<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 June 30, 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 August 12, 2005
   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.........................................  8
Item 3.   Quantitative and Qualitative Disclosures About Market Risk......... 18
Item 4.   Controls and Procedures............................................ 18

                                    PART II.

Item 1.   Legal Proceedings.................................................. 20
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds........ 20
Item 3.   Defaults Upon Senior Securities.................................... 20
Item 4.   Submission of Matters to a Vote of Security Holders................ 20
Item 5.   Other Information.................................................. 20
Item 6.   Exhibits........................................................... 20

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

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<CAPTION>
                                                       PART I

ITEM 1.  FINANCIAL STATEMENTS

                                   BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                        JUNE 30, 2005 AND SEPTEMBER 30, 2004
                                        (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                                  JUNE 30,          SEPTEMBER 30,
                                   ASSETS                                           2005                2004
                                                                               ----------------   ----------------
                                                                                 (UNAUDITED)
<S>                                                                            <C>                <C>
Cash and due from banks (including interest-earning balances of
  $14,804 and $3,021, respectively)                                            $         17,477   $          7,904
Time deposits and certificates                                                            9,562              6,871
Securities available-for-sale                                                             4,171              4,093
Securities held-to-maturity:
  Mortgage-backed securities (estimated fair value of $100,723 and
     $110,763, respectively)                                                            102,506            113,083
  Other (estimated fair value of $3,670 and $4,004, respectively)                         3,704              4,013
Loans receivable, net                                                                   188,333            163,027
Federal Home Loan Bank of New York ("FHLB") stock, at cost                                1,002              1,096
Accrued interest receivable                                                               1,309              1,276
Premises and equipment, net                                                               1,634              1,500
Prepaid expenses and other assets                                                        10,090              5,972
                                                                               ----------------   ----------------
         Total assets                                                          $        339,788   $        308,835
                                                                               ================   ================

                    LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits:
      Demand accounts                                                          $        133,583   $        143,427
      Certificates of deposit                                                           119,786            113,123
                                                                               ----------------   ----------------
         Total deposits                                                                 253,369            256,550
  Borrowings:
      Short-term FHLB advances                                                            2,450              7,331
      Long-term FHLB advances                                                             4,657              2,900
  Advance payments by borrowers for taxes and insurance                                   1,269              2,404
  Accrued expenses and other liabilities                                                  3,766              3,057
                                                                               ----------------   ----------------
         Total liabilities                                                              265,511            272,242
                                                                               ----------------   ----------------
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 as of June 30, 2005                            132                 --
      Additional paid-in capital                                                         37,762                 --
      Retained earnings - substantially restricted                                       39,522             36,608
      Unallocated common stock held by ESOP                                              (3,106)                --
      Accumulated other comprehensive loss:
           Net unrealized loss on securities, net of tax                                    (33)               (15)
                                                                               ----------------   ----------------
              Total stockholders' equity                                                 74,277             36,593
                                                                               ----------------   ----------------
         Total liabilities and stockholders' equity                            $        339,788   $        308,835
                                                                               ================   ================


                           See accompanying notes to consolidated financial statements.

                                                         1
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                                        BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                               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,
                                                                -----------------------------   -----------------------------
                                                                     2005            2004            2005            2004
                                                                -------------   -------------   -------------   -------------
<S>                                                             <C>             <C>             <C>             <C>
Interest income:
   First mortgage and other loans                               $       3,397   $       2,836   $       9,165   $       8,806
   Mortgage-backed securities                                             821             792           2,665           2,425
   Other securities and interest-earning assets                           293             125             628             376
                                                                -------------   -------------   -------------   -------------
     Total interest income                                              4,511           3,753          12,458          11,607
                                                                -------------   -------------   -------------   -------------

Interest expense:
   Deposits                                                             1,202             954           3,315           2,902
   Borrowings                                                              61              45             197             128
                                                                -------------   -------------   -------------   -------------
     Total interest expense                                             1,263             999           3,512           3,030
                                                                -------------   -------------   -------------   -------------

