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, 2007





OR





o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934








Commission
      File Number 000-51208





BROOKLYN
      FEDERAL BANCORP, INC.


(Exact
      name of registrant as specified in its charter)





Federal
            20-2659598(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification Number)





81
                Court StreetBrooklyn,
                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 or a non-accelerated filer (as defined in Rule 12b-2 of the
      Exchange Act).




Large
                Accelerated Filer o
            Accelerated
                Filer o
            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 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 13, 2007Common
                Stock, $.01 Par Value
            13,383,910








**BROOKLYN
      FEDERAL BANCORP, INC.**





**Form
      10-Q Quarterly Report**





**Table
      of Contents**








PART
      I.





Page
                NumberItem
                1.
            Financial
                Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and
                Results of Operations
            8Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            19Item
                4.
            Controls
                and Procedures
            20PART
                II.Item
                1.
            Legal
                Proceedings
            20Item
                1A.
            Risk
                Factors
            20Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            20Item
                3.
            Defaults
                Upon Senior Securities
            21Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            21Item
                5.
            Other
                Information
            21Item
                6.
            Exhibits
            21Signature
                Page
            
            22













**PART
      I**





**ITEM
      1.** **FINANCIAL
      STATEMENTS**





**BROOKLYN
      FEDERAL BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION**


**June
      30, 2007 and September 30, 2006**


**(In
      thousands, except share amounts)**


**(Unaudited)**


**Assets**
              
              **June
                  30,**
                **2007**
              
              **September
                  30,**
                **2006**Cash
                  and due from banks (including interest-earning balances of $2,768
                  and
                  $2,254, respectively)
              
              $
              5,294
              
              $
              4,078Certificates
                  of deposit
              
              
              4,186
              
              
              7,160Securities
                  available-for-sale
              
              
              4,534
              
              
              4,389Securities
                  held-to-maturity:Mortgage-backed
                  securities (estimated fair value of $75,601 and $84,792,
                  respectively)
              
              
              77,936
              
              
              86,967
 Other
                  (estimated fair value of $3 and $5, respectively)
              
              
              3
              
              
              5Loans
                  held-for-sale
              
              
              83,656
              
              
              92,243Loans
                  receivable
              
              
              203,925
              
              
              196,112Less:
                  Allowance for loan losses
              
              
              1,761
              
              
              1,757Loans
                  receivable, net
              
              
              202,164
              
              
              194,355Federal
                  Home Loan Bank (“FHLB”) of New York stock, at cost
              
              
              1,671
              
              
              2,778Accrued
                  interest receivable
              
              
              2,349
              
              
              1,992Premises
                  and equipment, net
              
              
              1,065
              
              
              1,245Bank
                  owned life insurance
              
              
              8,874
              
              
              8,604Prepaid
                  expenses and other assets
              
              
              6,282
              
              
              4,229Total
                  assets
              
              $
              398,014
              
              $
              408,045**Liabilities
                  and Stockholders’ Equity**Liabilities:Deposits:Non-interest-bearing
                  deposits
              
              $
              15,430
              
              $
              18,908Interest-bearing
                  deposits
              
              
              106,879
              
              
              99,734Certificates
                  of deposit
              
              
              158,991
              
              
              152,361Total
                  deposits
              
              
              281,300
              
              
              271,003Borrowings:Short-term
                  FHLB of New York advances
              
              
              20,532
              
              
              41,936Long-term
                  FHLB of New York advances
              
              
              2,939
              
              
              7,471Advance
                  payments by borrowers for taxes and insurance
              
              
              1,523
              
              
              2,139Accrued
                  expenses and other liabilities
              
              
              6,409
              
              
              5,533Total
                  liabilities
              
              
              312,703
              
              
              328,082Stockholders’
                  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 13,225,000 issued and 13,418,010 and 13,225,000 outstanding,
                  respectively
              
              
              135
              
              
              132Additional
                  paid-in capital
              
              
              42,634
              
              
              37,799Retained
                  earnings - substantially restricted
              
              
              47,278
              
              
              44,946Treasury
                  shares - at cost, 66,200 shares
              
              
              (969
              )
              
              —Unallocated
                  common stock held by employee stock ownership plan
                  (“ESOP”)
              
              
              (2,751
              )
              
              (2,870
              )Unallocated
                  shares of the stock-based incentive plan
              
              
              (953
              )
              
              —Accumulated
                  other comprehensive loss:Net
                  unrealized loss on securities, net of tax
              
              
              (63
              )
              
              (44
              )Total
                  stockholders’ equity
              
              
              85,311
              
              
              79,963Total
                  liabilities and stockholders’ equity
              
              $
              398,014
              
              $
              408,045





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**
            
            **For
                the Nine Months
                Ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Interest
                income:First
                mortgage and other loans
            
            $
            5,821
            
            $
            4,394
            
            $
            17,849
            
            $
            12,145Mortgage-backed
                securities
            
            
            871
            
            
            959
            
            
            2,619
            
            
            2,731Other
                securities and interest-earning assets
            
            
            181
            
            
            264
            
            
            596
            
            
            894Total
                interest income
            
            
            6,873
            
            
            5,617
            
            
            21,064
            
            
            15,770Interest
                expense:Deposits
            
            
            2,330
            
            
            1,701
            
            
            6,775
            
            
            4,771Borrowings
            
            
            325
            
            
            171
            
            
            1,321
            
            
            343Total
                interest expense
            
            
            2,655
            
            
            1,872
            
            
            8,096
            
            
            5,114Net
                interest income before provision for loan losses
            
            
            4,218
            
            
            3,745
            
            
            12,968
            
            
            10,656Provision
                for loan losses
            
            
            —
            
            
            204
            
            
            4
            
            
            319Net
                interest income after provision for loan losses
            
            
            4,218
            
            
            3,541
            
            
            12,964
            
            
            10,337Non-interest
                income:Banking
                fees and service charges
            
