Brooklyn Federal Bancorp, Inc. - FORM 10-Q/A

Attached files

file	filename
EX-11 - EXHIBIT 11 - Brooklyn Federal Bancorp, Inc.	ex11.htm
EX-32.2 - EXHIBIT 32.2 - Brooklyn Federal Bancorp, Inc.	ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - Brooklyn Federal Bancorp, Inc.	ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Brooklyn Federal Bancorp, Inc.	ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - Brooklyn Federal Bancorp, Inc.	ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

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

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-51208

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

	Federal		20-2659598
(State or other jurisdiction of		(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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer	o	Accelerated Filer	o
	Non-accelerated Filer	o	Smaller Reporting Company	x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

YES o NO x

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

Common Stock, $.01 Par Value		12,889,418
Class		Outstanding at May 17, 2010

EXPLANATORY NOTE

In connection with the preparation of its audited consolidated financial statements and annual report on Form 10-K for the fiscal year ended September 30, 2010, Brooklyn Federal Bancorp, Inc. (the “Company”) identified certain miscalculations in its allowance for loan losses during and between fiscal year 2010 quarterly periods. This Amendment No. 1 to Form 10-Q is being filed to correct the allowance for loan losses for the quarterly and six month periods ended March 31, 2010 and related financial statement items reflected herein as well as to update corresponding disclosures under the headings Management’s Discussion and Analysis of Financial Condition and in the Notes to the Consolidated Financial Statements. This Amendment No. 1 to Form 10-Q also contains updated disclosure in Item. 4 “Controls and Procedures” regarding the Company’s disclosure controls and procedures relating to a material weakness identified as a result of such miscalculations.

Except as set forth above, we have not modified or updated disclosures presented in this Form 10-Q to reflect events or developments that have occurred after the date of its original filing. Among other things, forward-looking statements made in the Form 10-Q upon its initial filing have not been revised to reflect events, results, or developments that have occurred or facts that have become known to us after that date (other than as discussed above), and such forward-looking statements should be read in their historical context. Accordingly, this Amendment should be read in conjunction with our filings made with the SEC subsequent to the initial filing of the Form 10-Q.

BROOKLYN FEDERAL BANCORP, INC.

Form 10-Q Quarterly Report

Table of Contents


		Page Number

PART I.

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4T.	Controls and Procedures	35

PART II.

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	(Reserved)	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

Signature Page		40

PART I

ITEM 1. FINANCIAL STATEMENTS

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share amounts)

(Unaudited)


	(Restated)
	March 31,			September 30,
	2010			2009
Assets	(unaudited)			(audited)
Cash and due from banks (including interest-earning balances of $7,551 and $2,102, respectively)	$	10,148		$	3,472
Securities:
Available-for-sale		3,213			3,305
Held-to-maturity (estimated fair value of $56,889 and $59,334, respectively)		62,009			66,201
Total securities		65,222			69,506
Loans held-for-sale		--			--
Loans receivable		423,172			430,435
Less: Allowance for loan losses		20,389			10,750
Loans receivable, net		402,783			419,685
Federal Home Loan Bank of New York (“FHLB”) stock, at cost		1,638			2,382
Bank owned life insurance		9,701			9,511
Accrued interest receivable		2,675			2,799
Premises and equipment, net		1,938			2,030
Deferred tax asset		16,816			10,330
Prepaid expenses and other assets		7,859			1,730
Total assets	$	518,780		$	521,445

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest-bearing deposits	$	16,224		$	16,595
Interest-bearing deposits		152,690			134,664
Certificates of deposit		261,469			250,811
Total deposits		430,383			402,070
Borrowings		9,300			27,300
Advance payments by borrowers for taxes and insurance		2,288			2,142
Accrued expenses and other liabilities		6,112			8,059
Total liabilities		448,083			439,571
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; 13,484,210 issued and 12,889,418 and 12,890,754 outstanding, respectively		135			135
Additional paid-in capital		43,177			43,112
Retained earnings - substantially restricted		40,834			52,671
Treasury shares - at cost, 594,792 shares and 593,456 shares, respectively		(7,719	)		(7,707	)
Unallocated common stock held by employee stock ownership plan (“ESOP”)		(2,314	)		(2,394	)
Unallocated shares of the stock-based incentive plan		(328	)		(417	)
Accumulated other comprehensive loss:
Net unrealized loss on securities, net of income tax		(3,088	)		(3,526	)
Total stockholders’ equity		70,697			81,874
Total liabilities and stockholders’ equity	$	518,780		$	521,445

See accompanying notes to consolidated financial statements.

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	March 31,			March 31,			March 31,			March 31,
	(Restated)						(Restated)
	2010			2009			2010			2009
Interest income:
First mortgage and other loans	$	6,907		$	7,408		$	14,095		$	14,580
Mortgage-backed securities		862			947			1,772			1,872
Other securities and interest-earning assets		82			72			174			150
Total interest income		7,851			8,427			16,041			16,602

Interest expense:
Deposits		1,950			2,460			4,015			4,960
Borrowings		51			95			105			217
Total interest expense		2,001			2,555			4,120			5,177

Net interest income before provision for loan losses		5,850			5,872			11,921			11,425
Provision for loan losses		12,083			93			23,877			840
Net interest income after provision for loan losses		(6,233	)		5,779			(11,956	)		10,585

Non-interest income:
Total loss on OTTI of securities		(929	)		(290	)		(2,017	)		(866	)
Less:
Non-credit portion of OTTI recorded in other comprehensive income (before taxes)		-			-			776			-
Net loss on OTTI recognized in earnings		(929	)		(290	)		(1,241	)		(866	)
Banking fees and service charges		199			257			484			626
Net gain on sale of loans held-for-sale		34			113			94			130
Other		148			142			290			298
Total non-interest (loss) income		(548	)		222			(373	)		188

Non-interest expense:
Compensation and fringe benefits		2,027			2,564			4,059			4,675
Occupancy and equipment		468			438			896			849
FDIC Insurance		154			44			302			60
Professional fees		423			131			594			253
Data processing fees		168			162			330			376
Other		385			370			743			722
Total non-interest expense		3,625			3,709			6,924			6,935

(Loss) income before income tax expense		(10,406	)		2,292			(19,253	)		3,838
Income tax (benefit) expense		(4,454	)		843			(8,215	)		1,414
Net (loss) income	$	(5,952	)	$	1,449		$	(11,038	)	$	2,424
(Loss) earnings per common share:
Basic	$	(0.47	)	$	0.11		$	(0.87	)	$	0.19
Diluted	$	(0.47	)	$	0.11		$	(0.87	)	$	0.19
Average common shares outstanding:
Basic		12,625,968			12,651,676			12,619,455			12,668,741
Diluted		12,625,968			12,652,013			12,622,373			12,673,815

See accompanying notes to consolidated financial statements.

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except for per share amounts)

(Unaudited)


						(Restated)															(Restated)

	Common Stock		Additional Paid-in Capital			Retained Earnings-Substantially Restricted			Treasury Stock			Unallocated Common Stock Held by ESOP			Unallocated Shares of the Stock-based Incentive Plan			Accumulated Other Comprehensive Income (Loss)			Total

Balance at September 30, 2009	$	135	$	43,112		$	52,671		$	(7,707	)	$	(2,394	)	$	(417	)	$	(3,526	)	$	81,874

Comprehensive income:
Net loss (restated)		--		--			(11,038	)		--			--			--			--			(11,038	)
Net unrealized loss on securities available-for-sale, net of income tax benefit of $42		--		--			--			--			--			--			(53	)		(53	)
Loss on impairment of securities available-for-sale, net of income tax benefit of $37		--		--			--			--			--			--			48			48
Non-credit impairment loss on securities held-to-maturity, net of income tax benefit of $418		--		--			--			--			--			--			(204	)		(204	)
Transfer of credit losses on securities held-to-maturity, net of income tax benefit of $509		--		--			--			--			--			--			647			647
Total comprehensive income (restated)																						(10,600	)
Treasury stock purchased (1,336 shares)		--		--			--			(12	)		--			--			--			(12	)
Allocation of ESOP stock		--		(1	)		--			--			80			--			--			79
Stock-based incentive plan expense		--		66			--			--			--			89			--			155
Dividends paid on common stock, $0.11 per share		--		--			(799	)		--			--			--			--			(799	)
Balance at March 31, 2010	$	135	$	43,177		$	40,834		$	(7,719	)	$	(2,314	)	$	(328	)	$	(3,088	)	$	70,697

See accompanying notes to consolidated financial statements.

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Six Months Ended
	March 31,
	(Restated)
	2010			2009
Cash flows from operating activities:
Net (loss) income	$	(11,038	)	$	2,424
Adjustments to reconcile net income to net cash used in operating activities:
ESOP expense		79			101
Stock-based incentive plan expense		155			155
Depreciation and amortization		226			227
Provision for loan losses		23,877			840
Income from bank-owned life insurance		(175	)		(183	)
Gross loss on OTTI recognized in earnings		1,241			866
(Accretion) amortization of servicing rights		(29	)		102
Accretion of deferred loan fees, net		(288	)		(166	)
Accretion of discounts, net of amortization of premiums		(205	)		(48	)
Originations of loans held-for-sale		(3,022	)		(50,895	)
Proceeds from sales of loans held-for-sale		3,065			7,310
Principal repayments on loans held-for-sale		2			988
Net gain on sales of loans held-for-sale		(94	)		(130	)
Decrease (increase) in accrued interest receivable		124			(353	)
Deferred income tax benefit		(5,215	)		(1,114	)
(Increase) decrease in prepaid expenses and other assets		(7,377	)		144
(Decrease) increase in accrued expenses and other liabilities		(1,947	)		60
Net cash used in operating activities		(621	)		(39,672	)
Cash flows from investing activities:
(Loan originations in excess of repayments) Repayments in excess of loan originations		(6,687	)		7,375
Principal repayments on mortgage-backed securities held-to-maturity		10,203			6,568
Purchases of mortgage-backed securities held-to-maturity		(6,462	)		(5,292	)
Purchases of securities available-for-sale		--			(500	)
Maturities of certificates of deposit		--			997
Redemptions (purchases) of FHLB stock		744			(3	)
Purchases of bank-owned life insurance		(15	)		(15	)
Purchases of premises and equipment		(134	)		(84	)
Net cash (used in) provided by investing activities		(2,351	)		9,046
Cash flows from financing activities:
Increase in deposits		28,313			33,630
Net decrease in short term borrowings		(23,000	)		(1,800	)
Proceeds from long term borrowings		5,000			--
Repayments of long term borrowings		--			(439	)
Increase (decrease) in advance payments by borrowers for taxes and insurance		146			(114	)
Purchases of treasury stock		(12	)		(1,170	)
Payment of cash dividend		(799	)		(744	)
Net cash provided by financing activities		9,648			29,363

Net increase (decrease) in cash and cash equivalents		6,676			(1,263	)
Cash and cash equivalents at beginning of year		3,472			5,053
Cash and cash equivalents at end of period	$	10,148		$	3,790

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Six Months Ended
	March 31,
	(Restated)
	2010		2009

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	4,121	$	5,178
Taxes		4,122		2,588
Other:
Mortgage loans held-for-sale transferred to held-to-maturity		--		24,270

See accompanying notes to consolidated financial statements.