Net interest income before provision for loan losses                    3,248           2,754           8,946           8,577
Provision for loan losses                                                 128              20             164              44
                                                                -------------   -------------   -------------   -------------
     Net interest income after provision for loan losses                3,120           2,734           8,782           8,533
                                                                -------------   -------------   -------------   -------------

Non-interest income:
   Banking fees and service charges                                       284             419           1,060             941
   Net gain (loss) on sale of loans held-for-sale                          --              (4)              5              30
   Other                                                                  180             155             474             461
                                                                -------------   -------------   -------------   -------------
     Total non-interest income                                            464             570           1,539           1,432
                                                                -------------   -------------   -------------   -------------

Non-interest expense:
   Compensation and fringe benefits                                     1,278           1,088           3,830           3,476
   Occupancy and equipment                                                237             205             685             653
   Other                                                                  555             348           1,377           1,026
                                                                -------------   -------------   -------------   -------------
     Total non-interest expense                                         2,070           1,641           5,892           5,155
                                                                -------------   -------------   -------------   -------------

Income before provision for income taxes                                1,514           1,663           4,429           4,810
Provision for income taxes                                                418             657           1,515           1,890
                                                                -------------   -------------   -------------   -------------
     Net income                                                 $       1,096   $       1,006   $       2,914   $       2,920
                                                                =============   =============   =============   =============
     Earnings per share:
          Basic                                                         $0.08             N/A             N/A             N/A
          Diluted                                                       $0.08             N/A             N/A             N/A
     Average common shares outstanding:
          Basic                                                    12,909,944             N/A             N/A             N/A
          Diluted                                                  12,909,944             N/A             N/A             N/A


                                 See accompanying notes to consolidated financial statements.

                                                              2
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<CAPTION>

                                           BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                              NINE MONTHS ENDED JUNE 30, 2005 AND 2004
                                                (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                                             (UNAUDITED)


                                                                                                    UNALLOCATED
                                                                       RETAINED                     ACCUMULATED
                                                        ADDITIONAL     EARNINGS-                       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, 2003               $        --  $          --  $       32,517  $         --  $          (10) $         32,507

Comprehensive income:
   Net income                                     --             --           2,920            --              --             2,920
   Net unrealized loss on securities              --             --              --            --              (6)               (6)
                                                                                                                   ----------------
      Comprehensive income                                                                                                    2,914
                                                                                                                   ----------------

                                         -----------  -------------  --------------  ------------  --------------  ----------------
BALANCE JUNE 30, 2004                    $        --  $          --  $       35,437  $         --  $          (16) $         35,421
                                         ===========  =============  ==============  =============  =============  ================

BALANCE SEPTEMBER 30, 2004               $        --  $          --  $       36,608  $         --  $          (15) $         36,593

Comprehensive income:
   Net income                                     --             --           2,914            --              --             2,914
   Net unrealized loss on securities              --             --              --            --             (18)              (18)
                                                                                                                   ----------------
      Comprehensive income                                                                                                    2,896
                                                                                                                   ----------------
Sale of 3,967,500 shares of common
 stock in the initial public offering
 and issuance of 9,257,000 shares to
 the mutual holding company                      132         37,762              --            --              --            37,894
Purchase of common stock by the ESOP              --             --              --        (3,174)             --            (3,174)
Allocation of ESOP stock                          --             --              --            68              --                68
                                         -----------  -------------  --------------  ------------  --------------  ----------------
BALANCE JUNE 30, 2005                    $       132  $      37,762  $       39,522  $     (3,106) $          (33) $         74,277
                                         ===========  =============  ==============  ============  ==============  ================


                                    See accompanying notes to consolidated financial statements.

