<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended December 31, 2005

                                       OR

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


                        Commission File Number 000-51208

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

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

81 Court Street
Brooklyn, New York                                                11201
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code (718) 855-8500.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [x] NO [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [x]

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

               Class                      Outstanding at February 13, 2006
   Common Stock, $.01 Par Value                       13,225,000

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                         BROOKLYN FEDERAL BANCORP, INC.

                           FORM 10-Q QUARTERLY REPORT

                                TABLE OF CONTENTS


                                     PART I.

                                                                     Page Number

Item 1.   Financial Statements .............................................   1
Item 2.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations........................................   9
Item 3.   Quantitative and Qualitative Disclosures About Market Risk........  17
Item 4.   Controls and Procedures...........................................  18

                                    PART II.

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

Signature Page..............................................................  20

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<CAPTION>

                                                       PART I

ITEM 1.  FINANCIAL STATEMENTS

                                   BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                      DECEMBER 31, 2005 AND SEPTEMBER 30, 2005
                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS AND SHARE DATA)


                                                                                  DECEMBER 31,      SEPTEMBER 30,
                                   ASSETS                                             2005              2005
                                                                               ----------------   ----------------
                                                                                  (UNAUDITED)
<S>                                                                            <C>                <C>
Cash and due from banks (including interest-earning balances of $11,146
  and $5,531, respectively)                                                    $         12,936   $          8,384
Federal funds and term deposits                                                          10,325                 --
Time deposits and certificates                                                            9,166              9,268
Securities available-for-sale                                                             4,229              4,190
Securities held-to-maturity:
  Mortgage-backed securities (estimated fair value of $93,764 and $93,884,
     respectively)                                                                       96,320             95,964

  Other (estimated fair value of $3,182 and $3,569, respectively)                         3,218              3,610
Loans held-for-sale                                                                      12,618              8,603
Loans                                                                                   194,084            196,585
  Less: Allowance for loan losses                                                         1,308              1,321
                                                                               ----------------   ----------------
         Net loans                                                                      192,776            195,264
Federal Home Loan Bank of New York ("FHLB") stock, at cost                                  870              1,002
Accrued interest receivable                                                               1,548              1,470
Premises and equipment, net                                                               1,456              1,542
Bank owned life insurance                                                                 8,361              8,280
Prepaid expenses and other assets                                                         3,054              3,281
                                                                               ----------------   ----------------
           Total assets                                                        $        356,877   $        340,858
                                                                               ================   ================

                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits:
      Demand accounts                                                          $        126,533   $        128,021
      Certificates of deposit                                                           140,814            123,613
                                                                               ----------------   ----------------
           Total deposits                                                               267,347            251,634
  Borrowings:
      Short-term FHLB advances                                                            2,550              2,250
      Long-term FHLB advances                                                             5,557              5,857
  Advance payments by borrowers for taxes and insurance                                   1,257              2,118
  Accrued expenses and other liabilities                                                  3,777              3,790
                                                                               ----------------   ----------------
           Total liabilities                                                            280,488            265,649
                                                                               ----------------   ----------------
Stockholders' equity:
     Preferred stock, $0.01 par value, 1,000,000 shares authorized;
          none issued                                                                        --                 --
      Common stock, $0.01 par value, 20,000,000 shares authorized;
          13,225,000 issued and outstanding                                                 132                132
      Additional paid-in capital                                                         37,777             37,773
      Retained earnings - substantially restricted                                       41,517             40,388
      Unallocated common stock held by employee stock ownership
          plan ("ESOP")                                                                  (2,989)            (3,038)
      Accumulated other comprehensive loss:
         Net unrealized loss on securities, net of tax                                      (48)               (46)
                                                                               ----------------   ----------------
           Total stockholders' equity                                                    76,389             75,209
                                                                               ----------------   ----------------
             Total liabilities and stockholders' equity                        $        356,877   $        340,858
                                                                               ================   ================

                            See accompanying notes to consolidated financial statements.