            
            493
            
            
            372
            
            
            1,558
            
            
            1,237Net
                gain on sale of loans held-for-sale
            
            
            50
            
            
            9
            
            
            62
            
            
            48Other
            
            
            153
            
            
            180
            
            
            460
            
            
            531Total
                non-interest income
            
            
            696
            
            
            561
            
            
            2,080
            
            
            1,816Non-interest
                expense:Compensation
                and fringe benefits
            
            
            2,148
            
            
            1,527
            
            
            8,507
            
            
            4,566Occupancy
                and equipment
            
            
            253
            
            
            181
            
            
            795
            
            
            780Professional
                fees
            
            
            148
            
            
            116
            
            
            406
            
            
            302Data
                processing fees
            
            
            153
            
            
            158
            
            
            488
            
            
            483Other
            
            
            336
            
            
            286
            
            
            962
            
            
            740Total
                non-interest expense
            
            
            3,038
            
            
            2,268
            
            
            11,158
            
            
            6,871Income
                before income tax expense
            
            
            1,876
            
            
            1,834
            
            
            3,886
            
            
            5,282Income
                tax expense
            
            
            666
            
            
            696
            
            
            1,305
            
            
            1,990Net
                income
            
            $
            1,210
            
            $
            1,138
            
            $
            2,581
            
            $
            3,292Earnings
                per common share:Basic
            
            $
            0.09
            
            $
            0.09
            
            $
            0.20
            
            $
            0.25Diluted
            
            $
            0.09
            
            $
            0.09
            
            $
            0.20
            
            $
            0.25Average
                common shares outstanding:Basic
            
            
            13,057,122
            
            
            12,931,449
            
            
            13,017,562
            
            
            12,927,363Diluted
            
            
            13,187,326
            
            
            12,931,449
            
            
            13,147,766
            
            
            12,927,363





See
      accompanying notes to consolidated financial statements.


2




**BROOKLYN
      FEDERAL BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**


**Nine
      Months Ended June 30, 2007 and 2006**


**(In
      thousands, except for per share amounts)**


**(Unaudited)**




**Retained**
            
            
            
            **Unallocated**
            
            **Unallocated**
            
            **Accumulated****Additional**
            
            **Earnings-**
            
            
            
            **Common**
            
            **Shares
                of the**
            
            **Other****Common**
            
            **Paid-in**
            
            **Substantially**
            
            **Treasury**
            
            **Stock**
            
            **Stock-based**
            
            **Comprehensive****Stock**
            
            **Capital**
            
            **Restricted**
            
            **Stock**
            
            **Held
                by ESOP**
            
            **Incentive
                Plan**
            
            **Loss**
            
            **Total****Balance
                September 30, 2005**
            
            $
            132
            
            $
            37,773
            
            $
            40,388
            
            $
            —
            
            $
            (3,038
            )
            $
            —
            
            $
            (46
            )
            $
            75,209Comprehensive
                income:Net
                income
            
            
            —
            
            
            —
            
            
            3,292
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,292Net
                unrealized loss on securities available-for-sale
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (12
            )
            
            (12
            )Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,280Allocation
                of ESOP stock
            
            
            —
            
            
            18
            
            
            —
            
            
            —
            
            
            128
            
            
            —
            
            
            —
            
            
            146**Balance
                June 30, 2006**
            
            $
            132
            
            $
            37,791
            
            $
            43,680
            
            $
            —
            
            $
            (2,910
            )
            $
            —
            
            $
            (58
            )
            $
            78,635**Balance
                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
            )
            $
            85,311





See
      accompanying notes to consolidated financial statements.


3


**BROOKLYN
      FEDERAL BANCORP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the Nine Months Ended June 30, 2007 and 2006**


**(In
      thousands)**


**(Unaudited)**




**For
                the Nine Months Ended**
              **June
                30,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                income
            
            $
            2,581
            
            $
            3,292Adjustments
                to reconcile net income to net cash provided by operating
                activities:ESOP
                expense
            
            
            165
            
            
            146Stock-based
                incentive plan
            
            
            3,839
            
            
            —Depreciation
                and amortization
            
            
            225
            
            
            277Provision
                for loan losses
            
            
            4
            
            
            319Income
                from bank-owned life insurance
            
            
            (255
            )
            
            (225
            )Increase
                in deferred loan fees, net
            
            
            (396
            )
            
            (262
            )Amortization
                of premiums, net of accretion of discounts
            
            
            8
            
            
            51Accretion
                of discount on certificates of deposit
            
            
            (3
            )
            
            (3
            )Originations
                of loans held-for-sale
            
            
            (22,821
            )
            
            (43,630
            )Proceeds
                from sales of loans held-for-sale
            
            
            2,225
            
            
            6,099Principal
                repayments on loans held-for-sale
            
            
            29,062
            
            
            313Net
                gain on sales of loans held-for-sale
            
            
            (62
            )
            
            (48
            )Increase
                in accrued interest receivable
            
            
            (357
            )
            
            (363
            )Deferred
                income tax benefit
            
            
            (1,759
            )
            
            (252
            )(Increase)
                decrease in prepaid expenses and other assets
            
            
            (281
            )
            
            295Increase
                in accrued expenses and other liabilities
            
            
            876
            
            
            5,325Net
                cash provided by (used in) operating activities
            
            
            13,051
            
            
            (28,666
            )**Cash
                flows from investing activities:**(Loan
                origination in excess of repayments) repayments in excess of loan
                originations
            
            
            (7,234
            )
            