                                                                 3
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<CAPTION>
                                  BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 FOR THE NINE MONTHS ENDED JUNE 30, 2005 AND 2004
                                                  (IN THOUSANDS)
                                                    (UNAUDITED)

                                                                                                 FOR THE NINE MONTHS ENDED
                                                                                                          JUNE 30,
                                                                                             ----------------------------------
                                                                                                  2005               2004
                                                                                             ---------------    ---------------
<S>                                                                                          <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                              $         2,914    $         2,920
     Adjustments to reconcile net income to net cash provided by operating activities:
         ESOP expense                                                                                     68                 --
         Depreciation and amortization                                                                   235                178
         Provision for loan losses                                                                       164                 44
         Income from bank-owned life insurance                                                          (129)               (90)
         Increase(decrease) in deferred loan fees, net                                                    70               (171)
         Amortization of premiums, net of accretion of discounts                                         278                374
         Originations of loans held-for-sale                                                            (394)            (1,400)
         Proceeds from sales of loans held-for-sale                                                      399              5,581
         Net gain on sales of loans held-for-sale                                                         (5)               (30)
         Increase in accrued interest receivable                                                         (33)              (117)
         Deferred income tax (benefit) expense                                                          (230)                25
         Decrease (increase) in prepaid expenses and other assets                                          6             (1,392)
         Increase in accrued expenses and other liabilities                                              709              1,016
                                                                                             ----------------   ---------------
              Net cash provided by operating activities                                                4,052              6,938
                                                                                             ---------------    ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Loan originations in excess of repayments                                                       (31,170)           (18,775)
     Proceeds from sale of loan participation interests                                                7,518             12,972
     Purchases of loans receivable                                                                    (1,889)            (1,456)
     Principal repayments on mortgage-backed securities held-to-maturity                              22,351             33,596
     Purchases of mortgage-backed securities held-to-maturity                                        (11,963)           (48,168)
     Maturities and principal pay downs of other securities held-to-maturity                             220                342
     Purchases of other securities held-to-maturity                                                        --            (3,137)
     Purchases of securities available-for-sale                                                          (95)            (8,215)
     Sales of securities available-for-sale                                                                --             8,168
     Purchases of time deposits and certificates                                                      (2,991)            (4,993)
     Maturities of time deposits and certificates                                                        300                 --
     Sales of FHLB stock                                                                                  94                314
     Purchases of bank-owned life insurance                                                           (3,765)               (16)
     Purchases of premises and equipment                                                                (369)               (67)
                                                                                             ---------------    ---------------
             Net cash used in investing activities                                                   (21,759)           (29,435)
                                                                                             ---------------    ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
     (Decrease) increase in deposits                                                                  (3,181)             7,298
     Proceeds from long-term FHLB advances                                                             2,257                 --
     Net (decrease) increase in short-term FHLB advances                                              (5,381)             3,007
     Decrease in advance payments by borrowers for taxes and insurance                                (1,135)              (711)
     Net proceeds from sale of common stock                                                           37,894                 --
     Loan to ESOP for purchase of common stock                                                        (3,174)                --
                                                                                             ---------------    ----------------
             Net cash provided by financing activities                                                27,280              9,594
                                                                                             ---------------    ---------------
             Net increase (decrease) in cash and cash equivalents                                      9,573            (12,903)
Cash and cash equivalents at beginning of year                                                         7,904             26,106
                                                                                             ---------------    ---------------
Cash and cash equivalents at end of period                                                   $        17,477    $        13,203
                                                                                             ===============    ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest on deposits                                                                $         3,326    $         2,907
         Interest on borrowings                                                                          187                128
         Taxes                                                                                         2,077              1,896

                                    See accompanying notes to consolidated financial statements.

                                                                 4
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                 BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 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 and nine
month periods ended June 30, 2005 are not necessarily indicative of the results
that may be expected for the year ending September 30, 2005. The Bank's
consolidated financial statements, as presented in the Company's Form S-1,
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 portion

                                       5
<PAGE>

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 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

                                       6
<PAGE>

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.

