<PAGE>

                                  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 December 31, 2006

                                       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. Employer
  incorporation 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     [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
Large Accelerated Filer [  ]  Accelerated Filer [  ]   Non-accelerated Filer [x]

Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).
YES [ ]          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 February 9, 2007
Common Stock,  $.01 Par Value                            13,442,500


<PAGE>


                         BROOKLYN FEDERAL BANCORP, INC.

                           FORM 10-Q QUARTERLY REPORT

                                TABLE OF CONTENTS


                                     PART I.

                                                                    Page Number

Item 1.  Financial Statements ............................................. 1
Item 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations........................................ 9
Item 3.  Quantitative and Qualitative Disclosures About Market Risk........18
Item 4.  Controls and Procedures...........................................18

                                    PART II.

Item 1.  Legal Proceedings.................................................19
Item 1A. Risk Factors......................................................19
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.......19
Item 3.  Defaults Upon Senior Securities...................................19
Item 4.  Submission of Matters to a Vote of Security Holders...............19
Item 5.  Other Information.................................................19
Item 6.  Exhibits..........................................................19

Signature Page.............................................................21



<PAGE>



                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

                  BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    DECEMBER 31, 2006 AND SEPTEMBER 30, 2006
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                              DECEMBER 31,   SEPTEMBER 30,
                                   ASSETS                                        2006            2006
                                                                               ---------      ---------
<S>                                                                            <C>            <C>
Cash and due from banks (including interest-earning balances of $7,523 and
  $2,254, respectively)                                                        $  10,058      $   4,078
Certificates of deposit                                                            6,566          7,160
Securities available-for-sale                                                      4,439          4,389
Securities held-to-maturity:
  Mortgage-backed securities (estimated fair value of $80,034 and $84,792,
     respectively)                                                                82,082         86,967
  Other (estimated fair value of $4 and $5, respectively)                              4              5
Loans held-for-sale                                                               91,100         92,243
Loans                                                                            194,381        196,112
     Less: Allowance for loan losses                                               1,774          1,757
                                                                               ---------      ---------
             Net loans                                                           192,607        194,355
Federal Home Loan Bank ("FHLB") of New York stock, at cost                         2,233          2,778
Accrued interest receivable                                                        2,127          1,992
Premises and equipment, net                                                        1,179          1,245
Bank owned life insurance                                                          8,703          8,604
Prepaid expenses and other assets                                                  4,006          4,229
                                                                               ---------      ---------
         Total assets                                                          $ 405,104      $ 408,045
                                                                               =========      =========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits:
      Non-interest-bearing deposits                                            $  15,875      $  18,908
      Interest-bearing deposits                                                  101,563         99,734
      Certificates of deposit                                                    161,334        152,361
                                                                               ---------      ---------
         Total deposits                                                          278,772        271,003
  Borrowings:
      Short-term FHLB of New York advances                                        30,136         41,936
      Long-term FHLB of New York advances                                          7,171          7,471
  Advance payments by borrowers for taxes and insurance                            1,383          2,139
  Accrued expenses and other liabilities                                           5,944          5,533
                                                                               ---------      ---------
         Total liabilities                                                       323,406        328,082
                                                                               ---------      ---------
Stockholders' 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;
        13,225,000 issued and outstanding                                            132            132
      Additional paid-in capital                                                  37,811         37,799
      Retained earnings - substantially restricted                                46,634         44,946
      Unallocated common stock held by employee stock ownership
         plan ("ESOP")                                                            (2,830)        (2,870)
      Accumulated other comprehensive loss:
        Net unrealized loss on securities, net of tax                                (49)           (44)
                                                                               ---------      ---------
         Total stockholders' equity                                               81,698         79,963
                                                                               ---------      ---------
         Total liabilities and stockholders' equity                            $ 405,104      $ 408,045
                                                                               =========      =========

                      See accompanying notes to consolidated financial statements.
</TABLE>

                                       1

<PAGE>


<TABLE>
<CAPTION>

                  BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)

                                                                 FOR THE THREE MONTHS
                                                                   ENDED DECEMBER 31,
                                                             -----------------------------
                                                                 2006             2005
                                                             ------------     ------------
<S>                                                          <C>              <C>
Interest income:
   First mortgage and other loans                            $      6,066     $      3,703
   Mortgage-backed securities                                         876              836
   Other securities and interest-earning assets                       205              339
                                                             ------------     ------------
     Total interest income                                          7,147            4,878
                                                             ------------     ------------
Interest expense:
   Deposits                                                         2,166            1,448
   Borrowings                                                         617               85
                                                             ------------     ------------
     Total interest expense                                         2,783            1,533
                                                             ------------     ------------

