SOUND FEDERAL BANCORP, S-1, 1998-06-22

SOUND FEDERAL BANCORP
S-1, 1998-06-22

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<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1998
REGISTRATION NO. 333-[ ]
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SOUND FEDERAL BANCORP
(Name of Small Business Issuer in Its Charter )

<TABLE>
<S> <C> <C>
FEDERAL 6712 (TO BE APPLIED FOR)
(State or Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Code Identification No.)
Organization) Number)
</TABLE>

300 MAMARONECK AVENUE
MAMARONECK, NEW YORK 10543-2647
(914) 698-6400
(Address and Telephone Number of Principal Executive Offices)

300 MAMARONECK AVENUE
MAMARONECK, NEW YORK 10543-2647
(Address of Principal Place of Business or Intended Principal Place of
Business)

RICHARD P. MCSTRAVICK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
300 MAMARONECK AVENUE
MAMARONECK, NEW YORK 10543-2647
(914) 698-6400
(Name, Address and Telephone Number of Agent for Service)

COPIES TO:
ALAN SCHICK, ESQ.
ERIC LUSE, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
5335 WISCONSIN AVENUE, N.W., SUITE 400
(202) 274-2000
WASHINGTON, D.C. 20015

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this registration statement becomes effective.

If this Form is filed to register additional shares for an offering pursuant to
Rule 462(b) under the Securities Act please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE> 2
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=========================================================================================================================
PROPOSED PROPOSED
AMOUNT TO BE MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF REGISTERED OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED PRICE OFFERING REGISTRATION FEE
PER SHARE PRICE (1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.10 par value 3,661,077 $10.00 $36,610,770 $10,801
per share
=========================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.

================================================================================

<PAGE> 3
SOUND FEDERAL BANCORP
(PROPOSED HOLDING COMPANY FOR SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION)
$10.00 PER SHARE
3,505,286 SHARES OF COMMON STOCK
(ADJUSTED MAXIMUM)

Sound Federal Savings and Loan Association, a federally-chartered
mutual savings association (the "Association"), is reorganizing to form a
federally-chartered mutual holding company (the "Reorganization"). As part of
the Reorganization, the Association will convert to a stock savings association
and will become a wholly-owned subsidiary of Sound Federal Bancorp, a federal
stock corporation (the "Company"). The Company will become the majority-owned
subsidiary of Sound Federal, MHC (the "Mutual Holding Company"), a federal
mutual holding company. Concurrently with the Reorganization, the Company is
offering for sale between 2,252,925 and 3,048,075 shares of its common stock,
par value $.10 per share (the "Common Stock"), in a subscription offering to
qualifying depositors and borrowers, the Association's tax-qualified employee
benefit plans including its employee stock ownership plan and to employees,
officers and directors of the Association. Any unsubscribed shares may be
offered for sale to the public in a community offering or syndicated community
offering (the subscription and community offerings are referred to collectively
as the "Offering"). The Common Stock offered for sale in the Offering will
represent a minority ownership interest of 45% of the Company's total
outstanding shares of Common Stock. As part of the Reorganization the Company
will contribute shares of Common Stock equal to 2% of its issued and
outstanding shares to the Sound Federal Savings and Loan Association Charitable
Foundation (the "Charitable Foundation"). The Reorganization and Offering are
being made pursuant to the terms of a plan of reorganization which must be
approved by a majority of the eligible votes of members of the Association and
by the Office of Thrift Supervision (the "OTS"). The Reorganization will not go
forward if the Association does not receive these approvals and the Company
does not sell at least 2,252,925 shares of Common Stock.

Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") will use its best
efforts to assist the Company in selling at least the minimum number of shares,
but does not guarantee that this number will be sold. All funds received from
subscribers will be held in an interest bearing account at the Association
until the completion or termination of the Reorganization.

FOR ADDITIONAL INFORMATION ON HOW TO SUBSCRIBE,
PLEASE CALL THE STOCK CONVERSION CENTER AT (914)____-____

---------------------------------

THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS AND ARE NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

---------------------------------

PLEASE REFER TO RISK FACTORS BEGINNING ON PAGE OF THIS DOCUMENT.
-----

---------------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT
SUPERVISION, NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

---------------------------------

TERMS OF THE OFFERING

An independent appraiser has estimated that as of June 12, 1998, the
pro forma market value of the Common Stock of the Company was between $50.1
million and $67.7 million, with a midpoint of $58.9 million. The 2,252,925 to
3,048,075 shares of Common Stock being sold in the Offering represent a
minority ownership interest in the Company equal to 45% of the minimum and
maximum of the estimated pro forma value of the Common Stock of the Company.
Subject to OTS approval, up to 3,505,286 shares of Common Stock will be
offered for sale in the Offering in the event of an increase in the pro forma
market value of the Common Stock. Based on these estimates, the Company is
making the following Offering of shares of Common Stock.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
PURCHASE PRICE REORGANIZATION EXPENSES NET PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share $10.00 $0.39 $9.61
- -----------------------------------------------------------------------------------------------------------------------
Midpoint Per Share $10.00 $0.35 $9.65
- -----------------------------------------------------------------------------------------------------------------------
Maximum Per Share $10.00 $0.33 $9.67
- -----------------------------------------------------------------------------------------------------------------------
Minimum Total $22,529,250 $883,000 $21,646,250
- -----------------------------------------------------------------------------------------------------------------------
Midpoint Total $26,505,000 $937,000 $25,568,000
- -----------------------------------------------------------------------------------------------------------------------
Maximum Total $30,480,750 $992,000 $29,488,750
- -----------------------------------------------------------------------------------------------------------------------
Adjusted Maximum $35,052,860 $1,055,000 $33,997,860
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

SANDLER O'NEILL & PARTNERS, L.P.
PROSPECTUS DATED _______________, 1998
<PAGE> 4
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN
"RISK FACTORS" BEGINNING ON PAGE _____ OF THIS PROSPECTUS.

PLEASE SEE THE GLOSSARY BEGINNING ON PAGE G-1 FOR THE MEANING OF
CAPITALIZED TERMS THAT ARE USED IN THIS PROSPECTUS.
<PAGE> 5
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING

Q: WHAT IS THE MUTUAL HOLDING COMPANY?

A: Sound Federal, MHC (the "Mutual Holding Company") is a
federally-chartered mutual corporation that is being established in
connection with the mutual holding company reorganization (the
"Reorganization") of Sound Federal Savings and Loan Association (the
"Association"). The Mutual Holding Company will be chartered under
the laws of the United States and will be regulated by the Office of
Thrift Supervision ("OTS"). The Mutual Holding Company will own 53%
of the outstanding Common Stock of Sound Federal Bancorp (the
"Company"), or 3,121,818 shares at the midpoint of the valuation range
established by the independent appraisal. The remaining 47% of the
Common Stock of the Company will be owned by persons who purchase
Common Stock in the Offering, and the Sound Federal Savings and Loan
Association Charitable Foundation (the "Charitable Foundation").
Members of the Association currently have voting rights in the
Association. After the Reorganization is completed, all of the current
membership and voting rights of the Association's members will be
transferred to the Mutual Holding Company. The former members of the
Association who controlled 100% of the votes eligible to be cast by
the Association's members prior to the Reorganization will, through
the Mutual Holding Company, control 53% of the votes eligible to be
cast by the Company's stockholders following the Reorganization.

Q: WHO WILL BE THE MINORITY STOCKHOLDERS OF THE COMPANY?

A: All persons who purchase Common Stock in the Offering, including the
employee stock ownership plan ("ESOP") of the Association as well as
the Charitable Foundation will be the minority stockholders (the
"Minority Stockholders") of the Company, and will own 47% of its
Common Stock upon completion of the Offering. The Mutual Holding
Company will own 53% of the Common Stock of the Company, and will
remain its majority stockholder as long as the Mutual Holding Company
remains in existence.

Q: WHAT IS THE PURPOSE OF THE REORGANIZATION AND OFFERING?

A: The primary purpose of the Reorganization and Offering is to raise
additional equity capital to support the growth and expansion of the
Association. The increased capital also will be used to expand the
Association's lending and investment activities. The Reorganization
will create a holding company and a stock charter, which is the
corporate form used by all commercial banks and an increasing number
of savings institutions. The holding company structure will expand
the investment and operating authority currently available to the
Association. The Offering also will provide you with the opportunity
to become a stockholder of the Company. We are also establishing the
Charitable Foundation that will be dedicated exclusively to supporting
charitable causes and community development activities in our market
area.

Q: WHY IS THE ASSOCIATION FORMING A TWO-TIER MUTUAL HOLDING COMPANY AND
CONDUCTING A MINORITY STOCK OFFERING INSTEAD OF UNDERGOING A FULL
CONVERSION TO STOCK FORM?

A: At the present time, the Association does not need all of the capital
that would be raised in a full stock conversion. A savings
institution that converts to stock form using the mutual holding
company structure sells only a minority of its shares to the public.
By doing so, the converting institution raises less than half the
capital that would be raised in a full conversion. However, with the
mutual holding company structure the Association will have the
flexibility to raise additional capital in the future. Moreover, the
Association's Board of Directors intends to maintain the independence
and community control of the Association. Because the Mutual Holding
Company will control a majority of the Company's Common Stock, the
Reorganization will permit the Association to achieve the benefits of
being a stock company without the loss of control.
<PAGE> 6
Q: HOW DO I ORDER THE COMMON STOCK?

A: You must complete and return the Stock Order Form to the Association,
together with your payment, on or before September ___, 1998. Please
review the Stock Order Form carefully before sending us any payment.

Q: HOW MUCH STOCK MAY I ORDER?

A: The minimum order is 25 shares (or $250). The maximum order for any
individual person or persons ordering through a single account is
15,000 shares (or $150,000). In certain instances, your order may be
grouped together with orders by other persons who are associated with
you (such as your spouse, child or relatives living in your home or
corporations, partnership and trusts of which you are an officer,
director or trustee), or with whom you are acting in concert, and, in
that event, the aggregate order may not exceed 30,000 shares (or
$300,000). The maximum purchase limitation may be decreased or
increased without notifying you. However, if the maximum purchase
limitation is increased, and you previously subscribed for the maximum
number of shares, you will be notified of the increase, as well as the
opportunity to subscribe for additional shares.

Q: WHO HAS SUBSCRIPTION RIGHTS AND WHAT ARE THE SUBSCRIPTION PRIORITIES?

A: Subscription rights to purchase Common Stock will be offered on a
priority basis to the following classes of persons:

- First, to persons who had one or more deposit accounts with
the Association aggregating at least $50 on March 31, 1997.
(The Association's tax-qualified employee benefit plans,
including the Association's ESOP will have priority over such
persons if more than 3,048,075 shares are sold).

- Second, to the Association's tax-qualified employee benefit
plans, including the Association's ESOP.

- Third, to persons who had one or more deposit accounts with
the Association aggregating at least $50 on June 30, 1998.

- Fourth, to depositors (who are not eligible depositors as of
March 31, 1997 or June 30, 1998) and borrowers of the
Association as of ___________.

- Fifth, to employees, officers and directors of the
Association.

Q: WHAT HAPPENS IF THERE ARE NOT ENOUGH SHARES TO FILL ALL ORDERS?

A: If the Offering is oversubscribed, you may not receive any or all of
the shares you wish to purchase. Shares will be allocated based upon
a formula set forth in the Plan of Reorganization.

Q: WILL SHARES BE OFFERED TO ANYONE OTHER THAN PERSONS WITH SUBSCRIPTION
RIGHTS?

A: If persons with subscription rights do not subscribe for all of the
shares offered, the remaining shares will be offered to certain
members of the general public in a community offering, with a
preference for natural persons residing in Westchester County.

2
<PAGE> 7
Q: WHAT PARTICULAR FACTORS SHOULD I CONSIDER WHEN DECIDING WHETHER OR NOT
TO BUY COMMON STOCK?

A: Before you decide to purchase Common Stock, you should read the entire
Prospectus, including the Risk Factors section on pages _____ of the
Prospectus.

Q: AS A DEPOSITOR OR BORROWER OF THE ASSOCIATION, WHAT WILL HAPPEN IF I
DO NOT ORDER ANY COMMON STOCK?

A: You presently have membership rights in the Association, which include
the right to elect directors and vote on certain other matters.
However, once the Reorganization is completed these membership rights
in the Association will be converted into membership rights in the
Mutual Holding Company, regardless of whether or not you purchase
Common Stock. You will retain your membership rights in the Mutual
Holding Company so long as your existing borrowings from the
Association remain outstanding, or so long as you remain a depositor
of the Association. If you purchase Common Stock, you will also have
voting rights in the Company, but such rights will depend on the
amount of Common Stock that you own and not on your deposit account or
lending relationship at the Association. YOU ARE NOT REQUIRED TO
PURCHASE COMMON STOCK. YOUR DEPOSIT ACCOUNT, CERTIFICATE ACCOUNTS AND
ANY LOANS YOU MAY HAVE WITH THE ASSOCIATION WILL NOT BE AFFECTED BY
THE REORGANIZATION.

Q: WHO CAN HELP ANSWER ANY OTHER QUESTIONS I MAY HAVE ABOUT THE OFFERING?

A: In order to make an informed investment decision, you should read this
entire Prospectus. This question and answer section highlights
selected information and may not contain all of the information that
is important to you. In addition, you may contact:

STOCK CONVERSION CENTER
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
MAMARONECK, NEW YORK 10543
(914) ________

SELLING OR ASSIGNING YOUR SUBSCRIPTION RIGHTS IS ILLEGAL. ALL PERSONS
EXERCISING THEIR SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT THEY ARE
PURCHASING SHARES SOLELY FOR THEIR OWN ACCOUNT AND THAT THEY HAVE NO AGREEMENT
OR UNDERSTANDING REGARDING THE SALE OR TRANSFER OF SUCH SHARES. THE
ASSOCIATION INTENDS TO PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE
EVENT IT BECOMES AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS. ORDERS KNOWN TO
INVOLVE THE TRANSFER OF SUBSCRIPTION RIGHTS WILL NOT BE HONORED. IN ADDITION,
PERSONS WHO VIOLATE THE PURCHASE LIMITATIONS MAY BE SUBJECT TO SANCTIONS AND
PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION.

3
<PAGE> 8
SUMMARY

This summary highlights selected information from this Prospectus and
does not contain all the information that you need to know before making an
informed investment decision. To understand the Offering fully, you should read
the entire Prospectus carefully, including the financial statements and the
notes to the financial statements of Sound Federal Savings and Loan
Association. Certain financial information contained in the Prospectus has
been derived from the audited financial statements of Sound Federal Savings and
Loan Association.

You should note as you read this Prospectus that at times capitalized
terms are used. These capitalized terms are generally defined in the glossary
that is at the end of this Prospectus. Defined terms are used to help you
differentiate between the various components of the transaction, to simplify
the discussion and to avoid unnecessary repetition by not having to define or
describe a term each time it is used. For example, to avoid confusion, all of
the steps that are part of the transactions described in this Prospectus are
referred to as the "Reorganization," and the offer and sale of 45% of the
Company's Common Stock is referred to as the Offering. References to the
"Association" refer to Sound Federal Savings and Loan Association. References
to "Company" refer to Sound Federal Bancorp, and references to the "Mutual
Holding Company" refer to Sound Federal, MHC. To further assist you in reading
this Prospectus, in addition to including a glossary, each term defined in the
glossary is also defined the first time that it is used in the Prospectus.

THE REORGANIZATION AND OFFERING

The Reorganization involves a number of steps, including the
following:

- The Association will establish the Company and the Mutual
Holding Company, neither of which will have any assets prior
to the completion of the Reorganization.

- The Association will convert from the mutual form of
organization to the capital stock form of organization and
issue 100% of its capital stock to the Company.

- The Company will issue between 5,006,500 and 6,773,500 shares
of its Common Stock in the Reorganization; 53% of these shares
(or between 2,653,445 shares and 3,589,955 shares) will be
issued to the Mutual Holding Company, 2% (or between 100,130
shares and 135,470 shares) will be contributed to the
Charitable Foundation and 45% (or between 2,252,925 shares and
3,048,075 shares) will be offered for sale in the Offering.

- Membership interests that depositors had in the Association
will become membership interests in the Mutual Holding
Company. As a result, members of the Association who
controlled 100% of the votes eligible to be cast by members
prior to the Reorganization will control 100% of the votes
eligible to be cast by members of the Mutual Holding Company
immediately after the Reorganization, and will through the
Mutual Holding Company, control 53% of the votes eligible to
be cast by the Company's stockholders immediately following
the reorganization.

DESCRIPTION OF THE MUTUAL HOLDING COMPANY STRUCTURE

The mutual holding company structure differs in significant respects
from the savings and loan holding company structure that is used in a standard
mutual to stock conversion. A savings institution that converts from the
mutual to stock form of organization using the mutual holding company structure
sells only a minority of its shares at the time of the reorganization and
offering. By doing so, a converting institution will raise less than half the
capital that would be raised in a "standard" mutual-to-stock conversion. The
shares that are issued to the Mutual Holding Company may be subsequently
offered for sale to the Association's depositors and others if the mutual
holding

4
<PAGE> 9
company converts from the mutual to the stock form of organization. See
"Conversion of the Mutual Holding Company to the Stock Form of Organization."
In addition, because the Mutual Holding Company will control a majority of the
Company's Common Stock, the Reorganization and Offering will permit the
Association to become a stock company without a loss of control that may occur
after a standard conversion from mutual to stock form.

Because the Mutual Holding Company is a mutual corporation, its
actions will not necessarily always be in the interests of the Company's
stockholders. In making business decisions, the Mutual Holding Company's Board
of Directors will consider a variety of constituencies, including the
depositors of the Association, the employees of the Company and the
Association, and the communities in which the Association operates. As the
majority stockholder of the Company, the Mutual Holding Company is also
interested in the continued success and profitability of the Association and
the Company. Consequently, the Mutual Holding Company will act in a manner
that furthers the general interest of all of its constituencies, including, but
not limited to, the interest of the stockholders of the Company. The interests
of the stockholders of the Company and those of the Mutual Holding Company's
other constituencies will be the same in many circumstances, such as the
ongoing profitability of the Company and Association and continued service to
the communities in which the Association operates.