        In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share-Based Payment" ("Statement No. 123R"),
which requires entities to measure the cost of employee services received in
exchange for an 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
Statement No. 123R includes the recognition and retention plan and the stock
option plan the Company expects to adopt. As a public company, pursuant to rules
issued by the SEC in April 2005, the Company will be required to adopt Statement
No. 123R in its first annual reporting period beginning after June 15, 2005
(i.e., the fiscal year beginning October 1, 2005). For shares awarded under the
recognition and retention plan, the Company will recognize the grant-date fair
value of the shares as compensation expense on a straight-line basis over the
applicable vesting period, which is the same accounting required prior to
Statement No. 123R. For options granted under the stock option plan, the Company
will 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 Statement 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.
Statement No. 123R did not change existing accounting principles applicable to
employee stock ownership plans.



                                       7
<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

                                       8
<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

                                       9
<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

        The Company's business strategy is to operate a well-capitalized and
profitable community bank dedicated to providing quality customer service. The
Company's business strategy has been to emphasize one- to four-family
residential mortgage lending and the Company will continue to emphasize this
type of lending. Management, however, has determined to broaden the range of the
Company's products and services to enhance profitability, consistent with safety
and soundness. The Company has introduced additional products and services, such
as debit cards and internet banking. The Company cannot assure you that it will
successfully implement its business strategy.

        Highlights of the Company's business strategy are as follows:

        o       REMAINING A COMMUNITY ORIENTED INSTITUTION. The Bank was
                established in Brooklyn, New York in 1887, and has been
                operating continuously since that time. The Bank has been, and
                continues to be, committed to meeting the financial needs of the
                communities in which the Bank operates, and the Bank is
                dedicated to providing quality personal service to its
                customers. Although historically the Bank's 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 the Bank has been originating a wider variety of
                residential loan products to meet the needs of its customers. If
                such loans do not satisfy the

                                       10
<PAGE>

                Bank's criteria for retention in its loan portfolio, they
                generally can be sold in the secondary market.

        o       CONTINUING TO INCREASE THE BANK'S MULTI-FAMILY, COMMERCIAL REAL
                ESTATE AND CONSTRUCTION LENDING. Historically, the Bank has
                emphasized one- to four-family residential lending within its
                market area. While one- to four-family loan originations remain
                an important form of loan origination because of its experience
                with this type of lending, in the past five years the Bank has
                emphasized the origination of loans secured by multi-family
                properties and commercial real estate and construction loans as
                a means of increasing its 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, the Bank, like other financial
                institutions, generally charges higher rates of interest for
                these types of loans compared to one- to four-family residential
                loans. The Bank has invested in a new loan servicing system and
                additional personnel to allow the Bank to service these types of
                loans more efficiently.

        o       INCREASING THE BANK'S REAL ESTATE LENDING CAPACITY. The
                additional capital raised in the offering and contributed to the
                Bank has increased the Bank's lending capacity, including
                staffing, by enabling the Bank to originate more loans and loans
                with larger balances. This will permit the Bank to serve
                borrowers with larger lending needs and to originate larger
                loans than the Bank has originated in the past.

        o       UTILIZING THE NET OFFERING PROCEEDS TO BETTER MANAGE INTEREST
                RATE RISK AND GROW ASSETS. With interest rates at historically
                low levels, the Bank has managed its interest rate risk by
                maintaining a significant percentage of its 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. Management adopted this
                conservative investment philosophy because the Bank's ratio of
                equity to assets and its relatively small asset size did not
                provide management with the flexibility to invest in
                longer-term, higher yielding assets without incurring
                significant interest rate risk. Also, this strategy will
                position the Bank to reinvest its short-term liquid assets in
                higher yielding loans and investments once interest rates begin
                to rise. During the recent sustained period of declining
                interest rates, however, this strategy has generated less
                interest income than would have been generated if the Bank had
                invested in longer-term loans and investments.