            2,605Purchase
                of loans receivable
            
            
            —
            
            
            (3,000
            )Principal
                repayments on mortgage-backed securities held-to-maturity
            
            
            14,973
            
            
            22,226Purchases
                of mortgage-backed securities held-to-maturity
            
            
            (5,950
            )
            
            (18,746
            )Maturities
                and principal pay downs of other securities
                held-to-maturity
            
            
            2
            
            
            1,607Purchases
                of securities available-for-sale
            
            
            (177
            )
            
            (142
            )Purchases
                of certificates of deposit
            
            
            —
            
            
            (3,979
            )Maturities
                of certificates of deposit
            
            
            2,977
            
            
            5,491Redemptions
                (purchases) of FHLB of New York stock
            
            
            1,107
            
            
            (705
            )Purchases
                of bank-owned life insurance
            
            
            (15
            )
            
            (15
            )Purchases
                of premises and equipment
            
            
            (45
            )
            
            (64
            )Net
                cash provided by investing activities
            
            
            5,638
            
            
            5,278**Cash
                flows from financing activities:**Increase
                in deposits
            
            
            10,297
            
            
            12,898Net
                (decrease) increase in overnight FHLB advances
            
            
            (24,300
            )
            
            16,000Proceeds
                from FHLB of New York term advances
            
            
            30,000
            
            
            4,000Repayments
                of FHLB of New York term advances
            
            
            (31,636
            )
            
            (2,500
            )Decrease
                in advance payments by borrowers for taxes and insurance
            
            
            (616
            )
            
            (780
            )Purchase
                of treasury stock
            
            
            (969
            )
            
            —Payment
                of cash dividend
            
            
            (249
            )
            
            —Net
                cash (used in) provided by financing activities
            
            
            (17,473
            )
            
            29,618Net
                increase in cash and cash equivalents
            
            
            1,216
            
            
            6,230Cash
                and cash equivalents at beginning of year
            
            
            4,078
            
            
            8,384Cash
                and cash equivalents at end of period
            
            $
            5,294
            
            $
            14,614**Supplemental
                disclosure of cash flow information:**Cash
                paid during the period for:Interest
            
            $
            8,114
            
            $
            5,100Taxes
            
            
            3,450
            
            
            2,201Other:Mortgage
                loans held-to-maturity transferred to held-for-sale
            
            
            8,354
            
            
            3,451Mortgage
                loans held-for-sale transferred to held-to-maturity
            
            
            8,537
            
            
            1,265




See
      accompanying notes to consolidated financial statements.


4


**BROOKLYN
      FEDERAL BANCORP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2007**


**(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, 2007 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 - 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
      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). On January 16, 2007 the Board of Directors granted 552,500
      options of the 648,025 options available and granted 221,000 shares of
      restricted stock of the 259,210 available shares of restricted stock, in
      accordance with the terms of the Brooklyn Federal Bancorp, Inc. 2006
      Stock-




5


Based
      Incentive Plan, which was approved by the Company’s shareholders at the April
      11, 2006 annual meeting of stockholders. During the quarter ending March 31,
      2007, 10,050 of granted options and 4,000 shares of granted restricted stock
      were forfeited due to a resignation. The Company expensed, 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). During the quarter ending June 30, 2007 the Company granted the remainder
      of 42,210 shares of restricted stock. The Company also expensed, during the
      quarter ending June 30, 2007, the entire fair value of 36,008 shares of
      restricted stock due to the provision in the 2006 Stock-Based Incentive Plan
      that accelerates the vesting of restricted stock upon termination of service
      following retirement age (as defined in the plan).




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.




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.




6




In
      September 2006, the FASB's Emerging Issues Task Force (EITF) issued EITF Issue
      No. 06-4, "Accounting for Deferred Compensation and Postretirement Benefit
      Aspects of Endorsement Split Dollar Life Insurance Arrangements" ("EITF 06-4").
      EITF 06-4 requires the recognition of a liability related to the postretirement
      benefits covered by an endorsement split-dollar life insurance arrangement.
      The
      consensus highlights that the employer (who is also the policyholder) has a
      liability for the benefit it is providing to its employee. As such, if the
      policyholder has agreed to maintain the insurance policy in force for the
      employee's benefit during his or her retirement, then the liability recognized
      during the employee's active service period should be based on the future cost
      of insurance to be incurred during the employee's retirement. Alternatively,
      if
      the policyholder has agreed to provide the employee with a death benefit, then
      the liability for the future death benefit should be recognized by following
      the
      guidance in SFAS No. 106 or Accounting Principals Board (APB) Opinion No. 12,
      as
      appropriate. For transition, an entity can choose to apply the guidance using
      either of the following approaches: (a) a change in accounting principle through
      retrospective application to all periods presented or (b) a change in accounting
      principle through a cumulative-effect adjustment to the balance in retained
      earnings at the beginning of the year of adoption. EITF 06-4 is effective for
      fiscal years beginning after December 15, 2007, with early adoption permitted.
      The Company does not believe that the implementation of this guidance will
      have
      a material impact on the Company's consolidated financial
      statements.




In
      September 2006, the Emerging Issues Task Force reached a conclusion on EITF
      Issue No. 06-5, “Accounting for Purchases of Life Insurance - Determining
      the Amount That Could Be Realized in Accordance with FASB Technical Bulletin
      No. 85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). The
      scope of EITF 06-5 consists of six separate issues relating to accounting for
      life insurance policies purchased by entities protecting against the loss of
      “key persons.” The six issues are clarifications of previously issued guidance
      on FASB Technical Bulletin No. 85-4. EITF 06-5 is effective for fiscal
      years beginning after December 15, 2006. The Company does not expect it to
      have a material impact on the Company’s consolidated financial
      statements.




