
              6.0Tangible
      capital(To
      tangible assets)
              
              
              74,157
              
              
              
              16.5
              
              
              
              6,747
              
              
              
              1.5
              
              
              
              N/A
              
              
              
              N/ATier
      1 leverage (core) capital(To
      adjusted tangible assets)
              
              
              74,157
              
              
              
              16.5
              
              
              
              13,494
              
              
              
              3.0
              
              
              
              22,489
              
              
              
              5.0
  15
  Off-Balance
Sheet Arrangements
 
 The following table sets forth the
Bank’s commercial commitments at June 30, 2008:
 
 Commitment
      Expiration by PeriodOff-Balance SheetArrangements
              
              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
              
              $
              163,621
              
              
              $
              163,621
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —Stand
      by letter of credit
              
              
              2,140
              
              
              
              2,140
              
              
              
              —
              
              
              
              —
              
              
              
              —Unused
      lines of credit
              
              
              49,214
              
              
              
              49,214
              
              
              
              —
              
              
              
              —
              
              
              
              —Total
              
              $
              214,975
              
              
              $
              214,975
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
   Comparison
of Operating Results for the Three Months Ended June 30, 2008 and
2007
  Net
Income.  Net income increased $228,000, or 18.8%, to $1.4
million for the three months ended June 30, 2008, from $1.2 million for the
three months ended June 30, 2007.  The primary reasons for the
increase were increased interest income of $149,000, reduced interest expense of
$190,000, reduced non-interest expense of $45,000 and a recovery of $7,000 for
loan loss provision, offset in part by increased income tax expense of $107,000
and reduced non-interest income of $56,000.
  Net Interest
Income Before Provision for Loan Losses.Net interest income
before provision for loan losses increased by $339,000, or 8.0%, to
$4.5 million for the three months ended June 30, 2008, from
$4.2 million for the three months ended June 30, 2007.  The
increase in net interest income resulted primarily from an increase of 17 basis
points in the Bank’s net interest rate spread to 3.70% for the three months
ended June 30, 2008, from 3.53% for the three months ended June 30,
2007.  The average balance of interest-earning assets increased $30.6
million, or 8.0%, to $413.5 million for the three months ended June 30, 2008
from $382.9 million for the three months ended June 30, 2007 while the yield on
interest-earning assets decreased 39 basis points to 6.79% for the three months
ended June 30, 2008 from 7.18% for the three months ended June 30,
2007.  The average balance of interest-bearing liabilities increased
$28.3 million, or 9.7%, to $319.6 million for the three months ended June 30,
2008 from $291.3 million for the three months ended June 30, 2007 while the cost
of interest-bearing liabilities decreased 56 basis points to 3.09% for the three
months ended June 30, 2008 from 3.65% for the three months ended June 30,
2007.  The Bank’s net interest margin remained at 4.41% for the three
month periods ended June 30, 2008 and 2007.
  Interest
Income.  Interest income increased $149,000, or 2.2%, to $7.0
million for the three months ended June 30, 2008, from $6.9 million for the
three months ended June 30, 2007.  Interest income on loans increased
by $213,000, or 3.7%, to $6.0 million for the three months ended June 30, 2008,
from $5.8 million for the three months ended June 30, 2007.  The
primary reasons for the increase in interest income on loans were increases of
$330,000 in multi-family and commercial real estate loan income, $273,000 in
one- to four-family loan income and $1,000 in other loan income, offset in part
by a decrease of $391,000 in construction loan income. The average balance of
the loan portfolio increased by $38.6 million, or 13.4%, to $326.5 million for
the three months ended June 30, 2008, from $287.9 million for the three months
ended June 30, 2007. The average yield on loans decreased 70 basis points to
7.39% for the three months ended June 30, 2008, from 8.09% for the three months
ended June 30, 2007. Interest income on security investments and other
interest-earning assets decreased by $64,000, or 6.1%, to $988,000 for the three
months ended June 30, 2008, from $1.1 million for the three months ended
June 30, 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 $8.0 million, or 8.4%, to $86.9 million at June 30,
2008 from $94.9 million at June 30, 2007, offset by an increase of 12 basis
points in the average yield to 4.55% for the quarter ended June 30, 2008,
compared to the average yield of 4.43% for the quarter ended June 30,
2007.
  16
  Interest
Expense.Interest expense decreased $190,000, or 7.2%, to $2.5
million for the three months ended June 30, 2008, from $2.7 million for the
three months ended June 30, 2007.  Interest expense on deposits
increased $1,000, to $2.3 million at June 30, 2008 and 2007.  Interest
expense on FHLB of New York borrowings decreased $191,000, or 58.8%, to $134,000
at June 30, 2008, from $325,000 at June 30, 2007.  The decrease was
primarily the result of a decrease in the average balance in FHLB of New York
borrowings of $6.0 million and its decrease in cost of 238 basis points, offset