CONVERSION OF THE MUTUAL HOLDING COMPANY TO THE STOCK FORM OF ORGANIZATION

OTS regulations and the Plan of Reorganization permit the Mutual
Holding Company to convert from the mutual to the capital stock form of
organization. There can be no assurance that such a transaction will ever
occur, and the Board of Directors has no current intention or plan to undertake
such a transaction. If the Mutual Holding Company were to convert to the
capital stock form of organization, eligible depositors would receive the right
to subscribe for additional shares of the new stock holding company that would
be formed in the transaction. In such a transaction, each share of Common
Stock outstanding and held by persons other than the Mutual Holding Company
would be converted automatically into shares of common stock of the new stock
holding company. The number of shares that each stockholder would receive
would be determined pursuant to an exchange ratio that ensures that after the
transaction, subject to an adjustment to reflect any dividends that the Mutual
Holding Company may have waived and any assets that the Mutual Holding Company
may have other than common stock of the Company, the percentage of the to-be
outstanding shares of the new stock holding company received by such
stockholder in exchange for his/her Common Stock, equals the percentage of the
outstanding shares of Common Stock owned by such stockholder immediately prior
to the conversion transaction.

THE COMPANIES

Sound Federal, MHC
300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400

The Mutual Holding Company is not currently an operating company and
has not engaged in any business to date. Upon completion of the
Reorganization, the Mutual Holding Company will be chartered under Federal law
and will own 53% of the outstanding Common Stock of the Company. So long as
the Mutual Holding Company exists, it will own at least 50.1% of the Company's
voting stock. Following completion of the Reorganization, persons who were
members of the Association will become members of the Mutual Holding Company,
so long as their existing borrowings from the Association remain oustanding or
they continue to maintain a deposit account with the Association.

5
<PAGE> 10
Sound Federal Bancorp
300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400

The Company is not currently an operating company and has not engaged
in any business to date. The Company will be chartered under Federal law and
will own 100% of the common stock of the Association. The Company will sell 45%
of its Common Stock in the Offering, contribute 2% of its Common Stock to the
Charitable Foundation and the remaining 53% of the Common Stock will be issued
to the Mutual Holding Company.

Sound Federal Savings and Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400

The Association was organized as a New York chartered savings bank in
1891 and became a federally chartered savings association in 1934. The
Association is a community-oriented federal mutual savings association,
providing banking and financial services to individuals, families and small
businesses from its main office in Mamaroneck and branch offices in Harrison
and Rye Brook, New York. Historically, the Association has emphasized
residential mortgage lending. At March 31, 1998, the Association had total
assets of $254.7 million, total deposits of $219.9 million, and retained
earnings of $31.9 million. See pages _____ to _____.

THE OFFERING

The Company is offering for sale between 2,252,925 and 3,048,075
shares of its Common Stock, par value $.10 per share (the "Common Stock"), at a
price of $10.00 per share. The Offering may be increased to 3,505,286 shares
without further notice to you if the estimated pro forma market value of the
Common Stock (the "Independent Valuation") is increased as a result of changes
in market or financial conditions prior to the completion of the Offering. The
shares sold in the Offering will represent a minority ownership interest of 45%
of the shares of Common Stock of the Company which, together with the 2% of the
shares of Common Stock to be contributed to the Charitable Foundation, will
constitute the "Minority Ownership Interest". The remaining 53% of the shares
of Common Stock of the Company will be issued to the Mutual Holding Company.

STOCK PURCHASE PRIORITIES

The Common Stock is being offered for sale in the following order of
priority in a Subscription Offering:

(i) the Association's Eligible Account Holders (holders of deposit
accounts totaling $50 or more as of March 31, 1997);

(ii) the Association's tax-qualified employee benefit plans,
including the Association's ESOP;

(iii) the Association's Supplemental Eligible Account Holders
(holders of deposit accounts totaling $50 or more as of June
30, 1998);

(iv) depositors and borrowers of the Association as of the Voting
Record Date who are not Eligible Account Holders or
Supplemental Eligible Account Holders; and

(v) employees, officers and directors of the Association.

6
<PAGE> 11
Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering and a Syndicated
Community Offering. See pages _____ to _____. Sandler O'Neill will assist in
selling the Common Stock on a best efforts basis.

THE OFFERING RANGE AND OFFERING PRICE PER SHARE

FinPro, Inc. ("FinPro"), an appraisal firm independent of the
Association and experienced in appraisals of savings associations, has
estimated that in its opinion, as of June 12, 1998, the aggregate pro forma
market value of the Company and the Association ranged from $50.1 million to
$67.7 million (the "Estimated Valuation Range") with a midpoint of $58.9
million. The Company is offering to sell 45% of its Common Stock in the
Offering and, based on the Independent Valuation, 45% of the Common Stock
ranged in value from $22.5 million to $30.5 million, with a midpoint of $26.5
million (the "Offering Range"). The Company is offering its Common Stock for
sale at $10.00 per share, representing 2,252,925 shares and 3,048,075 shares at
the minimum and maximum of the Offering Range, respectively, with a midpoint of
2,650,500 shares. The $10.00 per share offering price was determined in
consultation with Sandler O'Neill and represents the price most commonly used
in initial public stock offerings involving financial institutions. The
Independent Valuation was based in part upon the Association's financial
condition and operations and the effect of the additional capital raised by the
sale of Common Stock in the Offering. In addition to the 2,252,925 to
3,048,075 shares to be sold in the Offering, between 2,653,545 and 3,590,090
shares will be issued to the Mutual Holding Company, which will represent 53%
of the outstanding shares of Common Stock and 100,030 to 135,335 shares will be
contributed to the Charitable Foundation, which represents 2% of the
outstanding shares of Common Stock. The Independent Valuation will be updated
prior to the completion of the Offering. If the Independent Valuation
increases, there will be a corresponding change in the total number of shares
issued to the Mutual Holding Company in the Reorganization and sold to
subscribers in the Offering, but the percentage of shares of the Company's
Common Stock owned by the Mutual Holding Company and the Minority Stockholders
will not change as a result of a change in the Independent Valuation. If the
Independent Valuation increases by 15%, or up to $77,895,250, the number of
shares sold in the Offering will, subject to OTS approval, increase to
3,505,286 shares and the number of shares issued to the Mutual Holding Company
will increase to 4,128,604 shares. Prospective purchasers will be given the
opportunity to change or withdraw their purchase orders only if the Estimated
Valuation Range decreases below the minimum or increases by more than 15% above
the maximum of such range, or if fewer than 2,252,925 shares or more than
3,505,286 shares are sold in the Offering. See pages _____ to _____.

TERMINATION OF THE OFFERING

The Subscription Offering will terminate at ________ ___, New York
time, on ___________, 1998. The Community Offering, if one is held, is expected
to begin immediately after the termination of the Subscription Offering, but
may begin at any time during the Subscription Offering. The Community Offering
may terminate on or after __________, 1998, but in any event, no later than
__________, 1998, without OTS approval.

BENEFITS TO MANAGEMENT AND EMPLOYEES FROM THE OFFERING

Full-time employees of the Association will participate in an ESOP,
which is a form of retirement plan, that will purchase shares of Common Stock.
The Association also intends to implement a stock award plan (the "Stock Award
Plan") and a stock option plan (the "Stock Option Plan") following completion
of the Reorganization. The Stock Award Plan may award up to 4% of the Minority
Ownership Interest to executive officers and directors of the Association at no
cost to them, if the Stock Award Plan is adopted within one year after the
completion of the Offering. If the Stock Award Plan is adopted later than one
year after the completion of the Offering, up to 5%of the Minority Ownership
Interest may be granted, subject to stockholder approval. The Stock Option
Plan may grant

7
<PAGE> 12
options for the purchase of Common Stock up to 10% of the Minority Ownership
Interest to employees, officers and directors of the Association. Stock awards
and stock options would be granted at fair market value. The Stock Award Plan
and Stock Option Plan may not be adopted until at least six months after the
completion of the Reorganization, and are subject to shareholder approval and
compliance with OTS regulations. See pages _____ to _____.

USE OF THE PROCEEDS RAISED FROM THE SALE OF COMMON STOCK

The Company will retain up to 50% of the net proceeds from the
Offering and will contribute the remainder of the net proceeds to the
Association. The Company intends to use part of the net proceeds to make a
loan to the ESOP to fund its purchase of up to 8% of the Minority Ownership
Interest. The remainder of the net proceeds will be used for general corporate
purposes, and initially is expected to be invested in U.S. Government
securities and other federal agency securities. See pages _____ to _____.

DIVIDENDS

The Company does not initially intend to pay a dividend. Future
decisions as to whether or not to declare dividends by the Company will depend
upon a number of factors including investment opportunities available to the
Company or the Association and the Company's financial condition and results of
operations. If the Company decides to pay dividends on the Common Stock, the
Mutual Holding Company may waive its receipt of cash dividends, subject to
regulatory approval. See page _____.

THE CHARITABLE FOUNDATION

In furtherance of its commitment to its local community, the Company
intends to establish a Charitable Foundation as part of the Reorganization.
Upon completion of the Reorganization, the Company will contribute 2% of its
issued and outstanding shares of Common Stock to the Charitable Foundation. By
forming the Charitable Foundation, the Company will recognize an expense equal
to the value of the shares contributed, less applicable tax benefits, during
the quarter in which the contribution is made, which is expected to be the
calendar quarter ending December 31, 1998. Such expense will reduce earnings
and have a material impact on the Company's earnings for such quarter and for
the year ending March 31, 1999. See "Risk Factors--The Expense Effect of the
Contribution of Shares to the Charitable Foundation," "Pro Forma Data," and
"The Reorganization and Offering--Establishment of the Charitable
Foundation--Structure of the Charitable Foundation."

MARKET FOR THE COMMON STOCK

The Company has never issued capital stock. The Company expects that
the Common Stock will be quoted on the Nasdaq National Market under the symbol
"_________", but there can be no assurance that an active and liquid trading
market in the Common Stock will develop or be maintained. The requirements for
listing include a minimum number of publicly traded shares, market makers and
record holders, and a minimum market capitalization. Sandler O'Neill has
indicated its intention to make a market in the Common Stock, subject to
compliance with applicable provisions of federal and state securities laws and
other regulatory requirements, although Sandler O'Neill is not required to do
so. If you purchase shares, you may not be able to sell them when you want to
at a price that is equal to or more than the price you paid. See pages _____ to
_____.

PROHIBITION ON TRANSFER OF SUBSCRIPTION RIGHTS

SELLING OR ASSIGNING YOUR SUBSCRIPTION RIGHTS IS ILLEGAL. IF YOU
EXERCISE YOUR SUBSCRIPTION RIGHTS YOU WILL BE REQUIRED TO CERTIFY THAT YOU ARE
PURCHASING SHARES SOLELY FOR YOUR OWN ACCOUNT AND THAT YOU HAVE NO AGREEMENT OR
UNDERSTANDING REGARDING THE SALE OR TRANSFER OF SUCH SHARES. THE ASSOCIATION
INTENDS TO PURSUE

8
<PAGE> 13
ANY AND ALL LEGAL AND EQUITABLE REMEDIES IN THE EVENT THE ASSOCIATION BECOMES
AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS, AND THE ASSOCIATION WILL NOT
HONOR ORDERS KNOWN TO INVOLVE THE TRANSFER OF SUCH RIGHTS. IN ADDITION,
PERSONS WHO VIOLATE THE PURCHASE LIMITATIONS MAY BE SUBJECT TO SANCTIONS AND
PENALTIES IMPOSED BY THE OTS.

IMPORTANT RISKS IN PURCHASING AND OWNING THE COMMON STOCK

Before you decide to purchase Common Stock in the Offering, you should
read the Risk Factors section on pages _____ of this Prospectus, in addition to
the other sections of this Prospectus.

SELECTED FINANCIAL AND OTHER DATA OF
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

The following selected historical financial data at and for each of
the years in the five-year period ended March 31, 1998 is derived in part from
the audited financial statements of the Association. The following selected
financial data of the Association is qualified in its entirety by, and should
be read in conjunction with, the financial statements, including the notes
thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT MARCH 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
Total assets . . . . . . . . . . . . . . . . . . . $ 254,749 $ 242,983 $230,026 $ 214,225 $204,283
Loans, net . . . . . . . . . . . . . . . . . . . . 128,558 121,617 113,532 108,584 104,127
Mortgage-backed securities:(1)
Held to maturity . . . . . . . . . . . . . . . . 53,421 52,901 48,307 40,046 --
Held for investment . . . . . . . . . . . . . . -- -- -- -- 36,332
Other securities(1) :
Held to maturity . . . . . . . . . . . . . . . . 11,477 10,452 11,184 13,005 --
Held for investment . . . . . . . . . . . . . . -- -- -- -- 12,013
Available for sale . . . . . . . . . . . . . . . 2,994 1,995 1,994 1,986 --
Deposits . . . . . . . . . . . . . . . . . . . . . 219,913 211,223 200,611 186,951 179,980
Equity . . . . . . . . . . . . . . . . . . . . . . 31,901 29,017 26,726 24,325 21,591
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest and dividend income . . . . . . . . . . . $ 17,618 $ 16,637 $ 15,732 $ 14,033 $ 13,429
Interest expense . . . . . . . . . . . . . . . . . 8,743 7,917 7,848 5,594 5,278
--------- -------- -------- --------- --------
Net interest income . . . . . . . . . . . . . . 8,875 8,720 7,884 8,439 8,151
Provision for loan losses . . . . . . . . . . . . 155 146 98 82 82
--------- -------- -------- --------- --------
Net interest income after provision for loan losses 8,720 8,574 7,786 8,357 8,069
Noninterest income . . . . . . . . . . . . . . . . 186 301 208 201 236
Noninterest expense (excluding special assessment) 3,956 4,028 3,865 3,526 3,311
SAIF special assessment(2) . . . . . . . . . . . . -- 1,232 -- -- --
--------- -------- -------- --------- --------
Income before income tax expense . . . . . . . . 4,950 3,615 4,129 5,032 4,994
Income tax expense . . . . . . . . . . . . . . . . 2,065 1,325 1,732 2,290 2,149
--------- -------- -------- --------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 2,885 $ 2,290 $ 2,397 $ 2,742 $ 2,845
========= ======== ======== ========= ========
</TABLE>

(footnotes on next page)

9
<PAGE> 14
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED MARCH 31,
--------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA:

PERFORMANCE RATIOS:

Return on assets (ratio of net income to average total assets)(3) . . 1.16% 0.97% 1.09% 1.35% 1.47%
Return on equity (ratio of net income to average equity)(3) . . . . . 9.47 8.17 9.35 11.89 14.08
Average interest rate spread(3)(4) . . . . . . . . . . . . . . . . . . 3.29 3.42 3.31 3.91 4.10
Net interest margin(3)(5) . . . . . . . . . . . . . . . . . . . . . . 3.69 3.78 3.68 4.23 4.34
Efficiency ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . 43.66 44.65 47.76 40.81 39.48
Noninterest expense to average total assets(3)(7) . . . . . . . . . . 1.60 2.22 1.75 1.71 1.71
Average interest-earning assets to average interest-bearing
liabilities(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 110.98 110.51 110.04 111.23 108.40

ASSET QUALITY RATIOS:

Nonperforming assets to total assets . . . . . . . . . . . . . . . . . 0.82 0.98 1.37 1.17 0.87
Nonperforming loans to total loans . . . . . . . . . . . . . . . . . . 1.50 1.83 2.65 2.04 1.63
Allowance for loan losses to nonperforming loans . . . . . . . . . . . 50.26 37.32 23.48 29.03 33.08
Allowance for loan losses to total loans . . . . . . . . . . . . . . . 0.75 0.68 0.62 0.59 0.54

CAPITAL RATIOS:

Equity to total assets at end of period . . . . . . . . . . . . . . . 12.52 11.94 11.62 11.35 10.57
Average equity to average assets for the period . . . . . . . . . . . 12.29 11.82 11.60 11.20 10.43

OTHER DATA:

Number of full-service offices . . . . . . . . . . . . . . . . . . . . 3 3 3 3 3
</TABLE>

- --------------
(1) The Association has classified its securities as "held to maturity" or
"available for sale" since April 1, 1994, when it adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Prior thereto, all securities were
classified as "held for investment."

(2) Represents the Association's share of a special assessment imposed on all
financial institutions with deposits insured by the Savings Association
Insurance Fund (the "SAIF"). See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Comparison of Results of
Operations for the Years Ended March 31, 1998 and 1997."

(3) Ratio is based on average monthly balances during the indicated periods.

(4) The average interest rate spread represents the difference between the
weighted-average yield on interest-earning assets and the weighted-average
cost of interest-bearing liabilities for the period.

(5) The net interest margin represents net interest income as a percent of
average interest-earning assets for the period.

(6) The efficiency ratio represents noninterest expense (other than the special
assessment described in note (2) in fiscal 1997) divided by the sum of net
interest income and noninterest income.

(7) Excluding the SAIF special assessment described in note (2), the ratio of
noninterest expense to average total assets for fiscal 1997 was 1.70%.

10
<PAGE> 15
RISK FACTORS

In addition to the other information in this Prospectus, you should
consider carefully the following risk factors in evaluating an investment in
the Common Stock.

POTENTIAL IMPACT OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST RATE
ENVIRONMENT

The Association's profitability, like that of most financial
institutions, depends substantially on its net interest income, which is the
difference between the interest income earned on interest-earning assets (such
as loans and securities) and the interest expense paid on interest-bearing
liabilities (such as deposits). The Association's net interest income is
affected primarily by market interest rates and the amount, maturity and yield
on the Association's interest-earning assets relative to the amount, maturity
and cost of its interest-bearing liabilities. If an institution's
interest-earning assets have longer effective maturities than its
interest-bearing liabilities, the yield on the institution's interest-earning
assets generally will adjust more slowly than the cost of its interest-bearing
liabilities and, as a result, the institution's net interest income and
interest rate spread would be adversely affected by material and prolonged
increases in interest rates.