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

                                       11
<PAGE>

        o       FACILITATE GROWTH THROUGH DE NOVO BRANCHING. The Company has
                established financial, geographic and other criteria to evaluate
                potential new branch offices in its market area. The Company
                anticipates being able to use part of the net proceeds of the
                offering to finance the expansion of its branch network. While
                the Company continues to review potential branch sites, there
                can be no assurance as to whether or when the Company will open
                such offices.

        o       MAINTAINING HIGH ASSET QUALITY. The Company has focused on
                improving and maintaining strong asset quality by following
                conservative underwriting criteria, and primarily originating
                loans secured by real estate. The Company's ratio of
                non-performing assets to total assets at June 30, 2005 and
                September 30, 2004 was 1.08% and less than 0.01%, respectively.
                The Company's ratio of non-performing loans to total loans at
                June 30, 2005 increased to 1.94% from 0.01% at September 30,
                2004, due to an increase in non-accrual loans as discussed
                below.

        Management believes that the allowance for loan losses of $1.1 million
and $920,000 at June 30, 2005 and September 30, 2004, respectively, was
adequate.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2005 AND SEPTEMBER 30, 2004

        TOTAL ASSETS. Total assets increased by $31.0 million, or 10.0%, to
$339.8 million at June 30, 2005 from $308.8 million at September 30, 2004. This
increase was largely the result of the funds received from the net proceeds
received in the conversion to a stock form institution and an increase in loans
receivable, net, offset in part by a decrease in securities held-to-maturity.

        CASH AND DUE FROM BANKS. Cash and due from banks increased by $9.6
million to $17.5 million at June 30, 2005 from $7.9 million at September 30,
2004. This increase in short-term liquidity was primarily due to the net
proceeds received in the conversion to a stock form institution and repayments
of mortgage-backed securities held in the Company's investment portfolio, mainly
offset by cash used to fund our net loan portfolio increase.

        SECURITIES. Securities investments, which represents investments in time
deposits and certificates, securities available-for-sale and securities
held-to-maturity, decreased $8.1 million, or 6.3%, to $119.9 million at June 30,
2005, from $128.1 million at September 30, 2004. This decrease was due to
repayments on the Bank's mortgage-backed securities of $22.4 million, partially
offset by purchases of $3.0 million in time deposits and purchases of $12.0
million in mortgage-backed securities during the nine month period ended June
30, 2005.

        NET LOANS. Net loans increased $25.3 million, or 15.5%, to $188.3
million at June 30, 2005 from $163.0 million at September 30, 2004, primarily
due to increases of $16.7 million in commercial real estate loans, $8.6 million
in multi-family loans and $5.5 million in construction loans. This growth was
offset in part by a $5.3 million decrease in one-to four-family residential
mortgage and other loans.

        As of June 30, 2005, non-accrual loans totaled $3.7 million,
representing three loans with the same borrower. The non-accrual loans consist
of a $1.5 million commercial construction loan and a $1.9 million commercial
real estate loan which are secured by a first and second mortgage lien on a
hotel in Suffolk County, New York that had an appraised value of $4.3

                                       12
<PAGE>

million in December 2002. A more recent appraisal dated December 3, 2004,
prepared for another financial institution, indicates a value of $5.4 million.
The third loan is a $300,000 mortgage loan on the principal's personal
residence. All three loans were classified as substandard as of March 31, 2005
and were placed on non-accrual status during the quarter ended June 30, 2005.

        During the quarter ended June 30, 2005, a commercial real estate loan
for $1.9 million, secured by a first mortgage lien on waterfront industrial
property in Whitestone, New York was reinstated as an accruing loan. This loan
had been placed on non-accrual status during the quarter ended March 31, 2005.
All past due principal and interest was paid and the loan is current to date.

        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. 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.

        DEPOSITS. Deposits decreased by $3.2 million, or 1.2%, to $253.4 million
at June 30, 2005, from $256.6 million at September 30, 2004. The Bank believes
the decrease was primarily attributable to withdrawals being made to purchase
shares of common stock in the stock offering which closed on April 5, 2005.

        BORROWED FUNDS. Funds borrowed from the Federal Home Loan Bank of New
York on a short-term basis decreased by $4.9 million, or 66.6%, to $2.4 million
at June 30, 2005, from $7.3 million at September 30, 2004. During the nine month
period ended June 30, 2005, the Bank increased its longer-term borrowings by
$2.3 million to fund asset growth.