Net interest income before provision for loan losses                4,364            3,345
Provision for (recovery of) loan losses                                17              (13)
                                                             ------------     ------------
     Net interest income after provision for loan losses            4,347            3,358
                                                             ------------     ------------
Non-interest income:
   Banking fees and service charges                                   613              517
   Net gain on sale of loans held-for-sale                             12               26
   Other                                                              160              166
                                                             ------------     ------------
     Total non-interest income                                        785              709
                                                             ------------     ------------
Non-interest expense:
   Compensation and fringe benefits                                 1,544            1,510
   Occupancy and equipment                                            274              253
   Professional fees                                                  109               71
   Data processing fees                                               164              165
   Other                                                              307              260
                                                             ------------     ------------
     Total non-interest expense                                     2,398            2,259
                                                             ------------     ------------

Income before provision for income taxes                            2,734            1,808
Provision for income taxes                                          1,046              679
                                                             ------------     ------------
     Net income                                              $      1,688     $      1,129
                                                             ============     ============
     Earnings per share:
          Basic                                              $       0.13     $       0.09
          Diluted                                            $       0.13     $       0.09
     Average common shares outstanding:
          Basic                                                12,939,383       12,923,207
          Diluted                                              12,939,383       12,923,207
</TABLE>


                See accompanying notes to consolidated financial statements.

                                       2


<PAGE>

<TABLE>
<CAPTION>


                                          BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                          THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005
                                                         (IN THOUSANDS)
                                                           (UNAUDITED)

                                                                        RETAINED                     ACCUMULATED
                                                                       EARNINGS-     UNALLOCATED       OTHER
                                                        ADDITIONAL   SUBSTANTIALLY   COMMON STOCK   COMPREHENSIVE
                                     COMMON STOCK   PAID-IN CAPITAL    RESTRICTED    HELD BY ESOP       LOSS           TOTAL
                                     ------------   ---------------  -------------   ------------   --------------    --------
<S>                                  <C>            <C>              <C>             <C>            <C>              <C>
BALANCE SEPTEMBER 30, 2005           $    132       $        37,773  $      40,388   $    (3,038)   $         (46)   $  75,209

Comprehensive income:
    Net income                                 --                --          1,129            --               --        1,129
    Net unrealized loss on securities          --                --             --            --               (2)          (2)
                                                                                                                      --------
          Comprehensive income                                                                                           1,127
                                                                                                                      --------
Allocation of ESOP stock                       --                 4             --            49               --           53
                                     ------------   ---------------  -------------   ------------   --------------    --------
BALANCE DECEMBER 31, 2005            $        132   $        37,777  $      41,517   $    (2,989)   $         (48)    $ 76,389
                                     ============   ===============  =============   ============   ==============    ========

BALANCE SEPTEMBER 30, 2006           $        132   $        37,799  $      44,946   $    (2,870)   $         (44)    $ 79,963

Comprehensive income:
    Net income                                 --                --          1,688            --               --        1,688
    Net unrealized loss on securities          --                --             --            --               (5)          (5)
                                                                                                                      --------
          Comprehensive income                                                                                           1,683
                                                                                                                      --------
Allocation of ESOP stock                       --                12             --            40               --           52
                                     ------------   ---------------  -------------   ------------   --------------    --------
BALANCE DECEMBER 31, 2006            $        132   $        37,811  $      46,634   $    (2,830)   $         (49)    $ 81,698
                                     ============   ===============  =============   ============   ==============    ========


                                  See accompanying notes to consolidated financial statements.
</TABLE>

                                                                3

<PAGE>


<TABLE>
<CAPTION>

                                             BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND 2005
                                                            (IN THOUSANDS)
                                                              (UNAUDITED)
                                                                                              FOR THE THREE MONTHS ENDED
                                                                                                     DECEMBER 31,
                                                                                              -------------------------
                                                                                                2006             2005
                                                                                              --------         --------
<S>                                                                                           <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                                               $  1,688         $  1,129
     Adjustments to reconcile net income to net cash provided by operating activities:
         ESOP expense                                                                               52               53
         Depreciation and amortization                                                              84               96
         Provision for  (recovery of) loan losses                                                   17              (13)
         Income from bank-owned life insurance                                                     (84)             (66)
         Increase in deferred loan fees, net                                                      (233)             (66)
         Amortization of premiums, net of accretion of discounts                                     3               26
         Accretion of discount on certificates of deposit                                           (1)              --
         Originations of loans held-for-sale                                                    (4,734)         (10,067)
         Proceeds from sales of loans held-for-sale                                                207            6,073
         Principal repayments on loans held-for-sale                                             1,731                5
         Net gain on sales of loans held-for-sale                                                  (12)             (26)
         Increase in accrued interest receivable                                                  (135)             (78)
         Deferred income tax benefit                                                              (144)              (9)
         Decrease in prepaid expenses and other assets                                             371              238
         Increase (decrease) in accrued expenses and other liabilities                             411              (13)
                                                                                              --------         --------
              Net cash used in operating activities                                               (779)          (2,718)
                                                                                              --------         --------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Repayments in excess of loan originations                                                   5,915            2,567
     Principal repayments on mortgage-backed securities held-to-maturity                         4,882            9,209
     Purchases of mortgage-backed securities held-to-maturity                                       --           (9,594)
     Maturities and principal pay downs of other securities held-to-maturity                         1              395
     Purchases of securities available-for-sale                                                    (59)             (43)
     Purchases of certificates of deposit                                                           --              (98)
     Maturities of certificates of deposit                                                         595              200
     Redemption of FHLB of New York stock                                                          545              132
     Purchases of bank-owned life insurance                                                        (15)             (15)
     Purchases of premises and equipment                                                           (18)             (10)
                                                                                              --------         --------
             Net cash provided by investing activities                                          11,846            2,743
                                                                                              --------         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase in deposits                                                                        7,769           15,713
     Net decrease in overnight FHLB advances                                                   (16,800)              --
     Proceeds from FHLB of New York term advances                                               15,000              750
     Repayments of FHLB of New York term advances                                              (10,300)            (750)
     Decrease in advance payments by borrowers for taxes and insurance                            (756)            (861)
                                                                                              --------         --------
             Net cash (used in) provided by financing activities                                (5,087)          14,852
                                                                                              --------         --------