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2010

(Unaudited)

Note 1 - Business

BFS Bancorp, MHC

BFS Bancorp, MHC is the federally chartered mutual holding company parent of Brooklyn Federal Bancorp, Inc. The only business that BFS Bancorp, MHC has engaged in is the majority ownership of Brooklyn Federal Bancorp, Inc. BFS Bancorp, MHC was formed upon completion of Brooklyn Federal Savings Bank’s reorganization into the mutual holding company structure. So long as BFS Bancorp, MHC exists, it will own a majority of the voting stock of Brooklyn Federal Bancorp, Inc.

Brooklyn Federal Bancorp, Inc.

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. The Company completed its initial public offering on April 5, 2005.

The Company issued 9,257,500 shares to BFS Bancorp, MHC, and 3,967,500 shares to depositors resulting in a total of 13,225,000 shares issued and outstanding after completion of the reorganization. At March 31, 2010, there were 12,889,418 total shares outstanding 71.8% of which were owned by BFS Bancorp, MHC.

Brooklyn Federal Savings Bank (Restated)

The Bank is a federally chartered savings bank headquartered in Brooklyn, NY. The Bank was originally founded in 1887. We conduct our business from our main office and four branch offices. All of our offices are located in New York State. The telephone number at our main office is (718) 855-8500.

At March 31, 2010, we had total assets of $518.8 million, total deposits of $430.4 million and stockholders’ equity of $70.7 million. Our net loss for the three months and six months ended March 31, 2010 was $6.0 million and $11.0 million, respectively. Our principal business activity is originating mortgage loans secured by one-to-four-family residential real estate, multi-family real estate, commercial real estate, construction loans, land loans and, to a limited extent, a variety of consumer loans and home equity loans. We offer a variety of deposit accounts, including checking, savings and certificates of deposit, and emphasize personal and efficient service for our customers.

Note 2 - Basis of Presentation, Reclassifications, and Subsequent Events

A) Basis of Presentation

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included and all significant inter-company balances and transactions have been eliminated in consolidation. Operating results for the three and six month periods ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending September 30, 2010. The Company’s consolidated financial statements, as presented in the Company’s Form 10-K for the year ended September 30, 2009, should be read in conjunction with these statements.

B) Reclassifications

Certain amounts in the consolidated financial statements presented for the prior year period have been reclassified to conform to the current year presentation. On the Consolidated Statements of Financial Condition, the net deferred tax asset has been reclassified from prepaid expenses and other assets. On the Consolidated Statements of Operations, FDIC Insurance has been reclassified from Non-interest expense - Other.

C) Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the Consolidated Statements of Condition date of March 31, 2010 for items that should potentially be recognized or disclosed in these financial statements. Based upon our evaluation, no events were identified which would be recorded or disclosed in the interim financial statements, except as noted in Note 8 – Subsequent Events.

D) Restatement

The Company determined that it needed to restate its previously issued interim condensed consolidated financial statements as of and for the three months and six months ended March 31, 2010 and that these previously issued consolidated financial statements should no longer be relied upon, as a result of certain miscalculations in its allowance for loan losses during and between fiscal year 2010 quarterly periods.

This restatement corrects the allowance for loan losses for the three and six months ended March 31, 2010 and related financial statement items reflected herein.

This restatement had an effect on the Company’s consolidated net loss and cash flows for the three and six months ended March 31, 2010 and its consolidated financial condition as of March 31, 2010 as follows:

	For the Three Months Ended						For the Six Months Ended
	March 31, 2010						March 31, 2010
	As Reported			As Restated			As Reported			As Restated
Net interest income before provision for loan losses	$	5,850		$	5,850		$	11,921		$	11,921
Provision for loan losses		6,874			12,083			7,957			23,877
Net interest income after provision for loan losses		(1,024	)		(6,233	)		3,964			(11,956	)
Total non-interest loss		(548	)		(548	)		(373	)		(373	)
Total non-interest expense		3,625			3,625			6,924			6,924
Loss before income tax expense		(5,197	)		(10,406	)		(3,333	)		(19,253	)
Income tax benefit		(2,429	)		(4,454	)		(1,679	)		(8,215	)
Net loss	$	(2,768	)	$	(5,952	)	$	(1,654	)	$	(11,038	)
Loss per common share:
Basic	$	(0.22	)	$	(0.47	)	$	(0.13	)	$	(0.87	)
Diluted	$	(0.22	)	$	(0.47	)	$	(0.13	)	$	(0.87	)

	For the Six Months Ended
	March 31, 2010
	As Reported			As Restated
Cash flows from operating activities:
Net (loss) income	$	(1,654	)		$	(11,038	)
Provision for loan losses		7,957				23,877
Deferred income tax benefit		(2,815	)			(5,215	)
Increase in prepaid expenses and other assets		(3,236	)			(7,377	)
Increase in accrued expenses and other liabilities		(1,952	)			(1,947	)
All other operating activities		1,079				1,079
Net cash provided by (used in) operating activities		(621	)			(621	)
Net cash (used in) provided by investing activities		(2,351	)			(2,351	)
Net cash provided by financing activities		9,648				9,648
Net increase in cash and cash equivalents		6,676				6,676
Cash and cash equivalents at beginning of year		3,472				3,472
Cash and cash equivalents at end of period	$	10,148			$	10,148

	March 31, 2010
	As Reported				As Restated
Assets
Loans receivable		431,674				423,172
Less: Allowance for loan losses		12,971				20,389
Loans receivable, net		418,703				402,783
Deferred tax asset		13,060				16,816
Prepaid expenses and other assets		5,074				7,859
All other assets		91,322				91,322
Total assets	$	528,159			$	518,780

Liabilities and Stockholders’ Equity
Liabilities:
Accrued expenses and other liabilities		6,107				6,112
All other liabilities		441,971				441,971
Total liabilities		448,078				448,083
Stockholders’ equity:
Retained earnings - substantially restricted		50,218				40,834
All other equity		29,863				29,863
Total stockholders’ equity		80,081				70,697
Total liabilities and stockholders’ equity	$	528,159			$	518,780

Note 3 - Use of Estimates

The preparation of consolidated financial statements, in conformity with U.S. GAAP, 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, fair values of securities and deferred taxes are particularly susceptible to material change in the near term.

Note 4 - Impact of Certain Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2010-06, Fair Value Measurements and Disclosures (“Topic 820”): Improving Disclosures about Fair Value Measurements (“ASU 10-06”). ASU 10-06 revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The amendments also clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. These new disclosure requirements were adopted by the Company during the current period, with the exception of the requirement concerning gross presentation of Level 3 activity, which is effective for fiscal years beginning after December 15, 2010. With respect to the portions of this ASU that were adopted during the current period, the adoption of this standard did not have a material impact on the Company’s financial position, results of operations, cash flows, or disclosures. Management does not believe that the adoption of the remaining portion of this ASU will have a material impact on the Company’s financial position, results of operation, cash flows, or disclosures.

In February 2010, the FASB issued ASU 2010-09, Subsequent Events (“Topic 855”): Amendments to Certain Recognition and Disclosure Requirements. The amendments remove the requirement for a Securities and Exchange Commission (“SEC”) registrant to disclose the date through which subsequent events were evaluated as this requirement would have potentially conflicted with SEC reporting requirements. Removal of the disclosure requirement is not expected to affect the nature or timing of subsequent events evaluations performed by the Company. This ASU became effective upon issuance.

Note 5 - Securities

Investments in securities available-for-sale and held-to-maturity at March 31, 2010 are summarized as follows:

	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(In thousands)
Securities available-for-sale:
Mutual funds	$	3,204	$	9	$	--	$	3,213

	Amortized cost		Carrying cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
					(In thousands)
Securities held-to-maturity:
Mortgage-backed securities:
Government agency	$	118	$	118	$	7	$	(2	)	$	123
Government-sponsored enterprises		19,742		19,742		416		(201	)		19,957
Private issuers		47,677		42,149		426		(5,766	)		36,809
Total securities held-to-maturity	$	67,537	$	62,009	$	849	$	(5,969	)	$	56,889

The Company acquired all of our mortgage-backed securities (none resulted from retained interests in loans sold or securitized by the Company). At March 31, 2010, mortgage-backed securities issued by government-sponsored enterprises consist of (i) Federal Home Loan Mortgage Corporation (“Freddie Mac”) securities with an amortized cost of $9.5 million (compared to $12.2 million at September 30, 2009) and an estimated fair value of $9.7 million (compared to $12.5 million at September 30, 2009) and (ii) Federal National Mortgage Association (“Fannie Mae”) securities with an amortized cost of $10.2 million (compared to $8.2 million at September 30, 2009) and an estimated fair value of $10.3 million (compared to $8.3 million at September 30, 2009). These are the only securities of individual issuers held by the Company with an aggregate book value exceeding 10% of the Company’s equity at March 31, 2010. Government agency mortgage-backed securities represent securities issued by Government National Mortgage Association (“Ginnie Mae”).

The Company recognized an other-than-temporary impairment (“OTTI”) charge of $5,000 and $85,000 on securities available-for-sale for the three and six month periods ended March 31, 2010, compared to $0.3 million and $0.9 million for the three and six month periods ended March 31, 2009. The impairment charges relate to our investment in a mutual fund with a carrying and fair value of $2.7 million that invests primarily in agency and private label mortgage-backed securities. The Bank’s investment in this mutual fund has been steadily losing value. In addition, the fund implemented a temporary prohibition on cash redemptions, thereby lessening the ability of the Bank to dispose of its remaining $2.7 million investment in this asset.

The Company recognized an OTTI impairment charge of $0.9 million and $1.1 million on securities held-to-maturity for the three and six month periods ended March 31, 2010, respectively, compared to no such charges for the three and six month periods ended March 31, 2009. These charges related to credit losses and were attributable to privately issued mortgage-backed securities and were determined through a present-value analysis of expected cash flows on the securities.