        STOCKHOLDERS' EQUITY. Stockholders' equity increased by $37.7 million or
103.0%, to $74.3 million at June 30, 2005, from $36.6 million at September 30,
2004. The increase is the result of the conversion to a publicly held
institution in which the net offering proceeds received was approximately $37.9
million, and net income for the period, partially offset by the funding of 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

                                       13
<PAGE>

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 June 30, 2005, $17.5 million or 5.1% 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 $12.9 million at June 30, 2005. As of June 30, 2005, the Company had
$7.1 million in borrowings outstanding from the Federal Home Loan Bank of New
York and access to additional Federal Home Loan Bank advances.

        At June 30, 2005, the Company had approximately $64.1 million in loan
commitments outstanding, which included $16.6 million in undisbursed
construction loans, $4.0 million in one- to four- family loans, $1.3 million in
unused home equity lines of credit, $14.5 million in commercial real estate
lines of credit and $27.7 million to originate primarily multi-family and
nonresidential mortgage loans. The Company also had commitments to sell loans of
$740,000. Certificates of deposit due within one year of June 30, 2005 totaled
$64.9 million, or 54.1% 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
June 30, 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.

        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 were initially invested on a short-term
basis in liquid investments, namely, certificates of deposits, FHLB term
deposits and FHLB overnight investments. The Company has begun to deploy a
portion of the offering proceeds in longer-term securities and funding new
loans, although no assurance can be given that the Company will be able to
effectively deploy all of the offering proceeds.

                                       14
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND
2004

        NET INCOME. Net income increased $90,000, or 8.9%, to $1.1 million for
the three months ended June 30, 2005 from $1.0 million for the three months
ended June 30, 2004. The increase was primarily the result of a $494,000
increase in the Bank's net interest income and a decrease of $239,000 in
provision for income taxes, offset in part by a decrease of $106,000 in
non-interest income, an increase in provision for loan losses of $108,000 and an
increase of $429,000 in non-interest expense.

        NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased by $494,000 to $3.2 million
for the three months ended June 30, 2005 from $2.8 million for the three months
ended June 30, 2004. The increase in net interest income resulted primarily from
the increased average balances of interest-earning assets of $31.8 million
offset in part by a 6 basis points decrease in the Bank's net interest rate
spread to 3.55% for the three months ended June 30, 2005 from 3.61% for the
three months ended June 30, 2004. The Bank's net interest margin increased 24
basis points to 3.98% in the current quarter from 3.74% a year earlier.

        INTEREST INCOME. Interest income increased $758,000, or 20.2%, to $4.5
million for the three months ended June 30, 2005 from $3.8 million for the three
months ended June 30, 2004. Interest income on loans increased by $561,000, or
19.8%, to $3.4 million for the three months ended June 30, 2005 from $2.8
million for the three months ended June 30, 2004. The primary reasons for the
increase in interest income on loans were a $92,000 increase in construction
loan income and a $616,000 increase in commercial real estate loan income,
offset in part by a decrease in our residential mortgage loan and other loan
income of $147,000. The average balance of the loan portfolio increased by $19.5
million to $182.5 million for the three months ended June 30, 2005 from $163.0
million for the three months ended June 30, 2004. The average yield on loans
increased 48 basis points to 7.44% for the three months ended June 30, 2005 from
6.96% for the three months ended June 30, 2004. Interest income on investment
securities and other interest-earning assets increased by $197,000, or 21.5%, to
$1.1 million for the three months ended June 30, 2005 from $917,000 for the
three months ended June 30, 2004. The increase in interest income on investment
securities and other interest-earning assets was primarily due to a $12.2
million increase in average balances to $143.6 million for the three months
ended June 30, 2005 from $131.4 million for the three months ended June 30, 2004
and a 31 basis point increase in yield to 3.10% for the three months ended June
30, 2005 from 2.79% for the three months ended June 30, 2004.