The Association's primary lending activity is the origination of fixed
rate mortgage loans with terms of up to 30 years, and a substantial percentage
of the Association's interest-earning assets have longer effective maturities
than its interest-bearing liabilities. Accordingly, an increase in interest
rates generally would result in a decrease in the Association's average
interest rate spread and net interest income. During the year ended March 31,
1998, the Association originated $28.6 million of loans with fixed rates of
interest, which represented 99.0% of all loans originated by the Association
during the year. Furthermore, at March 31, 1998, $124.0 million, or 95.1%, of
the Association's loan portfolio consisted of fixed rate loans. The Association
has sought to increase the interest rate sensitivity of its interest-earning
assets by investing in adjustable rate mortgage-backed securities. In
addition, management has sought to protect the Association from increases in
interest rates by investing a significant portion of the Association's assets
in shorter term investment securities and in liquid federal funds sold and
certificates of deposit at other financial institutions. At March 31, 1998, the
Association held $52.2 million in adjustable rate mortgage-backed securities,
which represented 20.5% of total assets and $8.0 million in other securities
with terms of five years or less, which represented 3.1% of total assets.
Moreover, at March 31, 1998, the Association had invested $47.9 million, or
18.8% of total assets, in federal funds sold and in short-term certificates of
deposit. By investing in short-term, liquid securities the Association
believes it is better positioned to react to increases in market interest
rates. However, investments in shorter term securities generally bear lower
yields than longer term investments. These strategies may result in the
Association receiving less interest income than could be obtained by investing
in longer term fixed rate loans. The Association has also emphasized offering
certificate of deposit accounts which mature in two years or less. By
emphasizing short-term certificate of deposit accounts the Association may, in
a rising interest rate environment, experience an increased cost of funds in
order to retain maturing certificates of deposit. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Management of
Market Risk-Interest Rate Risk."

Changes in interest rates can also affect the average life of loans
and mortgage-backed securities. Relatively lower interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers have refinanced their mortgages to reduce their
borrowing costs. Under these circumstances, the Association is subject to risk
to the extent that it is not able to reinvest such prepayments at rates which
are comparable to the rates on the prepaid loans or securities. Moreover,
volatility in interest rates can also result in the flow of funds away from the
Association into investments such as U.S. Government and corporate securities
and other investments that generally pay higher rates of return than the rates
paid on deposits by savings institutions.

11
<PAGE> 16
POSSIBLE INCREASE IN INDEPENDENT VALUATION AND NUMBER OF SHARES SOLD - DILUTION
OF OWNERSHIP INTERESTS OF PURCHASERS

As a result of changes in market and economic conditions, the
Independent Valuation may increase when it is updated at the conclusion of the
Offering, and, in such event, the number of shares to be sold in the Offering
will increase. INVESTORS WILL NOT BE RESOLICITED UNLESS THE INDEPENDENT
VALUATION INCREASES BY MORE THAN 15%, OR TO MORE THAN $77,895,250, OR THE
NUMBER OF SHARES SOLD IN THE OFFERING INCREASES BY MORE THAN 15%, OR TO MORE
THAN 3,505,286 SHARES. If the Independent Valuation increases, then the
interests of those who purchase shares in the Offering will be diluted because
more shares will be outstanding at the conclusion of the Offering. See "Pro
Forma Data" and "The Reorganization and Stock Offering--Stock Pricing and
Number of Shares to be Issued."

REDUCED RETURN ON EQUITY AFTER REORGANIZATION

Return on equity (net income for a given period divided by average
equity during that period) is a ratio used by many investors to compare the
performance of a particular financial institution to its peers. The Company's
post- Reorganization return on equity is expected to be less than the average
return on equity for publicly traded thrift institutions and their holding
companies. See "Selected Financial and Other Data of Sound Federal Savings and
Loan Association" for numerical information regarding the Association's
historical return on equity and "Capitalization" for a discussion of the
Company's estimated pro forma consolidated capitalization as a result of the
Reorganization and Offering. In addition, the expenses associated with the
ESOP and the Stock Award Plan (see "Pro Forma Data"), along with other ongoing
post-Reorganization expenses, are expected to contribute initially to reduced
earnings. In the short term, the Association will have difficulty in improving
its interest rate spread and thus the return on equity to stockholders.
Consequently, for the foreseeable future, investors should not expect a return
on equity that will meet or exceed the average return on equity for publicly
traded thrift institutions, and no assurances can be given that this goal can
be attained.

THE EXPENSE OF THE CONTRIBUTION OF SHARES TO THE CHARITABLE FOUNDATION

Pursuant to the Plan of Reorganization, we intend to establish a
Charitable Foundation in connection with the Reorganization. In addition to
the shares to be sold to depositors and the public, the Company intends to
contribute shares to the Charitable Foundation equal to 2% of the shares
outstanding after the Offering, or 117,682 shares at the midpoint of the
Offering, which contribution would have a value equal to $1,176,820 based upon
the Common Stock's initial offering price of $10.00 per share. The
contribution of Common Stock to the Charitable Foundation will have an adverse
impact on the reported earnings of the Company in fiscal 1999, the fiscal year
in which the Charitable Foundation is to be established and the contribution
made. If the Charitable Foundation had been established at March 31, 1998, the
Association would have reported net income of $2.2 million, compared to net
income of $2.9 million actually reported for the year. Upon completion of the
Reorganization, the Charitable Foundation will own approximately 2% of the
total shares of the Common Stock to be issued and outstanding. The OTS has
imposed a condition (which may be waived in certain circumstances) on its
approval of the Reorganization that the shares held by the Charitable
Foundation will be voted in the same ratio as all other shares of the Company
as to any proposals considered by the stockholders. The establishment of the
Charitable Foundation is subject to the approval of the Association's members.
See "The Reorganization and Offering--Establishment of the Charitable
Foundation."

CONTROL BY CURRENT DIRECTORS

As the majority stockholder of the Company, the Mutual Holding Company
will be able to elect all of the directors of the Company and direct its
business and affairs. The Company will be controlled by its Board of Directors
which will consist initially of those persons who currently are directors of
the Association. After the Reorganization, the initial Board of Directors of
the Mutual Holding Company will also consist of those persons who

12
<PAGE> 17
currently are members of the Board of Directors of the Association. As a
result, it is expected that the Board of Directors of the Mutual Holding
Company will exercise control over the Mutual Holding Company and,
consequently, may be capable of perpetuating the Board of Directors and
management of the Mutual Holding Company, the Company and the Association.
Executive officers and directors of the Company will own 2.5% of the Common
Stock outstanding at the completion of the Offering (assuming shares are sold
at the midpoint of the Offering Range and executive officers and directors
receive all the shares for which they are expected to subscribe). Assuming
shares are sold at the midpoint of the Offering Range and including shares held
by the Mutual Holding Company, directors may control up to 55.5% of the Common
Stock following the Offering. Such percentage may increase if the Stock Award
Plan and Stock Option Plan are approved by the stockholders. THE PURCHASERS OF
THE COMMON STOCK IN THE OFFERING WILL BE MINORITY STOCKHOLDERS OF THE COMPANY
AND WILL HAVE LIMITED INFLUENCE IN ELECTING DIRECTORS OR OTHERWISE DIRECTING
THE AFFAIRS OF THE COMPANY AS LONG AS THE MUTUAL HOLDING COMPANY REMAINS IN
EXISTENCE. THE COMPANY'S FEDERAL CHARTER WILL PROHIBIT CUMULATIVE VOTING.
THEREFORE, THE MUTUAL HOLDING COMPANY WILL HAVE THE POWER TO ELECT ALL THE
DIRECTORS OF THE COMPANY. NO ASSURANCES CAN BE GIVEN THAT THE MUTUAL HOLDING
COMPANY WILL NOT TAKE ACTION THAT INDIVIDUAL MINORITY STOCKHOLDERS BELIEVE TO
BE CONTRARY TO THEIR INTERESTS.

WAIVER OF DIVIDENDS BY THE MUTUAL HOLDING COMPANY

The Company does not initially intend to pay dividends on its Common
Stock. However, in the event the Company pays cash dividends, the Mutual
Holding Company may, if permitted by regulatory authorities, waive the receipt
of such dividends if the Mutual Holding Company's board of directors determines
that such waiver is in the best interests of the Mutual Holding Company. The
Board of Directors of the Association, which will be the initial Board of
Directors of the Mutual Holding Company, currently believes that it will be in
the best interests of the Mutual Holding Company to waive the receipt of cash
dividends. A waiver of cash dividends by the Mutual Holding Company will
result in a greater likelihood that dividends will be paid to Minority
Stockholders. There is no assurance that the Mutual Holding Company will waive
the receipt of cash dividends, and any dividend waiver by the Mutual Holding
Company will require the prior approval of the OTS.

MINORITY PUBLIC OWNERSHIP AND CERTAIN ANTI-TAKEOVER PROVISIONS

VOTING CONTROL OF THE MUTUAL HOLDING COMPANY. Under OTS regulations
and the Plan of Reorganization, a majority of the Company's voting shares must
be owned by the Mutual Holding Company, and the Mutual Holding Company will own
53% of the Common Stock outstanding at the completion of the Offering. The
Mutual Holding Company will be controlled by its executive officers and
directors, who initially will consist of persons who are executive officers and
directors of the Company. Assuming shares are sold at the midpoint of the
Offering Range and including shares held by the Mutual Holding Company,
executive officers and directors may control up to 55.5% of the Common Stock
outstanding following the Offering. Such percentage may increase assuming the
exercise of stock options granted pursuant to the Stock Option Plan and the
awards of shares under the Stock Award Plan. The Mutual Holding Company will
elect all members of the Board of Directors of the Company and, with certain
exceptions, will control the outcome of matters presented to the stockholders
of the Company for resolution by vote. The situations in which the Mutual
Holding Company may not control the outcome of such vote include any
stockholder vote to approve a restricted stock plan or stock option plan
instituted within one year of the Offering (which would require the approval of
a majority of the shares other than shares held by the Mutual Holding Company),
any stockholder vote relating to the Mutual Holding Company's conversion from
the mutual to the stock form of organization (which would require the approval
of a majority of shares other than shares held by the Mutual Holding Company
and of two-thirds of all shares including shares held by the Mutual Holding
Company), the decision to contribute additional Common Stock to the Charitable
Foundation (which must be approved by a majority of the Minority Stockholders)
or any other stockholder vote in which the OTS may impose such a requirement.
The Mutual Holding Company, acting through its Board of Directors, will be able
to control the business and operations of the Company and the Association and
will be able to prevent any challenge to the ownership or control of the
Company by stockholders other than the Mutual Holding Company. Although OTS
regulations and the Plan of Reorganization

13
<PAGE> 18
permit the Mutual Holding Company to convert from the mutual to the capital
stock form of organization, there can be no assurance when, if ever, a
conversion of the Mutual Holding Company will occur.

PROVISIONS IN THE COMPANY'S AND THE ASSOCIATION'S GOVERNING
INSTRUMENTS. In addition, certain provisions of the Company's Charter and
Bylaws, particularly a provision limiting voting rights, as well as certain
federal regulations will assist the Company in maintaining its status as an
independent, publicly owned corporation. These provisions provide for, among
other things, staggered boards of directors, no cumulative voting for
directors, limits on the calling of special meetings of shareholders, and
limits on the ability to vote Common Stock in excess of 10% of outstanding
shares (except as to shares held by the Mutual Holding Company and the ESOP).

CONVERSION OF MUTUAL HOLDING COMPANY TO STOCK FORM - IMPACT OF WAIVED DIVIDENDS
ON MINORITY STOCKHOLDERS AND LIMITATIONS ON STOCKHOLDER PURCHASES IN A
CONVERSION TRANSACTION

OTS regulations permit a mutual holding company to convert to stock
form ("Conversion Transaction"). The Plan provides that in a Conversion
Transaction, the Mutual Holding Company may merge into the Company or the
Association, with either the Company or the Association as the surviving
entity, and depositors of the Association will have the right to subscribe for
shares of Common Stock of the Company or its successor. The additional shares
of Common Stock would be sold at their aggregate pro forma market value as
determined by an independent appraisal at the time of the Conversion
Transaction. Pursuant to the Plan, in any Conversion Transaction the Minority
Stockholders will be entitled to maintain the same percentage ownership
interest in the Company after the Conversion Transaction as their percentage
ownership interest in the Company immediately before the Conversion Transaction
(the "Minority Ownership Interest"), subject only to the following adjustments
if required by federal law, regulation or policy to reflect: (i) the cumulative
effect of the aggregate amount of dividends waived by the Mutual Holding
Company, and (ii) the market value of the Mutual Holding Company's assets other
than its Common Stock of the Company. Pursuant to OTS policy and the
Association's Plan, the benefit to Minority Stockholders of any dividends
waived by the Mutual Holding Company must be taken into account in any
Conversion Transaction, and would likely reduce the percentage of Common Stock
of the Company owned by Minority Stockholders following a Conversion
Transaction.

The adjustment referred to in clause (i) of the preceding paragraph
would require that the Minority Ownership Interest be adjusted by multiplying
the Minority Ownership Interest (expressed as a percentage) by the following
fraction:

(Company stockholders' equity immediately prior to Conversion Transaction) -
(aggregate amount of dividends waived by Mutual Holding Company)
- -------------------------------------------------------------------------------
Company stockholders' equity immediately prior to Conversion Transaction

The adjustment referred to in clause (ii) above would further adjust
the Minority Ownership Interest (expressed as a percentage) by multiplying it
by the following fraction:

(pro forma market value of Company) - (market value of assets of Mutual Holding
Company other than Company Common Stock)
- -------------------------------------------------------------------------------
pro forma market value of Company

At the sole discretion of the Board of Directors of the Mutual Holding
Company and the Company, a Conversion Transaction may be effected in any other
manner necessary to qualify the Conversion Transaction as a tax-free
reorganization under applicable federal and state tax laws, provided such
Conversion Transaction does not diminish the rights and ownership interest of
Minority Stockholders. Management of the Association has no current intention
to conduct a Conversion Transaction. A Conversion Transaction would require
the approval of applicable federal regulators and a majority of the eligible
votes of the members of the Mutual Holding Company.

14
<PAGE> 19
In addition, if the Mutual Holding Company conducts a Conversion
Transaction, the Plan of Conversion or OTS policy will require that shares of
the resulting entity received by Minority Stockholders in exchange for their
shares of Common Stock be included in determining whether a purchaser has
reached the maximum purchase limitation applicable to the Stock Offering
conducted as part of the Conversion Transaction. If this occurs, certain
Minority Stockholders will be unable to fully exercise their subscription
rights, and in certain circumstances may be required by the OTS to divest
shares of Common Stock.

COMPETITION

Numerous commercial banks and savings institutions have branches in
the immediate vicinity of the Association. There is strong competition from
financial institutions and mortgage brokers in the Association's local market
as well as from mutual funds in both originating loans and attracting funds.
The Association's primary competitors are other savings institutions,
commercial banks, mortgage banking companies and mortgage brokers. Trends
toward the consolidation of the financial institutions industry and removal of
restrictions on interstate banking and branching may make it more difficult for
smaller institutions such as the Association to compete effectively with large
national and regional banking institutions. Such competition may have an
adverse effect on the Association's growth and profitability in the future. See
"Competition."

GEOGRAPHIC CONCENTRATION OF LOANS

The Association's mortgage loans are secured by real estate properties
located primarily in Westchester County, New York. If the local economy,
national economy or real estate market weakens, the financial condition and
results of operations of the Association could be adversely affected. A
weakening in the local real estate market or a decline in the local economy
could increase the number of delinquent or nonperforming loans and reduce the
value of the collateral securing such loans, which would reduce the
Association's net income.

INTENT TO REMAIN INDEPENDENT

The Association has operated as an independent community-oriented
savings association since 1891. The Association intends to continue to operate
as an independent community-oriented savings association following the
Reorganization. The Association and the Company will be controlled by the
Mutual Holding Company, and, under current OTS policy, control of the Mutual
Holding Company may not be sold to a third party. Accordingly, you are urged
not to subscribe for shares of Common Stock if you are anticipating a sale of
control of the Association or the Company. See "Business of the Association."

LACK OF ACTIVE MARKET FOR THE COMMON STOCK

The Company has never issued capital stock to the public, and there
can be no assurance that an active and liquid trading market for the Common
Stock will develop or be maintained. It is anticipated that the Common Stock
will be quoted on the Nasdaq National Market under the symbol "_________."
Sandler O'Neill has indicated its intention to make a market in the Common
Stock, subject to compliance with applicable provisions of federal and state
securities laws and other regulatory requirements, although Sandler O'Neill is
not required to do so. If you purchase shares of Common Stock, you may not be
able to sell them when you want to at a price that equals or exceeds the price
you paid for the Common Stock.

EXPENSES ASSOCIATED WITH ESOP AND STOCK AWARD PLAN

The Association will recognize material employee compensation and
benefit expenses assuming the ESOP and the Stock Award Plan are implemented.
The actual aggregate amount of these new expenses cannot be predicted at the
present time because applicable accounting practices require that such expenses
be measured based on the fair

15
<PAGE> 20
market value of the shares of Common Stock. In the case of the ESOP, fair
market value would be measured when shares are committed to be released for
allocation to the ESOP participants; in the case of the Stock Award Plan, fair
market value would be measured at the grant date and amortized over the award's
vesting period. These expenses have been reflected in the pro forma financial
information under "Pro Forma Data" assuming the Purchase Price ($10.00 per
share) represents the fair market value for accounting purposes. Actual
expenses, however, will be based on the fair market value of the Common Stock
at future dates, which may be higher or lower than the Purchase Price. See
"Management of The Association--Benefits--Employee Stock Ownership Plan" and
"--Benefits--Stock Award Plan."

POSSIBLE DILUTIVE EFFECT OF STOCK AWARD PLAN AND STOCK OPTION PLAN

If the Reorganization and Offering are completed and stockholders
approve the Stock Award Plan and Stock Option Plan, the Company intends to
issue shares of Common Stock to officers and directors of the Association
through these plans. If the shares for these plans are issued from the
Company's authorized but unissued Common Stock, the book value and earnings per
share of minority stockholders would be diluted, and the trading price of the
Company's Common Stock may be reduced. See "Pro Forma Data" and "Executive
Compensation and Related Transactions of the Association."