Total pre-tax OTTI for the three and six month periods ended March 31, 2010 was $0.9 million and $1.2 million, respectively, and the net OTTI that was recognized in earnings was $0.5 million and $0.7 million. OTTI is a non-cash charge and not necessarily an indicator of a permanent decline in value.

At March 31, 2010, the Bank pledged securities having an amortized cost of $35.7 million, with an estimated fair value of $35.8 million, as collateral for advances from the Federal Home Loan Bank of New York.

The following table summarizes securities held-to-maturity at amortized cost and estimated fair value by contractual final maturity as of March 31, 2010. Actual maturities will differ from contractual final maturity due to scheduled monthly payments and due to borrowers having the right to prepay obligations with or without a prepayment penalty.

	Amortized		Carrying		Estimated
	cost		cost		Fair Value
	(In thousands)
Mortgage-backed securities:
One year or less	$	--	$	--	$	--
Over one year through five years		199		199		205
Over five years through ten years		21,757		21,757		21,887
More than ten years		45,581		40,053		34,797
Total securities held-to-maturity	$	67,537	$	62,009	$	56,889

The following table summarizes securities held-to-maturity at March 31, 2010 with gross unrealized losses, segregated by the length of time the securities had been in a continuous loss position:

	Less than 12 months					12 months or more					Total
	Estimated		Gross unrealized			Estimated		Gross unrealized			Estimated		Gross unrealized
	fair value		losses			fair value		losses			fair value		losses
	(In thousands)
Securities held-to-maturity:
Mortgage-backed securities:
Government agency	$	--	$	--		$	80	$	(2	)	$	80	$	(2	)
Government-sponsored enterprises		4,654		(201	)		-		-			4,654		(201	)
Private issuers		4,420		(293	)		17,832		(5,473	)		22,252		(5,766	)
Total temporarily impaired securities held-to-maturity	$	9,074	$	(494	)	$	17,912	$	(5,475	)	$	26,986	$	(5,969	)

In April 2009, the FASB amended the OTTI model for debt securities. The impairment model for equity securities was not affected. Under the updated guidance, an OTTI loss must be fully recognized in earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost basis. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event of OTTI, only the amount of impairment associated with the credit loss is recognized in earnings. Amounts relating to factors other than credit losses are recorded in accumulated other comprehensive loss (“AOCL”). The guidance also requires additional disclosures regarding the calculation of credit losses as well as factors considered in reaching a conclusion that an investment is not other-than-temporarily impaired.

Securities in unrealized loss positions are analyzed as part of the Company’s ongoing assessment of OTTI. When the Company intends to sell or is required to sell securities, the Company recognizes an impairment loss equal to the full difference between the amortized cost basis and fair value of those securities. When the Company does not intend to sell or is not required to sell equity or debt securities in an unrealized loss position, potential OTTI is considered based on a variety of factors, including the length of time and extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, the geographic area or financial condition of the issuer or the underlying collateral of a security; the payment structure of the security; changes to the rating of the security by a rating agency; the volatility of the fair value changes; and changes in fair value of the security after the balance sheet date. For debt securities, the Company estimates cash flows over the remaining lives of the underlying collateral to assess whether credit losses exist and determine if any adverse changes in cash flows have occurred. The Company’s cash flow estimates take into account expectations of relevant market and economic data as of the end of the reporting period. As of March 31, 2010, the Company does not intend to sell the securities with an unrealized loss position in AOCL, and it is likely that the Company will not be required to sell these securities before recovery of their amortized cost basis. The Company believes that the securities with an unrealized loss in AOCL are not other-than-temporarily impaired as of March 31, 2010. We will not be required to sell our securities due to the strong liquidity position and our ability to borrow an additional $56.6 million from the Federal Home Loan Bank of New York, if necessary.

U.S. Government Agency and Government Sponsored Enterprise Mortgage-backed Securities

The carrying value of the Company’s U.S. Government agency and Government sponsored mortgage-backed securities totaled $19.9 million at March 31, 2010 and comprised 32.0% of total held-to-maturity investments and 3.7% of total assets as of that date. At March 31, 2010, there were seven securities of this type in an unrealized loss position for less than 12 months and two securities of this type in an unrealized loss position for 12 months or longer. This category of securities generally includes mortgage pass-through securities and collateralized mortgage obligations issued by U.S. government agencies, such as Ginnie Mae, which guarantees the contractual cash flows associated with those securities and U.S. government-sponsored entities such as Fannie Mae and Freddie Mac, each of which carried the implicit guarantee of the U.S. government to guarantee the contractual cash flows associated with those securities. Those guarantees were strengthened during the 2008-2009 financial crisis during which time Fannie Mae and Freddie Mac each were placed into receivership by the federal government. Through those actions, the U.S. government effectively reinforced the guarantees of those agencies, thereby assuring the creditworthiness of the mortgage-backed securities issued by those agencies.

With credit risk being reduced to negligible levels due to the U.S. government’s support of these agencies, the unrealized losses on the Company’s investment in U.S. Government agency and Government sponsored mortgage-backed securities are due largely to the combined effects of several market-related factors. First, movements in market interest rates significantly impact the average lives of mortgage-backed securities by influencing the rate of principal prepayment attributable to refinancing activity. Changes in the expected average lives of these securities significantly impact their fair values due to the extension or contraction of the cash flows that an investor expects to receive over the life of the security.

Historically, lower market interest rates generally prompt greater refinancing activity, thereby shortening the average lives of mortgage-backed securities and vice-versa. However, prepayment rates are also influenced by fluctuating real estate values and the overall availability of credit in the marketplace, which significantly impacts the ability of borrowers to refinance. The deteriorating real estate market values and reduced availability of credit that has characterized the residential real estate marketplace over the past four years has significantly slowed both real estate purchase and refinancing activities. Consequently, prepayment rates on mortgage-backed securities have generally slowed thereby extending their average lives.

The market price of mortgage-backed securities, being the key measure of the fair value to an investor in those securities, is also influenced by the overall supply and demand for those securities in the marketplace. Absent other factors, an increase in the demand for, or a decrease in the supply of a security increases its price. Conversely, a decrease in the demand for, or an increase in the supply of a security decreases its price. The recent volatility and uncertainty in the marketplace has reduced the overall level of demand for mortgage-backed securities which has generally had an adverse impact on their market prices. This has been further exacerbated by many larger institutions selling mortgage-related assets to shrink their balance sheets for capital adequacy purposes, which has increased the supply of these securities.

In sum, the factors influencing the fair value of the Company’s U.S. Government agency and Government sponsored mortgage-backed securities, as described above, generally result from movements in market interest rates and changing real estate and financial market conditions, which affect the supply and demand for those securities. Inasmuch as market conditions fluctuate over time, the impairments of value arising from these changing market conditions are both “noncredit-related” and “temporary” in nature.

The Company has the stated ability and intent to “hold-to-maturity” those securities so designated. More specifically, as of March 31, 2010, the Company has no intention to sell the securities. Additionally, the Company has concluded that the possibility of being required to sell the securities prior to their anticipated recovery is unlikely based upon its strong liquidity and capital position as of that date.

Finally, the Company purchased these securities at either discounts or nominal premiums relative to their par amounts. Accordingly, the Company expects that the securities will not be settled for a price less than their amortized cost.

In light of the factors noted above, the Company does not consider its U.S. Government agency and Government sponsored mortgage-backed securities with unrealized losses at March 31, 2010 to be “other-than-temporarily” impaired as of that date.

Private Issuer Mortgage-backed Securities

The carrying value of the Company’s private issuer mortgage-backed securities totaled $42.1 million at March 31, 2010 and comprised 68.0% of total held-to-maturity investments and 8.0% of total assets as of that date. At March 31, 2010, there were three securities of this type in an unrealized loss position for less than 12 months and 20 securities of this type in an unrealized loss position for 12 months or longer.

Unlike agency and government sponsored mortgage-backed securities, private issuer collateralized mortgage obligations are not explicitly guaranteed by a U.S. government sponsored entity. Rather, these securities generally utilize the structure of the larger investment vehicle to reallocate credit risk among the individual tranches comprised within that vehicle. Through this process, investors in different tranches are subject to varying degrees of risk that the cash flows of their tranche will be adversely impacted by borrowers defaulting on the underlying mortgage loans. The creditworthiness of certain tranches may also be further enhanced by additional credit insurance protection embedded within the terms of the total investment vehicle.

The Company monitors the general level of credit risk for each of its private issuer mortgage-backed securities based upon the ratings assigned to its specific tranches by one or more credit rating agencies. The level of these ratings, and changes thereto, is one of several factors considered by the Company in identifying those securities that may be other-than-temporarily impaired. For example, all impaired private issuer mortgage-backed securities that are rated below investment grade are reviewed individually to determine if the impairment is other-than- temporary.

Additional factors considered by the Company in identifying its other-than-temporarily impaired securities include, but are not limited to, the severity and duration of the impairment, the payment performance of the underlying mortgage loans and trends relating thereto, the original terms of the underlying loans regarding credit quality (e.g., Prime, Alt-A), the geographic distribution of the real estate collateral supporting those loans and any current or anticipated declines in associated collateral values, as well as the degree of protection against credit losses afforded to the Company’s security through the structural characteristics of the larger investment vehicle as noted above. Based upon these additional factors, the impairment of certain investment grade securities may also be reviewed for other-than-temporary impairment.

Securities determined to be potentially other-than-temporarily impaired are individually analyzed to determine the “credit-related” and “noncredit-related” portions of the impairment. As noted earlier, a credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on an other-than-temporarily impaired security fall below its amortized cost. Projected cash flows for the Company’s private issuer mortgage-backed securities are modeled using an automated securities analytics system that is commonly used by institutional investors and the broker/dealer community. The system generates an individual tranche’s projected cash flows based upon several input assumptions regarding the payment performance of the mortgage loans underlying the larger investment vehicle of which the Company’s tranche is a part. These assumptions include, but may not be limited to, loan prepayment rates, loan default rates, and the severity of actual losses on defaulting loans. The Company generally bases the input values for these assumptions on historical data reported by the analytics system. The Company then calculates the present value of those cash flows based upon the appropriate discount rate required by the applicable accounting guidance.

The impairments of those securities whose cash flows, when present valued, fall below the Company’s carrying value due to expected principal losses are identified as other-than-temporary. The amount by which the present value of the expected cash flows falls below the Company’s carrying value of the security is identified as the credit-related portion of the other-than-temporary impairment. The remaining portion, where applicable, is identified as noncredit-related, other-than-temporary impairment.