In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities-Including an amendment of FASB
      Statement No. 115." SFAS No. 159 permits entities to choose to measure
      many financial instruments and certain other items at fair value. Unrealized
      gains and losses on items for which the fair value option has been elected
      will
      be recognized in earnings at each subsequent reporting date. SFAS No. 159
      is effective for our Company October 1, 2008. The Company is evaluating the
      impact that the adoption of SFAS No. 159 will have on our consolidated
      financial statements.




In
        March
        2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting
        for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF 06-10).
        EITF 06-10 provides guidance for determining a liability for the postretirement
        benefit obligation as well as recognition and measurement of the associated
        asset on the basis of the terms of the collateral assignment agreement. EITF
        06-10 is effective for fiscal years beginning after December 15, 2007. The
        Company is currently assessing the impact of EITF 06-10 on its consolidated
        financial position and results of operations.
 
 In
        March 2007, the FASB ratified EITF Issue No. 06-11, “Accounting for
        Income Tax Benefits of Dividends on Share-Based Payment Awards.” EITF 06-11
        requires companies to




7




recognize
      the income tax benefit realized from dividends or dividend equivalents that
      are
      charged to retained earnings and paid to employees for non-vested
      equity-classified employee share-based payment awards as an increase to
      additional paid-in capital. EITF 06-11 is effective for fiscal years beginning
      after September 15, 2007. The Company does not expect EITF 06-11 will have
      a material impact on its financial position, results of operations or cash
      flows.





In
      May
      2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 “Definition of
      Settlement in FASB Interpretation No. 48” (FSP FIN 48-1). FSP FIN 48-1 provides
      guidance on how to determine whether a tax position is effectively settled
      for
      the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1
      is
      effective retroactively to January 1, 2007. The implementation of this standard
      did not have a material impact on our consolidated financial position or results
      of operations.





**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




8




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 the Bank. The methodology for determining the allowance for loan losses
      is
      considered a critical accounting policy by management due to the high degree
      of
      judgment involved, the subjectivity of the assumptions utilized and the
      potential for changes in the economic environment that could result in changes
      to the amount of the recorded allowance for loan losses.





As
      a
      substantial amount of our loan portfolio is collateralized by real estate,
      appraisals of the underlying value of property securing loans are critical
      in
      determining the amount of the allowance required for specific loans. Assumptions
      for appraisals are instrumental in determining the value of properties. Overly
      optimistic assumptions or negative changes to assumptions could significantly
      impact the valuation of a property securing a loan and the related allowance
      determined. The assumptions supporting such appraisal valuations are carefully
      reviewed by management to determine that the resulting values reasonably reflect
      amounts realizable on the related loans.





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




The
        analysis of the allowance for loan losses has two components: specific and
        general allocations. Specific allocations are made for loans that are determined
        to be impaired.




9




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




10




products
              to meet the
              needs of our customers. If such loans do not satisfy our criteria for
              retention in our loan portfolio, they generally can be sold in the
              secondary market.·
            *Continuing
                to Increase Our Multi-Family, Commercial Real Estate, Construction
                and
                Land Lending*.
                Historically, we have emphasized one- to four-family residential
                lending
                within our market area. While one- to four-family loan originations
                remain
                an important form of loans because of our expertise with this type
                of
                lending, in the past five years we have emphasized the origination
                of
                loans secured by multi-family properties, commercial real estate,
                construction and land loans as a means of increasing our interest
                and fee
                income and meeting the lending needs of our customers. Multi-family,
                commercial real estate, construction and land lending generally expose
                a
                lender to greater credit risk than loans secured by one- to four-family
                real estate. The repayment of multi-family, commercial real estate,
                construction and land loans depends upon the business and financial
                condition of the borrower and, in the case of construction loans,
                on the
                economic viability of projects financed. Consequently we, like other
                financial institutions, generally charge higher rates of interest
                for
                these types of loans compared to one- to four-family residential
                loans. We
                have invested in a new loan servicing system and additional personnel
                to
                allow us to service these types of loans more
                efficiently.·
            *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.·
            *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 began to rise.
                During
                the recent period of leveling short-term interest rates, we have
                been able
                to maintain a market level of interest income on our short-term liquid
                assets, while still reducing security investments and redeploying
                those
                funds 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, 2007, $5.3 million, or 1.3% of our assets,
                was
                invested in cash and due from banks, and $4.3 million, or 1.1% 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. While we continue
                to
                review potential branch sites, there can be no assurance as to whether
                or
                when we will open such offices, however the
                Bank




11




announced,
              during
              the third fiscal quarter ended June 30, 2007, the anticipated opening
              of
              our fifth branch office, located in Commack, New York, in the first
              fiscal
              quarter 2008.·
            *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, 2007 and September 30,
      2006**




***Total
      Assets.*** Total
      assets decreased by $10.0 million, or 2.5%, to $398.0 million at June 30, 2007,
      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 and Federal Home Loan Bank of New York (“FHLB”) stock,
      offset primarily by increases in cash and due from banks, loans receivable,
      net
      and other assets.




***Cash
      and Due from Banks.*** Cash
      and
      due from banks increased $1.2 million, or 29.8%, to $5.3 million at June 30,
      2007, from $4.1 million at September 30, 2006.




***Investment
      in Certificates of Deposit.*** Certificates of deposit decreased $3.0 million, or 41.5%, to $4.2 million at
      June 30, 2007, 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 $8.9 million, or 9.7%, to $82.5 million at June
      30, 2007, from $91.4 million at September 30, 2006. This decrease was primarily
      due to repayments in mortgage-backed securities of $15.0 million, offset in
      part
      by purchases of mortgage-backed securities of $6.0 million and an increase
      in
      securities available-for-sale of approximately $145,000.