CAPABILITY OF THE ASSOCIATION'S DATA PROCESSING TO ACCOMMODATE THE YEAR 2000

Like many financial institutions, the Association relies upon
computers for the daily conduct of its business and for data processing
generally. There is concern that on January 1, 2000 computers will be unable
to "read" the new year and as a consequence, there may be widespread computer
malfunctions. The Association generally relies on independent third parties to
provide data processing services to the Association, and has been advised by
such parties that the issue is being addressed and that it should not affect
the Association's external data processing. The Association is in the process
of testing its computer applications and hardware to ensure that they will be
able to read the year 2000. At March 31, 1998, the costs incurred to address
the year 2000 issue have not been significant. Management does not expect that
the additional costs to be incurred in connection with the year 2000 issue will
have a material impact on the Association's financial condition and results of
operations. However, there can be no assurance that the Association's third
party data service provider will be able to satisfactorily address the year
2000 issue, or that the associated costs will not exceed management's estimate.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capability of the Association's Data Processing to Accommodate the
Year 2000."

RISK OF DELAYED OFFERING

Although the Reorganization and Offering are expected to be completed
within the time periods indicated in this Prospectus, it is possible that
adverse market, economic or other factors may significantly delay the
completion of the Reorganization and Offering, which could significantly
increase the costs of the Reorganization and Offering. See "The
Reorganization."

16
<PAGE> 21
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the approximate purchases of Common
Stock by each director and executive officer of the Association and their
Associates in the Offering. All shares will be purchased for investment
purposes and not for purposes of resale. This table excludes shares to be
purchased by the ESOP, as well as Stock Award Plan awards and grants under the
Stock Option Plan that may be made no earlier than six months after the
completion of the Reorganization. The table assumes that 2,650,500 shares (the
midpoint of the Offering Range) of Common Stock will be sold at $10.00 per
share and that sufficient shares will be available to satisfy subscriptions.

<TABLE>
<CAPTION>
TOTAL SHARES AGGREGATE PRICE
PROPOSED TO BE OF INTENDED PERCENT OF
NAME POSITION SUBSCRIBED FOR (1) PURCHASES SHARES SOLD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bruno J. Gioffre Chairman of the Board 30,000 $300,000 1.13%

Richard P. McStravick President, Chief 25,000 250,000 0.94
Executive Officer
and Director

Joseph Dinolfo Director 15,000 150,000 0.57

Donald H. Heithaus Director 20,000 200,000 0.75

Robert P. Joyce Director 16,000 160,000 0.60

Joseph A. Lanza Director 14,000 140,000 0.53

Arthur C. Phillips, Jr. Director 15,000 150,000 0.57

James Staudt Director 5,000 50,000 0.19

Stephen P. Milliot Chief Financial Officer 200 2,000 0.01
and Treasurer

William H. Morel Senior Vice President
and Secretary 7,500 75,000 0.28
----- ------ -----
All directors and executive
officers as a group (10 147,700 $1,477,000 5.57%
persons) ======= ========== =====
</TABLE>

- ------------------------------------
(1) Includes purchases by associates.

SOUND FEDERAL, MHC

The Mutual Holding Company will at all times own a majority of the
outstanding shares of Common Stock. Each member of the Association immediately
prior to the Reorganization will receive the same membership rights in the
Mutual Holding Company after the Reorganization that such person had in the
Association before the Reorganization so long as such member continues to
maintain a deposit account with the Association after the Reorganization, or,
in the case of a borrower member, such member's borrowings from the
Association, as of the effective date of the Reorganization, remain
outstanding. Borrowers will not receive membership rights for any new
borrowings from the Stock Association after the completion of the
Reorganization. The Mutual Holding Company will be chartered as a federal
mutual holding company and will be subject to regulation by the OTS.

17
<PAGE> 22
Although many federal mutual holding companies waive the receipt of
cash dividends declared by their subsidiaries, the Mutual Holding Company
intends to make such a determination at the time the Company declares a
dividend. OTS regulations require the Mutual Holding Company to give the OTS
prior written notice of any such waiver, and the conditions pursuant to which
the OTS generally approves dividend waivers are described in
"Regulation--Holding Company Regulation." The Mutual Holding Company's Board
of Directors will waive dividends paid by the Company if the Board determines
that such a waiver is in the Mutual Holding Company's members' best interest
because, among other reasons: (i) the Mutual Holding Company has no need for
the dividend considering its business operations; (ii) the cash that would be
received could be invested by the Company or the Association at a more
favorable rate of return; (iii) such waiver may increase the capital of the
Association and enhance its business so that members will continue to have
access to the services of the Association; and (iv) such waiver preserves the
net worth of the Mutual Holding Company through its principal asset (the
Company, and indirectly, the Association), which would be available for
distribution in the unlikely event of a voluntary liquidation of the Company
and the Association after satisfaction of claims of depositors and creditors.
The Board of Directors may consider other factors in determining whether such
waiver is consistent with its fiduciary duties to members of the Mutual Holding
Company. Any waiver of dividends by the Mutual Holding Company is likely to
result in an adjustment to the ratio pursuant to which shares of Common Stock
are exchanged for shares of the resulting company in a Conversion Transaction.

The Mutual Holding Company's Board of Directors may accept dividends
paid by the Company in an amount necessary to pay the Mutual Holding Company's
expenses, and will accept additional dividends if it determines that accepting
such dividends is in the Mutual Holding Company's members' best interest
because, among other reasons: (i) the Mutual Holding Company may increase its
direct ownership of the Company, and indirect ownership of the Association, by
using cash dividends to purchase additional shares of Common Stock in the open
market from time to time; and (ii) such dividends may be used to promote
activities that are in the interest of members and the members' community. Any
purchases of Common Stock by the Mutual Holding Company will increase the
percentage of the Company's Common Stock held by the Mutual Holding Company
and, in a Conversion Transaction, will decrease the aggregate number of shares
of the resulting company issued to Minority Stockholders in exchange for their
shares of Common Stock.

Immediately after the Reorganization, it is expected that the only
business activity of the Mutual Holding Company will be to own a majority of
the Common Stock. The Mutual Holding Company, however, will be authorized to
engage in any other business activities that are permissible for mutual holding
companies under federal law, including investing in loans and securities.

SOUND FEDERAL BANCORP

The Company will be formed as a federal corporation and will own 100%
of the Association's common stock. The Company has not engaged in any business
to date and, for that reason, its financial statements are not included in this
Prospectus. The Company has received approval from the OTS to become a savings
and loan holding company through the acquisition of all of the capital stock of
the Association to be issued and outstanding upon completion of the
Reorganization. The Company will have all of the powers set forth in its
Federal charter and under Federal law. The Company will be subject to the same
restrictions on its permissible business activities under federal law that are
applicable to the Mutual Holding Company.

The Company will retain up to 50% of the net proceeds of the Offering.
Part of the net proceeds will be used to fund a loan to the ESOP, which is
expected to purchase shares of Common Stock up to 8% of the Minority Ownership
Interest. The remainder of the net proceeds will be used for general corporate
purposes. The Company has no specific plans at present regarding
diversification, acquisitions or expansion. The Company initially will not

18
<PAGE> 23
conduct any active business and does not intend to employ any persons other
than its officers, although it may utilize the Association's support staff from
time to time.

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

The Association was organized as a New York chartered institution in
1891 and became a federally chartered savings association in 1934. The
Association's deposits are insured by the FDIC. The Association currently
conducts its business from its main office in Mamaroneck and two full-service
branches, located in Harrison and Rye Brook, New York. The Association is a
community-oriented institution engaged primarily in the business of accepting
deposits from customers, most of whom live or work in Westchester County, and
investing these deposits together with funds generated from operations, in
one-to-four family residential mortgage loans and home equity lines of credit,
and to a much lesser extent, multi-family and commercial mortgage, construction
and consumer loans. At March 31, 1998, net loans totalled $128.6 million. The
Association also invests in mortgage-backed and other securities. At March 31,
1998, mortgage-backed securities totalled $53.4 million and other securities
totalled $14.5 million. At March 31, 1998, the Association had total assets of
$254.7 million, total deposits of $219.9 million and retained earnings of $31.9
million, or 12.5% of assets.

SUMMARY DESCRIPTION OF THE REORGANIZATION

Pursuant to the Plan, the Association will reorganize into a two-tier
mutual holding company structure by forming: (i) the Mutual Holding Company as
a federally-chartered mutual holding company; (ii) the Company as a
federally-chartered stock holding company that will sell 45% of its Common
Stock in the Offering, will contribute 2% of its Common Stock to the Charitable
Foundation, and will issue the remaining 53% of its Common Stock to the Mutual
Holding Company; and (iii) the Stock Association as a federally-chartered stock
savings association which will be the successor to the Association in its
current mutual form, and which will be wholly-owned by the Company.

The Reorganization will structure the Association in the stock form of
ownership, which is the corporate form used by commercial banks, most major
businesses and a large number of savings institutions. The primary purpose

19
<PAGE> 24
of the Reorganization is to raise equity capital and establish a holding
company to enable the Association to compete more effectively in the financial
services marketplace. See "The Reorganization and Offering--Reasons for the
Reorganization."

MARKET AREA

The Association is a community-oriented savings institution that
offers a variety of financial products and services from its main office and
two branch offices. The Association's primary lending area is concentrated in
the neighborhoods surrounding the Association's office locations. Most of the
Association's deposit customers are residents of Westchester County. To a
lesser extent, the Association obtains deposits from, and originates loans to,
persons in Fairfield County, Connecticut. The Association's market area is
comprised of middle income and upper income communities. The largest employers
headquartered in the Association's market area are IBM and Texaco, however the
local economy is not dependent upon any single employer, but is affected by the
general economy of the New York City metropolitan area.

COMPETITION

The Association has significant competition in originating loans from
savings and loan associations, savings banks, mortgage banking companies,
insurance companies and commercial banks, many of which have greater financial
and marketing resources than the Association. The Association also faces
significant competition in attracting deposits from savings and loan
associations, savings banks, commercial banks and credit unions. The
Association faces additional competition for deposits from common stock mutual
funds, money market funds and other corporate and government securities funds,
and from other financial service providers such as brokerage firms and
insurance companies.

The Association attracts and retains deposits by offering personalized
service, convenient office locations and competitive interest rates. Loan
originations are obtained primarily through (i) direct contacts by employees
with individuals, businesses and attorneys in the Association's community, (ii)
personalized service that the Association provides borrowers, and (iii)
competitive pricing. Competition is affected by, among other things, the
general availability of lendable funds, general and local economic conditions,
current interest rate levels, and other factors that management cannot readily
predict.

USE OF PROCEEDS

The Company will retain up to 50% of the net proceeds from the
Offering (or $12.8 million at the midpoint), and will use the balance of the
net proceeds to purchase all of the Common Stock issued by the Association. A
portion of the net proceeds retained by the Company will be loaned to the ESOP
to fund its purchase of up to 8% of the Minority Ownership Interest (assuming
such amount of shares can be purchased in the Offering, the ESOP loan would be
$2.2 million at the midpoint). On a short-term basis, the remaining net
proceeds retained by the Company may be invested in U.S. Government securities
and other federal agency securities. On a longer-term basis, the Company will
use the net proceeds for general corporate purposes. The Company may also use
a portion of the net proceeds to fund the purchase of Common Stock for the
Stock Award Plan. The Stock Award Plan may not be adopted by the Company's
Board of Directors earlier than six months following the completion of the
Reorganization, and is subject to the approval of stockholders.

The Association intends to use a portion of the net proceeds that it
receives from the Company to make one-to-four family, multi-family and
commercial mortgage loans, subject to market conditions. The Association may
use a portion of the net proceeds to expand its branch franchise as
opportunities arise. The Association is currently evaluating a number of
branching opportunities although it has not entered into any agreements to open
any branch

20
<PAGE> 25
locations. On an interim basis, a portion of the net proceeds may be invested
in U.S. Government securities and other Federal agency securities. See
"Business of the Association--Investment Activities."

The following table shows estimated gross and net proceeds based on
the sale of Common Stock at the minimum, midpoint, maximum and 15% above the
maximum, of the Offering Range.

<TABLE>
<CAPTION>
15% ABOVE
MINIMUM, MIDPOINT, MAXIMUM, MAXIMUM,
2,252,925 2,650,500 3,048,075 3,505,286
SHARES SOLD SHARES SOLD SHARES SOLD SHARES SOLD
AT PRICE AT PRICE AT PRICE AT PRICE
OF $10.00 OF $10.00 OF $10.00 OF $10.00(2)
- -------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Gross proceeds . . . . . . . $ 22,529 $ 26,505 $ 30,481 $ 35,053

Less offering expenses
(estimated underwriting
commissions and other
costs)(1) . . . . . . . . 883 937 992 1,055
-------- --------- --------- ---------

Estimated net proceeds(1) . . $ 21,646 $ 25,568 $ 29,489 $ 33,998
======== ========= ========= =========
</TABLE>

- -------------------------
(1) In calculating estimated net proceeds, it has been assumed that no sales
will be made through selected dealers.

(2) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Range of up to 15% to
reflect changes in market or financial conditions following the
commencement of the Subscription Offering and the Community Offering, if
any, as well as to reflect the demand for the Common Stock.

The actual net proceeds may differ from the estimated net proceeds
calculated above for various reasons, including variances in the actual amount
of legal and accounting expenses incurred in connection with the Reorganization
and Offering, commissions paid for sales made through other dealers, and the
actual number of shares of Common Stock sold in the Offering. Any variance in
the actual net proceeds from the estimates provided in the table above is not
expected to be material.

DIVIDENDS

The Company has no present plans to pay a dividend on the Common
Stock, although it may consider the payment of such dividends in the future.
Dividends will be subject to determination and declaration by the Company's
Board of Directors in its discretion, which will take into account the
Company's consolidated financial condition and results of operations, tax
considerations, industry standards, economic conditions, capital levels,
regulatory restrictions on dividend payments by the Association to the Company,
general business practices and other factors. See "Regulation--Savings
Association Regulatory Capital" and "--Dividend Limitations."

The Company will not be subject to OTS regulatory restrictions on the
payment of dividends, although its ability to pay dividends will depend in part
upon the receipt of dividends from the Association. The Association must
provide the OTS with 30 days prior notice of its intention to pay a dividend or
other capital distribution to the Company. Additional limits on the dollar
amount of any capital distribution by the Association to the Company are set
forth in OTS regulations. The Company will not undertake any action within a
year from the completion of the Reorganization towards the furtherance of a
tax-free return of capital. See "Regulation--Dividend Limitations."

21
<PAGE> 26
If permitted by regulatory authorities, the Mutual Holding Company
may waive the receipt of any cash dividends declared on the Common Stock if the
Mutual Holding Company's Board of Directors determines that such waiver is in
the best interests of the Mutual Holding Company. The Board of Directors may
conclude that such waiver, which permits retention of capital by the Company,
is in the best interests of the Mutual Holding Company because, among other
reasons, (i) the Mutual Holding Company has no need for the dividend
considering its current business operations, and (ii) the cash that would be
received could be invested by the Company at a more favorable rate of return.
The Board of Directors may consider other factors in determining whether such
waiver is consistent with its fiduciary duties to the Mutual Holding Company.
A waiver of dividends by the Mutual Holding Company will result in a greater
likelihood that dividends will be paid to stockholders other than the Mutual
Holding Company. There is no assurance that the Mutual Holding Company will
waive the receipt of dividends.

In addition to the foregoing, the portion of the Association's
earnings which has been appropriated for bad debt reserves and deducted for
federal income tax purposes cannot be used by the Association to pay cash
dividends to the Company without the payment of federal income taxes by the
Association at the then current income tax rate on the amount deemed
distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Taxation--Federal Taxation" and Note 8
to the Financial Statements. The Company does not contemplate any distribution
by the Association that would result in a recapture of the Association's bad
debt reserve or otherwise create federal tax liabilities.

MARKET FOR THE COMMON STOCK

The Company has never issued Common Stock to the public. Consequently,
there is no established market for the Common Stock. The Company intends to
have the Common Stock traded on the Nasdaq National Market under the symbol
"______", but there can be no assurance that an active and liquid trading
market will develop or be maintained. The requirements for listing include a
minimum number of publicly traded shares, market makers and shareholders, and a
minimum market capitalization. Sandler O'Neill has advised the Association
that it intends to act as a market maker for the Common Stock, subject to
compliance with applicable provisions of federal and state securities laws and
other regulatory requirements, but it is under no obligation to do so.

The existence of a public trading market will depend upon the presence
in the market of both willing buyers and willing sellers at any given time. The
presence of a sufficient number of buyers and sellers at any given time is a
factor over which neither the Company nor any broker or dealer has control.

CAPITALIZATION

The following table presents the Association's historical
capitalization at March 31, 1998, and the pro forma consolidated capitalization
of the Company as of that date, giving effect to the sale of Common Stock
offered by this Prospectus based on the number of shares indicated in the
table, and subject to the other assumptions set forth below. The pro forma data
set forth below may change significantly at the time the Company completes the
Reorganization and Offering due to, among other factors, a change in the
Independent Valuation or a change in the current estimated expenses of the
Reorganization and Offering. If the Offering Range changes so that between
2,252,925 and 3,505,286 shares are not sold in the Offering, subscriptions will
be returned to subscribers who do not affirmatively elect to continue their
subscriptions at the revised Offering Range.