The impairments of those individually analyzed securities whose cash flows, when present valued, exceed the Company’s carrying value or otherwise reflect no expected principal losses, are generally identified as temporary. Similarly, the impairments associated with those securities that have generally retained their investment-grade credit rating and whose additional factors, as noted above, are not characterized by potentially adverse attributes, are also generally identified as temporary. In these cases, the Company attributes the unrealized losses to the same fluctuating market-related factors as those affecting agency mortgage-backed securities, noting, in particular, the comparatively greater temporary adverse effect on fair value arising from the general illiquidity of private issuer, investment grade mortgage-backed securities in the marketplace compared to agency-guaranteed mortgage-backed securities. In light of these factors, the related impairments are defined as “temporary.”

The classification of impairment as “temporary” is further reinforced by the Company’s stated intent and recognition that we will not be required to sell any of our private issuer mortgage-backed securities which allows for an adequate timeframe during which the fair values of the impaired securities are expected to recover to their amortized cost. More specifically, as of March 31, 2010, the Company has no intention to sell the securities. Additionally, the Company has concluded that the possibility of being required to sell the securities prior to their anticipated recovery is unlikely based upon its strong liquidity and capital position as of that date.

In light of the factors noted above, the Company concluded that nine of its 34 private issuer mortgage-backed securities with amortized costs, excluding impairments, totaling approximately $12.7 million were “other-than-temporarily” impaired by approximately $10.0 million, cumulatively, as of March 31, 2010, comprising $3.2 million and $6.8 million of credit-related and non-credit related impairments, respectively. The Company does not consider the remaining 18 private issuer mortgage-backed securities in an unrealized loss position, with amortized costs of approximately $25.3 million, to be “other-than-temporarily” impaired as of that date.

The following table presents a roll-forward of the credit loss component of OTTI on private issuer mortgage-backed securities for which a non-credit component of OTTI was recognized in other comprehensive loss for the three and six months ended March 31, 2010. OTTI recognized in earnings for credit-impaired debt securities is presented as additions in two components, based upon whether the current period is the first time a debt security was credit-impaired (initial credit impairment) or is not the first time a debt security was credit impaired (subsequent credit impairment). Changes in the credit loss component of credit-impaired debt securities were as follows:

For the Three Months ended March 31, 2010	Total Other- Than- Temporary Impairment Loss		Other-Than- Temporary Impairment Credit Losses Recorded in Earnings		Other-Than-Temporary Impairment Credit Losses Recorded in Other Comprehensive Income
	(in thousands)
Beginning balance as of January 1, 2010	$	9,093	$	2,256	$	6,837
Add: Initial other-than-temporary credit losses		-		-		-
Additional other-than-temporary credit losses		924		924		-
Ending balance as of March 31, 2010	$	10,017	$	3,180	$	6,837

For the Six Months ended March 31, 2010	Total Other-Than-Temporary Impairment Loss		Other-Than-Temporary Impairment Credit Losses Recorded in Earnings		Other-Than-Temporary Impairment Credit Losses Recorded in Other Comprehensive Income
	(in thousands)
Beginning balance as of September 30, 2009	$	8,085	$	2,024	$	6,061
Add: Initial other-than-temporary credit losses		954		178		776
Additional other-than-temporary credit losses		978		978		-
Ending balance as of March 31, 2010	$	10,017	$	3,180	$	6,837

Note 6 – Allowance for Loan Losses (Restated)

The following table summarizes the activity in allowance for loan losses for the six month period ended March 31, 2010 and fiscal year ended September 30, 2009 (dollars in thousands):

	(Restated)
	March			September
	2010			2009

Balance at beginning of period	$	10,750		$	2,205

Charge-offs:
One-to-four-family		170			--
Multi-family		2,692			--
Commercial real estate		9,956			--
Construction		255			--
Land		1,130			--
Consumer and other		35			--
Recoveries		--			--
Net charge-offs		14,238			--

Provision for loan losses		23,877			8,545

Balance at end of period	$	20,389		$	10,750

Ratios:
Annualized net charge-offs to average loans outstanding		3.27	%		0.00	%
Allowance for loan losses to total loans at end of period		4.82	%		2.50	%

Non-performing loans are defined as either in non-accrual status and/or past contractual maturity date. At March 31, 2010, $54.3 million of our loans net of specific allowances, or 12.83%, of our total loans, compared to $22.1 million at September 30, 2009, were non-accrual and/or past maturity and therefore non-performing. These loans consist of multi-family, commercial real estate, construction and land loans. We are actively pursuing all applicable methods and resources to reduce the number and amount of non-performing loans.

The table below sets forth the amounts and categories of our non-performing assets, net of specific allowances at the dates indicated. We may from time to time agree to modify the contractual terms of a borrower’s loan. In cases where these modifications represent a concession (for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates) to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. At March 31, 2010, loans modified in a troubled debt restructuring totaled $7.5 million. Seven loans for a total of $7.1 million at the time their terms were modified are non-performing and included in the table below. One loan for $0.4 million at the time its terms were modified is performing in accordance with its new terms and, therefore, is not included in the table below. The sharp deterioration in the real estate market has resulted in a deterioration of the Company’s loans receivable portfolio, which in turn has caused increases in non-performing loans, particularly in our multi-family, commercial real estate and construction loan portfolios.

The following table sets forth information with respect to the Company’s non-performing assets (dollars in thousands):

	(Restated)
	March 31,			September 30,
	2010			2009

Non-accrual loans:
One- to four-family	$	--		$	--
Multi-family		18,401			902
Commercial real estate		26,890			15,623
Construction		5,640			832
Land		669			4,722
Consumer		--			--
Total non-accrual loans		51,600			22,079

Loans past maturity and still accruing		2,699			--
Total non-performing assets	$	54,299		$	22,079

Ratios:
Total non-performing loans to total loans		12.83	%		5.13	%
Total non-performing loans to total assets		10.60	%		4.23	%
Total non-performing assets to total assets		10.60	%		4.23	%

Note 7 - Financial Instrument Fair Value Disclosures (Restated)

FASB issued guidance regarding Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. This guidance applies to other accounting pronouncements that require or permit fair value measurements.

The FASB-issued guidance establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under this guidance are as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted for similar assets or liabilities; quoted prices in markets that are not active; or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy as reported on the consolidated statements of financial condition at March 31, 2010 and September 30, 2009 are as follows (in thousands):

(Level 1)

Quoted Prices

(Level 2)

in Active

Significant

(Level 3)

Markets for

Other

Significant

Identical

Observable

Unobservable

Description

March 31, 2010

Assets

Inputs

Securities available-for-sale

3,213

(Level 1)

Quoted Prices

(Level 2)

in Active

Significant

(Level 3)

Markets for

Other

Significant

Identical

Observable

Unobservable

Description

September 30, 2009

Assets

Inputs

Securities available-for-sale

3,305

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy as reported on the consolidated statement of financial condition at March 31, 2010 is as follows (in thousands):

(Level 1)

Quoted Prices

(Level 2)

in Active

Significant

(Level 3)

Markets for

Other

Significant

Identical

Observable

Unobservable

Description

March 31, 2010

Assets

Inputs

Impaired loans

68,377

Impaired securities

3,603

The following valuation techniques were used to measure fair value of assets in the tables above:

Securities available-for-sale – The fair value of the securities was obtained through a primary broker/dealer from readily available price quotes as of March 31, 2010.

Impaired loans – The Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less their specific valuation allowances.

Impaired securities – The Company has measured impairment generally based on the fair values of securities that are primarily determined by obtaining matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

Fair value disclosures are required for financial instruments for which it is practicable to estimate fair value. The definition of a financial instrument includes many of the assets and liabilities recognized in the Bank’s consolidated statements of financial condition, as well as certain off-balance sheet items. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date.

Quoted market prices are used to estimate fair values when those prices are available. However, active markets do not exist for many types of financial instruments. Consequently, fair values for these instruments must be estimated by management using techniques such as discounted cash flow analysis and comparison to similar instruments. Estimates developed using these methods are highly subjective and require judgments regarding significant matters such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material effect on the fair value estimates. Since these estimates are made as of a specific point in time, they are susceptible to material near-term changes. Fair values disclosed do not reflect any premium or discount that could result from the sale of a large volume of a particular financial instrument, nor do they reflect possible tax ramifications or estimated transaction costs.

The following table summarizes the carrying value and estimated fair value of the Company’s financial instruments at March 31, 2010 and September 30, 2009:

	March 31, 2010				September 30, 2009
	Carrying		Estimated		Carrying		Estimated
	value		fair value		value		fair value
	(In thousands)
Financial assets:
Cash and due from banks	$	10,148	$	10,148	$	3,472	$	3,472
Securities available-for-sale		3,213		3,213		3,305		3,305
Securities held-to-maturity		62,009		56,889		66,201		59,334
Loans receivable, net (restated)		402,783		404,647		419,685		421,085
FHLB stock		1,638		1,638		2,382		2,382

Financial liabilities:
Deposits		430,383		434,663		402,070		405,548
Borrowings		9,300		9,430		27,300		27,390

The following methods and assumptions were utilized by the Company in estimating the fair values of its financial instruments at March 31, 2010 and September 30, 2009:

(a)

Cash and Due from Banks

The estimated fair values of cash and due from banks are assumed to equal the carrying values, as these balances are due on demand.

(b) Securities Available-for-Sale and Held-to-Maturity

The estimated fair values for securities available-for-sale were based principally on quoted market prices. The fair values of securities held-to-maturity (carried at amortized cost) were primarily determined by obtaining matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The loan portfolio was segregated into various components for valuation purposes in order to group loans based on their significant financial characteristics, such as loan type, interest rate, interest rate type (adjustable or fixed) and payment status (performing or non-performing).

Fair values were estimated for each component as described below.

The fair values of performing mortgage loans and consumer loans were estimated by discounting the anticipated cash flows from the respective portfolios. The discount rates reflected current market rates for loans with similar terms to borrowers of similar credit quality.

The fair values of non-performing mortgage loans and consumer loans were based on recent collateral appraisals or management’s analysis of estimated cash flows based upon expected proceeds discounted at rates commensurate with the credit risk involved.

(d) Federal Home Loan Bank Stock

The estimated fair value of the Bank’s investment in Federal Home Loan Bank stock is deemed to equal its carrying value, which represents the price at which it may be redeemed.

(e) Deposits

The estimated fair values of deposits with no stated maturity, which include NOW, money market, and passbook savings accounts are deemed to be equal to the amount payable on demand at the valuation date. The estimated fair values of certificates of deposit represent contractual cash flows discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities.

(f) Borrowings

The fair values of borrowings were estimated using a discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements.

(g) Commitments

Fair values of commitments outstanding are estimated based on the fees that would be charged for similar agreements, considering the remaining term of the agreement, the rate offered and the creditworthiness of the parties. The estimated fair values of commitments outstanding as of March 31, 2010 and September 30, 2009 were not considered significant and are not included in the above table.