***Net
      Loans.*** Net
      loans before allowance for loan losses, which includes loans held-for-sale,
      decreased $774,000, or 0.3%, to $287.6 million at June 30, 2007, from
      $288.4 million at September 30, 2006, primarily due to decreases of $14.0
      million in multi-family loans, $5.8 million in land loans and $4.3 million
      in
      construction loans, offset in part by increases of $14.7 million in commercial
      real estate loans, $8.2 million in one-to four-family loans and $396,000 in
      consumer and other loans. Net deferred fees/costs decreased approximately
      $109,000.




At
      June
      30, 2007, loans receivable in non-accrual status were approximately $71,000.
      The
      non-accrual loan at June 30, 2007 is secured by a multi-family apartment
      building and the Bank has established a specific loss allowance for this loan
      totaling $71,000 and classified this loan as doubtful.




The
      Company had one multi-family loan, located in Brooklyn, New York, with an
      outstanding principal of $726,000 classified as substandard at March 31, 2007.
      The property suffered structural damage due to construction at an adjoining
      lot.
      Management has placed the loan on substandard status due to concerns about
      the
      property damage and the borrower’s ability to make future contractual payments.
      The structural damage was corrected and during the quarter ended June 30, 2007:
      the borrower completed renting the remaining apartments, the Bank procured
      an
      appraisal indicating a value of approximately $1.9 million and
      refinanced




12


the
      property to a total of $926,000. The outstanding
      balance of the loan at June 30, 2007 is approximately $925,000 and the Bank
      continues to classify this loan as substandard.




The
      Company has five loans totaling $4.2 million classified as special mention
      at
      June 30, 2007. These loans are comprised of three construction loans totaling
      approximately $1.7 million and two commercial real estate mortgage loans
      totaling approximately $2.5 million. Two construction loans totaling
      approximately $1.3 million are to one borrower and classified special mention
      due to the slow progress of construction. One of the loans for approximately
      $676,000 was one contractual payment past due and subsequently sold in July
      2007. The third construction loan of approximately $400,000 is classified
      special mention due to being past due on two contractual payments and past
      maturity. This loan is cross collateralized with a commercial real estate
      mortgage loan of $960,000, which is one of the commercial real estate loans
      classified special mention due to one delinquent contractual payment. The Bank
      does not expect a loss on this loan.





In
      addition, the Bank has one commercial real estate mortgage loan of waterfront
      property located in Whitestone, New York for $1.6 million that is three
      contractual payments past due, past maturity and the foreclosure process is
      continuing. The Bank does not expect a loss on this non-performing loan.





***Federal
      Home Loan Bank of New York Stock.*** FHLB
      of
      New York stock decreased $1.1 million, or 39.8%, to $1.7 million at June 30,
      2007, from $2.8 million at September 30, 2006. This decrease was primarily
      due
      to a decreased balance in FHLB borrowings, which triggered a sale of FHLB
      stock.




***Bank
      Owned Life Insurance, Prepaid Expenses and Other Assets.*** Prepaid
      expenses and other assets including bank-owned life insurance increased $2.3
      million, or 18.1%, to $15.1 million at June 30, 2007, from $12.8 million at
      September 30, 2006. This increase was mainly due to increases in miscellaneous
      other assets of approximately $2.0 million, which includes an increase in
      deferred tax assets of approximately $1.8 million and other miscellaneous assets
      of approximately $200,000. Bank-owned life insurance also increased
      $270,000. ******




***Deposits.*** Deposits
      increased by $10.3 million, or 3.8%, to $281.3 million at June 30, 2007, 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 $25.9 million, or 52.5%,
      to
      $23.5 million at June 30, 2007, from $49.4 million at September 30, 2006. The
      primary reasons for the decrease were the utilization of funds received during
      the period, due to a deposit flow increase, payments received on securities
      held-to-maturity and repayments on the mortgage portfolio.




***Accrued
      Expenses and Other Liabilities.*** Accrued
      expenses and other liabilities increased $876,000, or 15.8%, to $6.4 million
      at
      June 30, 2007, from $5.5 million at September 30, 2006. This increase was
      primarily due to increases in unprocessed banking liabilities of $848,000,
      Supplemental Executive Retirement Plan (“SERP”) of $241,000, accrued expenses of
      $78,000 and loan payables of $55,000, offset in part by decreases in income
      taxes payable of $331,000 and other miscellaneous payables of $15,000.




13




***Stockholders’
      Equity.*** Stockholders’
      equity increased by $5.3 million, or 6.7%, to $85.3 million at June 30,
      2007, from $80.0 million at September 30, 2006. The primary reasons for the
      increase is the implementation of the stock-based incentive plan and the result
      of net income for the period, offset in part by purchases of treasury stock
      of
      approximately $969,000 pursuant to the Company’s stock repurchase
      plan.




***Liquidity
      and Capital Resources.*** The
      Company maintains liquid assets at levels it considers adequate to meet its
      liquidity needs. The Company adjusts its liquidity levels to fund deposit
      outflows, pay real estate taxes on mortgage loans, repay its borrowings and
      to
      fund loan commitments. The Company also adjusts liquidity as appropriate to
      meet
      asset and liability management objectives.





The
      Company’s primary sources of liquidity are deposits, amortization and prepayment
      of loans and mortgage-backed securities, maturities of investment securities
      and
      other short-term investments, and earnings and funds provided from operations,
      as well as access to FHLB of New York advances. While scheduled principal
      repayments on loans and mortgage-backed securities are a relatively predictable
      source of funds, deposit flows and loan prepayments are greatly influenced
      by
      market interest rates, economic conditions, and rates offered by the Company’s
      competition. The Company sets the interest rates on its deposits to maintain
      a
      desired level of total deposits. In addition, the Company invests excess funds
      in short-term interest-earning assets, which provide liquidity to meet lending
      requirements.