22
<PAGE> 27

<TABLE>
<CAPTION>
AT MARCH 31, 1998
PRO FORMA COMPANY
CAPITALIZATION BASED ON SALE OF
-------------------------------------------------------------
2,252,925 2,650,500 3,048,075 3,505,286
SHARES AT SHARES AT SHARES AT SHARES AT
PRICE OF PRICE OF PRICE OF PRICE OF
HISTORICAL $10.00 $10.00 $10.00 $10.00(7)
- --------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits(1) ..................................... $ 219,913 $ 219,913 $ 219,913 $ 219,913 $ 219,913
========= ========= ========= ========= =========

Stockholders# equity (2):
Preferred stock, $0.10 par value per share;
10,000,000 shares authorized; none to be
issued..................................... $ -- $ -- $ -- $ -- $ --
Common stock, $0.10 par value per share;
20,000,000 shares authorized; shares to be
issued as shown(3)(4)......................... -- 501 589 677 779
Additional paid-in capital(3).................... -- 22,135 26,146 30,155 34,765
Net unrealized gain (loss) on securities
available-for-sale, net of taxes.............. (4) (4) (4) (4) (4)
Retained earnings................................ 31,905 31,905 31,905 31,905 31,905
Less:
Pre-tax expense recognized for shares
contributed to Charitable Foundation.......... -- (1,000) (1,177) (1,353) (1,556)
Plus:
Tax benefit of contribution to
Charitable Foundation......................... -- 400 471 541 622

Less common stock acquired by ESOP(5)............ -- (1,882) (2,215) (2,547) (2,929)
Less common stock acquired by Stock
Award Plan(6)................................. -- (941) (1,107) (1,273) (1,464)
--------- --------- --------- --------- ---------

Total stockholders' equity....................... $ 31,901 $ 51,114 $ 54,608 $ 58,101 $ 62,118
========= ========= ========= ========= =========
</TABLE>

- -------------------------
(1) Excludes withdrawals from deposit accounts for the purchase of Common
Stock. Such withdrawals will reduce pro forma deposits by the amount
thereof.

(2) Pro forma stockholders' equity is not intended to represent the fair
market value of the Common Stock, the net fair market value of the
Company's assets and liabilities or the amounts, if any, that would be
available for distribution to stockholders in the event of liquidation.
Such pro forma data may be affected by a change in the number of shares
to be sold in the Offering and by other factors.

(3) Includes all shares to be issued by the Company (i) in the Offering,
(ii) to the Charitable Foundation and (iii) to the Mutual Holding
Company. The number of shares to be issued in the Offering may be
increased or decreased based on market and financial conditions prior to
the completion of the Offering. Assumes estimated offering expenses of
$883,000, $937,000, $992,000 and $1,055,000 at the minimum, midpoint,
maximum and adjusted maximum of the Offering Range, respectively. See
"Use of Proceeds." Additional paid-in capital has been reduced to
reflect the capitalization of the Mutual Holding Company at $10,000.

(4) Does not reflect additional shares of Common Stock that could be issued
pursuant to the Stock Option Plan, if implemented, under which
directors, executive officers and other employees of the Company would
be granted options to purchase an

23
<PAGE> 28
aggregate amount of Common Stock equal to 10% of the Minority Ownership
Interest. Implementation of the Stock Option Plan requires shareholder
approval, which is expected to be sought at a meeting of stockholders
to be held no earlier than six months following the Reorganization.

(5) Assumes purchases by the ESOP of a number of shares equal to 8% of the
Minority Ownership Interest. The funds used to acquire the ESOP shares
will be borrowed from the Company. See "Use of Proceeds." The
Association intends to make contributions to the ESOP sufficient to
service and ultimately retire its debt. The Common Stock acquired by
the ESOP is reflected as a reduction of stockholders' equity. As the
ESOP debt is repaid, shares will be released and allocated to
participants' accounts, and a corresponding reduction in the charge
against stockholders' equity will occur. See "Executive Compensation
and Related Transactions of the Association-- Employee Stock Ownership
Plan and Trust."

(6) Assuming the receipt of shareholder approval, the Company intends to
implement the Stock Award Plan. Assuming such implementation, the Stock
Award Plan will purchase an amount of shares equal to 4% of the Minority
Ownership Interest if the Stock Award Plan is adopted within one year of
the completion of the Reorganization or up to 5% of the Minority
Ownership Interest if the Stock Award Plan is adopted more than one year
after the Reorganization. Such shares may be purchased from authorized
but unissued shares or in the open market. Under the terms of the Stock
Award Plan, assuming it is adopted within one year of the
Reorganization, shares awarded to officers and directors will vest at
the rate of 20% per year. The Common Stock to be purchased by the Stock
Award Plan represents unearned compensation and is, accordingly,
reflected as a reduction to pro forma stockholders' equity. As shares of
the Common Stock granted pursuant to the Stock Award Plan vest, a
corresponding reduction in the charge against stockholders' equity will
occur. In the event that authorized but unissued shares are acquired,
the interests of existing stockholders will be diluted. Assuming that
5,890,000 shares of Common Stock, the midpoint of the Offering Range,
are issued in the Reorganization, and that all awards under the Stock
Award Plan are from authorized but unissued shares, the Company
estimates that the per share book value for the Common Stock would be
diluted by $0.17 per share, or 1.83% on a pro forma basis at March 31,
1998. The dilution would be $0.18 per share (1.76%) and $0.15 per share
(1.75%) at the minimum and maximum levels, respectively, of the Offering
Range on a pro forma basis at March 31, 1998.

(7) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Independent Valuation and Offering
Range of up to 15% to reflect changes in market or financial conditions
following the commencement of the Subscription Offering and Community
Offering, if any.

PRO FORMA DATA

The following table sets forth the pro forma consolidated net income
of the Company and the Association for the year ended March 31, 1998, as though
the Offering had been consummated at the beginning of the fiscal year and the
investable net proceeds had been invested at 5.41% which was the one-year
Treasury bill rate at March 31, 1998. The one-year Treasury bill rate was used
to calculate the reinvestment of net proceeds because it more appropriately
reflects a market rate of return, as compared to using the rate equal to the
arithmetic average yield of the Association's interest-earning assets and cost
of deposits. Management believes the difference in income that would be
generated by using the one-year Treasury bill rate as opposed to the arithmetic
average yield of the Association's interest-earning assets and cost of deposits
to be immaterial. The pro forma after-tax return for the Company on a
consolidated basis is assumed to be 3.25% for the year ended March 31, 1998,
after giving effect to (i) the yield on investable net proceeds from the
Offering and (ii) adjusting for taxes using a combined federal and state income
tax rate of 40%. Historical and per share amounts have been calculated by
dividing historical amounts and pro forma amounts by the indicated number of
shares of Common Stock, assuming that such number of shares had been
outstanding during the entire period. The 2,252,925, 2,650,500, 3,048,075 and
3,505,286 shares represent 45% of minimum, midpoint, maximum and adjusted
maximum, respectively, of the Estimated Valuation Range.

Book value represents the difference between the stated amount of
consolidated assets and consolidated liabilities of the Company computed in
accordance with generally accepted accounting principles. Book value does not
necessarily reflect current market value of assets and liabilities, or the
amounts, if any, that would be available for distribution to shareholders in
the event of liquidation. See "The Reorganization--Principal Effects of
Reorganization--Effect on Liquidation Rights." Book value also does not reflect
the federal income tax consequences

24
<PAGE> 29
of the restoration to income of the Association's bad debt reserve for income
tax purposes, which would be required in the unlikely event of liquidation or
if a substantial portion of retained earnings were otherwise used for a purpose
other than absorption of bad debt losses. See "Taxation--Federal Taxation." Pro
forma book value includes only net proceeds from the Offering as though it
occurred as of the indicated date and does not include earnings on the proceeds
for the period then ended.

The pro forma net income derived from the assumptions set forth above
should not be considered indicative of the actual consolidated results of
operations of the Company and the Association that would have been attained for
the year ended March 31, 1998 if the Offering had been actually consummated at
the beginning of such year, and the assumptions regarding investment yields
should not be considered indicative of the actual yield expected to be achieved
during any future period. The pro forma book values at the date indicated
should not be considered as reflecting the potential trading value of the
Common Stock. There can be no assurance that an investor will be able to sell
the Common Stock purchased in the Offering at prices within the range of the
pro forma book values of the Common Stock or at or above the Purchase Price.
The pro forma data may not total due to rounding differences.

25
<PAGE> 30
<TABLE>
<CAPTION>
At or for the Year Ended March 31, 1998
Based on the Sale of Common Stock for $10.00 Per Share
----------------------------------------------------------
2,252,925 2,650,500 3,048,075 3,505,286
Shares Shares Shares Shares
Sold Sold Sold Sold(1)
--------- -------- -------- -----------
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Gross proceeds . . . . . . . . . . . . . . . . . . . . . $ 22,529 $ 26,505 $ 30,481 $ 35,053
Plus value of shares issued to the Charitable Foundation(2) 1,000 1,177 1,353 1,556
Less equity retained by the MHC . . . . . . . . . . . . . (10) (10) (10) (10)
Less offering expenses . . . . . . . . . . . . . . . . . (883) (937) (992) (1,055)
-------- -------- --------- ---------
Estimated net proceeds . . . . . . . . . . . . . . . . 21,636 25,558 29,479 33,988
Less common stock acquired by ESOP . . . . . . . . . . . (1,882) (2,215) (2,547) (2,929)
Less common stock acquired by Stock Award Plan . . . . . (941) (1,107) (1,273) (1,464)
-------- -------- --------- ---------
Estimated investable proceeds . . . . . . . . . . . . . $ 18,813 $ 22,236 $ 25,659 $ 29,595
======== ======== ========= =========

Net earnings:
Historical . . . . . . . . . . . . . . . . . . . . . . $ 2,885 $ 2,885 $ 2,885 $ 2,885
Pro forma income on net proceeds(3) . . . . . . . . . . 611 722 833 961
Less pro forma ESOP adjustment(4) . . . . . . . . . . . (113) (133) (153) (176)
Less pro forma Stock Award Plan adjustment(5) . . . . . (113) (133) (153) (176)
-------- -------- --------- ---------
Pro forma net earnings . . . . . . . . . . . . . . . $ 3,270 $ 3,341 $ 3,412 $ 3,494
======== ======== ========= =========

Per share net earnings:(6)
Historical . . . . . . . . . . . . . . . . . . . . . . $ 0.60 $ 0.51 $ 0.44 $ 0.38
Pro forma income on net proceeds(3) . . . . . . . . . . 0.13 0.13 0.13 0.13
Less pro forma ESOP adjustment(4) . . . . . . . . . . . (0.02) (0.02) (0.02) (0.02)
Less pro forma Stock Award Plan adjustment(5) . . . . . (0.02) (0.02) (0.02) (0.02)
-------- -------- --------- ---------
Pro forma net earnings per share(6)(7) . . . . . . . $ 0.69 $ 0.60 $ 0.53 $ 0.47
======== ======== ========= =========

Stockholders' equity:
Historical(8) . . . . . . . . . . . . . . . . . . . . . $ 31,901 $ 31,901 $ 31,901 $ 31,901
Estimated adjusted net proceeds(9) . . . . . . . . . . 21,636 25,558 29,479 33,988
Plus tax benefit of contribution to Charitable Foundation(2) 400 471 541 622
Less common stock acquired by ESOP(4) . . . . . . . . . (1,882) (2,215) (2,547) (2,929)
Less common stock acquired by Stock Award Plan(5) . . . (941) (1,107) (1,273) (1,464)
-------- -------- --------- ---------
Pro forma stockholders' equity . . . . . . . . . . . . $ 51,114 $ 54,608 $ 58,101 $ 62,118
======== ======== ========= =========

Stockholders' equity per share:(8)
Historical . . . . . . . . . . . . . . . . . . . . . . $ 6.37 $ 5.42 $ 4.71 $ 4.10
Estimated adjusted net proceeds(9) . . . . . . . . . . 4.32 4.34 4.35 4.36
Plus tax benefit of contribution to Charitable Foundation(2) 0.08 0.08 0.08 0.08
Less common stock acquired by ESOP(4) . . . . . . . . . (0.38) (0.38) (0.38) (0.38)
Less common stock acquired by Stock Award Plan(5) . . . (0.19) (0.19) (0.19) (0.19)
-------- -------- --------- ---------
Pro forma stockholders' equity per share(7) . . . . . . $ 10.20 $ 9.27 $ 8.57 $ 7.97
======== ======== ========= =========
Offering price to pro forma stockholders' equity per share 98.04% 107.87% 116.69% 125.47%
======== ======== ========= =========
Offering price to pro forma net earnings per share(6) . . 14.49x 16.67x 18.87x 21.28x
======== ======== ========= =========
Minority Ownership Interest(10) . . . . . . . . . . . . . 47% 47% 47% 47%
======== ======== ========= =========
</TABLE>

(footnotes on following page)

26
<PAGE> 31
(1) Assumes that at the conclusion of the Offering the Independent Valuation
increases by 15% to $77,895,250 and that the Association increases the
number of shares sold in the Offering to 3,505,286.

(2) Assumes the issuance of 117,682 shares of authorized but unissued shares
to the Charitable Foundation. Pro forma net income and pro forma income
per share do not give effect to the nonrecurring expense that will be
recognized upon establishment of the Charitable Foundation and the
contribution of shares to it. The after tax expense is expected to be
approximately $706,000, assuming a marginal tax rate of 40%. Assuming the
contribution was expensed during the year ended March 31, 1998, the pro
forma net earnings per share would be $0.55, $0.46, $0.40 and $0.34 at the
minimum, midpoint, maximum and maximum as adjusted, respectively.

(3) No effect has been given to withdrawals from deposit accounts for the
purpose of purchasing Common Stock. Since funds on deposit at the
Association may be withdrawn to purchase shares of Common Stock (which
will reduce deposits by the amount of such purchases), the net amount of
additional funds available to the Association for investment following
receipt of the net proceeds of the Offering will be reduced by the amount
of such withdrawals.

(4) Assumes that 8% of the shares representing the Minority Ownership Interest
will be purchased by the ESOP. The funds used to acquire such shares will
be borrowed by the ESOP from the Company; accordingly, interest income
earned by the Company on the ESOP loan will offset the interest paid by
the Association and only the principal payments on the ESOP debt are
recorded as an expense (tax-effected) on a consolidated basis. The amount
of ESOP debt is reflected as a reduction to stockholders' equity. The
Association intends to make annual contributions to the ESOP in an amount
at least equal to the principal and interest requirements of the debt,
which is expected to have a maturity of 10 years. The pro forma net
earnings assume that: (i) the Association's total annual contribution is
equivalent to the debt service requirement for the year ended March 31,
1998, and was made at the end of the year; and (ii) the marginal tax rate
applicable to the ESOP expense was 40%.

For purposes of this table, the purchase price of $10.00 was utilized to
calculate ESOP expense. The Association will account for the ESOP in
accordance with Statement of Position ("SOP") No. 93-6, "Employers'
Accounting for Employee Stock Ownership Plans." Accordingly, the
Association will recognize compensation expense equal to the fair value of
ESOP shares at the time they are committed to be released to participants.
As a result, to the extent the fair value of the Common Stock appreciates
over time, compensation expense related to the ESOP will increase. SOP
No. 93-6 also requires that, for the earnings per share computations for
leveraged ESOPs, outstanding shares include only such shares as have been
committed to be released to participants. The table above assumes that
the number of ESOP shares are allocated on a straight-line basis over 10
years and that 10% of the ESOP shares are committed to be released during
the first year.

(5) Subsequent to the completion of the Offering, and subject to the approval
by stockholders other than the Mutual Holding Company at the first annual
meeting of stockholders if established within the first year following
completion of the Reorganization, the Stock Award Plan intends to purchase
an aggregate number of shares of common stock equal to 4.0% of the
Minority Ownership Interest if the Stock Award Plan is adopted within one
year of the completion of the Reorganization. A greater number of shares
may be granted under the Stock Award Plan if such plan is adopted more
than one year after the Reorganization. The shares may be acquired
directly from the Company from authorized but unissued shares, or through
open market purchases. The funds to be used by the Stock Award Plan to
purchase the shares will be provided by the Company or the Association.
The table is based on the assumption that the Stock Award Plan acquires
the shares on the open market at the offering price with funds contributed
by the Company, and that 20% of the amount contributed to the Stock Award
Plan is amortized as an expense in the year ended March 31, 1998.

(6) Assumes 4,837,087 shares, 5,690,691 shares, 6,544,295 shares, and
7,525,939 shares are outstanding at the minimum, midpoint, maximum, and
adjusted maximum of the Valuation Range, respectively. Such number of
shares includes shares sold in the Offering, shares issued to the Mutual
Holding Company in the Reorganization, and shares issued to the Charitable
foundation. No effect has been given to the issuance of additional shares
of Common Stock pursuant to the Company's stock option plans (which will
not be established within the first year after the conclusion of the
Offering unless approved by Minority Stockholders). Stock Award Plan
shares are assumed to be fully vested for purposes of computing net
earnings per share.

(7) If the Stock Award Plan purchases 110,727 shares of Common Stock in the
open market after the Offering (i.e., 4% of the Minority Ownership
Interest at the midpoint of the Offering Range) at an assumed fair market
value of $10.00 per share, the pro forma stockholders' equity and earnings
per share would be $9.10 and $0.58, respectively, at and for the fiscal
year ended March 31, 1998.

(8) Stockholders' equity represents the excess of the carrying value of the
assets of the Association over its liabilities. The amounts shown do not
reflect the federal income tax consequences of the potential restoration
to income of the bad debt reserves for income tax purposes, which would be
required in the event of liquidation. See Note 8 of Notes to the
Financial Statements.

(9) Includes assumed proceeds from sale to the Stock Award Plans for $10.00
per share of a number of authorized but unissued shares equal to 4% of the
Minority Ownership Interest. Purchases by the Stock Award Plans will be
made at the fair market value of such shares at the time of purchase,
which may be more or less than $10.00.

(10) "Minority Ownership Interest" represents the aggregate of the number of
shares of common stock sold in the Offering and the shares issued to the
Charitable Foundation as a percentage of 5,006,500 shares,5,890,000
shares, 6,773,500 shares and 7,789,525 shares at the minimum, midpoint,
maximum and adjusted maximum of the Offering Range, respectively.