                                                         1
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<CAPTION>

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

                                                                  FOR THE THREE MONTHS ENDED
                                                                         DECEMBER 31,
                                                                -----------------------------
                                                                     2005            2004
                                                                -------------   -------------
<S>                                                             <C>             <C>
Interest income:
   First mortgage and other loans                               $       3,703   $       2,930
   Mortgage-backed securities                                             836             908
   Other securities and interest-earning assets                           339             120
                                                                -------------   -------------
     Total interest income                                              4,878           3,958
                                                                -------------   -------------

Interest expense:
   Deposits                                                             1,448           1,023
   Borrowings                                                              85              65
                                                                -------------   -------------
     Total interest expense                                             1,533           1,088
                                                                -------------   -------------

Net interest income before provision for loan losses                    3,345           2,870
(Recovery of) provision for loan losses                                   (13)             14
                                                                --------------  -------------
     Net interest income after provision for loan losses                3,358           2,856
                                                                -------------   -------------

Non-interest income:
   Banking fees and service charges                                       517             424
   Net gain (loss) on sale of loans held-for-sale                          26               5
   Other                                                                  166             174
                                                                -------------   -------------
     Total non-interest income                                            709             603
                                                                -------------   -------------

Non-interest expense:
   Compensation and fringe benefits                                     1,510           1,328
   Occupancy and equipment                                                253             224
   Other                                                                  496             421
                                                                -------------   -------------
     Total non-interest expense                                         2,259           1,973
                                                                -------------   -------------

Income before provision for income taxes                                1,808           1,486
Provision for income taxes                                                679             538
                                                                -------------   -------------
     Net income                                                 $       1,129   $         948
                                                                =============   =============
     Earnings per share:
         Basic                                                          $0.09             N/A
         Diluted                                                        $0.09             N/A
     Average common shares outstanding:
         Basic                                                     12,923,207             N/A
         Diluted                                                   12,923,207             N/A


                 See accompanying notes to consolidated financial statements.

                                              2
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<CAPTION>
                                            BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                            THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                                           (IN THOUSANDS)
                                                             (UNAUDITED)

                                                                       RETAINED                     ACCUMULATED
                                                        ADDITIONAL     EARNINGS-     UNALLOCATED       OTHER
                                           COMMON        PAID-IN     SUBSTANTIALLY   COMMON STOCK  COMPREHENSIVE
                                            STOCK        CAPITAL       RESTRICTED    HELD BY ESOP       LOSS            TOTAL
                                         -----------  -------------  --------------  ------------  --------------  ----------------
<S>                                      <C>          <C>            <C>             <C>           <C>             <C>
BALANCE SEPTEMBER 30, 2004               $        --  $          --  $       36,608  $         --  $          (15) $         36,593

Comprehensive income:
  Net income                                      --             --             948            --              --               948
  Net unrealized loss on securities               --             --              --            --              (5)               (5)
                                                                                                                   ----------------
      Comprehensive income                                                                                                      943
                                         -----------  -------------  --------------  ------------  --------------  ----------------
BALANCE DECEMBER 31, 2004                $        --  $          --  $       37,556  $         --  $          (20) $         37,536
                                         ===========  =============  ==============  ============  ==============  ================

BALANCE SEPTEMBER 30, 2005               $       132  $      37,773  $       40,388  $     (3,038) $          (46) $         75,209

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


                                    See accompanying notes to consolidated financial statements.

                                                                 3
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<TABLE>
<CAPTION>
                                          BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                                                          (IN THOUSANDS)
                                                           (UNAUDITED)