in part by an increase in the average balance of interest-bearing deposits of
$34.3 million and its decreased cost of 40 basis points.  In addition,
the average cost of total interest-bearing liabilities decreased 56 basis points
to 3.09% for the three months ended June 30, 2008, from 3.65% for the three
months ended June 30, 2007.
  Provision for
Loan Losses.The Bank’s provision for loan losses decreased
$7,000 to a recovery of $7,000 for the three months ended June 30, 2008, from no
provision for loan losses for the three months ended June 30,
2007.  Management believes the established loan loss reserves are
adequate.  The allowance for loan losses as of June 30, 2008,
represented 0.56% of total loans, compared to 0.61% of total loans as of June
30, 2007.
  Non-interest
Income.  Non-interest income decreased by $56,000, or 8.0%, to
$640,000 for the three months ended June 30, 2008, from $696,000 for the three
months ended June 30, 2007. This decrease was primarily due to an
initial $582,000 impairment charge taken on the Bank’s investment in a
mutual fund that invests primarily in agency and private label mortgage
backed securities. The market values of the fund’s holdings have been steadily
decreasing which has caused a corresponding decrease in the fund’s net asset
value.  In addition, the fund has recently implemented a temporary
prohibition on cash redemptions, lessening the ability of the Bank to dispose of
its remaining $4.3 million investment in this asset.  The Company will
continue to evaluate this investment and if the market value of such
investment declines further and remains depressed for a substantial period
of time, the Company will evaluate the investment for other-than-temporary
impairment at that time.  The decrease was also due to depositor
related fees of $8,000, offset in part by increases in bank owned life insurance
income and proceeds of $235,000, loan fees of $280,000, net gain on sale of
loans held-for-sale of $3,000 and miscellaneous fees of $16,000.
  Non-interest
Expense.  Non-interest expense decreased by $45,000, or 1.5%,
to $3.0 million for the three months ended June 30, 2008, from $3.0 million
for the three months ended June 30, 2007.  The decrease resulted
primarily from decreases of  $239,000 in compensation and fringe
benefits, which included decreases in the Company’s stock-based incentive plan
of $550,000, supplemental executive retirement plan of $25,000 and ESOP expense
of $10,000, offset in part by increases in salaries of $283,000 and
miscellaneous officer and employee expenses of $63,000. The Company also
experienced decreased professional fees of $106,000, offset in part by increased
costs in occupancy and equipment of $123,000, other expenses of $162,000, which
include advertising, promotional items and postage, and data processing fees of
$15,000.
  17
  Income Taxes.Income tax expense increased $107,000, or 16.1%, to $773,000 for the
three months ended June 30, 2008, from $666,000 for the three months ended June
30, 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 June 30, 2008, was 35.0% and for the
three months ended June 30, 2007 the effective income tax was
35.5%.
  Comparison
of Operating Results for the Nine Months Ended June 30, 2008 and
2007
  Net
Income.  Net income increased by $1.5 million, or 59.0%, to
$4.1 million for the nine month period ended June 30, 2008, from $2.6 million
for the same period in 2007.  The primary reasons for the increase in
net income were a $2.7 million decrease in non-interest expense, a decrease in
interest expense of $410,000 and an increase in non-interest income of $125,000,
offset in part by increases in provision for income taxes of $1.1 million,
provision for loan losses of $109,000 and a reduction in interest income of
$509,000.
  Net Interest
Income Before Provision for Loan Losses.Net interest income
decreased by $99,000, or 0.8%, to $12.9 million for the nine month period ended
June 30, 2008, from approximately $13.0 million for the same period in
2007.  This decrease was primarily due to a seven basis point decrease
in the Bank’s net interest rate spread to 3.53% for the nine months ended June
30, 2008, from 3.60% for the nine months ended June 30, 2007.  The
average balance of interest-earning assets increased approximately $9.2 million,
or 2.4%, to a $396.4 million for the nine months ended June 30, 2008, from
$387.2 million for the nine months ended June 30, 2007, while the yield on
interest-earning assets decreased 34 basis points to 6.91% for the nine months
ended June 30, 2008, from 7.25% for the nine months ended June 30,
2007.  The average balance of interest-bearing liabilities increased
approximately $7.6 million, or 2.6%, to $303.3 million for the nine months ended
June 30, 2008, from $295.7 million for the nine months ended June 30, 2007,
while the cost of interest-bearing liabilities decreased 27 basis points to
3.38% for the nine months ended June 30, 2008, from 3.65% for the nine months
ended June 30, 2007.  The Bank’s net interest margin decreased 14
basis points to 4.33% for the nine months ended June 30, 2008, from 4.47% for
the nine months end June 30, 2007.
  Interest
Income.Interest income decreased $509,000, or 2.4%, to $20.6
million for the nine months ended June 30, 2008, from $21.1 million for the nine
months ended June 30, 2007.  The decrease was due to decreases in
interest income from multi-family and commercial loans of $233,000, construction
loans of $940,000, mortgage back securities of $89,000 and other interest
earning assets of $146,000, offset in part by increased interest income on
one-to four- family and other loans of $897,000. The yield on the mortgage loan
portfolio decreased 66 basis points to 7.58% for the nine months ended June 30,
2008, from 8.24% for the nine months ended June 30, 2007.  The yield
on investment securities and other interest-earning assets increased 19 basis
points to 4.55% for the nine months ended June 30, 2008, from 4.36% for the nine
months ended June 30, 2007.  The average yield on total
interest-earning assets decreased by 34 basis points to 6.91% for the nine
months ended June 30, 2008, from 7.25% for the nine months ended June 30,
2007.
  Interest