        INTEREST EXPENSE. Interest expense increased $264,000 to $1.3 million
for the three months ended June 30, 2005 from $1.0 million for the three months
ended June 30, 2004. The increase was primarily the result of a $248,000
increase in interest expense on deposits and a $16,000 increase in interest
expense on borrowed funds, primarily reflecting an increase in the average cost
of 49 basis points to 1.98% for the three months ended June 30, 2005 from 1.49%
for the three months ended June 30, 2004.

        PROVISION FOR LOAN LOSSES. The Bank's provision for loan losses was
$128,000 for the three months ended June 30, 2005 and $20,000 for the three
months ended June 30, 2004. The primary reasons for this increase are growth in
the commercial real estate and construction loan portfolio, as well as the
increase in non-accrual loans. Loans in non-accrual status totaled $3.7

                                       15
<PAGE>

million as of June 30, 2005 and $13,000 as of June 30, 2004. The allowance for
loan losses as of June 30, 2005 represented 0.57% of total loans, compared to
0.54% of total loans as of June 30, 2004.

        NON-INTEREST INCOME. Non-interest income decreased by $106,000, or
18.6%, to $464,000 for the three months ended June 30, 2005 from $570,000 for
the three months ended June 30, 2004. The decrease was primarily due to a
reduction in syndication loan fee income of $88,000, a $32,000 decrease in
mortgage and other loan fees and a $26,000 decrease in fees on deposit products,
offset in part by increases of $36,000 in income on bank owned life insurance
and a decrease in losses on sale of loans of $4,000.

        NON-INTEREST EXPENSE. Non-interest expense increased by $429,000, or
26.1%, to $2.1 million for the three months ended June 30, 2005 from $1.6
million for the three months ended June 30, 2004. The increase resulted
primarily from a $190,000 increase in compensation and fringe benefits, which
included increases of $83,000 for the Supplemental Executive Retirement Plan,
$78,000 for the employee pension and ESOP plans and $29,000 in salary costs. The
increase in non-interest expense also includes increases in professional fees of
$147,000 and other expenses of $92,000 including occupancy and equipment,
advertising, insurance and other operating expenses.

        INCOME TAXES. Income tax expense decreased $239,000, or 36.4%, to
$418,000 for the three months ended June 30, 2005 from $657,000 for the three
months ended June 30, 2004. The primary reasons for the decrease in 2005 are
lower income before taxes and the reversal of $80,000 in certain prior period
tax accruals, which are no longer required. The decrease resulted in a decrease
in the effective tax rate from 39.5% in 2004 to 27.6% in 2005.

COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED JUNE 30, 2005
AND 2004

        NET INCOME. Net income was $2.9 million for each of the nine-month
periods ended June 30, 2005 and 2004. While net income amounts for the periods
were comparable, the 2005 period reflected an increase of $369,000 in net
interest income, an increase of $107,000 in non-interest income and a decrease
of $375,000 in the provision for income taxes. These changes were offset by an
increase of $120,000 in the provision for loan losses and an increase of
$737,000 in non-interest expense.

        NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased by $369,000 to $8.9 million
for the nine month period ended June 30, 2005 from $8.6 million for the nine
month period ended June 30, 2004. The increase in net interest income resulted
primarily from the increased average balance of interest-earning assets of $19.3
million, offset in part by a 23 basis point decrease in the net interest rate
spread to 3.57% for the nine month period ended June 30, 2005 from 3.80% for the
nine month period ended June 30, 2004. The Bank's net interest margin decreased
9 basis points to 3.85% in the current nine-month period from 3.94% in the prior
period.