Note 8 – Subsequent Events

In connection with its December 31, 2009 examination of the Bank, the Office of Thrift Supervision (the “OTS”) issued a supervisory directive that the Bank cease originating new construction loans or commercial real estate loans, except for any legally binding commitments outstanding at December 3, 2009. In addition, the OTS has designated the Bank as being in “troubled condition”, for purposes of imposing certain regulatory restrictions including, without limitation, that the Bank:

(1) Limit its asset growth in any quarter to an amount not to exceed net interest credited on deposit liabilities;

(2) Obtain prior OTS approval before declaring or paying dividends or making any other capital distributions;

(3) Obtain the nonobjection of the OTS before increasing brokered deposits in excess of interest credited above the amount as of February 28, 2010;

(4) Notify the OTS prior to adding any new directors or senior executive officers; and

(5) Receive nonobjection from the OTS before entering into, renewing, extending or revising any contractual arrangement related to compensation or benefits with any officer or director of the Bank.

The Bank is in compliance with these limitations.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

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 except as required by law.

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, other-than-temporary impairments, gains (losses) on sales of loans and securities available-for-sale and other miscellaneous income. The Company’s non-interest expenses consist primarily of compensation and employee benefits, office occupancy, technology, FDIC insurance, 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.

Our website address is www.brooklynbank.com. Information on our website should not be considered a part of this document.

Critical Accounting Policies

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policies:

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses that is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for the Bank. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly impact the valuation of a property securing a loan and the related allowance determined. The assumptions supporting 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 selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allocations. Actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results.

Other-than-Temporary Impairment of Securities. We evaluate on a quarterly basis whether any securities are other-than-temporarily impaired. In making this determination, we consider the extent and duration of the impairment, the nature and financial health of the issuer and our ability and intent to hold the securities for a period sufficient to allow for any anticipated recovery in market value. Other considerations include, without limitation, a review of the credit quality of the issuer and the existence of a guarantee or insurance, if applicable to the security. If a security is determined to be other-than-temporarily impaired, we record an impairment loss as a charge to income for the period in which the impairment loss is determined to exist, resulting in a reduction to our earnings for that period.

The fair value of the Bank’s investment in a mutual fund that invests primarily in agency and private label mortgage-backed securities has been steadily decreasing, which has caused a corresponding decrease in the fund’s net asset value. In addition, the fund implemented a temporary prohibition on cash redemptions, lessening the ability of the Bank to dispose of its remaining $2.7 million investment in this asset. During the six month period ended March 31, 2010, we concluded that this available-for-sale investment did incur an other-than-temporary impairment totaling $0.1 million and the Bank charged current earnings for the impairment.

Regarding the securities held-to-maturity, which are composed completely of debt securities, an other-than-temporary impairment loss must be fully recognized in earnings if an investor has the intent to sell the debt security or if it is more likely than not that the investor will be required to sell the debt security before recovery of its amortized cost basis. However, even if an investor does not expect to sell a debt security, it must evaluate the expected cash flows to be received and determine if a credit loss has occurred. In the event of an other-than-temporary impairment loss, only the amount of impairment associated with the credit loss is recognized in earnings. An other-than-temporary impairment loss relating to factors other than credit losses is recorded in accumulated other comprehensive loss. For the securities held-to-maturity, we concluded that a portion of the unrealized loss was temporary in nature due to marketability and market interest rates and not the underlying credit quality of the issuers of the securities and did not incur an other-than-temporary impairment. The Bank charged current earnings for the impairment related to credit losses totaling $0.9 million and $1.1 million for the three and six month periods ended March 31, 2010, respectively, and recorded in accumulated other comprehensive loss the remaining loss related to market factors totaling $0.8 million for the six months ended March 31, 2010. Additionally, we have the intent to hold these investments and it is unlikely that we will be required to sell these investments prior to the time necessary to recover the amortized costs. Future events that would materially change this conclusion and require a charge to operations for an impairment loss include a change in the credit quality of the issuers.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. We consider the determination of this valuation allowance to be a critical accounting policy because of the need to exercise significant judgment in evaluating the amount and timing of recognition of deferred tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. A valuation allowance for deferred tax assets may be required if the amount of taxes recoverable through loss carry-back declines, or if we project lower levels of future taxable income. Such a valuation allowance would be established through a charge to income tax expense which would adversely affect our operating results.

Comparison of Financial Condition at March 31, 2010 and September 30, 2009

Total Assets. Total assets decreased $2.6 million, or 0.5%, to $518.8 million at March 31, 2010 from $521.4 million at September 30, 2009. This increase was primarily due to decreases in securities, loans receivable, net and FHLB stock offset by increases in cash and due from banks, loans receivable, deferred tax asset and prepaid expenses and other assets.

Cash and Due From Banks. Cash and due from banks increased $6.6 million, or 192.3%, to $10.1 million at March 31, 2010 from $3.5 million at September 30, 2009.

Securities. Investment securities, which represent securities available-for-sale and securities held-to-maturity, decreased $4.3 million, or 6.2%, to $65.2 million at March 31, 2010 from $69.5 million at September 30, 2009. This decrease was primarily due to repayments of mortgage-backed securities of approximately $10.2 million and the recording of an other-than-temporary impairment of approximately $1.2 million partially offset by security purchases of $6.5 million. Our holdings of mortgage-backed securities and securities available-for-sale totaled $62.0 million and $3.2 million, respectively, at March 31, 2010.

Net Loans. Loans before allowance for loan losses decreased $7.3 million, or 1.7%, to $423.2 million at March 31, 2010 from $430.4 million at September 30, 2009, primarily due to an increase in construction loans of $14.3 million offset by decreases in multi-family loans of $8.5 million, land loans of $4.4 million, one-to-four-family loans of $1.2 million, commercial real estate loans of $7.2 million and consumer and other loans of $0.2 million. Net deferred fees and costs increased approximately $0.1 million. We expect nominal loan growth for the foreseeable future since, under the directive we received from the OTS, other than contractual commitments outstanding as of December 3, 2009, the Bank will not originate any multi-family, commercial real estate, construction or land loans without the prior approval of the OTS.

On the basis of management’s review of assets, at March 31, 2010 we classified $69.3 million of our assets as special mention or potential problem loans compared to $56.4 million at September 30, 2009. This increase was due to the continuing deterioration in the real estate market that has resulted in a deterioration of the Company’s loans receivable portfolio. Loans classified as special mention are not considered “classified” under the OTS regulations but do warrant extra attention. In addition, at March 31, 2010 we classified $66.9 million as substandard compared to $54.4 million at September 30, 2009. Of the $66.9 million of loans classified as substandard, $51.6 million are in non-accrual status. Non-performing loans totaled $54.3 million at March 31, 2010 and are included in substandard loans. We have evaluated each substandard loan for potential impairment under ASC 310 “Receivables.” Based upon our analysis $23.6 million did not require an allowance as of March 31, 2010 due to the fact that the collateral value of the real estate, net of estimated selling costs, exceeded the carrying value of the loan. There can be no assurances that additional provision for loan losses will not be required in future periods. The Company believes that as of March 31, 2010 the allowance for loan losses is adequate to absorb known and inherent losses within the loan portfolio.

Charge-offs totaled $14.2 million for the six months ended March 31, 2010 compared to none for the six months ended March 31, 2009. Annualized net charge-offs represented 3.27% of average loans for the six months ended March 31, 2010.

Allowance for Loan Losses and Asset Quality (Restated)

The Company maintains an allowance for loan losses that management believes is sufficient to absorb known and inherent losses in its loan portfolio. The adequacy of the allowance for loan and lease losses (“ALLL”) is determined by management’s continuing review of the Company’s loan portfolio, which includes identification and review of individual factors that may affect a borrower’s ability to repay. Management reviews overall portfolio quality through an analysis of delinquency and non-performing loan data, estimates of the value of underlying collateral and current charge-offs. A review of regulatory examinations, an assessment of current and expected economic conditions and changes in the size and composition of the loan portfolio are also taken into consideration. The ALLL reflects management’s evaluation of the loans presenting identified loss as well as the risk inherent in various components of the portfolio. As such, an increase in the size of the portfolio or any of its components could necessitate an increase in the ALLL even though there may not be a decline in credit quality or an increase in potential problem loans.

For additional information regarding the Company’s ALLL policy, please refer to Note 2(h) of Notes to Consolidated Financial Statements, “Nature of Business and Summary of Significant Accounting Policies” included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2009.

The following table summarizes the activity in allowance for loan losses for the six month period ended March 31, 2010 and fiscal year ended September 30, 2009 (dollars in thousands):

	(Restated)
	March			September
	2010			2009

Balance at beginning of period	$	10,750		$	2,205

Charge-offs:
One-to-four-family		170			--
Multi-family		2,692			--
Commercial real estate		9,956			--
Construction		255			--
Land		1,130			--
Consumer and other		35			--
Recoveries		--			--
Net charge-offs		14,238			--

Provision for loan losses		23,877			8,545

Balance at end of period	$	20,389		$	10,750

Ratios:
Annualized net charge-offs to average loans outstanding		3.27	%		0.00	%
Allowance for loan losses to total loans at end of period		4.82	%		2.50	%

The Company provided $23.9 million in loan loss provision for the six months ended March 31, 2010, an increase of $23.1 million compared to a $0.8 million provision in the same prior year period. The $23.1 million recognized in the provision for the six month period ended March 31, 2010 reflects increases of $2.0 million in allocated loss allowances and $14.2 million of charge offs for criticized assets and $7.7 million in a general loss allowance. The increase in the general component of the allowance for loan losses was due to the charge-offs recognized during the quarter coupled with the increase in substandard loans. The Company’s future level of non-performing loans will be influenced by economic conditions, including the impact of those conditions on the Bank’s customers, interest rates and other factors existing at the time. Based on management’s evaluation of residential and commercial real estate markets and the overall economy, coupled with the composition of our delinquencies, non-performing loans, net loan charge-offs and overall loan portfolio, we determined that an $23.9 million provision for loan losses was warranted for the six months ended March 31, 2010.

At March 31, 2010 and September 30, 2009, the Bank’s allowance for loan losses was $20.4 million and $10.8 million, respectively. The ratio of the allowance for loan losses to non-performing loans was 37.55% at March 31, 2010, compared to 48.69% at September 30, 2009.