27
<PAGE> 32
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITHOUT CHARITABLE FOUNDATION

In the event that the Charitable Foundation was not being established
as part of the Reorganization, FinPro has estimated that the pro forma
aggregate market capitalization of the Company would be approximately $61.5
million at the midpoint, which is approximately $2.6 million greater than the
pro forma aggregate market capitalization of the Company if the Charitable
Foundation is included, and would result in an increase of approximately $1.2
million in the amount of Common Stock offered for sale in the Offering. The
pro forma price to book ratio and pro forma price to earnings ratio would be
different under both the current appraisal and the estimate of the value of the
Company without the Charitable Foundation. Further, assuming the midpoint of
the Estimated Valuation Range, pro forma stockholders' equity per share and pro
forma earnings per share would be $9.27 and $0.60, respectively, with the
Charitable Foundation and $8.99 and $0.57, respectively, without the Charitable
Foundation. The pro forma price to book ratio and the pro forma price to
earnings ratio at the midpoint are 107.87% and 16.67x, respectively, with the
Charitable Foundation and 111.23% and 17.54x, respectively, without the
Charitable Foundation. There is no assurance that in the event the Charitable
Foundation was not formed that the appraisal prepared at the time would have
concluded that the pro forma market value of the Company would be the same as
that estimated herein. Any appraisals prepared at that time would be based on
the facts and circumstances existing at that time, including, among other
things, market and economic conditions.

For comparative purposes only, set forth below are certain pricing
ratios and financial data and ratios, at the minimum, midpoint, maximum and
maximum, as adjusted, of the Estimated Valuation Range, assuming the
Reorganization was completed at March 31, 1998.

<TABLE>
<CAPTION>
MINIMUM MIDPOINT
----------------------------- ----------------------------
WITH WITHOUT WITH WITHOUT
CHARITABLE CHARITABLE CHARITABLE CHARITABLE
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
----------- ------------- ---------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<S> <C> <C> <C> <C>
Estimated offering amount.................................. $ 22,529 $ 23,524 $ 26,505 $ 27,675
Pro forma market capitalization............................ 23,529 23,524 27,682 27,675
Pro forma total assets..................................... 273,962 274,542 277,456 278,138
Total liabilities.......................................... 222,848 222,848 222,848 222,848
Pro forma stockholders' equity............................. 51,114 51,694 54,608 55,290
Pro forma net earnings..................................... 3,270 3,301 3,341 3,378
Pro forma stockholders' equity per share................... 10.20 9.89 9.27 8.99
Pro forma net earnings per share........................... 0.69 0.66 0.60 0.57

Pro forma pricing ratios:
- -------------------------
Offering price as a percentage of pro forma stockholders'
equity per share......................................... 98.04% 101.11% 107.87% 111.23%
Offering price to pro forma net earnings per share(1)...... 14.49x 15.15x 16.67x 17.54x
Pro forma market capitalization to total assets............ 18.28% 19.04% 21.23% 22.11%

Pro forma financial ratios:
- ---------------------------
Return on assets(2)........................................ 1.19% 1.20% 1.20% 1.21%
Return on equity(3)........................................ 6.40 6.39 6.12 6.11
Equity to assets........................................... 18.66 18.83 19.68 19.88

<CAPTION>
MAXIMUM MAXIMUM, AS ADJUSTED
--------------------------- -----------------------------
WITH WITHOUT WITH WITHOUT
CHARITABLE CHARITABLE CHARITABLE CHARITABLE
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
----------- -------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Estimated offering amount................................. $ 30,481 $ 31,826 $ 35,053 $ 36,600
Pro forma market capitalization........................... 31,834 31,826 36,609 36,600
Pro forma total assets.................................... 280,949 281,734 284,966 285,869
Total liabilities......................................... 222,848 222,848 222,848 222,848
Pro forma stockholders' equity............................ 58,101 58,886 62,118 63,021
Pro forma net earnings.................................... 3,412 3,455 3,494 3,543
Pro forma stockholders' equity per share.................. 8.57 8.33 7.97 7.75
Pro forma net earnings per share.......................... 0.53 0.51 0.47 0.46

Pro forma pricing ratios:
- -------------------------
Offering price as a percentage of pro forma stockholders'
equity per share........................................ 116.69% 120.05% 125.47% 129.03%
Offering price to pro forma net earnings per share(1)..... 18.87x 19.61x 21.28x 21.74x
Pro forma market capitalization to total assets........... 24.11% 25.11% 27.34% 28.45%

Pro forma financial ratios:
- ---------------------------
Return on assets(2)....................................... 1.21% 1.23% 1.23% 1.24%
Return on equity(3)....................................... 5.87 5.87 5.62 5.62
Equity to assets.......................................... 20.68 20.90 21.80 22.05
</TABLE>

- ----------
(1) If the contribution to the Charitable Foundation had been expensed during
the year ended March 31, 1998, the ratio of the offering price to pro forma
net earnings per share would have been 18.18x, 21.74x, 25.00x and 29.41x at
the minimum, midpoint, maximum and maximum, as adjusted, respectively.

(2) If the contribution to the Foundation had been expensed during the year
ended March 31, 1998, the return on assets would have been 0.97%, 0.95%,
0.93% and 0.90% at the minimum, midpoint, maximum and maximum, as
adjusted, respectively.

(3) If the contribution to the Charitable Foundation had been expensed during
the year ended March 31, 1998, return on equity would have been 5.22%,
4.82%, 4.48% and 4.12% at the minimum, midpoint, maximum and maximum, as
adjusted, respectively.

28
<PAGE> 33
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

The following table compares the Association's historical and pro
forma regulatory capital levels as of March 31, 1998 to the OTS' capital
requirements after giving effect to the Offering. The table is based on the
assumption that the Association will receive 50% of the estimated net proceeds
from the offering, reduced by all shares assumed to be acquired by the ESOP and
Stock Award Plan.

<TABLE>
<CAPTION>
PRO FORMA BASED UPON SALE OF
-------------------------------
MINIMUM OF
OFFERING
RANGE
HISTORICAL AT (2,252,925 SHARES
MARCH 31, 1998 AT $10.00 PER SHARE)
---------------------------- ------------------------------

AMOUNT PERCENT AMOUNT PERCENT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equity under generally accepted accounting principles.... $ 31,901 12.52% $ 39,896 15.18%
============ ======== ============ ========

Tangible capital(2)...................................... $ 31,901 12.52% 39,896 15.18%

Tangible capital requirement(3).......................... 3,821 1.50 3,942 1.50
------------ --------- ------------ ---------

Excess................................................. $ 28,080 11.02% $ 35,954 13.68%
============ ======== ============ ========

Core capital(2).......................................... $ 31,901 12.52% 39,896 15.18%

Core capital requirement(2) (4).......................... 7,642 3.00 7,885 3.00
------------ --------- ------------ ---------

Excess................................................. $ 24,259 9.52% $ 32,011 12.18%
============ ======== ============ ========

Risk-based capital(2)(3)................................. $ 32,885 34.95% 40,880 41.68%
Risk-based capital requirement........................... 7,527 8.00 7,847 8.00
------------ --------- ------------ ---------

Excess................................................. $ 25,358 26.95% $ 33,033 33.68%
============ ======== ============ ========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA BASED UPON SALE OF
----------------------------------------------------------------
MIDPOINT OF MAXIMUM OF
OFFERING OFFERING
RANGE RANGE
(2,650,500 SHARES (3,048,075 SHARES
AT $10.00 PER SHARE) AT $10.00 PER SHARE)
---------------------------- ----------------------------

AMOUNT PERCENT AMOUNT PERCENT
------------ ---------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Equity under generally accepted accounting principles.... $ 41,358 15.65% $ 42,821 16.12%
============ ======== ============ ========

Tangible capital(2)...................................... 41,358 15.65% 42,821 16.12%

Tangible capital requirement(3).......................... 3,964 1.50 3,986 1.50
------------ --------- ------------ ---------

Excess................................................. $ 77,394 14.15% $ 38,835 14.62%
============ ======== ============ ========

Core capital(2).......................................... 41,358 15.65% 42,821 16.12%

Core capital requirement(2) (4).......................... 7,929 3.00 7,973 3.00
------------ --------- ------------ ---------

Excess................................................. $ 33,433 12.65% $ 34,848 13.12%
============ ======== ============ ========

Risk-based capital(2)(3)................................. 42,342 42.85% 43,805 44.00%
Risk-based capital requirement........................... 7,905 8.00 7,964 8.00
------------ --------- ------------ ---------

Excess................................................. $ 34,437 34.85% $ 35,841 36.00%
============ ======== ============ ========
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA BASED UPON SALE OF
----------------------------
MAXIMUM, AS ADJUSTED,
OF OFFERING
RANGE
(3,505,286 SHARES
AT $10.00 PER SHARE(1))
----------------------------
AMOUNT PERCENT
--------- ---------

<S> <C> <C>
Equity under generally accepted accounting principles.... $ 44,502 16.65%
============ =====

Tangible capital(2)...................................... 44,502 16.65%

Tangible capital requirement(3).......................... 4,011 1.50
------------ -----

Excess................................................. $ 40,491 15.15%
============ =====

Core capital(2).......................................... 44,502 16.65%

Core capital requirement(2) (4).......................... 8,023 3.00
------------ -----

Excess................................................. $ 36,479 13.65%
============ =====

Risk-based capital(2)(3)................................. 45,486 45.31%
Risk-based capital requirement........................... 8,031 8.00
------------ -----

Excess................................................. $ 37,455 37.31%
============ =====
</TABLE>

- ----------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Range of up to 15% to
reflect changes in market and financial conditions following commencement
of the Subscription Offering and the Community Offering, if any, as well as
to reflect demand for the Common Stock.

(2) Tangible and core capital levels are shown as a percentage of total assets;
risk-based capital levels are shown as a percentage of risk-weighted
assets.

(3) Pro forma risk-based capital amounts and percentages assume net proceeds
have been invested in 50% risk-weighted assets.

(4) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts.

29
<PAGE> 34
THE REORGANIZATION AND OFFERING

THE BOARD OF DIRECTORS OF THE ASSOCIATION AND THE OTS HAVE APPROVED
THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY MEMBERS AT A SPECIAL MEETING OF
MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY
THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.

GENERAL

On May 13, 1998, the Board of Directors unanimously adopted the Plan,
pursuant to which the Association will reorganize from a federally chartered
mutual savings and loan association into a two-tier federal mutual holding
company structure. The Plan has been approved by the OTS subject to, among
other things, approval of the Plan by the Association's members as of the
Voting Record Date. A special meeting of members has been called for this
purpose, to be held on __________, 1998, (the "Special Meeting"). The
Reorganization will be completed as follows:

(i) the Association will organize an interim stock savings
association as a wholly-owned subsidiary ("Interim One");

(ii) Interim One will organize an interim stock savings association
as a wholly-owned subsidiary ("Interim Two");

(iii) Interim One will organize the Company as a wholly-owned
subsidiary;

(iv) the Association will amend its charter to read in the form of
a federal stock savings association charter at which time the
Association will become the Stock Association, and Interim One
will exchange its charter for a federal mutual holding company
charter to become the Mutual Holding Company;

(v) simultaneously with step (vi), Interim Two will merge with and
into the Stock Association, and the Stock Association will be
the surviving institution;

(vi) all of the stock constructively issued by the Stock
Association will be transferred to the Mutual Holding Company
in exchange for membership interests in the Mutual Holding
Company; and

(vii) the Mutual Holding Company will contribute the Stock
Association's stock to the Company, and the Stock Association
will become a wholly-owned subsidiary of the Company.

Concurrently with the Reorganization the Company will offer for sale
45% of its Common Stock representing 45% of the pro forma market value of the
Company and the Association.

The Association has mailed to each person eligible to vote at the
Special Meeting a proxy statement (the "Proxy Statement") containing
information concerning the business purposes of the Reorganization and the
effects of the Plan and the Reorganization on voting rights, liquidation
rights, the continuation of the Association's business and existing savings
accounts, FDIC insurance and loans. The Proxy Statement also describes the
manner in which the Plan may be amended or terminated. Included with the Proxy
Statement is a proxy card which should be used to vote on the Plan.

As part of the Reorganization, the Association intends to establish
the Charitable Foundation to which the Company will contribute shares equal to
2% of the shares of Common Stock issued and outstanding. The Charitable
Foundation is being formed as a means of complementing our existing community
reinvestment activities and to share

30
<PAGE> 35
our financial success as a locally headquartered, community-oriented financial
services institution. The Charitable Foundation will be dedicated to the
promotion of charitable purposes including community development, grants or
donations to support housing assistance, not-for-profit community groups and
other types of organizations or civic projects. See "--Establishment of the
Charitable Foundation."

The following is a summary of the material aspects of the Plan, the
Subscription Offering, and the Community Offering. The Plan should be consulted
for a more detailed description of its terms.

REASONS FOR REORGANIZATION

The primary purpose of the Reorganization is to establish a holding
company and to convert the Association to the stock form of ownership in order
to compete and expand more effectively in the financial services marketplace.
The stock form of ownership, is the corporate form used by commercial banks,
most major businesses and a large number of savings institutions. The
Reorganization also will enable customers, employees, management and directors
to have an equity ownership interest in the Association, which management
believes will enhance the long-term growth and performance of the Association
and the Company by enabling the Association to attract and retain qualified
employees who have a direct interest in the financial success of the
Association. The Reorganization will permit the Company to issue capital
stock, which is a source of capital not available to mutual savings
associations. Since the Company will not be offering all of its Common Stock
for sale in the Offering, the Reorganization will result in less capital
raised in comparison to a standard mutual-to-stock conversion. The
Reorganization, however, also will allow the Association to raise additional
capital in the future because a majority of the Company's Common Stock will be
available for sale in the event of a conversion of the Mutual Holding Company
to stock form. The Reorganization also will provide the Association with
greater flexibility to structure and finance the expansion of its operations,
both directly and through the Company, including the potential acquisition of
other financial institutions, and to diversify into other financial services,
to the extent permissible by applicable law and regulation. Although there are
no current arrangements, understandings or agreements regarding any such
opportunities, the Company will be in a position after the Reorganization,
subject to regulatory limitations and the Company's financial position, to take
advantage of any such opportunities that may arise. Lastly, the Reorganization
will enable the Association to better manage its capital by providing broader
investment opportunities through the holding company structure and by enabling
the Company to repurchase its common stock as market conditions permit.
Although the Reorganization and Offering will create a stock savings
association and stock holding company, only a minority of the Common Stock will
be offered for sale in the Offering. As a result, the Association's mutual
form of ownership and its ability to provide community-oriented financial
services will be preserved through the mutual holding company structure.

The Board of Directors believes that these advantages outweigh the
potential disadvantages of the mutual holding company structure to Minority
Stockholders, which may include: (i) the inability of stockholders other than
the Mutual Holding Company to obtain majority ownership of the Company and the
Stock Association, which may result in the perpetuation of the management and
Board of Directors of the Stock Association and the Company; and (ii) that the
mutual holding company structure is a relatively new form of corporate
ownership, and new regulatory policies relating to the mutual interest in the
Mutual Holding Company that may be adopted from time-to-time may have an
adverse impact on Minority Stockholders. A majority of the voting stock of the
Company will be owned by the Mutual Holding Company, which will be controlled
by its Board of Directors. While this structure will permit management to
focus on the Company's and the Association's long-term business strategy for
growth and capital redeployment without undue pressure from stockholders, it
will also serve to perpetuate the existing management and directors of the
Association. The Mutual Holding Company will be able to elect all members of
the Board of Directors of the Company, and will be able to control the outcome
of all matters presented to the stockholders of the Company for resolution by
vote except for certain matters, such as the approval of the Stock Award Plan
and the Stock Option Plan, that, if established within the first year after the
conclusion of the Offering, must be approved by a majority of the votes of the
Minority Stockholders of the Company. No assurance can be given that the Mutual
Holding Company will not take action adverse to the interests of the Minority
Stockholders. For example, the Mutual Holding Company

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could revise the dividend policy, prevent the sale of control of the Company,
or defeat a candidate for the Board of Directors of the Company or other
proposals put forth by the Minority Stockholders.

The Reorganization does not preclude the conversion of the Mutual
Holding Company from the mutual to stock form of organization following the
reorganization. No assurance can be given when, if ever, the Mutual Holding
Company will convert to stock form or what conditions the OTS or other
regulatory agencies may impose on such a transaction. See "Risk Factors,"
"Conversion of Mutual Holding Company to Stock Form--Impact of Waived Dividends
on Minority Stockholders and Limitations on Stockholder Purchases in a
Conversion Transaction."

Following the completion of the Reorganization, all depositors who had
liquidation rights with respect to the Association as of the Effective date of
the Reorganization will continue to have such rights solely with respect to the
Mutual Holding Company so long as they continue to hold deposit accounts with
the Association. In addition, all persons who become depositors of the
Association subsequent to the Reorganization will have such liquidation rights
with respect to the Mutual Holding Company.

All insured deposit accounts of the Association that are transferred
to the Stock Association will continue to be federally insured by the FDIC and
the SAIF up to the legal maximum limit in the same manner as deposit accounts
existing in the Association immediately prior to the Reorganization. Upon
completion of the Reorganization, the Association may exercise any and all
powers, rights and privileges of, and shall be subject to all limitations
applicable to, capital stock savings associations under Federal law and OTS
regulations. Although the Company will have the power to issue shares of
capital stock to persons other than the Mutual Holding Company, as long as the
Mutual Holding Company is in existence, the Mutual Holding Company will be
required to own a majority of the voting stock of the Company. The Company may
issue any amount of non-voting stock to persons other than the Mutual Holding
Company, and the Company must own 100% of the voting stock of the Association.
The Association and the Company may issue any amount of non-voting stock or
debt to persons other than the Mutual Holding Company.

TAX EFFECTS OF THE REORGANIZATION

The Association intends to proceed with the Reorganization on the
basis of an opinion from its special counsel, Luse Lehman Gorman Pomerenk &
Schick, P.C., Washington, D.C., as to certain tax matters that are material to
the Reorganization. The opinion is based, among other things, on certain
representations made by the Association, including the representation that the
exercise price of the subscription rights to purchase the Common Stock will be
approximately equal to the fair market value of the stock at the time of the
completion of the Reorganization. With respect to the subscription rights, the
Association has received an opinion of FinPro which, based on certain
assumptions, concludes that the subscription rights to be received by Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members do not
have any economic value at the time of distribution or the time the
subscription rights are exercised, whether or not a Community Offering takes
place, and Luse Lehman Gorman Pomerenk & Schick, P.C.'s opinion is given in
reliance thereon. Luse Lehman Gorman Pomerenk & Schick, P.C.'s opinion
provides substantially as follows:

1. The change in the Association's form from a mutual savings
association to a stock savings association (the "Stock
Association") will qualify as a reorganization under Section
368(a)(1)(F) of the Internal Revenue Code, as amended
("Code"), and no gain or loss will be recognized to the
Association in either its mutual form or stock form by reason
of the Reorganization.