             Net increase in cash and cash equivalents                                           5,980           14,877
Cash and cash equivalents at beginning of year                                                   4,078            8,384
                                                                                              --------         --------
Cash and cash equivalents at end of period                                                    $ 10,058         $ 23,261
                                                                                              ========         ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest                                                                             $  2,774         $  1,533
         Taxes                                                                                     450               --
     Other:
         Mortgage loans held-for-sale transferred to held-to-maturity                            3,951               --


                               See accompanying notes to consolidated financial statements.

                                                            4

</TABLE>
<PAGE>



                  BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2006
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

        Brooklyn Federal Bancorp, Inc. (the "Company") was formed to serve as
the stock holding company for Brooklyn Federal Savings Bank (the "Bank") as part
of the Bank's reorganization into the mutual holding company structure. For a
further discussion of the Company's formation and operations, see the Company's
Registration Statement on Form S-1, as amended, declared effective by the
Securities and Exchange Commission (the "SEC") on February 11, 2005 (File Number
333-121580). The Company completed its initial public offering on April 5, 2005
(see Note 2). Based upon the foregoing, the Unaudited Interim Financial
Statements filed as part of this quarterly report are those of the Bank and its
subsidiaries through March 31, 2005 and for the Company, the Bank and its
subsidiaries (collectively, the "Company") thereafter. All significant
inter-company balances and transactions have been eliminated in consolidation.

        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. Operating results for the three-month
period ended December 31, 2006 are not necessarily indicative of the results
that may be expected for the year ending September 30, 2007. The Company's
consolidated financial statements, as presented in the Company's Form 10-K for
the year ended September 30, 2006, should be read in conjunction with these
statements.

NOTE 2 - COMPLETION OF PLAN OF CONVERSION AND REORGANIZATION

        On November 9, 2004, the Board of Directors adopted a plan of
reorganization pursuant to which the Bank would convert to a stock savings bank
under a two-tier mutual holding company structure. As part of this plan, the
Bank established a federally-chartered mutual holding company known as BFS
Bancorp, MHC. Upon consummation of the plan of reorganization, the Bank became a
federally-chartered stock savings bank, wholly-owned by the Company. BFS
Bancorp, MHC owns approximately 70% of the Company.

        Effective February 11, 2005, the Company received approval from both the
SEC and the Office of Thrift Supervision to proceed with its planned stock
offering equal to the pro forma market value of the Company and its
subsidiaries, after giving effect to the offering. The offering closed April 5,
2005 and the net proceeds from the offering were approximately $37.9 million
(gross proceeds of $39.7 million for the issuance of 3,967,500 shares, less
offering costs of approximately $1.8 million). The Company also issued 9,257,500
shares to BFS Bancorp, MHC, resulting in a total of 13,225,000 shares issued and
outstanding after completion of the reorganization. BFS Bancorp, MHC owns 70% of
the Company's outstanding shares. A

                                       5

<PAGE>


portion of the proceeds were used to fund the ESOP, which purchased 317,400
shares of the Company's common stock at a cost of $3.2 million on April 5, 2005.