                                                                                                  FOR THE THREE MONTHS ENDED
                                                                                                         DECEMBER 31,
                                                                                             ----------------------------------
                                                                                                   2005               2004
                                                                                             ---------------    ---------------
<S>                                                                                           <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                                 $       1,129      $         948
   Adjustments to reconcile net income to net cash provided by operating activities:
       ESOP expense                                                                                      53                 --
       Depreciation and amortization                                                                     96                 71
       (Recovery of) provision for loan losses                                                          (13)                14
       Income from bank-owned life insurance                                                            (66)               (32)
       (Decrease) increase in deferred loan fees, net                                                   (12)                 1
       Amortization of premiums, net of accretion of discounts                                           26                179
       Originations of loans held-for-sale                                                          (10,067)              (394)
       Proceeds from sales of loans held-for-sale                                                     6,073                399
       Principal repayments on loans held-for-sale                                                        5                 --
       Net gain on sales of loans held-for-sale                                                         (26)                (5)
       (Increase) decrease in accrued interest receivable                                               (78)                 1
       Deferred income tax benefit                                                                       (9)               (21)
       Decrease in prepaid expenses and other assets                                                    238                294
       (Decrease) increase in accrued expenses and other liabilities                                    (13)               215
                                                                                             ---------------    ---------------
           Net cash (used in) provided by operating activities                                       (2,664)             1,670
                                                                                             ---------------    ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Repayments in excess of loan originations (loan originations in excess of repayments)              1,586             (5,113)
   Proceeds from sale of loan participation interests                                                   927              3,702
   Principal repayments on mortgage-backed securities held-to-maturity                                9,209              7,741
   Purchases of mortgage-backed securities held-to-maturity                                          (9,594)                --
   Maturities and principal pay downs of other securities held-to-maturity                              395                 --
   Purchases of securities available-for-sale                                                           (43)               (28)
   Purchases of time deposits and certificates                                                          (98)                --
   Maturities of time deposits and certificates                                                         200                 --
   Sales of FHLB stock                                                                                  132                 --
   Purchases of bank-owned life insurance                                                               (15)               (19)
   Purchases of premises and equipment                                                                  (10)               (74)
                                                                                             ---------------    ---------------
           Net cash provided by investing activities                                                  2,689              6,209
                                                                                             ---------------    ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Increase (decrease) increase in deposits                                                          15,713             (5,060)
   Proceeds from FHLB advances                                                                          750                 --
   Payments of FHLB advances                                                                           (750)            (1,046)
   Decrease in advance payments by borrowers for taxes and insurance                                   (861)              (123)
                                                                                             ---------------    ---------------
           Net cash provided by (used in) financing activities                                       14,852             (6,229)
                                                                                             ---------------    ---------------
           Net increase in cash and cash equivalents                                                 14,877              1,650
Cash and cash equivalents at beginning of year                                                        8,384              7,904
                                                                                             ---------------    ---------------
Cash and cash equivalents at end of period                                                    $      23,261      $       9,554
                                                                                             ===============    ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for:
       Interest                                                                               $       1,533      $       1,101
       Taxes                                                                                             --                465

                                   See accompanying notes to consolidated financial statements.

                                                                4
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<PAGE>

                  BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2005
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

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

        The unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with instructions for Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(all of which are normal and recurring in nature) considered necessary for a
fair presentation have been included. Operating results for the three month
periods ended December 31, 2005 are not necessarily indicative of the results
that may be expected for the year ending September 30, 2006. The Company's
consolidated financial statements, as presented in the Company's Form 10-K for
the year ended September 30, 2005, should be read in conjunction with these
statements.

NOTE 2 - COMPLETION OF PLAN OF CONVERSION AND REORGANIZATION

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

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

                                       5
<PAGE>

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

NOTE 3 - USE OF ESTIMATES

        The preparation of consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from current estimates. Estimates associated with the
allowance for loan losses and the fair values of securities are particularly
susceptible to material change in the near term.

NOTE 4 - IMPACT OF CERTAIN ACCOUNTING PRONOUNCEMENTS

        In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R"),
which requires entities to measure the cost of employee services received in
exchange for any award of equity instruments based on the grant-date fair value
of the award (with limited exceptions). The cost is recognized as an expense
over the period during which the employee is required to provide service in
exchange for the award, which is usually the vesting period. The scope of SFAS
No. 123R includes the recognition and retention plan and the stock option plan
the Company expects to adopt. As a public company, the Company will be required
to adopt SFAS No. 123R in its first reporting period beginning after June 15,
2005 (i.e., the quarter beginning October 1, 2005). For shares awarded under the
recognition and retention plan, the Company will generally recognize the
grant-date fair value of the shares as compensation expense on a straight-line
basis over the applicable vesting period. For options granted under the stock
option plan, the Company will generally recognize the grant-date fair value of
the options as compensation expense on a straight-line basis over the applicable
vesting period. This accounting treatment differs significantly from the
previous accounting for fixed stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," which generally
required expense recognition only when the exercise price of the option was less
than the market price of the underlying stock on the grant date. As required by
SFAS No. 123R, the Company will estimate the fair value of its stock options on
each grant date, using an appropriate valuation approach such as the
Black-Scholes option pricing model. SFAS No. 123R did not change existing
accounting principles applicable to employee stock ownership plans.

        FASB Staff Position No. FAS 115-1 and FAS 124-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments" (the
"FSP"), was issued in November 2005 and addresses the determination of when an
investment is considered impaired; whether the impairment is other than
temporary; and how to measure an impairment loss. The FSP also addresses
accounting considerations subsequent to the recognition of an
other-than-temporary impairment on a debt security, and requires certain
disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. The FSP replaces the impairment guidance in
EITF Issue No. 03-1 with references

                                       6
<PAGE>

to existing authoritative literature concerning other-than-temporary
determinations (principally SFAS No. 115 and SEC Staff Accounting Bulletin 59).
Under the FSP, impairment losses must be recognized in earnings equal to the
entire difference between the security's cost and its fair value at the
financial statement date, without considering partial recoveries subsequent to
that date. The FSP also requires that an investor recognize an
other-than-temporary impairment loss when a decision to sell a security has been
made and the investor does not expect the fair value of the security to fully
recover prior to the expected time of sale. The FSP is effective for reporting
periods beginning after December 15, 2005. The Company does not expect that the
application of the FSP will have a material impact on its financial condition,
results of operations or financial statement disclosures.