2. No gain or loss will be recognized by the Association or the
Stock Association upon the transfer of the Association's
assets to the Stock Association solely in exchange for shares
of Stock Association stock and the assumption by the Stock
Association of the liabilities of the Association.

3. The Stock Association's holding period in the assets received
from the Association will include the period during which such
assets were held by the Association.

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4. The Stock Association's basis in the assets of the Association
will be the same as the basis of such assets in the
Association immediately prior to the Reorganization.

5. The Stock Association will succeed to and take into account
the Association's earnings and profits or deficit in earnings
and profits, as of the date of the Reorganization.

6. The Stock Association's depositors will recognize no gain or
loss solely by reason of the Reorganization.

7. The Mutual Holding Company and the Minority Stockholders will
recognize no gain or loss upon the transfer of Stock
Association stock and cash, respectively, to the Company in
exchange for Common Stock of the Company.

8. The Company will recognize no gain or loss upon its receipt of
property from the Mutual Holding Company and Minority
Stockholders in exchange for Common Stock of the Company.

9. The basis of the Company Common Stock to the Minority
Stockholders will be the actual purchase price thereof, and
the holding period for Common Stock acquired through the
exercise of subscription rights will begin on the date the
rights are exercised.

The opinions of Luse Lehman Gorman Pomerenk & Schick, P.C., unlike a
letter ruling issued by the Internal Revenue Service, are not binding on the
Service and the conclusions expressed herein may be challenged at a future
date. The Service has issued favorable rulings for transactions substantially
similar to the proposed Reorganization, but any such ruling may not be cited as
precedent by any taxpayer other than the taxpayer to whom the ruling is
addressed. The Association does not plan to apply for a letter ruling
concerning the transactions described herein.

The Association has also received an opinion from KPMG Peat Marwick
LLP that the New York State Franchise Tax on banking corporation and New York
State personal income tax consequences of the proposed transaction are
consistent with the federal income tax consequences.

ESTABLISHMENT OF THE CHARITABLE FOUNDATION

GENERAL. In furtherance of the Association's our commitment to the
communities that the Association serves, the Board of Directors has determined
to establish the Charitable Foundation, which will be incorporated under
Delaware law as a non-stock corporation. The Charitable Foundation will be
funded with a contribution of 2% of the shares of Common Stock to be issued and
outstanding following the Reorganization or 117,682 shares of Common Stock at
the midpoint of the Offering. By further enhancing the Association's visibility
and reputation in the communities that it serves, the Board believes that the
Charitable Foundation will enhance the long-term value of the Association's
community banking franchise. The Charitable Foundation will be dedicated
exclusively to charitable purposes within the communities served by the
Association, including community development activities.

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Foundation with Common Stock is a means of enabling the communities served by
the Association to share in the growth and success of the Company long after
completion of the Reorganization. The Charitable Foundation will accomplish
that goal by providing for continued ties between the Charitable Foundation and
the Association, thereby forming a partnership with the Association's
community. Charitable foundations have been formed by other financial
institutions for this purpose, among others. The Association, however, does
not expect the contribution to the Charitable Foundation to take the place of
the Association's traditional community lending activities.

STRUCTURE OF THE CHARITABLE FOUNDATION. The Charitable Foundation
will be incorporated under Delaware law as a non-stock corporation. Pursuant
to the Charitable Foundation's Bylaws, the Charitable Foundation's initial
board of directors will be comprised of two members of the Company's and the
Association's Board of Directors and one person who is unaffiliated with the
Association. Other individuals may be selected as board members (there is no
present intention to expand the board of directors of the Charitable
Foundation). A nominating committee of the Charitable Foundation's Board will
nominate individuals eligible for election to the Board of Directors. The
members of the Charitable Foundation, who are comprised of its Board members,
will elect the directors at the annual meeting of the Charitable Foundation
from those nominated by the nominating committee. Only persons serving as
directors of the Charitable Foundation qualify as members of the Charitable
Foundation, with voting authority. Directors will be elected annually. The
certificate of incorporation of the Charitable Foundation provides that the
corporation is organized exclusively for charitable purposes, including
community development, as set forth in Section 501(c)(3) of the Code. The
Charitable Foundation's certificate of incorporation further provides that no
part of the net earnings of the Charitable Foundation will inure to the benefit
of, or be distributable to its directors, officers or members.

The authority for the affairs of the Charitable Foundation will be
vested in the Board of Directors of the Charitable Foundation. The Directors
of the Charitable Foundation will be responsible for establishing the policies
of the Charitable Foundation with respect to grants or donations by the
Charitable Foundation, consistent with the purposes for which the Charitable
Foundation was established. Although no formal policy governing Charitable
Foundation grants exists at this time, the Charitable Foundation's Board of
Directors will adopt such a policy upon establishment of the Charitable
Foundation. As directors of a nonprofit corporation, directors of the
Charitable Foundation will at all times be bound by their fiduciary duty to
advance the Charitable Foundation's charitable goals, to protect the assets of
the Charitable Foundation and to act in a manner consistent with the charitable
purpose for which the Charitable Foundation is established. The Directors of
the Charitable Foundation will also be responsible for directing the activities
of the Charitable Foundation, including the management of the Common Stock of
the Company held by the Charitable Foundation. However, it is expected that
as a condition to receiving OTS approval of the Reorganization, that the
Charitable Foundation will be required to commit to the OTS that all shares of
Common Stock held by the Charitable Foundation will be voted in the same ratio
as all other shares of Common Stock on all proposals considered by stockholders
of the Company; provided, however, that, consistent with such expected
condition, the OTS would waive this voting restriction under certain
circumstances if compliance with the voting restriction would: (i) cause a
violation of the law of the State of Delaware and the OTS determines that
federal law would not preempt the application of the laws of Delaware to the
Charitable Foundation; (ii) cause the Charitable Foundation to lose its
tax-exempt status, or cause the Internal Revenue Service to deny the Charitable
Foundation's request for a determination that it is an exempt organization or
otherwise have a material and adverse tax consequence on the Charitable
Foundation; or (iii) cause the Charitable Foundation to be subject to an excise
tax under Section 4941 of the Code. In order for the OTS to waive such voting
restriction, the Company's or the Charitable Foundation's legal counsel would
be required to render an opinion satisfactory to the OTS that compliance with
the voting requirement would have the effect described in clauses (i), (ii) or
(iii) above. Under those circumstances, the OTS would grant a waiver of the
voting restriction upon submission of such legal opinion(s) by the Company or
the Charitable Foundation that are satisfactory to the OTS. In the event that
the OTS were to waive the voting requirement, the directors would direct the
voting of the Common Stock held by the Charitable Foundation.

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<PAGE> 39
operations of the Charitable Foundation. In this regard, it is expected that
the Association will be required to provide the OTS with a commitment that, to
the extent applicable, the Association will comply with the affiliate
restrictions set forth in Sections 23A and 23B of the Federal Reserve Act with
respect to any transactions between the Association and the Charitable
Foundation.

The Company and the Association determined to fund the Charitable
Foundation with Common Stock rather than cash because Common Stock will provide
the Charitable Foundation with a potentially larger endowment if the Common
Stock appreciates in value. The contribution of Common Stock to the Charitable
Foundation may reduce the amount of cash that the Company would have to
contribute to the Charitable Foundation in future years in order to maintain a
level amount of charitable grants and donations.

The Charitable Foundation will receive working capital from any
dividends that may be paid on the Common Stock from loans collateralized by the
Common Stock subject to applicable federal and state laws or from the proceeds
of the sale of any of the Common Stock in the open market from time to time.
As a private Charitable Foundation under Section 501(c)(3) of the Code, the
Charitable Foundation will be required to distribute annually in grants or
donations, a minimum of 5% of the average fair market value of its net
investment assets.

IMPACT ON EARNINGS. The contribution of Common Stock to the
Charitable Foundation will have an adverse impact on the Company's earnings in
the year in which the contribution is made. The Company will recognize
expense in the full amount of the contribution of common stock to the
Charitable Foundation in the quarter in which the contribution occurs, which is
expected to be the quarter ended December 31, 1998. The contribution expense
will be partially offset by related tax benefits. We have been advised that the
contribution to the Charitable Foundation will be tax deductible, subject to an
annual limitation based on 10% of the Company's annual taxable income. The
Association estimates that, at the midpoint of the offering range, the
contribution of shares will result in a reduction in net income of
approximately $700,000. If the Charitable Foundation had been established at
March 31, 1998, the Association would have reported net income of $2.2 million
compared to net income of $2.9 million actually reported for the year. The
Association and the Company do not currently anticipate making additional
contributions to the Charitable Foundation within the first five years
following the initial contribution.

TAX CONSIDERATIONS. The Association has been advised that an
organization created and operated for the above charitable purposes would
general qualify as a Section 501(c)(3) exempt organization under the Code, and
further that such an organization would likely be classified as a private
foundation. This opinion presumes that the Charitable Foundation will submit a
timely request to the IRS to be recognized as an exempt organization. As long
as the Charitable Foundation files its application for recognition of
tax-exempt status within 15 months from the date of its organization, and
provided the IRS approves the application, the effective date of the Charitable
Foundation's status as a Section 501(c)(3) organization will be the date of its
organization. The Association's tax advisor, however, has not rendered any
advice on the condition to the contribution to be agreed to by the Charitable
Foundation which requires that all shares of Common Stock of the Company held
by the Charitable Foundation must be voted in the same ratio as all other
outstanding shares of Common Stock on all proposals considered by stockholders
of the Company. Consistent with the expected condition, in the event that the
Company or the Charitable Foundation receives an opinion of its legal counsel
that compliance with this voting restriction would have the effect of causing
the Charitable Foundation to lose its tax-exempt status or otherwise have a
material and adverse tax consequence on the Charitable Foundation, or subject
the Charitable Foundation to an excise tax under Section 4941 of the Code, it
is expected that the OTS would waive such voting restriction upon submission of
a legal opinion(s) by the Company or the Charitable Foundation satisfactory to
the OTS. See "--Regulatory Conditions Imposed on the Charitable Foundation."

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<PAGE> 40
of additional capital being raised in the Offering. In making such a
determination, the Board of Directors considered the impact on earnings of the
contribution of Common Stock to the Charitable Foundation. Based on such
consideration, the Company and the Association believe that the contribution to
the Charitable Foundation in excess of the 10% annual deduction limitation is
justified given the Association's capital position and its earnings, the
substantial additional capital being raised in the Offering and the potential
benefits of the Charitable Foundation to the communities served by the
Association. In this regard, and assuming the sale of the Common Stock at the
midpoint of the Estimated Valuation Range, the Company would have pro forma
stockholders' equity of $54.6 million or 19.68% of pro forma consolidated
assets and the Association's pro forma tangible, core and total risk-based
capital ratios would be 15.65%, 15.65% and 42.85%, respectively. See "Pro Forma
Data--Historical and Pro Forma Regulatory Capital Compliance," and
"Capitalization." Thus, the amount of the contribution will not adversely
impact the Association's financial condition and management believes that the
amount of the charitable contribution is reasonable given the Association's pro
forma capital positions. As such, management believes that the contribution
does not raise safety and soundness concerns.

The Association has received an opinion of its tax advisors that the
Company's contribution of its own stock to the Charitable Foundation would not
constitute an act of self-dealing, and that the Company will be entitled to a
deduction in the amount of the fair market value of the stock at the time of
the contribution, subject to the annual deduction limitation described above.
The Company, however, would be able to carry forward any unused portion of the
deduction for five years following the contribution, subject to certain
limitations. The Association's tax advisor, however, has not rendered advice as
to fair market value for purposes of determining the amount of the tax
deduction. If the Charitable Foundation had been established in the year ended
December 31, 1997, the Company would have received a current tax benefit of
approximately $450,000 (tax based on the Association's taxable income for that
period and considering the annual limitation on deductibility). The
Association is permitted under the Code to carry over the excess contribution
over the five-year period following the contribution to the Charitable
Foundation. The Association estimates that all of the contribution should be
deductible over the six-year period. Neither the Company nor the Association
expect to make any further contributions to the Charitable Foundation within
the first five years following the initial contribution. After that time, the
Association and the Company may consider future contributions to the Charitable
Foundation. Any such decisions would be based on an assessment of, among other
factors, our financial condition, the interests of stockholders of the Company,
and the financial condition and operations of the Charitable Foundation.

Although the Association has received an opinion that the Company will
be entitled to a deduction for the charitable contribution, there can be no
assurances that the IRS will recognize the Charitable Foundation as a Section
501(c)(3) exempt organization or that a deduction for the charitable
contribution will be allowed. In such event, the contribution to the
Charitable Foundation would be expensed without partial offset for any tax
benefit, resulting in a reduction in earnings in the year in which the IRS
makes such a determination.

The Charitable Foundation will be required to make an annual filing
with the IRS within four and one-half months after the close of the Charitable
Foundation's fiscal year to maintain its tax-exempt status. The Charitable
Foundation will be required to publish a notice that the annual information
return will be available for public inspection for a period of 180 days after
the date of such public notice. The information return for a private
foundation must include, among other things, an itemized list of all grants
made or approved, showing the amount of each grant, the recipient, any
relationship between a grant recipient and the Charitable Foundation's managers
and a concise statement of the purpose of each grant.

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The pro forma price to book ratio and the pro forma price to earnings ratio, at
and for the year ended March 31, 1998, are 107.87% and 16.67x, respectively, at
the midpoint of the Estimated Valuation Range. In the event that the
Reorganization did not include the Charitable Foundation, FinPro has estimated
that the estimated pro forma market value of the Common Stock being offered for
sale in the Offering would be $27.7 million at the midpoint, with a pro forma
price to book ratio and a pro forma price to earnings ratio of 111.23% and
17.24x, respectively. The amount of Common Stock being offered for sale in the
Offering at the midpoint of the Estimated Valuation Range is approximately $1.2
million less than the estimated amount of Common Stock that would be sold in
the Offering without the Charitable Foundation based on the estimate provided
by FinPro. Accordingly, persons who subscribe to purchase Common Stock in the
Offering would receive fewer shares depending on the size of a subscriber's
stock order and the amount of his or her qualifying deposits in the Association
and the overall level of subscriptions. See "Comparison of Valuation and Pro
Forma Information Without Charitable Foundation." This estimate by FinPro was
prepared solely for purposes of providing subscribers with information with
which to make an informed decision on the Reorganization and Offering.

The decrease in the amount of Common Stock being offered for sale as a
result of the contribution of Common Stock to the Charitable Foundation will
not have a significant effect on the Company or the Association's capital
position. The Association's regulatory capital is significantly in excess of
its regulatory capital requirements and will further exceed such requirements
following the Reorganization. The Association's leverage (core) and risk-based
capital ratios at March 31, 1998 were 12.5% and 34.9%, respectively. Assuming
the sale of shares at the midpoint of the Estimated Valuation Range, the Bank's
pro forma core and risk-based capital ratios at March 31, 1998 would be 15.65%
and 42.85%, respectively. On a consolidated basis, the Company's pro forma
stockholders' equity would be $54.6 million, or approximately 19.68% of pro
forma consolidated assets, assuming the sale of shares at the midpoint of the
Estimated Price Range. Pro forma stockholders' equity per share and pro forma
net income per share would be $9.27 and $0.60, respectively. If the Charitable
Foundation was not being established in the Reorganization, based on the FinPro
estimate, the Company's pro forma stockholders' equity would be approximately
$55.3 million, or approximately 19.88% of pro forma consolidated assets at the
midpoint of the estimated value, and pro forma stockholders' equity per share
and pro forma net income per share would be higher with the Charitable
Foundation as without the establishment of the Charitable Foundation. See
"Comparison of Valuation and Pro Forma Information Without Charitable
Foundation."

REGULATORY CONDITIONS IMPOSED ON THE CHARITABLE FOUNDATION.
Establishment of the Charitable Foundation is expected to be subject to the
following conditions being agreed to by the Charitable Foundation in writing as
a condition to receiving OTS approval of the Reorganization and Offering: (i)
the Charitable Foundation will be subject to examination by the OTS; (ii) the
Charitable Foundation must comply with supervisory directives imposed by the
OTS; (iii) the Charitable Foundation will operate in accordance with written
policies adopted by its board of directors, including a conflict of interest
policy; (iv) any shares of Common Stock held by the Charitable Foundation must
be voted in the same ratio as all other outstanding shares of Common Stock on
all proposals considered by stockholders of the Company; provided, however,
that, consistent with the condition, the OTS may waive this voting restriction
under certain circumstances if compliance with the voting restriction would:
(a) cause a violation of the law of the State of Delaware and the OTS
determines that federal law would not preempt the application of the laws of
Delaware to the Charitable Foundation; (b) would cause the Charitable
Foundation to lose its tax-exempt status or otherwise have a material and
adverse tax consequence on the Charitable Foundation; or (c) would cause the
Charitable Foundation to be subject to an excise tax under Section 4941 of the
Code; and (v) any shares of Common Stock subsequently purchased by the
Charitable Foundation will be aggregated with any shares repurchased by the
Company or the Association for purposes of calculating the number of shares
which may be repurchased during the three-year period subsequent to the
Reorganization. In order for the OTS to waive such voting restriction, the
Company's or the Charitable Foundation's legal counsel would be required to
render an opinion satisfactory to the OTS. While there is no current intention
for the Company or the Charitable Foundation to seek a waiver from the OTS from
such restrictions, there can be no assurances that a legal opinion addressing
these issues could be rendered, or if rendered, that the OTS would grant an
unconditional waiver of the voting restriction. In no event would the voting
restriction survive the sale of shares of the Common Stock held by the
Charitable Foundation.