NOTE 3 - 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 4 - IMPACT OF CERTAIN ACCOUNTING PRONOUNCEMENTS

        In December 2004, the Financial Accounting Standards Board (the "FASB")
issued Statement of Accounting Standard ("SFAS") SFAS No. 123 (revised 2004),
"Share-Based payment." This statement revised the original guidance contained in
SFAS No. 123 and supersedes Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. Under SFAS No. 123 (revised 2004), an entity such as the Company will
be required to measure the cost of employee services received in exchange for
any award of equity instruments made after June 30, 2006, based on the
grant-date fair value of the award (with limited exceptions) and recognize such
cost over the period during which an employee is required to provide service in
exchange for the award (usually the vesting period). For stock options and
similar instruments, grant-date fair value will be estimated using
option-pricing models adjusted for the unique characteristics of instruments
(unless observable market prices for the same or similar instruments are
available). SFAS No. 123 (revised 2004) will not have any effect on the
Company's existing historical financial statements as the Company has not had
and does not currently have any stock-based compensation grants which would be
subject to SFAS No. 123 (revised 2004). At December 31, 2006 the Company had not
granted any stock compensation awards. However, on January 16, 2007 the Board of
Directors granted 552,500 options of the 648,025 options available and granted
221,000 shares of restriced stock of the 259,210 available shares of restricted
stock, in accordance with the terms of the Brooklyn Federal Bancorp, Inc. 2006
Stock-Based Incentive Plan, which was approved by the Company's shareholders at
the April 11, 2006 annual meeting of stockholders. The Company anticipates
expensing during the quarter ending March 31, 2007 the entire fair value of
365,000 options and 146,000 shares of restricted stock due to the provision in
the 2006 Stock-Based Incentive Plan that accelerates the vesting of options and
shares of restricted stock upon termination of service following retirement age
(as defined in the plan).

        In February 2006, the FASB issued FASB Staff Position No. FAS 123(R)-4,
"Classification of Options and Similar Instruments Issued as Employee
Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent
Event." This position amends SFAS 123R to incorporate that a cash settlement
feature that can be exercised only upon the occurrence of a contingent event
that is outside the employee's control does not meet certain conditions in SFAS
123R until it becomes probable that the event will occur. The guidance in this
FASB Staff

                                       6

<PAGE>


Position shall be applied upon initial adoption of Statement 123R. The Company
is currently evaluating the impact that the adoption of SFAS 123R will have on
its financial statements.

        In October 2006, the FASB issued FASB Staff Position No. 123R-5,
"Amendment of FASB Staff Position FAS 123(R)-1" ("FSP 123(R)-5"). FSP 123(R)-5
amends FSP 123(R)-1 for equity instruments that were originally issued as
employee compensation and then modified, with such modification made solely to
reflect an equity restructuring that occurs when the holders are no longer
employees. The Company does not expect the adoption of FSP 123(R)-5 to have a
material impact on its financial condition, results of operations or cash flows.

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

        In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments". SFAS No. 155 amends FASB Statement No. 133 and
FASB Statement No. 140, and improves the financial reporting of certain hybrid
financial instruments by requiring more consistent accounting that eliminates
exemptions and provides a means to simplify the accounting for these
instruments. Specifically, SFAS No. 155 allows financial instruments that have
embedded derivatives to be accounted for as a whole (eliminating the need to
bifurcate the derivative from its host) if the holder elects to account for the
whole instrument on a fair value basis. SFAS No. 155 is effective for all
financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The Company is required
to adopt the provisions of SFAS No. 155, as applicable, beginning in fiscal year
2007. Management does not believe the adoption of SFAS No. 155 will have a
material impact on the Company's financial position and results of operations.

                                       7

<PAGE>


        In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
of Financial Assets -- An Amendment of FASB Statement No. 140". SFAS No. 156
requires that all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable. The statement
permits, but does not require, the subsequent measurement of servicing assets
and servicing liabilities at fair value. SFAS No. 156 is effective as of the
beginning of an entity's first fiscal year that begins after September 15, 2006,
which for the Company will be as of the beginning of fiscal 2007. The Company
does not believe that the adoption of SFAS No. 156 will have a significant
effect on its financial statements.

        In September 2006, the FASB issued SAFS No. 157, FAIR VALUE
MEASUREMENTS, which defines fair value, establishes a framework for measuring
fair value under Generally Accepted Accounting Principles, and expands
disclosures about fair value measurements. SAFS No. 157 applies to other
accounting pronouncements that require or permit fair value measurements. The
new guidance is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and for interim periods within those fiscal
years. We are currently evaluating the potential impact, if any, of the adoption
of SAFS No. 157 on our consolidated financial position, results of operations
and cash flows.

        In September 2006, the FASB issued SFAS No. 158, EMPLOYERS' ACCOUNTING
FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS, which amends SFAS
No. 87 and SFAS No. 106 to require recognition of the over funded or under
funded status of pension and other postretirement benefit plans on the balance
sheet. Under SFAS No. 158, gains and losses, prior service costs and credits,
and any remaining transition amounts under SFAS No. 87 and SFAS No. 106 that
have not yet been recognized through net periodic benefit cost will be
recognized in accumulated other comprehensive income, net of tax effects, until
they are amortized as a component of net periodic cost. The measurement date --
the date at which the benefit obligation and plan assets are measured -- is
required to be the company's fiscal year end. SFAS No. 158 is effective for
publicly held companies for fiscal years ending after December 15, 2006, except
for the measurement date provisions, which are effective for fiscal years ending
after December 15, 2008. The Company is currently analyzing the effects of SFAS
No. 158 but does not expect its implementation will have a significant impact on
the Company's financial condition or results of operations.