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

        In December 2003, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") 03-3, "ACCOUNTING FOR CERTAIN LOANS OR DEBT
SECURITIES ACQUIRED IN A TRANSFER." The SOP is effective for loans acquired in
fiscal years beginning after December 15, 2004. The SOP addresses accounting for
differences between contractual cash flows and cash flows expected to be
collected from an investor's initial investment in loans or debt securities
(loans) acquired in a transfer if those differences are attributable, at least
in part, to credit quality. The SOP applies to loans acquired in business
combinations but does not apply to loans originated by the Company. Management
does not believe the provisions of this standard will have a material impact on
the Company's results of operations or financial condition.

        On March 9, 2004, the SEC issued Staff Accounting Bulletin ("SAB") No.
105, APPLICATION OF ACCOUNTING PRINCIPLES TO LOAN COMMITMENTS. SAB No. 105
requires that when a company is recognizing and valuing a loan commitment at
fair value, only differences between the guaranteed interest rate in the loan
commitment and a market interest rate should be included. Any expected future
cash flows related to the customer relationships or loan servicing should be
excluded from the fair value measurement. The expected future cash flows that

                                       7
<PAGE>

are excluded from the fair-value determination include anticipated fees for
servicing the funded loan, late-payment charges, other ancillary fees, or other
cash flows from servicing rights. The guidance in SAB No. 105 is effective for
mortgage-loan commitments that are accounted for as derivatives and are entered
into after March 31, 2004. The adoption of the provisions of this standard did
not have any impact on the results of operations. In May 2005, the Financial
Accounting Standards Board (the "FASB") issued Statement of Financial Accounting
Standards No. 154, "Accounting Changes and Error Corrections" ("Statement No.
154"), which replaces APB Opinion No. 20, "Accounting Changes," and Statement of
Financial Accounting Standards No. 3, "Reporting Accounting Changes in Interim
Financial Statements," and changes the requirements for the accounting for and
reporting of a change in accounting principle. Statement No. 154 applies to all
voluntary changes in accounting principle and to changes required by accounting
pronouncement when the pronouncement does not include specific transition
periods. Statement No. 154 requires retrospective application of changes in
accounting principle to prior periods' financial statements unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. APB Opinion No. 20 previously required that most voluntary
changes in accounting principle be recognized by including the cumulative effect
of the change in net income for the period of the change in accounting
principle. Statement No. 154 carries forward without change the guidance
contained in APB Opinion No. 20 for reporting the correction of an error in
previously issued financial statements and a change in accounting estimate.
Statement No. 154 also carries forward the guidance in APB Opinion No. 20
requiring justification of a change in accounting principle on the basis of
preferability. Statement No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005,
with early adoption permitted. The Company's adoption of Statement No. 154 is
not expected to affect its financial condition or results of operations.

        On September 30, 2004, the FASB issued Staff Position No. EITF Issue
03-1-1, "Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning
of Other-Than-Temporary Impairment and its Application to Certain Investments,"
which delayed the effective date of the measurement and recognition guidance
contained in Emerging Issues Task Force ("EITF") Issue No. 03-1. As originally
issued, EITF Issue No. 03-1 provided guidance for evaluating whether an
investment is other-than-temporarily impaired and was to be effective for
other-than-temporary impairment evaluations made in reporting periods beginning
after June 15, 2004 (July 1, 2004 for the Company). On June 29, 2005, the FASB
directed its staff to issue Staff Position No. FAS 115-1, "The Meaning of
Other-Than-Temporary-Impairment and Its Application to Certain Investments,"
which will supersede EITF Issue No. 03-1 and be effective for impairment
analyses conducted in periods beginning after September 15, 2005. Staff Position
No. FAS 115-1 will replace the guidance in EITF Issue No. 03-1 with references
to existing authoritative literature concerning other-than-temporary impairments
and clarify that an investor should recognize an impairment loss no later than
when the impairment is deemed other-than-temporary, even if a decision to sell
the investment has not been made. The Company does not expect that the issuance
of Staff Position No. FAS 115-1 will have a material effect on its financial
condition or results of operations.