A
      portion
      of the Company’s liquidity consists of cash and due from banks, which are a
      product of its operating, investing and financing activities. At June 30, 2007,
      $5.3 million, or 1.3%, of the Company’s assets are 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, 2007 investments in
      certificates of deposit and short-term investment securities (maturing in less
      than three years) totaled $4.3 million, or 1.1%, of the Company’s assets. As of
      June 30, 2007, the Company had $23.5 million in borrowings outstanding from
      the
      FHLB of New York and access to additional FHLB of New York advances.





At
      June
      30, 2007, the Company had approximately $128.0 million in commitments to
      originate loans and unused lines of credit outstanding, which included $27.0
      million in undisbursed construction loans, $8.7 million in one- to four-family
      loans, $1.0 million in unused home equity lines of credit, $5.3 million in
      commercial real estate lines of credit and $86.0 million to originate
      multi-family and nonresidential mortgage loans. The Bank had a one- to
      four-family loan committed to sell of approximately $130,000 at June 30, 2007.
      Certificates of deposit due within one year of June 30, 2007 totaled $123.7
      million, or 77.8% 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




14




Company
      currently pays on the certificates of deposit
      due on or before June 30, 2008. 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, 2007, 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)
            
            $
            69,780
            
            
            24.3
            %
            $
            22,944
            
            
            8.0
            %
            $
            28,680
            
            
            10.0
            %Tier
                1 risk-based capital(To
                risk-weighted assets)
            
            
            68,089
            
            
            23.7
            
            
            11,472
            
            
            4.0
            
            
            17,208
            
            
            6.0Tangible
                capital(To
                tangible assets)
            
            
            68,089
            
            
            17.2
            
            
            5,924
            
            
            1.5
            
            
            N/A
            
            
            N/ATier
                1 leverage (core) capital(To
                adjusted tangible assets)
            
            
            68,089
            
            
            17.2
            
            
            11,849
            
            
            3.0
            
            
            19,748
            
            
            5.0





**Contractual
      Obligations and Off-Balance Sheet Arrangements**





The
      following tables set forth the Bank’s contractual obligations and commercial
      commitments at June 30, 2007:





Payment
                Due by PeriodContractual
                Obligations
            
            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)FHLB
                of New York advances
            
            $
            23,471
            
            $
            20,532
            
            $
            2,139
            
            $
            600
            
            $
            200Certificates
                of deposit
            
            
            158,991
            
            
            123,700
            
            
            24,398
            
            
            10,792
            
            
            101Lease
                obligations
            
            
            8,769
            
            
            600
            
            
            1,278
            
            
            1,093
            
            
            5,798Total
            
            $
            191,231
            
            $
            144,832
            
            $
            27,815
            
            $
            12,485
            
            $
            6,099







Commitment
                Expiration by PeriodOff-Balance
                Sheet Arrangements
            
            Total
            
            One
                Year
              or
                less
            
            More
                than One
              Year
                Through
              Three
                Years
            
            More
                Than
              Three
                Years
              through
                Five
              Years
            
            More
                Than
              Five
                Years(In
                thousands)To
                originate loans
            
            $
            94,703
            
            $
            94,703
            
            $
            -
            
            $
            -
            
            $
            -Unused
                lines of credit
            
            
            33,297
            
            
            33,297
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            128,000
            
            $
            128,000
            
            $
            -
            
            $
            -
            
            $
            -




15




**Comparison
      of Operating Results for the Three Months Ended June 30, 2007 and
      2006**




***Net
      Income.*** Net
      income increased $72,000, or 6.3%, to $1.2 million for the three months ended
      June 30, 2007, from net income of $1.1 million for the three months ended June
      30, 2006. The primary reasons for the increase were increases in interest income
      of $1.3 million, a $135,000 increase in non-interest income, reductions in
      loan
      loss provisions and provision for income taxes of $204,000 and $30,000,
      respectively, offset in part by increases in interest expense of $783,000 and
      non-interest expense of $770,000.




***Net
      Interest Income Before Provision for Loan Losses.*** Net
      interest income before provision for loan losses increased by $473,000, or
      12.6%, to $4.2 million for the three months ended June 30, 2007, from
      $3.7 million for the three months ended June 30, 2006. The increase in net
      interest income resulted primarily from an increase in the average balance
      of
      interest-earning assets of $30.5 million, offset in part by a two basis point
      decrease in the Bank’s net interest rate spread to 3.53% for the three months
      ended June 30, 2007, from 3.55% for the three months ended June 30, 2006. The
      Bank’s net interest margin increased 16 basis points to 4.41% in the three
      months ended June 30, 2007 compared to 4.25% for the three months ended June
      30,
      2006.




***Interest
      Income.*** Interest
      income increased $1.3 million, or 22.4%, to $6.9 million for the three
      months ended June 30, 2007, from $5.6 million for the three months ended
      June 30, 2006. Interest income on loans increased by $1.4 million, or 32.5%,
      to
      $5.8 million for the three months ended June 30, 2007, from $4.4 million
      for the three months ended June 30, 2006. The primary reasons for the increase
      in interest income on loans were a $1.1 million increase in multi-family and
      commercial real estate loan income, $229,000 in construction loan income and
      $72,000 in one- to four-family and other loan income. The average balance of
      the
      loan portfolio increased by $55.7 million, or 24.0%, to $287.9 million for
      the
      three months ended June 30, 2007, from $232.2 million for the three months
      ended
      June 30, 2006. The average yield on loans increased 52 basis points to 8.09%
      for
      the three months ended June 30, 2007, from 7.57% for the three months ended
      June
      30, 2006. Interest income on investment securities and other interest-earning
      assets decreased by $171,000, or 14.0%, to $1.1 million for the three
      months ended June 30, 2007, from $1.2 million for the three months ended
      June 30, 2006. The decrease in interest income on investment securities and
      other interest-earning assets was primarily due to a reduction in the average
      balance of $25.2 million, or 21.0%, to $94.9 million at June 30, 2007 from
      $120.1 million at June 30, 2006, offset by an increase of 36 basis points in
      the
      average yield to 4.43% for the quarter ended June 30, 2007, compared to the
      average yield of 4.07% for the quarter ended June 30, 2006.