        In September 2006, the SEC issued Staff Accounting Bulletin No. 108
("SAB No. 108"). SAB No. 108 provides interpretive guidance on how the effects
of the carryover or reversal of prior year misstatements should be considered in
quantifying a potential current year misstatement. Prior to SAB No. 108,
Companies might evaluate the materiality of financial-statement misstatements
using either the income statement or balance sheet approach, with the income
statement approach focusing on new misstatements added in the current year, and
the balance sheet approach focusing on the cumulative amount of misstatement
present in a company's balance sheet. Misstatements that would be material under
one approach could be viewed as immaterial under another approach, and not be
corrected. SAB No. 108 now requires that companies view financial statement
misstatements as material if they are material according to either the income
statement or balance sheet approach. The Company has analyzed SAB No. 108 and
determined that upon adoption it will have no impact on the reported results of
operations or financial condition.

                                       8

<PAGE>


        In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes--an interpretation of FASB Statement No. 109"
("FIN 48"), which clarifies the accounting for uncertainty in tax positions.
This Interpretation requires that companies recognize in their financial
statements the impact of a tax position, if that position is more likely than
not of being sustained on audit, based on the technical merits of the position.
The provisions of FIN 48 are effective for fiscal years beginning after December
15, 2006, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. We are currently
evaluating the impact of adopting FIN 48 on our 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.

        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

                                       9

<PAGE>


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 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 and
discounted cash flow valuations of properties are critical in determining the
amount of the allowance required for specific loans. Assumptions for appraisals
and discounted cash flow valuations 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 appraisals and
discounted cash flow valuations are carefully reviewed by management to
determine that the resulting values reasonably reflect amounts realizable on the
related loans.

        Management performs a quarterly evaluation of the adequacy of the
allowance for loan losses. Consideration is given to a variety of factors in
establishing this estimate including, but not limited to, current economic
conditions, delinquency statistics, geographic and industry concentrations, the
adequacy of the underlying collateral, the financial strength of the borrower,
results of internal and external loan reviews and other relevant factors. This
evaluation is inherently subjective, as it requires material estimates that may
be susceptible to significant revision based on changes in economic and real
estate market conditions.

        The analysis of the allowance for loan losses has two components:
specific and general allocations. Specific allocations are made for loans that
are determined to be impaired. Impairment is measured by determining the present
value of expected future cash flows or, for collateral-dependent loans, the fair
value of the collateral adjusted for market conditions and

                                       10

<PAGE>


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:

                o       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

                                       11

<PAGE>


                        criteria for retention in our loan portfolio, they
                        generally can be sold in the secondary market.

                o       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. We have invested in a new loan
                        servicing system and additional personnel to allow us to
                        service these types of loans more efficiently.

                o       INCREASING OUR REAL ESTATE LENDING CAPACITY. The
                        additional capital raised in the stock offering
                        increased our lending capacity by enabling us to
                        originate more loans and loans with larger balances.
                        This permits us to serve borrowers with larger lending
                        needs and to originate larger loans than we have
                        originated in the past.

                o       UTILIZING THE NET PROCEEDS WE RECEIVED IN THE OFFERING
                        TO BETTER MANAGE OUR INTEREST RATE RISK AND GROW OUR
                        ASSETS. With long-term interest rates at low levels, we
                        have managed our interest rate risk by maintaining a
                        significant percentage of our assets in short-term
                        liquid assets, such as cash and cash equivalents,
                        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 began to rise. During the recent period
                        of rising short-term interest rates, we have been able
                        to increase interest income on our short-term liquid
                        assets, while still reducing security investments and
                        redeploying those funds to loan originations. Continuing
                        to maintain a high 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 December 31, 2006, $10.1 million, or
                        2.5% of our assets, was invested in cash or cash
                        equivalents, and $6.7 million, or 1.6% of our assets,
                        was invested in certificates of deposit and securities
                        that mature within three years.

                o       FACILITATE GROWTH THROUGH DE NOVO BRANCHING. We have
                        established financial, geographic and other criteria to
                        evaluate potential new branch offices in our market
                        area. While we continue to review potential branch
                        sites, there can be no assurance as to whether or when
                        we will open such offices.

                                       12

<PAGE>


                o       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 DECEMBER 31, 2006 AND SEPTEMBER 30, 2006

        TOTAL ASSETS. Total assets decreased by $2.9 million, or 0.7%, to $405.1
million at December 31, 2006, from $408.0 million at September 30, 2006. This
decrease was primarily due to decreases in certificate of deposit investments,
securities held-to-maturity, loans held-for-sale, loans receivable, net, and
Federal Home Loan Bank ("FHLB") of New York stock, offset primarily by an
increase in cash and due from banks.

        CASH AND DUE FROM BANKS. Cash and due from banks, increased $6.0
million, or 146.6%, to $10.1 million, at December 31, 2006, from $4.1 million at
September 30, 2006.

        INVESTMENT IN CERTIFICATES OF DEPOSIT. Certificates of deposit decreased
$594,000, or 8.3%, to $6.6 million at December 31, 2006, from $7.2 million at
September 30, 2006. The decrease in these short-term investments was primarily
due to certificate maturities.