                                       8
<PAGE>

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.

        The Company completed its stock offering on April 5, 2005, raising $39.7
million in gross proceeds and approximately $37.9 million in net proceeds. The
Company issued a total of 3,967,500 shares of its common stock to public
stockholders and 9,257,500 shares of its common stock to its parent, BFS
Bancorp, MHC. The offering proceeds had been invested on a short-term basis in
liquid investments, namely, certificates of deposits, FHLB term deposits and
FHLB overnight investments. A portion of the proceeds were used to fund the
employee stock ownership plan, which purchased 317,400 shares of the Company's
common stock at a cost of $3.2 million during the quarter ended June 30, 2005.
The Company is currently deploying a portion of the offering proceeds in
longer-term securities and funding new loans.

GENERAL

        The Company's results of operations depend mainly on its net interest
income, which is the difference between the interest income earned on its loan
and investment portfolios and interest expense paid on its deposits and borrowed
funds. Results of operations are also affected by fee income from banking
operations, provisions for loan losses, gains (losses) on sales of loans and
securities available-for-sale and other miscellaneous income. The Company's

                                       9
<PAGE>

non-interest expenses consist primarily of compensation and employee benefits,
office occupancy, technology, marketing, general administrative expenses and
income tax expense.

        The Company's results of operations are also significantly affected by
general economic and competitive conditions, particularly with respect to
changes in interest rates, government policies and actions of regulatory
authorities. Future changes in applicable laws, regulations or government
policies may materially affect the Company's financial condition and results of
operations.

CRITICAL ACCOUNTING POLICIES

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

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

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

                                       10
<PAGE>

selling expenses. The general allocation is determined by segregating the
remaining loans by type of loan, risk rating (if applicable) and payment
history. The Company also analyzes 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 the Company has
established which could have a material negative effect on its financial
results.

        DEFERRED INCOME TAXES. The Company uses 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.
The Company considers 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 carryback declines, or if the Company
projects lower levels of future taxable income. Such a valuation allowance would
be established through a charge to income tax expense, which would adversely
affect the Company's 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 and
construction lending. We have also introduced additional products and services,
such as debit cards and internet banking. We cannot assure you that we will
successfully implement our business strategy.

        Highlights of our business strategy are as follows:

        o       REMAINING A COMMUNITY ORIENTED INSTITUTION. We were established
                in Brooklyn, New York in 1887, and we have been operating
                continuously since that time. We have been, and continue to be,
                committed to meeting the financial needs of the communities in
                which we operate, and we are dedicated to providing quality
                personal service to our customers. Although historically our
                principal business activity has been accepting deposits from the
                public and using those funds to originate one- to four-family
                mortgage loans, in recent years we have been originating a wider
                variety of residential and commercial real estate loan products
                to meet the needs of our customers. If such loans do not satisfy
                our

                                       11
<PAGE>

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

        o       CONTINUING TO INCREASE OUR MULTI-FAMILY, COMMERCIAL REAL ESTATE
                AND CONSTRUCTION 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 and commercial real estate
                and construction loans as a means of increasing our interest and
                fee income. Multi-family, commercial real estate and
                construction 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 and
                construction loans depends upon the business and financial
                condition of the borrower and, in the case of construction
                loans, on the economic viability of projects financed.
                Consequently, we, like other financial institutions, generally
                charge higher rates of interest for these types of loans
                compared to one- to four-family residential loans. We have
                invested in a new loan servicing system and additional personnel
                to allow us to service these types of loans more efficiently.

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

        o       UTILIZING THE NET PROCEEDS WE RECEIVED IN THE OFFERING TO BETTER
                MANAGE OUR INTEREST RATE RISK AND GROW OUR ASSETS. With
                long-term interest rates at low levels, we have managed our
                interest rate risk by maintaining a significant percentage of
                our assets in short-term liquid assets, such as cash and cash
                equivalents, short-term investment securities and
                mortgage-related securities that provide significant cash flows.
                This strategy positioned us to reinvest our short-term liquid
                assets in higher yielding loans and investments once interest
                rates began to rise. During the recent period of rising
                short-term interest rates, we have been able to increase
                interest income on our short-term liquid assets, while still
                reducing security investments and redeploying those funds to
                loan originations. Continuing to maintain a high level of
                short-term liquid assets, however, generates less interest
                income than would have been generated if we had invested in
                longer-term loans and investments. At December 31, 2005, $23.3
                million, or 6.5% of our assets, was invested in cash or cash
                equivalents, and $12.4 million, or 3.5% of our assets, was
                invested in certificates of deposit and securities that mature
                within three years.