        INTEREST INCOME. Interest income increased $851,000, or 7.3%, to $12.5
million for the nine month period ended June 30, 2005 from $11.6 million for the
nine month period ended June 30, 2004. Interest income on investment securities
and other interest-earning assets increased by $492,000, or 17.6%, to $3.3
million for the nine month period ended June 30, 2005

                                       16
<PAGE>

from $2.8 million for the nine month period ended June 30, 2004. The increase in
interest income on investment securities and other interest-earning assets was
primarily due to a $6.5 million increase in average balances to $137.9 million
for the nine month period ended June 30, 2005 from $131.4 million for the nine
month period ended June 30, 2004 and a 34 basis point increase in yield to 3.18%
for the nine months ended June 30, 2005 from 2.84% for the nine month period
ended June 30, 2004. Interest income on loans increased by $359,000, or 4.1%, to
$9.2 million for the nine month period ended June 30, 2005 from $8.8 million for
the nine month period ended June 30, 2004. The increase in interest income on
loans reflects increases in commercial mortgage loans of $902,000 and
construction loans of $352,000, partially offset by decreases in income on one-
to four-family mortgage loans and other loans of $635,000 and prepayment
penalties of $260,000.

        INTEREST EXPENSE. Interest expense increased $482,000 to $3.5 million
for the nine month period ended June 30, 2005 from $3.0 million for the nine
month period ended June 30, 2004. The increase was primarily the result of a
$413,000 increase in interest expense on deposits and a $69,000 increase in
interest expense on borrowed funds, reflecting a 26 basis point increase in the
average cost of such deposits and borrowings.

        PROVISION FOR LOAN LOSSES. The provision for loan losses was $164,000
for the nine month period ended June 30, 2005 and $44,000 for the nine month
period ended June 30, 2004. Loans in non-accrual status were $3.7 million as of
June 30, 2005 and $13,000 as of June 30, 2004. See discussion on non-accrual
loans in "--Comparison of Financial Condition at June 30, 2005 and September 30,
2004." The allowance for loan losses as of June 30, 2005 represented 0.57% of
total loans, compared to 0.54% of total loans as of June 30, 2004.

        NON-INTEREST INCOME. Non-interest income increased by $107,000, or 7.5%,
to $1.5 million for the nine month period ended June 30, 2005 from $1.4 million
for the nine month period ended June 30, 2004. The reasons for the increase are
increases in mortgage and other loan fees of $159,000 and bank owned life
insurance income of $40,000, partially offset by decreases in deposit related
fees of $67,000 and gain on sale of mortgage loans of $25,000.

        NON-INTEREST EXPENSE. Non-interest expense increased by $737,000, or
14.3%, to $5.9 million for the nine month period ended June 30, 2005 from $5.2
million for the nine month period ended June 30, 2004. The increase resulted
primarily from a $354,000 increase in compensation and fringe benefits, which
included increases of $136,000 for the Supplemental Executive Retirement Plan,
$118,000 for the employee pension and ESOP plans and $104,000 in salary costs
for new employees and increases in base salaries for certain officers and
employees. The increase in non-interest expenses also reflects increases in data
processing service bureau expense of $145,000, professional fees of $175,000 and
other operating expenses of $67,000.

        INCOME TAXES. Income tax expense decreased $375,000 to $1.5 million for
the nine month period ended June 30, 2005 from $1.9 million for the nine month
period ended June 30, 2004. The decrease resulted primarily from lower income
before taxes and the reversal of $80,000 in certain prior period tax accruals,
which are no longer required. The lower effective tax rate of 34.2% for the nine
months ended June 30, 2005 compares to 39.3% for the same period in 2004.

                                       17
<PAGE>

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
declining 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, 2004.

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, 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.

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<PAGE>

        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.








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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

        There are 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 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

        10.1    Executive Supplemental Retirement Income Agreement between
                Brooklyn Federal Savings Bank and Angelo J. Di Lorenzo

        10.2    Executive Supplemental Retirement Income Agreement between
                Brooklyn Federal Savings Bank and Richard A. Kielty

        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.


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<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: August 15, 2005                     /s/ Angelo J. Di Lorenzo
                                          --------------------------------------
                                          Angelo J. Di Lorenzo
                                          Chief Executive Officer and President



Date: August 15, 2005                     /s/ Richard A. Kielty
                                          --------------------------------------
                                          Richard A. Kielty
                                          Executive Vice President and
                                          Chief Financial Officer


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