Expense.Interest expense decreased $410,000, or 5.1%, to $7.7
million for the nine months ended June 30, 2008, from $8.1 million for the nine
months ended June 30, 2007.  The decrease in interest expense
reflected a 27 basis point decrease in the cost of interest-bearing liabilities
to 3.38% for the nine months ended June 30, 2008, from 3.65% for the nine months
ended June 30, 2007, offset in part by an increase in the average
interest-bearing liabilities balance of $7.6 million.  The decrease in
interest expense reflected lower market interest rates on the Bank’s borrowings
with the FHLB of New York during the nine months ended June 30, 2008, compared
to the nine months ended June 30, 2007.  Interest expense on savings
accounts decreased by $52,000, or 10.5%, to $443,000 for the nine months ended
June 30, 2008, from $495,000 for the nine months ended June 30, 2007, as the
average cost on savings accounts increased one basis point, to 1.01% for the
nine months ended June 30, 2008, from 1.00% for the nine months ended June 30,
2007.  The average balance of savings accounts decreased $7.8 million,
or 11.7%, to $58.3 million for the nine months ended June 30, 2008, from $66.1
million for the nine months ended June 30, 2007.  Interest expense on
money market and NOW accounts increased $382,000, or 60.9% to $1.0 million for
the nine months ended June 30, 2008, from $627,000 for the nine months ended
June 30, 2007, as the average cost on these deposits increased four basis points
to 2.37% for the nine months ended June 30, 2008, from 2.33% for the nine months
ended June 30, 2007, while the average balances increased $20.8 million, or
58.0%, to $56.7 million for the nine months ended June 30, 2008, from $35.9
million for the nine months ended June 30, 2007.  Interest expense on
certificates of deposit increased by $143,000, or 2.5%, to $5.8 million for the
nine months ended June 30, 2008, from $5.7 million for the nine months ended
June 30, 2007, as the average cost on certificates of deposit decreased by 20
basis points to 4.50% for the nine months ended June 30, 2008, from 4.70% for
the nine months ended June 30, 2007. The average balance of certificates of
deposit increased approximately $11.3 million, or 7.0%, to $171.7 million for
the nine months ended June 30, 2008, from $160.4 million for the nine months
ended June 30, 2007.   Interest expense on FHLB of New York
advances decreased by $883,000, or 66.8%, to $438,000 for the nine months ended
June 30, 2008, from $1.3 million for the nine months ended June 30, 2007, as the
average of the FHLB of New York advances decreased by $16.7 million, or 50.2%,
to $16.5 million for the nine months ended June 30, 2008 from $33.2 million for
the nine months ended June 30, 2007.  The average cost on these
borrowings decreased 177 basis points to 3.53% for the nine months ended June
30, 2008, from 5.30% for the nine months ended June 30, 2007.
  18
  Provision for
Loan Losses.Our provision for loan losses increased $109,000
to $113,000 for the nine months ended June 30, 2008, compared to $4,000 for the
nine months ended June 30, 2007.  The increase is due to the
originations in higher risk loans.   Our non-performing loans in
non-accrual status totaled $6,000 and $71,000 at June 30, 2008 and June 30,
2007, respectively.  The allowance for loan losses at June 30, 2008,
represented 0.56% of total loans, compared to 0.61% of total loans at June 30,
2007.
  Non-interest
Income.  Non-interest income increased by $125,000, or 6.0% to
$2.2 million for the nine months ended June 30, 2008, from $2.1 million for
the nine months ended June 30, 2007.  The increase was primarily due
to increases of $239,000 in banking fees and service charges, $214,000 in net
gain on sale of loans held-for-sale and  $254,000 in other income,
offset by an initial $582,000 impairment charge taken on the Bank’s
investment in a mutual fund that invests primarily in agency and private
label mortgage backed securities, as previously discussed.  The
increase in banking fees and service charges was primarily due to increased loan
syndication fees of approximately $378,000, offset in part by reductions in
other loan fees of approximately $124,000 and deposit related fees of
approximately $15,000.  The increase in the net gain on sale of loans
available-for-sale was due to increased sales of loans and servicing rights
associated with such sales.  The increase in other income was
primarily due to an $11,000 increase in cash surrender value and $234,000 of
proceeds from bank owned life insurance and a $9,000 increase in other
miscellaneous income.
  Non-interest
Expense.  Non-interest expense decreased $2.7 million, or
24.1%, to $8.5 million for the nine months ended June 30, 2008, compared to
$11.2 million for the nine months ended June 30, 2007.  The largest
component of the decrease was in compensation and fringe
benefits.  Compensation and fringe benefits decreased approximately
$2.9 million, or 33.9%, to $5.6 million for the nine months ended June 30, 2008,
from $8.5 million for the nine months ended June 30, 2007.  This
decrease was primarily due to the decreases in stock-based incentive plan
expense of $3.6 million and the supplemental executive retirement plan of
$141,000 and ESOP expense of $13,000, offset by increases in compensation of
$700,000, which included general salary increases for officers and employees and
hiring of staff, health care expense of $91,000 and other miscellaneous employee
expenses of $85,000.  In addition, professional fees decreased
$167,000 and data processing fees decreased $52,000, offset in part by increases
in occupancy and equipment expense of $257,000 and miscellaneous expenses of
$160,000, which is comprised of advertising and public relations, insurance and
other expense.
  19
  Income
Taxes.Income tax expense increased $1.1 million, or 82.6%, to
$2.4 million for the nine months ended June 30, 2008, from $1.3 million for the
nine months ended June 30, 2007.  This increase was primarily due to
increased income before taxes.  The effective tax rate was 36.7% for
the nine months ended June 30, 2008, as compared 33.6% for the nine months ended
June 30, 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.
 