        SECURITIES. Securities investments, which represent securities
available-for-sale and securities held-to-maturity, decreased $4.8 million, or
5.3%, to $86.6 million at December 31, 2006, from $91.4 million at September 30,
2006. This decrease was primarily due to repayments in mortgage-backed
securities.

        NET LOANS. Net loans before allowance for loan losses and including
loans held-for-sale, decreased $2.9 million, or 1.0%, to $285.5 million at
December 31, 2006, from $288.4 million at September 30, 2006, primarily due to
decreases of $4.4 million in multi-family loans and $191,000 in one-to
four-family loans, offset by increases of $823,000 in commercial real estate
loans, $456,000 in construction loans, $184,000 in land loans and $83,000 in
consumer and other loans. Net deferred fees/costs decreased approximately
$217,000.

        The Company had one non-accrual loan with an outstanding balance of
approximately $125,000 at December 31, 2006 and three non-accrual loans with
outstanding balances in total of $299,000 at September 30, 2006. During the
quarter ended December 31, 2006 one, single family, non-accrual loan paid off
and the other, single family, non-accrual loan made payments to bring current
and the Bank has classified this loan as special mention. The non-accrual loan
at December 31, 2006 is on a multi-family apartment building for which the Bank
established a specific loss allowance and classified this loan as doubtful.

        The Company had one multi-family loan, located in Brooklyn, New York,
with an outstanding principal of $724,000 when it was classified as substandard
during the quarter ended June 30, 2005 and remained classified as substandard at
December 31, 2006. The outstanding principal balance on this loan was $648,000
at December 31, 2006. The property suffered structural damage due to
construction at an adjoining lot. Management has placed the loan on substandard
status due to concerns about the property damage and the borrower's ability to
make future contractual payments.

                                       13

<PAGE>


        The Company had four loans in the special mention classification at
December 31, 2006. There are two construction loans totaling approximately
$702,000, one single family mortgage loan totaling approximately $114,000 and
one commercial real estate mortgage loan of approximately $1.7 million. This
commercial real estate mortgage loan is past maturity and considered
non-performing and the foreclosure process is proceeding. The Bank does not
expect a loss on this non-performing loan.

        PREPAID EXPENSES AND OTHER ASSETS. Prepaid expenses and other assets
including bank-owned life insurance decreased $124,000, or 1.0%, to $12.7
million at December 31, 2006, from $12.8 million at September 30, 2006. This
decrease was mainly due to a decrease in miscellaneous other assets of
approximately $223,000, offset in part by increases in bank-owned life insurance
of $99,000.

        DEPOSITS. Deposits increased by $7.8 million, or 2.9%, to $278.8 million
at December 31, 2006, from $271.0 million at September 30, 2006. The increase
was primarily due to the Bank's competitive rates offered on its deposit
products.

        BORROWED FUNDS. Total funds borrowed from the FHLB of New York,
decreased $12.1 million, or 24.5%, to $37.3 million at December 31, 2006, from
$49.4 million at September 30, 2006.

        ACCRUED EXPENSES AND OTHER LIABILITIES. Accrued expenses and other
liabilities increased $411,000, or 7.4%, to $5.9 million at December 31, 2006,
from $5.5 million at September 30, 2006. This increase was primarily due to
increases in income taxes payable of $740,000, other accrued expenses of
$233,000 and Supplemental Executive Retirement Plan ("SERP") liability of
$141,000, offset in part by decreases in loan portfolio payables approximating
$568,000.

        STOCKHOLDERS' EQUITY. Stockholders' equity increased by $1.7 million, or
2.2%, to $81.7 million at December 31, 2006, from $80.0 million at September 30,
2006. The primary reason for the increase is the result of net income for the
period.

        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

<PAGE>


        A significant portion of the Company's liquidity consists of cash and
cash equivalents, which are a product of its operating, investing and financing
activities. At December 31, 2006, $10.1 million or 2.5% of the Company's assets
were invested in cash and cash equivalents. 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
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 December 31,
2006 investments in certificates of deposit and short-term investment securities
(maturing in less than three years) totaled $6.7 million or 1.6% of the
Company's assets. As of December 31, 2006, the Company had $37.3 million in
borrowings outstanding from the FHLB of New York and access to additional FHLB
of New York advances.