Non-Performing Loans and Potential Problem Assets (Restated)

After a one-to-four-family residential loan becomes 15 days late, the Bank delivers a computer-generated late charge notice to the borrower. Approximately one week later, we deliver a reminder notice. When a loan becomes 30 days delinquent, the loan servicing department manager determines whether to send an acceleration letter to the borrower and attempts to make personal contact. After 60 days, we will generally refer the matter to legal counsel who is authorized to commence foreclosure proceedings. Management is authorized to begin foreclosure proceedings on any loan after 60 days, after determining that it is prudent to do so and the proper acceleration letter has been sent.

After a multi-family, commercial real estate or construction loan becomes ten days delinquent, the Bank delivers a computer-generated late charge notice to the borrower and attempts to make personal contact with the borrower. If there is no successful resolution of the delinquency at that time, we may accelerate the payment terms of the loan and issue a letter notifying the borrower of this acceleration. After such loan is 15 days delinquent, we may refer the matter to legal counsel who is authorized to commence foreclosure proceedings. Management is authorized to begin foreclosure proceedings on any delinquent loan after determining that it is prudent to do so.

Mortgage loans are reviewed on a regular basis by management’s Asset Classification Committee and are placed on non-accrual status when they become 90 days or more delinquent and collection is doubtful or when, regardless of how many days delinquent the loan is, other factors indicate that the collection of these amounts is doubtful. When loans are placed on non-accrual status, unpaid accrued interest is reversed, and further income is recognized only to the extent received.

Non-Performing Loans. Non-performing loans are defined as either in non-accrual status and/or past contractual maturity date. At March 31, 2010, $54.3 million of our loans net of specific allowances, or 12.83%, of our total loans, compared to $22.1 million at September 30, 2009, were non-accrual and/or past maturity and therefore non-performing. These loans consist of multi-family, commercial real estate, construction and land loans. We are actively pursuing all applicable methods and resources to reduce the number and amount of non-performing loans.

Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets, net of specific allowances at the dates indicated. We may from time to time agree to modify the contractual terms of a borrower’s loan. In cases where these modifications represent a concession (for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates) to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. At March 31, 2010, loans modified in a troubled debt restructuring totaled $7.5 million. Seven loans for a total of $7.1 million at the time their terms were modified are non-performing and included in the table below. One loan for $0.4 million at the time its terms were modified is performing in accordance with its new terms and, therefore, is not included in the table below. The sharp deterioration in the real estate market has resulted in a deterioration of the Company’s loans receivable portfolio, which in turn has caused increases in non-performing loans, particularly in our multi-family, commercial real estate and construction loan portfolios.

The following table sets forth information with respect to the Company’s non-performing assets (dollars in thousands):

	(Restated)
	March 31,			September 30,
	2010			2009

Non-accrual loans:
One- to four-family	$	--		$	--
Multi-family		18,401			902
Commercial real estate		26,890			15,623
Construction		5,640			832
Land		669			4,722
Consumer		--			--
Total non-accrual loans		51,600			22,079

Loans past maturity and still accruing		2,699			--
Total non-performing assets	$	54,299		$	22,079

Ratios:
Total non-performing loans to total loans		12.83	%		5.13	%
Total non-performing loans to total assets		10.60	%		4.23	%
Total non-performing assets to total assets		10.60	%		4.23	%

Federal Home Loan Bank of New York Stock. FHLB stock decreased $0.8 million, or 31.2%, to $1.6 million at March 31, 2010 from $2.4 million at September 30, 2009. This decrease was primarily due to the decrease in FHLB borrowings, which triggered redemptions of FHLB stock. We have evaluated the FHLB stock for impairment as of March 31, 2010, concluding there was no impairment.

Prepaid Expenses and Other Assets. Prepaid expenses and other assets increased $6.1 million, or 354.3%, to $7.8 million at March 31, 2010 from $1.7 million at September 30, 2009. The increase was primarily due to increases of $2.0 million in prepaid FDIC insurance assessments, $1.1 million in accrued income tax receivable and $0.3 million in accounts receivable. The FDIC prepaid insurance assessment covers the estimated premiums to be paid by the Bank through December 31, 2012.

Deposits. Deposits increased $28.3 million, or 7.0%, to $430.4 million at March 31, 2010 from $402.1 million at September 30, 2009. The increase was primarily due to the Bank’s efforts to remain competitive with all of its deposit offerings. Money market deposit balances increased $13.7 million, certificates of deposit increased $10.7 million, savings account balances increased $2.7 million and NOW account balances increased $1.6 million compared to September 30, 2009. Non-interest bearing deposits decreased $0.4 million at March 31, 2010, compared to September 30, 2009.

Borrowed Funds. Total funds borrowed from the FHLB of New York decreased $18.0 million, or 65.9%, to $9.3 million at March 31, 2010 from $27.3 million at September 30, 2009. Excess liquidity due to deposit growth was redeployed into reducing outstanding borrowings.

Accrued Expenses and Other Liabilities. Accrued expenses and other liabilities decreased $2.0 million, or 24.2%, to $6.1 million at March 31, 2010 from $8.1 million at September 30, 2009. This decrease was primarily due to a reduction in income tax payable of approximately $1.9 million due to a decrease in current taxable income.

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 its liquidity levels as appropriate to meet asset and liability management objectives.

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

A significant portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At March 31, 2010, $10.1 million of our assets were invested in cash and due from banks. Our primary 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, we sell longer-term fixed rate mortgage loans, and we syndicate and sell participation interests in portions of our multi-family, commercial real estate and construction loans. This activity may continue so long as it meets our operational and financial needs. However, pursuant to the directive we received from the OTS, except for commitments outstanding as of December 3, 2009, we will not originate any multi-family, commercial real estate, construction or land loans without the prior approval of the OTS. In addition, we invest excess funds in short-term interest-earning assets and other assets, which provide liquidity to meet our lending requirements. There were no certificates of deposit and short-term investment securities (maturing in less than three years) at March 31, 2010. As of March 31, 2010 we had $9.3 million in borrowings outstanding from the Federal Home Loan Bank of New York and we have access to additional Federal Home Loan Bank advances of up to $56.6 million.

At March 31, 2010 we had $81.7 million in loan commitments outstanding, which included $64.7 million in undisbursed construction loans, $11.4 million in commercial real estate lines of credit, $4.3 million in unused home equity lines of credit and $1.3 million in one-to-four-family loans. Pursuant to the directive we received from the OTS, other than contractual commitments outstanding as of December 3, 2009, the Bank will not originate any multi-family, commercial real estate, construction, or land loans without prior OTS approval. Certificates of deposit due within one year of March 31, 2010 totaled $181.8 million, or 69.5%, of total certificates of deposit. The large percentage of certificates of deposit that mature within one year reflects our customers’ hesitancy to invest their funds for long periods in the current low interest rate environment. If these maturing deposits do not remain with us we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on these deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2011. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

The following table sets forth the Bank’s capital position at March 31, 2010 and September 30, 2009, as compared to the minimum regulatory capital requirements:

											To be well capitalized
						For capital adequacy					under prompt corrective
	Actual					purposes					action provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2010:	(Dollars in thousands)
Total risk-based capital (to risk weighted assets)	$	74,780		12.5	%	$	48,032		8.0	%	$	60,040		10.0	%
Tier I risk-based capital (to risk weighted assets)		63,721		10.6			24,016		4.0			36,024		6.0
Tangible capital (to tangible assets)		63,721		12.3			7,751		1.5			N/A		N/A
Tier I leverage (core) capital (to adjusted tangible assets)		63,721		12.3			15,502		3.0			25,836		5.0

At September 30, 2009:
Total risk-based capital (to risk weighted assets)	$	79,779		14.5	%	$	43,938		8.0	%	$	54,922		10.0	%
Tier I risk-based capital (to risk weighted assets)		71,192		13.0			21,969		4.0			32,953		6.0
Tangible capital (to tangible assets)		71,192		13.8			7,760		1.5			N/A		N/A
Tier I leverage (core) capital (to adjusted tangible assets)		71,192		13.8			15,521		3.0			25,868		5.0

Off-Balance Sheet Arrangements

The following table sets forth the Bank’s contractual obligations and commercial commitments at March 31, 2010:

Commitment Expiration by Period
					More than		More Than
					One Year		Three Years
			One Year		Through		Through		More Than
Off-Balance Sheet Arrangements	Total		or Less		Three Years		Five Years		Five Years
To originate loans	$	1,267	$	1,267	$	--	$	--	$	--
Unused lines of credit, including undisbursed construction loans		80,419		61,218		11,636		2,242		5,323
Total	$	81,686	$	62,485	$	11,636	$	2,242	$	5,323

Analysis of Earnings

The Company’s profitability is primarily dependent upon net interest income and further affected by provisions for loan losses, non-interest income, non-interest expense and income taxes. The earnings of the Company, which are principally earnings of the Bank, are significantly affected by general economic and competitive conditions, particularly changes in market interest rates, and to a lesser extent by government policies and actions of regulatory authorities.

The following tables set forth, for the periods indicated, certain information relating to the Company’s average interest-earning assets, average interest-bearing liabilities, net interest income, interest rate spread and interest rate margin. It reflects the average yield on assets and the average cost of liabilities. Such yields and costs are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily or month-end balances as available. Management does not believe that using average monthly balances instead of average daily balances represents a material difference in information presented. The average balance of loans includes loans on which the Company has discontinued accruing interest. The average yield and cost include fees, which are considered adjustments to yields (dollars in thousands).

BROOKLYN FEDERAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCES

	Three months ended March 31,
	2010							2009
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:

Loans (1)	$	435,643	$	6,907		6.34	%	$	407,550	$	7,408		7.27	%
Mortgage-backed securities (2)		68,347		862		5.04			80,200		947		4.72
Investment securities and other interest-earning assets (2)		9,705		82		3.43			7,791		72		3.71
Total interest-earning assets		513,695		7,851		6.10	%		495,541		8,427		6.80

Non interest-earning assets		12,893							20,707
Total assets	$	526,588						$	516,248

Interest-bearing liabilities:

Savings accounts	$	63,111		92		0.59		$	58,784		149		1.01
Money market/NOW accounts		85,232		250		1.19			60,694		247		1.63
Certificates of deposit		262,158		1,608		2.49			227,353		2,064		3.63
Total interest-bearing deposits		410,501		1,950		1.93			346,831		2,460		2.84
Borrowings		8,868		51		2.33			52,944		95		0.72
Total interest-bearing liabilities		419,369		2,001		1.94			399,775		2,555		2.56

Non interest-bearing liabilities:		28,426							29,610
Total liabilities		447,795							429,385

Stockholders’ equity		78,793							86,863
Total liabilities & stockholders’ equity	$	526,588						$	516,248

Net interest income			$	5,850						$	5,872

Average interest rate spread						4.16	%						4.24	%

Net interest-earning assets	$	94,326						$	95,766

Net interest margin						4.56	%						4.74	%

Ratio of average interest-earning assets to interest-bearing liabilities						122.49	%						123.95	%

(1) Non-accrual loans are included in the appropriate average loan category but interest on non-accrual loans has not been included for purposes of determining interest income.