***Interest
      Expense.*** Interest
      expense increased $783,000, or 41.8%, to $2.7 million for the three months
      ended
      June 30, 2007, from $1.9 million for the three months ended June 30, 2006.
      Interest expense on deposits increased $629,000, or 37.0%, to $2.3 million
      at
      June 30, 2007, from $1.7 million at June 30, 2006. Interest expense on FHLB
      of
      New York borrowings increased $154,000, or 90.1%, to $325,000 at June 30, 2007,
      from $171,000 at June 30, 2006. The increase was primarily the result of
      increases in the average balances of interest-bearing deposits of $16.6 million
      and FHLB of New York borrowings of $10.3 million. In addition, the average
      cost


16


of
      the
      interest-bearing liabilities increased 82 basis points to 3.65% for the three
      months ended June 30, 2007, from 2.83% for the three months ended June 30,
      2006.




***Provision
      for Loan Losses.*** The
      Bank’s provision for loan losses decreased $204,000, or 100.0%, for the three
      months ended June 30, 2007, from a provision of $204,000 for the three months
      ended June 30, 2006. The Bank did not provide for any loan loss due to decreases
      in higher risk loans, such as multi-family, construction and land loans.
      Management believes the established loan loss reserves are sufficient. The
      allowance for loan losses as of June 30, 2007 represented 0.61% of total loans,
      compared to 0.67% of total loans as of June 30, 2006.




***Non-interest
      Income.*** Non-interest income increased by $135,000, or 24.1%, to $696,000 for the three
      months ended June 30, 2007, from $561,000 for the three months ended June 30,
      2006. The increase was primarily due to increases in loan fees of $137,000,
      bank
      owned life insurance income of $8,000 and net gain on sale of loans
      held-for-sale of $41,000, offset in part by decreases in deposit related fees
      of
      $15,000 and other miscellaneous income of $36,000.




***Non-interest
      Expense.*** Non-interest expense increased by $770,000, or 34.0%, to $3.0 million for
      the three months ended June 30, 2007, from $2.3 million for the three months
      ended June 30, 2006. The increase resulted from increases of $621,000 in
      compensation and fringe benefits, which included a $628,000 expense for the
      vesting charges of the Company’s stock-based incentive plan and increased
      expenses of $37,000 for compensation and fringe benefits, $30,000 for other
      miscellaneous employee costs and ESOP expense of $12,000, offset in part by
      a
      reduction of $86,000 for the supplemental executive retirement plan. The Company
      also experienced increased costs in occupancy and equipment of $72,000,
      professional fees of $32,000 and other expenses of $50,000, which include
      advertising, office supplies, printing, and insurance, offset by a decrease
      of
      $5,000 for data processing fees.




***Income
      Taxes.*** Income
      tax expense decreased $30,000, or 4.3%, to $666,000 for the three months ended
      June 30, 2007, from $696,000 for the three months ended June 30, 2006. The
      effective income tax rate, of the Company, for the three months ended June
      30,
      2007 was 35.5% compared to the effective income tax rate for the three months
      ended June 30, 2006 of 37.9%.




**Comparison
      of Operating Results for the Nine Months Ended June 30, 2007 and
      2006**




***Net
      Income.*** Net
      income decreased $711,000, or 21.6%, to $2.6 million for the nine months ended
      June 30, 2007, from $3.3 million for the nine months ended June 30, 2006. The
      primary reasons for the decrease were increases of $3.0 million in interest
      expense and $4.3 million in non-interest expense, offset in part by increases
      of
      $5.3 million in interest income, $264,000 in non-interest income and decreases
      in provision for loan losses of $315,000 and provision for taxes of
      $685,000.




***Net
      Interest Income Before Provision for Loan Losses.*** Net
      interest income before provision for loan losses increased by $2.3 million,
      or
      21.7%, to $13.0 million for the nine months ended June 30, 2007, from
      $10.7 million for the nine months ended June 30, 2006. The increase in net
      interest income resulted primarily from an increase in the average balance
      of
      interest-earning assets of $43.7 million and a 12 basis point increase in the
      Bank’s net interest rate spread to 3.60% for the nine months ended June 30,
      2007, from 3.48% for the nine months


17




ended
      June 30, 2006. The Bank’s net interest margin increased 33 basis points to 4.47%
      in the nine months ended June 30, 2007 compared to 4.14% for the nine months
      ended June 30, 2006.