 ITEM
4T.                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 June 30, 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.
  20
  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 June 30,
2008.  On March 18, 2008, the Board of Directors approved its 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 June 30, 2008, 394,829 total shares have been
repurchased with repurchases in the quarter described in the following
table:
 
 
 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
      programsApril
      1, 2008 through April 30, 2008
              
              
              6,330
              
              
              $
              12.48
              
              
              
              257,289
              
              
              $
              2,905,904May
      1, 2008 through May 31, 2008
              
              
              5,500
              
              
              $
              12.39
              
              
              
              262,789
              
              
              $
              2,837,784June
      1, 2008 through June 30, 2008
              
              
              132,040
              
              
              $
              12.47
              
              
              
              394,829
              
              
              $
              1,191,303
 
 21
  ITEM
3.                  DEFAULTS
UPON SENIOR SECURITIES
  None.
  ITEM
4.                  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
  None.
  ITEM
5.                  OTHER
INFORMATION
  None.
  ITEM
6.                  EXHIBITS
  11           
Computation of Earnings Per Share
  31.1         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:  August
      14, 2008
                /s/
      Angelo J. Di LorenzoAngelo
      J. Di LorenzoVice
      Chairman and Chief Executive Officer
 
 Date:  August
      14, 2008
                /s/ Ralph
      WaltherRalph
      WaltherVice
      President andChief
      Financial Officer