(2) These amounts represent net amounts after OTTI charges.

	Six months ended March 31,
	2010							2009
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:

Loans (1)	$	434,442	$	14,095		6.49	%	$	395,551	$	14,580		7.37	%
Mortgage-backed securities (2)		70,664		1,772		5.02			80,107		1,872		4.67
Investments securities and other interest-earning assets (2)		8,996		174		3.88			8,480		150		3.55
Total interest-earning assets		514,102		16,041		6.24	%		484,138		16,602		6.86

Non interest-earning assets		12,016							20,894
Total assets	$	526,118						$	505,032

Interest-bearing liabilities:

Savings accounts	$	62,189		193		0.62		$	57,897		301		1.04
Money market/NOW accounts		81,960		512		1.25			59,472		536		1.80
Certificates of deposit		258,847		3,310		2.56			221,442		4,123		3.72
Total interest-bearing deposits		402,996		4,015		2.00			338,811		4,960		2.93
Borrowings		13,543		105		1.55			49,319		217		0.88
Total interest-bearing liabilities		416,539		4,120		1.98			388,130		5,177		2.67

Non interest-bearing liabilities		28,567							30,042
Total liabilities		445,106							418,172

Stockholders’ equity		81,012							86,860
Total liabilities & stockholders’ equity	$	526,118						$	505,032

Net interest income			$	11,921						$	11,425
Average interest rate spread						4.26	%						4.19	%
Net interest-earning assets	$	97,563						$	96,008
Net interest margin						4.63	%						4.72	%

Ratio of average interest-earning assets to interest-bearing liabilities						123.42	%						124.74	%

(1) Non-accrual loans are included in the appropriate average loan category but interest on non-accrual loans has not been included for purposes of determining interest income.

(2) These amounts represent net amounts after OTTI charges.

Comparison of Operating Results for the Three Months Ended March 31, 2010 and 2009

Net Income. Net income decreased $7.4 million to a net loss of $6.0 million for the three months ended March 31, 2010 from net income of $1.4 million for the three months ended March 31, 2009. The primary reasons for the decrease were the increase in the provision for loan losses of $12.0 million, to $12.1 million for the three months ended March 31, 2010 from $0.1 million for the three months ended March 31, 2009 and an increase in other-than-temporary impairment of securities of $0.6 million, to $0.9 million for the three months ended March 31, 2010 from $0.3 million for the three months ended March 31, 2009, which was partially offset by a reduction in income tax expense of $5.3 million due to an income tax benefit of $4.5 million for the three months ended March 31, 2010, compared to an income tax expense of $0.8 million for the three months ended March 31, 2009.

Net Interest Income Before Provision for Loan Losses. Net interest income before provision for loan losses remained unchanged at $5.9 million for the three months ended March 31, 2010 and 2009. The Bank’s net interest rate spread decreased eight basis points to 4.16% for the three months ended March 31, 2010, compared to 4.24% for the three months ended March 31, 2009. The Bank’s net interest margin decreased 18 basis points to 4.56% for the three months ended March 31, 2010, compared to 4.74% for the three months ended March 31, 2009.

Interest Income. Interest income decreased $0.6 million, or 6.8%, for the three months ended March 31, 2010 from $8.4 million for the three months ended March 31, 2009 to $7.8 million. Interest income on loans decreased $0.5 million, or 6.8%, to $6.9 million for the quarter ended March 31, 2010 from $7.4 million for the quarter ended March 31, 2009. Interest on construction loans increased $0.7 million offset by decreases of $1.1 million in multi-family and commercial real estate loan income and $0.1 million in one-to-four-family loan income. The average balance of the loan portfolio increased $28.1 million, or 7.5%, to $435.6 million for the three months ended March 31, 2010 from $407.5 million for the three months ended March 31, 2009. The average yield on loans decreased 93 basis points to 6.34% for the three months ended March 31, 2010, from 7.27% for the three months ended March 31, 2009. Interest income on mortgage-backed securities decreased $0.1 million for the three months ended March 31, 2010, compared to the three months ended March 31, 2009. The average balance of the mortgage-backed securities portfolio decreased $11.9 million, or 14.8%, to $68.3 million at March 31, 2010 from $80.2 million at March 31, 2009. The average yield on mortgage-backed securities increased 32 basis points to 5.04% for the quarter ended March 31, 2010, compared to 4.72% for the quarter ended March 31, 2009. Interest income on investment securities and other interest-earning assets remained flat at $0.1 million for the three months ended March 31, 2010 and 2009. The average balance of investment securities and other interest-earning assets increased $1.9 million, or 24.6%, to $9.7 million for the quarter ended March 31, 2010 from $7.8 million for the quarter ended March 31, 2009. The average yield on investment securities and other interest-earning assets decreased 28 basis points to 3.43% for the three months ended March 31, 2010, compared to 3.71% for the three months ended March 31, 2009.

Interest Expense. Interest expense decreased $0.6 million, or 21.7%, to $2.0 million for the three months ended March 31, 2010, compared to $2.6 million for the three months ended March 31, 2009. Interest expense on deposits decreased $0.5 million, or 20.7%, to $2.0 million for the quarter ended March 31, 2010, compared to $2.5 million for the quarter ended March 31, 2009. Interest expense on FHLB borrowings remained flat at $0.1 million for the three months ended March 31, 2010 and 2009. The decrease in total interest expense was primarily the result of a 91 basis point decrease in the average cost of interest-bearing deposits, to 1.93% for the three months ended March 31, 2010, compared to 2.84% for the three months ended March 31, 2009 as well as a $44.0 million decrease in the average balance of FHLB borrowings, from $52.9 million for the quarter ended March 31, 2009 to $8.9 million for the quarter ended March 31, 2010. The decrease in total interest expense was partially offset by a $63.7 million increase in the average balance of interest-bearing deposits, to $410.5 million for the quarter ended March 31, 2010, from $346.8 million for the quarter ended March 31, 2009 and a 161 basis point increase in the average cost of FHLB borrowings, to 2.33% for the three months ended March 31, 2010, compared to the average cost of 0.72% for the three months ended March 31, 2009. The average cost of total interest-bearing liabilities decreased 62 basis points to 1.94% for the three months ended March 31, 2010, from 2.56% for the three months ended March 31, 2009.

Provision for Loan Losses. The Company provided $12.1 million in loan loss provision for the second quarter of fiscal 2010, an increase of $12.0 million compared to a $0.1 million loan loss provision in the prior year period. The $12.1 million provision for the three month period ended March 31, 2010 reflects increases of $1.1 million in allocated loss allowances and $11.7 million in charge offs for criticized assets offset by a $0.7 million decrease in the general loss allowance. The Company’s future level of non-performing loans will be influenced by economic conditions, including the impact of those conditions on the Bank’s customers, interest rates, real estate values and other factors existing at the time. Based on management’s evaluation of residential and commercial real estate markets and the overall economy, coupled with the composition of our delinquencies, non-performing loans, net loan charge-offs and overall loan portfolio, we determined that a $12.1 million provision for loan losses was warranted for the three months ended March 31, 2010. Please refer to the “Allowance for Loan Losses and Asset Quality” section of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.

Non-interest Income. Non-interest income decreased $0.7 million, or 346.8%, to a loss of $0.5 million for the three months ended March 31, 2010 from a gain of $0.2 million for the three months ended March 31, 2009. The decrease was primarily due to an increase in the impairment charge of $0.6 million, or 220.3%, to $0.9 million for the three months ended March 31, 2010, from $0.3 million for the three months ended March 31, 2009.

Non-interest Expense. Non-interest expense decreased $0.1 million, or 2.3%, to $3.6 million for the three months ended March 31, 2010, from $3.7 million for the three months ended March 31, 2009. The decrease resulted primarily from a decrease in compensation and employee benefits of $0.5 million offset by increases in professional fees and FDIC insurance of $0.3 million and $0.1 million, respectively.

Income Taxes. Income tax expense decreased $5.3 million to a benefit of $4.4 million for the three months ended March 31, 2010, compared to an expense of $0.9 million for the three months ended March 31, 2009. The reason for this decrease was the loss before provision for income taxes.

Comparison of Operating Results for the Six Months Ended March 31, 2010 and 2009

Net Income. Net income decreased $13.4 million to a net loss of $11.0 million for the six months ended March 31, 2010 from net income of $2.4 million for the six months ended March 31, 2009. The primary reasons for the decrease were the increases in the provision for loan losses of $23.0 million and the loss on impairment of investment securities of $0.4 million, partially offset by an increase in net interest income of $0.6 million. Income tax expense decreased $9.6 million for the six months ended March 31, 2010, compared to the same period last year.

Net Interest Income Before Provision for Loan Losses. Net interest income before provision for loan losses increased $0.5 million, or 4.3%, to $11.9 million for the six months ended March 31, 2010 from $11.4 million for the six months ended March 31, 2009. The increase in net interest income resulted primarily from a sharp decrease in the average cost of interest-bearing deposits from 2.93% for the six months ended March 31, 2009 to 2.00% for the six months ended March 31, 2010. The average balance of interest-bearing deposits increased by 18.9%, from $338.8 million for the six months ended March 31, 2009 to $403.0 million for the six months ended March 31, 2010. The Bank’s net interest rate spread increased seven basis points to 4.26% for the six months ended March 31, 2010, compared to 4.19% for the six months ended March 31, 2009. The Bank’s net interest margin decreased nine basis points to 4.63% from 4.72% for the comparative periods.

Interest Income. Interest income decreased $0.6 million, or 3.4%, to $16.0 million for the six months ended March 31, 2010 from $16.6 million for the six months ended March 31, 2009. Interest income on loans decreased $0.5 million, or 3.4%, to $14.1 million for the six months ended March 31, 2010 from $14.6 million for the six months ended March 31, 2009. Interest on construction loans increased $1.5 million, which was offset by decreases of $1.7 million in multi-family and commercial real estate loan income and $0.3 million in one-to-four-family loan income. The average balance of the loan portfolio increased $38.3 million, or 9.8%, to $434.4 million for the six months ended March 31, 2010 from $395.6 million for the six months ended March 31, 2009. The average yield on loans decreased 88 basis points to 6.49% for the six months ended March 31, 2010, from 7.37% for the six months ended March 31, 2009. Interest income on mortgage-backed securities decreased $0.1 million, or 5.3%, for the six months ended March 31, 2010, compared to the same period last year. The average balance of mortgage-backed securities decreased $9.4 million, however the average yield increased by 35 basis points, from 4.67% for the six months ended March 31, 2009 to 5.02% for the six months ended March 31, 2010. Interest income on investment securities and other interest-earning assets was flat for the six months ended March 31, 2010, compared to the same period last year. The average balance on investment securities and other interest-earning assets increased $0.5 million, or 6.1%, to $9.0 million for the six months ended March 31, 2010 from $8.5 million for the six months ended March 31, 2009. The average yield on investment securities and other interest-earning assets increased 33 basis points to 3.88% for the six months ended March 31, 2010, compared to 3.55% for the six months ended March 31, 2009.