        At December 31, 2006, the Company had approximately $65.4 million in
loan commitments outstanding, which included $17.0 million in undisbursed
construction loans, $2.2 million in one- to four- family loans, $1.1 million in
unused home equity lines of credit, $5.2 million in commercial real estate lines
of credit and $39.9 million to originate multi-family and nonresidential
mortgage loans. The Company had $50,000 in commitments to sell one single-
family home equity loan at December 31, 2006. Certificates of deposit due within
one year of December 31, 2006 totaled $119.3 million, or 73.9% of certificates
of deposit. If these maturing deposits do not remain with the Company, the
Company will be required to seek other sources of funds, including other
certificates of deposit and borrowings. Depending on market conditions, the
Company may be required to pay higher rates on such deposits or other borrowings
than the Company currently pays on the certificates of deposit due on or before
December 31, 2007. 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 December
31, 2006, as compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
                                                                                        To be well Capitalized
                                                                                              Under Prompt
                                                                     Minimal Capital       Corrective Actions
                                                  Actual              Requirements             Provisions
                                         ----------------------------------------------------------------------
                                          Amount         Ratio     Amount       Ratio     Amount        Ratio
                                          ------         -----     ------       -----     ------        -----
                                                                 (Dollars in thousands)
<S>                                       <C>            <C>      <C>            <C>     <C>            <C>
Total risk-based capital
       (To risk-weighted assets)          $66,454        22.9%    $23,243        8.0%    $29,054        10.0%
Tier 1 risk-based capital
       (To risk-weighted assets)           64,805        22.3      11,622        4.0      17,432         6.0
Tangible capital
       (To tangible assets)                64,805        16.0       6,064        1.5         N/A         N/A
Tier 1 leverage (core) capital
       (To adjusted tangible assets)       64,805        16.0      12,128        3.0      20,214         5.0
</TABLE>

                                       15

<PAGE>


CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

        The following tables set forth the Bank's contractual obligations and
commercial commitments at December 31, 2006:
<TABLE>
<CAPTION>

                                                Payment Due by Period

                                                                                        More Than
                                                                     More than One     Three Years
                                                      One Year       Year Through      through Five      More Than
Contractual Obligations              Total            or less        Three Years           Years         Five Years
-----------------------            --------------------------------------------------------------------------------
                                                                    (In thousands)
<S>                                <C>               <C>               <C>               <C>               <C>
FHLB of New York Advances          $ 37,307          $ 30,136          $  6,371          $    600          $    200
Certificates of Deposit             161,334           119,254            27,918            14,162                 -
Lease obligations                     4,732               373               925               984             2,450
                                   --------          --------          --------          --------          --------
           Total                   $203,373          $149,763          $ 35,214          $ 15,746          $  2,650
                                   ========          ========          ========          ========          ========
</TABLE>

<TABLE>
<CAPTION>

                                           Commitment Expiration by Period

                                                                                        More Than
                                                                     More than One     Three Years
                                                      One Year       Year Through      through Five      More Than
Off-Balance Sheet Arrangements       Total            or less        Three Years          Years          Five Years
------------------------------     --------------------------------------------------------------------------------
                                                                    (In thousands)
<S>                                 <C>               <C>              <C>               <C>               <C>
To originate loans                  $42,153           $42,153          $      -          $      -          $      -
Unused lines of credit               23,272            23,272                 -                 -                 -
                                   --------          --------          --------          --------          --------
           Total                    $65,425           $65,425          $      -          $      -          $      -
                                   ========          ========          ========          ========          ========
</TABLE>


COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2006 AND
2005

        NET INCOME. Net income increased $559,000, or 49.5%, to $1.7 million for
the three months ended December 31, 2006, from $1.1 million for the three months
ended December 31, 2005. The primary reasons for the increase were a $2.3
million increase in interest income and a $76,000 increase in non-interest
income, offset in part by a $1.3 million increase in interest expense, a
$139,000 increase in non-interest expense, a $30,000 increase in the provision
for loan losses and an increase of $367,000 in the provision for income taxes.

        NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased by $1.0 million or 30.5%, to
$4.4 million for the three months ended December 31, 2006, from $3.4 million for
the three months ended December 31, 2005. The increase in net interest income
resulted primarily from an increase in the average balance of interest-earning
assets of $57.7 million and a 19 basis point increase in the Bank's net interest
rate spread to 3.57% for the three months ended December 31, 2006, from 3.38%
for the three months ended December 31, 2005. The Bank's net interest margin
increased 45 basis points to 4.43% in the three months ended December 31, 2006
compared to 3.98% for the three months ended December 31, 2005.

        INTEREST INCOME. Interest income increased $2.3 million, or 46.5%, to
$7.1 million for the three months ended December 31, 2006, from $4.8 million for
the three months ended December 31, 2005. Interest income on loans increased by
$2.4 million, or 63.8%, to $6.1 million

                                       16

<PAGE>


for the three months ended December 31, 2006, from $3.7 million for the three
months ended December 31, 2005. The primary reasons for the increase in interest
income on loans were a $1.8 million increase in multi-family and commercial real
estate loan income, $469,000 in construction loan income and $59,000 in one- to
four-family and other loan income. The average balance of the loan portfolio
increased by $86.5 million, or 42.0%, to $292.3 million for the three months
ended December 31, 2006, from $205.8 million for the three months ended December
31, 2005. The average yield on loans increased 110 basis points to 8.30% for the
three months ended December 31, 2006, from 7.20% for the three months ended
December 31, 2005. Interest income on investment securities and other
interest-earning assets decreased by $94,000, or 8.0%, to $1.1 million for the
three months ended December 31, 2006, from $1.2 million for the three months
ended December 31, 2005. The decrease in interest income on investment
securities and other interest-earning assets was primarily due to a reduction in
the average balance of $28.8 million, or 22.1%, to $101.6 million at December
31, 2006 from $130.4 at December 31, 2005, offset by an increase of 65 basis
points in the average yield to 4.25% for the quarter ended December 31, 2006,
compared to the average yield of 3.60% for the quarter ended December 31, 2005.