                The net proceeds from the stock offering increased our capital
                and provided management with greater flexibility to manage
                interest rate risk and increase our interest-earning assets,
                including our investment in longer-term, higher yielding loans
                and securities.

                                       12
<PAGE>

        o       FACILITATE GROWTH THROUGH DE NOVO BRANCHING. We have established
                financial, geographic and other criteria to evaluate potential
                new branch offices in our market area. We anticipate being able
                to use part of the net proceeds of the stock offering to finance
                the expansion of our branch network. While we continue to review
                potential branch sites, there can be no assurance as to whether
                or when we will open such offices.

        o       MAINTAINING HIGH ASSET QUALITY. We have focused on improving and
                maintaining strong asset quality by following conservative
                underwriting criteria, and primarily originating loans secured
                by real estate.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2005 AND SEPTEMBER 30, 2005

        TOTAL ASSETS. Total assets increased by $16.0 million, or 4.7%, to
$356.9 million at December 31, 2005 from $340.9 million at September 30, 2005.
This increase was primarily the result of the funds received in our certificates
of deposit products and the reinvestment of these funds into term deposits at
the Federal Home Loan Bank of New York, mortgage backed securities
held-to-maturity and the origination of loans held-for-sale, offset in part by
decreases in our demand deposit products and repayments of loans and securities
held-to-maturity.

        CASH AND DUE FROM BANKS. Cash and due from banks increased by $4.5
million to $12.9 million at December 31, 2005 from $8.4 million at September 30,
2005. This increase in short-term liquidity was primarily due to the funds
received in our certificates of deposit products.

        FEDERAL FUNDS AND TERM DEPOSITS. Federal funds and term deposits
increased to $10.3 million at December 31, 2005. The increase in these
shorter-term investments, usually less than one year, was primarily due to the
funds received from our certificates of deposit products. The Company did not
have any investments in this portfolio at September 30, 2005.

        SECURITIES. Securities investments, which represents investments in time
deposits and certificates, securities available-for-sale and securities
held-to-maturity, decreased $99,000, or 0.1%, to $112.9 million at December 31,
20005, from $113.0 million at September 30, 2005. This decrease was primarily
due to repayments on the Bank's mortgage-backed securities portfolio of $9.6
million and $200,000 of maturities in the time deposit and certificates
portfolio, partially offset by purchases of $9.6 million and $98,000 in
mortgage-backed securities and time deposits, respectively.

        NET LOANS. Net loans, before allowance for loan losses and including
loans held-for-sale, increased $1.5 million, or 0.7%, to $206.7 million at
December 31, 2005 from $205.2 million at September 30, 2005, primarily due to
increases of $5.4 million in multi-family loans and $1.1 million in land loans.
This growth was offset in part by decreases of $600,000 in one-to four-family
residential mortgage loans, $3.5 million in commercial real estate loans and
$900,000 in construction and other loans.

        As of December 31, 2005, the Company had one non-accrual mortgage loan
with an outstanding balance of approximately $190,000. The non-accrual mortgage
loan is on a multi-family apartment building. The Bank established a specific
loss allowance on this mortgage loan and classified it as doubtful.

                                       13
<PAGE>

        A multi-family loan, located in Brooklyn, New York, with an outstanding
principal of $746,000, was classified substandard during the quarter ended June
30, 2005 and remained classified as substandard at December 31, 2005. The
principal outstanding balance on this loan was $713,000 at December 31, 2005.
The property suffered structural damage due to construction at an adjoining lot,
although loan payments have remained current, 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.

        As reported in the Company's form 10-K for the fiscal year ended
September 30, 2005 filed with the Securities and Exchange Commission on December
29, 2005, the Bank received payment in full on a $1.4 million commercial
construction loan and a $1.8 million commercial real estate loan which were
classified non-performing and on non-accrual status at September 30, 2005. The
Company also reported that during the quarter ended September 30, 2005 two loans
to one borrower totaling $1.3 million were classified as special mention. Both
of these loans paid off on December 19, 2005.

        DEPOSITS. Deposits increased by $15.7 million, or 6.2%, to $267.3
million at December 31, 2005, from $251.6 million at September 30, 2005. The
primary reasons for the increase were the Bank's ability to offer competitive
market rates on its certificates of deposit and to offer new deposit products.