Interest Expense. Interest expense decreased $1.1 million, or 20.4%, to $4.1 million for the six months ended March 31, 2010, compared to $5.2 million for the six months ended March 31, 2009. Interest expense on deposits decreased $0.9 million, or 19.1%, to $4.0 million for the six months ended March 31, 2010, compared to $4.9 million for the six months ended March 31, 2009. Interest expense on FHLB borrowings decreased to $0.1 million for the six months ended March 31, 2010 from $0.2 million for the six months ended March 31, 2009. The decrease in total interest expense was primarily the result of a 93 basis point decrease in the average cost of interest-bearing deposits, from 2.93% for the six months ended March 31, 2009 to 2.00% for the six months ended March 31, 2010. The average balance of interest-bearing deposits increased by $64.2 million, from $338.8 million for the six months ended March 31, 2009 to $403.0 million for the six months ended March 31, 2010. The average cost of FHLB borrowings increased 67 basis points, however the average balance decreased $35.8 million, or 72.5%, from the six months ended March 31, 2009, compared to the six months ended March 31, 2010. The average cost of total interest-bearing liabilities decreased 69 basis points to 1.98% for the six months ended March 31, 2010, from 2.67% for the six months ended March 31, 2009.

Provision for Loan Losses. The Company provided $23.9 million in loan loss provision for the six months ended March 31, 2010, an increase of $23.0 million compared to a $0.9 million loan loss provision in the prior year period for the same reasons noted in the “Provision for Loan Losses” discussion for the three months ended March 31, 2010. Based upon the Company’s evaluation, the $23.9 million recognized in the loan loss provision for the six month period ended March 31, 2010 reflecting increases of $2.0 million in specific loss allowances and $14.2 million of charge offs for criticized assets and $7.7 million in a general loss allowance was warranted. Please refer to the “Allowance for Loan Losses and Asset Quality” section of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.

Non-interest Income. Non-interest income decreased $0.6 million, or 298.4%, to a loss of $0.4 million for the six months ended March 31, 2010 from a gain of $0.2 million for the six months ended March 31, 2009. The decrease was primarily due to an increase in the impairment charge of $0.4 million, or 43.3%, to $1.3 million for the six months ended March 31, 2010, from $0.9 million for the six months ended March 31, 2009. Banking fees and service charges decreased $0.1 million, or 22.7%, from $0.6 million for the six months ended March 31, 2009 to $0.5 million for the six months ended March 31, 2010.

Non-interest Expense. Overall non-interest expense was virtually unchanged, at $6.9 million for the six months ended March 31, 2010 and 2009. Compensation and employee benefits decreased $0.6 million, or 13.2%, offset by increases in professional fees of $0.3 million, or 134.8%, and in FDIC insurance of $0.2 million, or 403.3%.

Income Taxes. Income tax expense decreased $9.6 million to a benefit of $8.2 million for the six months ended March 31, 2010, from an expense of $1.4 million for the six months ended March 31, 2009. The reason for this decrease was the loss before provision for income taxes.

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 finance 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 environment of decreased 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. Management intends to lengthen the maturity of the Company’s interest-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, 2009.

ITEM 4T.

CONTROLS AND PROCEDURES

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of March 31, 2010, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, we concluded that our disclosure controls and procedures were not effective as of March 31, 2010. Our conclusion was primarily related to the methodologies we used to assess the adequacy of the allowance for loan losses. We concluded that those methodologies relied too heavily on subjective factors, and did not adequately take into account directional trends. We have concluded that this is a material weakness in our internal controls over financial reporting. In addition, in connection with the completion and audit of the Company’s consolidated financial statements for the fiscal year ended September 30, 2010, management, together with its independent registered public accounting firm, Crowe Horwath LLP, identified certain miscalculations in its allowance for loan losses during and between fiscal year 2010 quarterly periods. The miscalculations resulted from delays in the provision of updated appraisal information to the Company’s accounting personnel after new appraisals were secured, ultimately delaying the completion of impairment testing and, at times, delaying the recognition of partial loan charge-offs until subsequent periods, which is the base factor in the calculation of the allowance for loan losses. Control procedures in place for reviewing the Company’s methodology for determining the allowance for loan losses did not timely identify the miscalculations, and as such, the Company did not have adequately designed procedures. The Company is filing this amended and restated Form 10-Q for the quarterly period ended March 31, 2010 to correct the allowance for loan losses as set forth in the quarterly consolidated financial statements. As a result, management has concluded that an additional material weakness in its internal control associated with the procedures for determining the allowance for loan losses existed as of March 31, 2010.

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, except for the corrective action noted above.

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 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, 2009, as filed with the SEC on January 6, 2010 except as follows:

Legislation has been introduced in the United States Senate and House of Representatives that would implement sweeping changes to the current bank regulatory structure. A bill passed by the House of Representatives (H.R. 4173) would eliminate our current primary federal regulator, the OTS, by merging the OTS into the Comptroller of the Currency (the primary federal regulator for national banks). The House legislation would grant the Federal Reserve Board exclusive authority to regulate all bank and thrift holding companies. If the House bill is enacted, the Company would become a holding company subject to supervision by the Federal Reserve Board, as opposed to the OTS, and would become subject to the Federal Reserve Board’s regulations and policies, including holding company capital requirements and the Federal Reserve Board’s policy regarding dividend waivers by mutual holding companies. In particular, as a Federal mutual holding company chartered and regulated by the OTS, BFS Bancorp, MHC is permitted to waive the receipt of cash dividends declared by the Company. The Federal Reserve Board’s current policy would prohibit a mutual holding company, such as BFS Bancorp, MHC, from waiving the receipt of cash dividends from the Company, which would adversely affect the Company’s capital position and ability to pay dividends. There can be no assurance that the Federal Reserve Board’s policy would change as a result of any new legislation.

Under the Senate bill, the OTS would be eliminated and supervisory authority over federal savings associations would be transferred to the OCC. Holding companies of national banks and federal savings associations with assets of less than $50 billion would be supervised and examined by the Office of the Comptroller of the Currency, and holding companies of state banks and state savings banks with assets of less than $50 billion would be supervised and examined by the FDIC. However, under the Senate bill, rulemaking authority with respect to all holding companies would be transferred to the Federal Reserve Board. Although the Senate bill would not directly subject savings and loan holding companies to regulation by the Federal Reserve Board, it is possible that regulations implemented in response to the legislation could subject savings and loan holding companies to more stringent regulation or policies, including holding company capital requirements and the Federal Reserve Board’s policy regarding dividend waivers by mutual holding companies.

Both the House bill and the Senate proposal would establish new government entities to write consumer protection rules and, in certain cases, to conduct examinations and implement enforcement actions relating to consumer protection. Compliance with new regulations and being supervised by one or more new regulatory agencies would likely increase our operating expenses.

Our disclosure controls and procedures and internal control over financial reporting were determined not to be effective as of March 31, 2010, as evidenced by a material weakness that existed in our internal controls. Our disclosure controls and procedures and internal control over financial reporting may not be effective in future periods, as a result of newly identified material weaknesses in internal controls. Effective internal control over financial reporting is necessary for compliance with the Sarbanes-Oxley Act of 2002 and appropriate financial reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. As disclosed in this interim report on Form 10-Q, management’s assessment of our internal control over financial reporting identified a material weakness as discussed in Item 4T. Controls and Procedures. A material weakness is a deficiency in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. See Item 4T. Controls and Procedures of this Form 10-Q for remediation status of the material weakness identified. However, there can be no assurance that additional material weaknesses will not be identified in the future or that our remediation measures will be effective in mitigating or preventing these specific material weaknesses. As we continue to evaluate and improve our internal control over financial reporting, we may determine to take additional measures to address internal control deficiencies or determine to modify certain of the remediation measures described herein. We may continue to be at an increased risk that our financial statements could contain errors that will be undetected, and we may continue to incur significant expense and management burdens associated with the additional procedures required to prepare our consolidated financial statements.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company repurchased 1,336 shares of Common Stock in the quarter ending March 31, 2010. Through September 30, 2009, the Board of Directors of the Company approved four common stock repurchase plans. The first repurchase plan was completed in August 2007, purchasing $1.5 million or 102,370 shares at an average cost of $14.65 per share. The second repurchase plan was completed in March 2008, purchasing $2.0 million or 147,339 shares at an average cost of $13.57 per share. The third repurchase plan was completed in October 2008, purchasing $3.0 million or 238,483 shares at an average cost of $12.58 per share. The fourth plan was authorized in November 2008 and through March 31, 2010, the Company has repurchased 106,600 shares at an average cost of $11.44 per share. Stock repurchases will be made from time to time and may be effected through open market purchases, block trades and in privately negotiated transactions. Repurchased stock will be held as treasury stock and will be available for general corporate purposes.

Company Purchases of Common Stock

Total

number of

Approximate

dollar value of

purchased

shares that

as part of

may yet be

Total

Average

publicly

purchased

number of

price

announced

under the

paid per

plans or

Period

purchased

programs

January 1, 2010 through January 31, 2010

1,336

8.88

594,792

780,559

February 1, 2010 through February 28, 2010

March 1, 2010 through March 31, 2010

Total

1,336

8.88

594,792

780,559

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

(RESERVED)

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

3.1

Certificate of Incorporation of Brooklyn Federal Bancorp, Inc. 1

3.2

Bylaws of Brooklyn Federal Bancorp, Inc. 1

Form of Common Stock of Brooklyn Federal Bancorp, Inc. 1

Computation of Earnings Per Share **

31.1

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

31.2

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

32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

1 Filed as exhibits to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the SEC (Registration Statement No. 333-121580).

** Filed herewith.

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: June 27, 2011	/s/ Gregg J. Wagner
	Gregg J. Wagner
	President and Chief Executive Officer

Date: June 27, 2011	/s/ Michael A. Trinidad
	Senior Vice President and
	Chief Financial Officer

Brooklyn Federal Bancorp, Inc. - FORM 10-Q/A - June 27, 2011

Attached files

Brooklyn Federal Bancorp, Inc. Reports