        INTEREST EXPENSE. Interest expense increased $1.3 million, or 81.5%, to
$2.8 million for the three months ended December 31, 2006, from $1.5 million for
the three months ended December 31, 2005. Interest expense on deposits increased
$718,000, or 49.6%, to $2.1 million at December 31, 2006, from $1.4 million at
December 31, 2005. Interest expense on FHLB of New York borrowings increased
$532,000, or 625.9%, to $617,000 at December 31, 2006, from $85,000 at December
31, 2005. The increase was primarily the result of increases in the average
balances of interest-bearing deposits of $11.8 million and FHLB of New York
borrowings of $37.1 million. In addition, the average cost of the
interest-bearing liabilities increased 127 basis points to 3.69% for the three
months ended December 31, 2006, from 2.42% for the three months ended December
31, 2005.

        PROVISION FOR LOAN LOSSES. The Bank's provision for loan losses
increased $30,000, to $17,000 for the three months ended December 31, 2006, from
a recovery of $13,000 for the three months ended December 31, 2005. The primary
reason for this increase was due to the growth in the Bank's commercial real
estate and construction loan portfolios. The allowance for loan losses as of
December 31, 2006 represented 0.62% of total loans, compared to 0.63% of total
loans as of December 31, 2005.

        NON-INTEREST INCOME. Non-interest income increased by $76,000, or 10.7%,
to $785,000 for the three months ended December 31, 2006, from $709,000 for the
three months ended December 31, 2005. The increase was primarily due to
increases in loan fees of $108,000, bank owned life insurance of $18,000, offset
in part by decreases in net gain on sale of loans held for sale of $14,000,
deposit related fees of $12,000 and other miscellaneous income of $24,000.

        NON-INTEREST EXPENSE. Non-interest expense increased by $139,000, or
6.2%, to $2.4 million for the three months ended December 31, 2006, from $2.3
million for the three months ended December 31, 2005. The increase resulted from
increases of $34,000 in compensation and fringe benefits, $21,000 for occupancy
and equipment, $38,000 in professional fees and $47,000 in other expenses
including advertising, office supplies and printing, insurance and other
operating expenses, offset by a reduction in data processing service bureau
expense of $1,000.

                                       17

<PAGE>


        INCOME TAXES. Income tax expense increased $367,000, or 54.1%, to $1.0
million for the three months ended December 31, 2006, from $679,000 for the
three months ended December 31, 2005. The primary reason for the increase in the
first fiscal quarter 2007 was an increase in income before taxes. The effective
tax rate for the three months ended December 31, 2006 was 38.3%. The effective
tax rate for the three months ended December 31, 2005 was 37.6%.

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 sustained period of
low interest rates, 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. The net proceeds from the stock
offering increased the Company's capital and provided management with greater
flexibility to manage its interest rate risk. In particular, management intends
to leverage the capital the Company received to increase interest-earning
assets. 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, 2006.

ITEM 4.  CONTROLS AND PROCEDURES

        An evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended)
as of December 31, 2006. Based on such evaluation, the

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<PAGE>


Company's Chief Executive Officer and Chief Financial Officer have concluded
that the Company's disclosure controls and procedures are designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and regulations and are operating in an effective manner.

        No change in the Company's internal controls over financial reporting
(as defined in Rules 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act
of 1934) occurred during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

        There is no material pending legal proceedings to which the Company or
its subsidiaries is a party other than ordinary routine litigation incidental to
their respective businesses.

ITEM 1A. RISK FACTORS

        There are no material changes to the risk factors as previously
disclosed in the Company's Form 10-K for the year ended September 30, 2006 as
filed with the SEC on December 29, 2006.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
         PROCEEDS

        None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

        None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

ITEM 5.  OTHER INFORMATION

        None.

ITEM 6.  EXHIBITS

        11     Computation of Earnings Per Share

        31.1   Certification of Chief Executive Officer Pursuant to Rule 13a-14
               (a)/15d-14(a)

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<PAGE>


        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.

                                       20

<PAGE>



                                   SIGNATURES

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



                                       BROOKLYN FEDERAL BANCORP, INC.
                                       (Registrant)




Date:  February 13, 2007               /s/ Angelo J. Di Lorenzo
                                       -----------------------------------------
                                       Angelo J. Di Lorenzo
                                       President and Chief Executive Officer




Date:  February 13, 2007               /s/ Richard A. Kielty
                                       -----------------------------------------
                                       Richard A. Kielty
                                       Executive Vice President and
                                       Chief Financial Officer

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