        BORROWED FUNDS. Total funds borrowed from the Federal Home Loan Bank of
New York were $8.1 million at December 31, 2005 and September 30, 2005. During
the three-month period ended December 31, 2005, short-term borrowings increased
by $300,000 and long-term borrowings decreased by $300,000.

        STOCKHOLDERS' EQUITY. Stockholders' equity increased by $1.2 million or
1.6%, to $76.4 million at December 31, 2005, from $75.2 million at September 30,
2005. The increase is due to net income and adjustments related to the ESOP.

        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 Federal Home Loan Bank 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 significant portion of the Company's liquidity consists of cash and
cash equivalents, which are a product of its operating, investing and financing
activities. At December 31, 2005,

                                       14
<PAGE>

$23.3 million or 6.5% of the Company's assets were invested in cash and cash
equivalents. The Company's primary recurring sources of cash are principal
repayments on loans, proceeds from the calls and maturities of investment
securities, principal repayments of mortgage-backed securities and increases in
deposit accounts. Currently, the Company sells longer-term mortgage loans, and
the Company syndicates and sells participation interests in portions of its
multi-family, commercial real estate and construction 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. Certificates of deposit and short-term
investment securities (maturing in less than three years) totaled $12.4 million
at December 31, 2005. As of December 31, 2005, the Company had $8.1 million in
borrowings outstanding from the Federal Home Loan Bank of New York and access to
additional Federal Home Loan Bank advances.

        At December 31, 2005, the Company had approximately $90.0 million in
loan commitments outstanding, which included $25.2 million in undisbursed
construction loans, $490,000 in one- to four- family loan commitments, $1.1
million in unused home equity lines of credit, $2.7 million in commercial real
estate lines of credit and $60.5 million in commitments, to originate primarily
multi-family and nonresidential mortgage loans. The Company also had commitments
to sell loans of $600,000. Certificates of deposit due within one year of
December 31, 2005 totaled $89.0 million, or 63.2% of certificates of deposit.
The large percentage of certificates of deposit that mature within one year
reflects customers' hesitancy to invest their funds for long periods in the
current low interest rate environment. If these maturing deposits do not remain
with the Company, the Company will be required to seek other sources of funds,
including other certificates of deposit and borrowings. Depending on market
conditions, the Company may be required to pay higher rates on such deposits or
other borrowings than the Company currently pays on the certificates of deposit
due on or before December 31, 2006. 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.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AND
2004

        NET INCOME. Net income increased $181,000, or 19.1%, to $1.1 million for
the three months ended December 31, 2005 from $948,000 for the three months
ended December 31, 2004. The increase was primarily the result of a $475,000
increase in the Bank's net interest income, a decrease of $27,000 in provision
for loan losses and a $106,000 increase in non-interest income, offset in part
by an increase of $286,000 in non-interest expense and an increase of $141,000
in provision for income taxes.

        NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased by $475,000 to $3.3 million
for the three months ended December 31, 2005 from $2.9 million for the three
months ended December 31, 2004. The increase in net interest income resulted
primarily from the increased average balances of interest-earning assets of
$39.9 million, offset in part by a 22 basis points decrease in the Bank's net
interest rate spread to 3.38% for the three months ended December 31, 2005 from
3.60% for the three months ended December 31, 2004. The Bank's net interest
margin increased 11 basis points to 3.98% in the current quarter from 3.87% a
year earlier.

                                       15
<PAGE>

        INTEREST INCOME. Interest income increased $920,000, or 23.2%, to $4.9
million for the three months ended December 31, 2005 from $4.0 million for the
three months ended December 31, 2004. Interest income on loans increased by
$773,000, or 26.4%, to $3.7 million for the three months ended December 31, 2005
from $2.9 million for the three months ended December 31, 2004. The primary
reasons for the increase in interest income on loans were a $729,000 increase in
commercial real estate and multi-family loan income and a $79,000 increase in
construction loan income, offset in part by a decrease in our residential
mortgage loan and other loan income of $35,000. The average balance of the loan
portfolio increased by $41.6 million to $205.7 million for the three months
ended December 31, 2005 from $164.1 million for the three months ended December
31, 2004. The average yield on loans increased 6 basis points to 7.20% for the
three months ended December 31, 2005 from 7.14% for the three months ended
December 31, 2004. Interest income on investment securities and other
interest-earning assets increased by $147,000, or 14.3%, to $1.2 million for the
three months ended December 31, 2005 from $1.0 million for the three months
ended December 31, 2004. The increase in interest income on investment
securities and other interest-earning assets was primarily due to an increase of
49 basis points in yield to 3.60% for the three months ended December 31, 2005
from 3.11% yield for the same period in 2004, off set in part by a reduction of
$1.8 million in average investment balances to $130.4 million for the three
months ended December 31, 2005 from $132.2 million for the same time period in
2004.