***Interest
      Income.*** Interest
      income increased $5.3 million, or 33.6%, to $21.1 million for the nine
      months ended June 30, 2007, from $15.8 million for the nine months ended
      June 30, 2006. Interest income on loans increased by $5.7 million, or 47.0%,
      to
      $17.8 million for the nine months ended June 30, 2007, from
      $12.1 million for the nine months ended June 30, 2006. The primary reasons
      for the increase in interest income on loans were increases of $4.5 million
      in
      multi-family and commercial real estate loan income, $972,000 in construction
      loan income and $187,000 in one- to four-family and other loan income. The
      average balance of the loan portfolio increased by $71.3 million, or 32.8%,
      to
      $288.9 million for the nine months ended June 30, 2007, from $217.6 million
      for
      the nine months ended June 30, 2006. The average yield on loans increased 80
      basis points to 8.24% for the nine months ended June 30, 2007, from 7.44% for
      the nine months ended June 30, 2006. Interest income on investment securities
      and other interest-earning assets decreased by $410,000, or 11.3%, to
      $3.2 million for the nine months ended June 30, 2007, from $3.6
      million for the nine months ended June 30, 2006. The decrease in interest
      income on investment securities and other interest-earning assets was primarily
      due to a reduction in the average balance of $27.7 million, or 21.9%, to $98.3
      million at June 30, 2007 from $126.0 at June 30, 2006, offset by an increase
      of
      52 basis points in the average yield to 4.36% for the nine month period ended
      June 30, 2007, compared to the average yield of 3.84% for the period ended
      June
      30, 2006.




***Interest
      Expense.*** Interest
      expense increased $3.0 million, or 58.3%, to $8.1 million for the nine months
      ended June 30, 2007, from $5.1 million for the nine months ended June 30,
      2006. Interest expense on deposits increased $2.0 million, or 42.0%, to $6.8
      million at June 30, 2007, from $4.8 million at June 30, 2006. Interest expense
      on FHLB of New York borrowings increased $978,000, or 285.1%, to $1.3 million
      at
      June 30, 2007, from $343,000 at June 30, 2006. The increase was primarily the
      result of increases in the average balances of interest-bearing deposits of
      $14.5 million and FHLB of New York borrowings of $22.9 million. In addition,
      the
      average cost of the interest-bearing liabilities increased 101 basis points
      to
      3.65% for the nine months ended June 30, 2007, from 2.64% for the nine months
      ended June 30, 2006.




***Provision
      for Loan Losses.*** The
      Bank’s provision for loan losses decreased $315,000, to $4,000 for the nine
      months ended June 30, 2007, or 98.7%, from $319,000 for the nine months ended
      June 30, 2006. The primary reason for this decrease were pay offs in higher
      risk
      loans, such as multi-family, construction and land, offset in part by increases
      in originations of one- to four-family and commercial real estate loans. The
      allowance for loan losses as of June 30, 2007 represented 0.61% of total loans,
      compared to 0.67% of total loans as of June 30, 2006.




***Non-interest
      Income.*** Non-interest income increased by $264,000, or 14.5%, to $2.1 million for the
      nine months ended June 30, 2007, from $1.8 million for the nine months ended
      June 30, 2006. The increase was primarily due to increases in loan fees of
      $357,000, bank owned life insurance income of $30,000 and net gain on sale
      of
      loans held-for-sale of $14,000, offset in part by decreases in deposit related
      fees of $36,000 and other miscellaneous income of $101,000.




***Non-interest
      Expense.*** Non-interest expense increased by $4.3 million, or 62.4%, to $11.2 million
      for the nine months ended June 30, 2007, from $6.9 million for the nine months
      ended June 30, 2006. The increase resulted from increases of $3.9 million in
      compensation and fringe benefits, which included a $3.8 million expense for
      the
      vesting charges of the Company’s stock-based incentive plan and increased
      expense of $100,000 for other compensation and fringe benefits, $15,000 in
      occupancy and equipment expense, $104,000 in professional fees,


18




$5,000
      in
      data processing service bureau expense and $222,000 in other expenses which
      include advertising, office supplies, printing, insurance and other operating
      expenses.




***Income
      Taxes.***Income tax expense decreased $685,000, or 43.3%, to $1.3
      million for the nine months ended June 30, 2007, from $2.0 million for the
      nine
      months ended June 30, 2006.  The primary reason for the decrease, for the
      nine months ended June 30, 2007, was the decrease in income before taxes. 
The effective tax rate, of the Company, for the nine months ended June 30,
      2007
      was 33.6% compared to the effective tax rate for the nine months ended June
      30,
      2006 of 37.7%




**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.


19




**ITEM
                4.**
            **CONTROLS
                AND PROCEDURES**




An
      evaluation was performed under the supervision and with the participation of
      the
      Company’s management, including the Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures (as defined in Rule 13a-15(e) or
      15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended)
      as
      of June 30, 2007. Based on such evaluation, the Company’s Chief Executive
      Officer and Chief Financial Officer have concluded that the Company’s disclosure
      controls and procedures are designed to ensure that information required to
      be
      disclosed by the Company in the reports that it files or submits under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and regulations and are
      operating in an effective manner.




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




**PART
      II - OTHER INFORMATION**





**ITEM
                1.**
            **LEGAL
                PROCEEDINGS**




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




**ITEM
                1A.**
            **RISK
                FACTORS**





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




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




(c)  The
      Company repurchased Common Stock in the quarter ending June 30, 2007. On January
      16, 2007, the Board of Directors approved a stock repurchase program and
      authorized the repurchase of up to $1.5 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, 2007, 66,200
      shares have been repurchased with repurchases in the quarter described in the
      following table:


20





**Company
                Purchases of Common Stock****Period**
            
            **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
                programs**April
                1, 2007 through April 30, 2007
            
            
            25,000
            
            $
            14.44
            
            
            47,000
            
            $
            827,000May
                1, 2007 through May 31, 2007
            
            
            _
            
            
            N/A
            
            
            47,000
            
            $
            827,000June
                1, 2007 through June 30, 2007
            
            
            19,200
            
            $
            15.43
            
            
            66,200
            
            $
            531,000







**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.














21




**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, 2007
            
            /s/
                Angelo J. Di LorenzoAngelo
                J. Di LorenzoPresident
                and Chief Executive OfficerDate: August 14, 2007
            
            /s/
                Richard A. KieltyRichard
                A. KieltyExecutive
                Vice President andChief
                Financial Officer






22