        INTEREST EXPENSE. Interest expense increased $445,000 to $1.5 million
for the three months ended December 31, 2005 from $1.1 million for the three
months ended December 31, 2004. The increase was primarily the result of a
$425,000 increase in interest expense on deposits and a $20,000 increase in
interest expense on borrowed funds, primarily reflecting an increase in the
average cost of total interest-bearing liabilities of 68 basis points to 2.42%
for the three months ended December 31, 2005 from 1.74% for the three months
ended December 31, 2004.

        PROVISION FOR LOAN LOSSES. The Bank had a recovery of $13,000 in
provision for loan losses for the three months ended December 31, 2005 and a
charge to provision for loan losses of $14,000 for the three months ended
December 31, 2004. The primary reason for the recovery was the decrease in
non-performing loans that were in non-accrual status, offset in part by growth
in the loan portfolios. Loans in non-accrual status totaled $190,000 at December
31, 2005 compared to no loans in non-accrual status at December 31, 2004. The
allowance for loan losses as of December 31, 2005, represented 0.63% of total
loans, compared to 0.56% of total loans as of December 31, 2004.

        NON-INTEREST INCOME. Non-interest income increased by $106,000, or
17.6%, to $709,000 for the three months ended December 31, 2005 from $603,000
for the three months ended December 31, 2004. The increase was primarily due to
increases in syndication loan fee income of $128,000, bank owned life insurance
of $34,000 and net gains on sale of mortgage loans of $21,000, off set in part
by decreases in mortgage lending fees of $27,000, deposit product fees of
$8,000, office building income of $22,000 and decreases in other fees of $20,000
which include miscellaneous income and fees for other banking products.

        NON-INTEREST EXPENSE. Non-interest expense increased by $286,000, or
14.5%, to $2.3 million for the three months ended December 31, 2005 from $2.0
million for the three months ended December 31, 2004. The increase resulted
primarily from increases of $182,000 in

                                       16
<PAGE>

compensation and fringe benefits, which included increases of $117,000 for the
Supplemental Executive Retirement Plan, $64,000 for the employee pension and
ESOP plans and $30,000 in medical insurance costs and other miscellaneous
employee costs off set in part by a reduction in salary costs and directors fees
of $29,000. The increase in non-interest expense also includes increases in
professional fees of $40,000, occupancy and equipment expense of $29,000, data
processing of $9,000 and increases in other expenses of $26,000 including
advertising, insurance and other operating expenses.

        INCOME TAXES. Income tax expense increased $141,000, or 26.2%, to
$679,000 for the three months ended December 31, 2005 from $538,000 for the
three months ended December 31, 2004. The primary reasons for the increase in
the quarter ended December 31, 2005 were increased income before taxes and an
increase in the effective tax rate to 37.6% for the quarter ended December 31,
2005 from 36.2% for the quarter ended December 31, 2004.

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, 2005.

                                       17
<PAGE>

ITEM 4.    CONTROLS AND PROCEDURES

        An evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended)
as of December 31, 2005. 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.



                                       18
<PAGE>

                           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, 2005 as
filed with the S.E.C. on December 29, 2005.

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

        The Company completed its stock offering on April 5, 2005, raising $39.7
million in gross proceeds and approximately $37.9 million in net proceeds. The
Company issued a total of 3,967,500 shares of its common stock to public
stockholders and 9,257,500 shares of its common stock to its parent, BFS
Bancorp, MHC.

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

        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.


                                       19
<PAGE>

                                   SIGNATURES

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


                                       BROOKLYN FEDERAL BANCORP, INC.
                                       (Registrant)



Date: February 14, 2006                /s/ Angelo J. Di Lorenzo
                                       -----------------------------------------
                                       Angelo J. Di Lorenzo
                                       Chief Executive Officer and President



Date:  February 14, 2006               /s/ Richard A. Kielty
                                       -----------------------------------------
                                       Richard A. Kielty
                                       Executive Vice President and
                                       Chief Financial Officer


                                       20