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Various OTS regulations may be deemed to apply to the Charitable
Foundation including regulations regarding (i) transactions with affiliates,
(ii) conflicts of interest, (iii) capital distributions and (iv) repurchases of
capital stock within the three-year period subsequent to a mutual-to-stock
conversion. Because only two of the eight directors of the Company and the
Association are expected to serve as directors of the Charitable Foundation,
the Company and the Association do not believe that the Charitable Foundation
should be deemed an affiliate of the Association. The Company and the
Association anticipate that the Charitable Foundation's affairs will be
conducted in a manner consistent with the OTS' conflict of interest
regulations. The Association has provided information to the OTS demonstrating
that the initial contribution of common stock to the Charitable Foundation
would be within the amount which the Association would be permitted to make as
a capital distribution assuming such contribution is deemed to have been made
by the Association.

POTENTIAL CHALLENGES. To date, there has been limited precedent with
respect to the establishment and funding of a foundation as part of the
reorganization of a mutual savings institution to stock form. In addition,
establishment and funding of the Charitable Foundation will require the OTS to
grant the Association and the Company waivers from its mutual-to-stock
conversion regulations and mutual holding company regulations. As such, the
Charitable Foundation and the OTS's non-objection to the Reorganization may be
subject to potential challenges with respect to, among other things, the
Company's and the Association's ability to establish the Charitable Foundation,
notwithstanding that the Board of Directors have carefully considered the
various factors involved in the establishment of the Charitable Foundation in
reaching its determination to establish the Charitable Foundation as part of
the Reorganization, and/or with respect to the OTS' authority to grant the
waivers necessary to establish the Charitable Foundation. If challenges were
to be instituted seeking management to terminate the establishment of the
Charitable Foundation no assurances could be made that the resolution of such
challenges would not result in a delay in the consummation of the
Reorganization or that any objecting persons would not be ultimately successful
in obtaining such relief.

APPROVAL OF MEMBERS. Establishment of the Charitable Foundation is
subject to the approval of a majority of the total outstanding votes of the
Association's members eligible to be cast at the Special Meeting. The
Charitable Foundation will be considered as a separate matter from approval of
the Plan. If the members approve the Plan, but not the establishment of the
Charitable Foundation, the Association intends to complete the Reorganization
without establishing of the Charitable Foundation. Failure to approve the
Charitable Foundation may materially increase the pro forma market value of the
Common Stock being offered for sale in the Offering because the Estimated
Valuation Range takes into account the proposed contribution to the Charitable
Foundation. If the pro forma market value of the Company without the
Charitable Foundation is either greater than $67.7 million or less than $50.1
million, or if the OTS otherwise requires a resolicitation of subscribers, the
Association will establish a new Estimated Valuation Range and resolicit
subscribers (i.e., subscribers will be permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest). Any change in the Estimated
Valuation Range must be approved by the OTS. See "--Stock Pricing and Number
of Shares to be Issued." Further, if the Mutual Holding Company were to
undertake a Conversion Transaction, and in connection with such a transaction
additional shares of stock of the Company or its successor were contributed to
the Charitable Foundation, such contribution of additional shares of Common
Stock to the Charitable Foundation would be voted on as a separate matters and
would require the approval of: (i) a majority of the total outstanding vote of
the members of the Mutual Holding Company eligible to be cast; and (ii) a
majority vote of the total outstanding shares of Common Stock held by
stockholders other than the Mutual Holding Company and the Charitable
Foundation.

OFFERING OF COMMON STOCK

Under the Plan, up to 3,048,075 shares of Common Stock are being
offered for sale, initially through the Subscription Offering (subject to a
possible increase to 3,505,286 shares). See "--Subscription Offering." The Plan
requires, with certain exceptions, that at least 2,252,925 shares be sold in
order for the Reorganization to be effective.

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The Subscription Offering expires at __________, New York time, on
__________, 1998. OTS regulations and the Plan require that the sale of Common
Stock be completed within 45 days after the close of the Subscription Offering.
This 45-day period expires on ____________, 1998. In the event the Association
is unable to complete the sale of common stock within this 45-day period, the
Association may request an extension of this time period from the OTS. No
single extension granted by the OTS, however, may exceed 90 days. No assurance
can be given that an extension would be granted if requested. If an extension
is granted, the Association would promptly notify subscribers of the granting
of the extension of time and would promptly return subscriptions unless
subscribers affirmatively elect to continue their subscriptions during the
period of extension. Such extensions may not be made beyond _____________,
2001.

Shares may also be offered to the public in a Community Offering, if
one is to be held. In the event a Community Offering is held, it may begin
immediately after the Subscription Offering, or any time during the
Subscription Offering. The Community Offering may end at the same time as or
after the Subscription Offering, but not later than ___________1998, unless
further extended with the approval of the OTS. The actual number of shares to
be sold in the Offering will depend upon market and financial conditions at the
time of the Offering, provided that no fewer than 2,252,925 shares or more than
3,505,286 shares are sold in the Offering. The per share price to be paid by
prospective purchasers in the Community Offering, if any, for any remaining
shares will be $10.00, the same price paid by subscribers in the Subscription
Offering. See "--Stock Pricing."

As permitted by OTS regulations, the Plan provides that if, for any
reason, purchasers cannot be found for an insignificant number of unsubscribed
shares of the common stock, the Board of Directors will seek to make other
arrangements for the sale of the remaining shares. Such other arrangements will
be subject to the approval of the OTS. If such other purchase arrangements
cannot be made, the Plan will terminate. In the event that the Offering is not
completed, the Association will remain a mutual savings association, all
subscription funds will be promptly returned to subscribers with interest
earned thereon at the passbook rate, which is currently _____% per annum
(except for payments to have been made through withdrawal authorizations which
will have continued to earn interest at the contractual account rates), and all
withdrawal authorizations will be canceled.

SUBSCRIPTION OFFERING

In accordance with OTS regulations, nontransferable rights to
subscribe for the purchase of the Company's Common Stock have been granted
under the Plan to the following persons in the following order of priority: (1)
Eligible Account Holders; (2) the Association's tax-qualified plans including
the ESOP; (3) Supplemental Eligible Account Holders; (4) depositors and
borrowers other than Eligible Account Holders and Supplemental Eligible Account
Holders, at the close of business on ___________, 1998, the voting record date
for the Special Meeting ("Other Members"); and (5) employees, officers and
directors. All subscriptions received will be subject to the availability of
Common Stock after satisfaction of all subscriptions of all persons having
prior rights in the Subscription Offering, and to the maximum and minimum
purchase limitations set forth in the Plan (and described below). The March 31,
1997 date for determining who qualifies as Eligible Account Holders, and the
June 30, 1998 date for determining who qualifies as Supplemental Eligible
Account Holders, were selected in accordance with federal regulations
applicable to the Reorganization.

CATEGORY I: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder
will receive, without cost to him or her, nontransferable subscription rights
to subscribe for an amount of shares equal to the greater of (i) $150,000 of
the Common Stock sold in the Offering; or (ii) 15 times the product (rounded
down to the whole next number) obtained by multiplying the total number of
shares to be issued by a fraction of which the numerator is the amount of
qualifying deposits of such subscriber and the denominator is the total
qualifying deposits of all account holders in this category on the qualifying
date; provided, however, that no Eligible Account Holder may purchase with his
or her Associates (as defined in this Prospectus) and persons acting in
concert, more than $300,000 (30,000 shares) of Common Stock. The Company may,
in its sole discretion and without further notice to, or solicitation of,
subscribers or other prospective purchasers, increase the maximum purchase
limitation up to 5% of the maximum number of shares offered

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<PAGE> 44
in the Offering, or decrease the maximum purchase limitation to as low as 0.1%
of the maximum number of shares offered in the Offering.

If sufficient shares are not available in this Category I, the
Association will allocate shares in a manner that will allow each Eligible
Account Holder purchase the lesser of 100 shares or the amount subscribed for.
Thereafter, unallocated shares will be allocated to subscribing Eligible
Account Holders in the proportion that the amounts of their respective
qualifying deposits bear to the total amount of qualifying deposits of all
subscribing Eligible Account Holders. To ensure a proper allocation of Common
Stock, each Eligible Account Holder must list on the Stock Order Form all
accounts in which the Eligible Account Holder had an ownership interest as of
March 31, 1997. Failure to list all such qualifying deposit accounts may
result in the inability of the Company or the Association to fill all or part
of a subscription order. Neither the Company, the Association, nor any of
their agents shall be responsible for orders on which all qualifying deposit
accounts have not been fully and accurately disclosed.

The "qualifying deposits" of an Eligible Account Holder are the
aggregate amount of the deposit balances (provided such aggregate balance is
not less than $50.00) in one or more deposit accounts with the Association,
including money market accounts, as of the close of business on March 31, 1997.
Subscription rights received by directors and officers in this category based
upon their increased deposits in the Association during the year preceding
March 31, 1997, are subordinated to the subscription rights of other Eligible
Account Holders. Notwithstanding the foregoing, shares of Common Stock with a
value in excess of $150,000, may be sold to the Association's tax-qualified
benefit plans, including the ESOP before satisfying the subscriptions of
Eligible Account Holders in the event the number of shares sold in the Offering
is increased to more than 3,048,075 shares. For allocation purposes,
qualifying deposits will be divided in the case of multiple orders.

CATEGORY II: TAX-QUALIFIED EMPLOYEE BENEFIT PLANS. The Association's
tax-qualified employee benefit plans, including the ESOP will receive
nontransferable subscription rights to purchase up to 10% of the Minority
Ownership Interest, provided that shares remain available after satisfying the
subscription rights of Eligible Account Holders. The ESOP currently intends to
purchase shares equal to 8% of the Minority Ownership Interest. If the ESOP is
unable to purchase all or part of the shares of Common Stock for which it
subscribes, the ESOP may purchase such shares in the open market or may
purchase authorized but unissued shares of the Company. Any purchase by the
ESOP of authorized but unissued shares would dilute the interests of the
Company's shareholders.

CATEGORY III: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each
Supplemental Eligible Account Holder will receive, without cost to him or her,
nontransferable subscription rights to subscribe for an amount of shares equal
to the greater of (i) $150,000 of the Common Stock sold in the Offering; or
(ii) 15 times the product (rounded down to the whole next number) obtained by
multiplying the total number of shares to be issued by a fraction of which the
numerator is the amount of qualifying deposits of such subscriber and the
denominator is the total qualifying deposits of all account holders in this
category on the qualifying date. The subscription rights of each Supplemental
Eligible Account Holder shall be reduced to the extent of such person's
subscription rights as an Eligible Account Holder; provided, however, that no
Supplemental Eligible Account Holder may purchase with his or her Associates
and persons acting in concert, more than $300,000 (30,000 shares) of common
stock. Such subscription rights will be applicable only to shares that remain
available after the subscriptions of Eligible Account Holders and the
tax-qualified benefit plans have been satisfied. The Company may, in its sole
discretion, and without further notice to, or solicitation of, subscribers or
other prospective purchasers, increase the maximum purchase limitation to up to
5% of the maximum number of shares offered in the Offering or decrease the
maximum purchase limitation to as low as 0.1% of the maximum number of shares
offered in the Offering.

If sufficient shares are not available in this Category III, the
Association will allocate shares in a manner that will allow each Supplemental
Eligible Account Holder to purchase the lesser of 100 shares or the amount
subscribed for. Thereafter, unallocated shares will be allocated to each
subscribing Supplemental Eligible Account Holders in the proportion that the
amounts of his or her qualifying deposits bears to the total amount of
qualifying deposits of all subscribing Supplemental Eligible Account Holders.
To ensure a proper allocation of Common Stock, each

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<PAGE> 45
Supplemental Eligible Account Holder must list on the Stock Order Form all
accounts in which he or she has an ownership interest as of June 30, 1998.
Failure to list all such qualifying deposit accounts may result in the
inability of the Company or the Association to fill all or part of a
subscription order. Neither the Company, the Association nor any of their
agents shall be responsible for orders on which all qualifying deposit accounts
have not been fully and accurately disclosed.

The "qualifying deposits" of a Supplemental Eligible Account Holder
are the aggregate amount of the deposit balances (provided such aggregate
balance is not less than $50.00) in his or her deposit accounts, including
money market accounts, as of the close of business on June 30, 1998.

CATEGORY IV: OTHER MEMBERS. Each Other Member will receive, without
cost to him or her, nontransferable subscription rights to subscribe for up to
$150,000 (15,000 shares) of the Common Stock; provided, however, that no Other
Member may purchase with his or her Associates and persons acting in concert,
more than $300,000 (30,000 shares) of Common Stock. Such subscription rights
will be applicable only shares that remain available after the subscriptions of
Eligible Account Holders, the tax-qualified benefit plans and Supplemental
Eligible Account Holders have been satisfied. The Company may in its sole
discretion increase the maximum purchase limitation to up to 5% of the maximum
number of shares offered in the Offering or decrease the maximum purchase
limitation to as low as 0.1% of the maximum number of shares offered in the
Offering.

If sufficient shares are not available in this Category IV, shares
will be allocated pro rata among subscribing Other Members in the same
proportion that the number of shares subscribed for by each Other Member bears
to the total number of shares subscribed for by all Other Members.

CATEGORY V: EMPLOYEES, OFFICERS AND DIRECTORS. Employees, officers
and directors of the Association will receive, without cost to them,
nontransferable subscription rights to subscribe for up to $150,000 (15,000
shares) of the Common Stock; provided that no employee, officer or director may
purchase with his or her Associates and persons acting in concert more than
$300,000 (30,000 shares) of Common Stock. For purposes of the Plan directors,
officers and employees are not Associates of one another, nor are they acting
in concert solely as a result of their positions as directors, officers or
employees of the Association. Such subscription rights will only be provided
after subscriptions of Eligible Account holders, the tax-qualified benefit
plans, Supplemental Eligible Account Holders and other Members have been
satisfied. If sufficient shares are not available in this Category V, shares
will be allocated among directors, officers and employees on a pro rata basis
based on the size of each person's order.

TIMING OF OFFERING AND METHOD OF PAYMENT. The Subscription Offering
will expire at __________, New York time, on ___________, 1998 (the
"Expiration Date"). The Expiration Date may be extended by the Association and
the Company for successive 90-day periods, subject to OTS approval, to
___________, 2000. If the Offering is extended beyond ______________, 2000,
subscribers will be given the right to increase, decrease, confirm or modify
their orders.

Before the Expiration Date, or any extension of such date, each
subscriber must return the Order Forms to the Association, properly completed,
together with checks or money orders in an amount equal to the Purchase Price
multiplied by the number of shares for which subscription is made. Payment for
stock purchases can also be accomplished through authorization on the order
form of withdrawals from accounts with the Association (including a certificate
of deposit). The Association has the right to reject any orders transmitted by
facsimile and any payments made by wire transfer.

Until completion or termination of the Reorganization, subscribers who
elect to make payment through authorization of withdrawal from accounts with
the Association will not be permitted to reduce the deposit balance in any such
accounts below the amount required to purchase the shares for which they
subscribed. In such cases interest will continue to be credited on deposits
authorized for withdrawal until the completion of the Reorganization. Interest
at the passbook rate, which is currently _____ per annum, will be paid on
amounts submitted by check. Authorized

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<PAGE> 46
withdrawals from certificate accounts for the purchase of Common Stock will be
permitted without the imposition of early withdrawal penalties or loss of
interest. However, withdrawals from certificate accounts that reduce the
balance of such accounts below the required minimum for specific interest rate
qualification will cause the cancellation of the certificate accounts at the
effective date of the Reorganization, and the remaining balance will earn
interest at the passbook savings rate or will be returned to the depositor.
Stock subscriptions received and accepted by the Association are final.
Subscriptions may be withdrawn only in the event that the Reorganization is not
completed by __________, 1998.

MEMBERS IN NON-QUALIFIED STATES OR FOREIGN COUNTRIES. The Association
will make reasonable efforts to comply with the securities laws of all states
in the United States in which persons entitled to subscribe for stock pursuant
to the Plan reside. However, no person will be offered or sold any stock in
the Subscription Offering if such person resides in a foreign country or
resides in a state in the United States with respect to which all of the
following apply: (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state; (ii) the granting of
subscription rights or the offer or sale of Common Stock to such persons would
require the Association or the Company or its respective officers and
directors, under the securities laws of such state, to register as a broker,
dealer, salesman or selling agent, or to register or otherwise qualify the
Common Stock for sale in such state; and (iii) such registration, qualification
or filing in its judgment or in the judgment of the Company would be
impracticable or unduly burdensome for reasons of cost or otherwise.

To assist in the Offering, the Association has established a Stock
Information Center that you may contact at (914) _________ . Callers to the
Stock Information Center will be able to request a Prospectus and other
information relating to the Offering.

COMMUNITY OFFERING

To the extent shares remain available for purchase after filling all
orders received in the Subscription Offering, the Company may offer shares of
the common stock in a Community Offering to the general public, with preference
given to residents in Westchester County, the county where the Association
maintains its offices. The Association may terminate the Community Offering as
soon as it has received orders for at least the minimum number of shares
available for purchase in the Offering.

Persons wishing to purchase stock in the Community Offering, if
conducted, should return the Order Form to the Association, properly completed,
together with a check or money order in the amount equal to the Purchase Price
multiplied by the number of shares which that person desires to purchase. Order
Forms will be accepted until the completion of the Community Offering. However,
the Association may terminate the Community Offering as soon as orders are
received for at least the minimum number of shares available for purchase in
the Offering.

The amount of Common Stock which may be purchased in the Community
Offering by any person (including such person's Associates) or persons acting
in concert is $150,000 (15,000 shares) in the aggregate. A member who, together
with his Associates and persons acting in concert, has subscribed for shares in
the Subscription Offering may subscribe for additional shares of Common Stock
in the Community Offering that does not exceed the lesser of (i) $150,000
(15,000 shares) or (ii) a number of shares which, when added to the number of
shares subscribed for by the member (and his Associates and persons acting in
concert) in the Subscription Offering, would not exceed $300,000 (30,000
shares). The Association reserves the right in its sole discretion to reject
any orders received in the Community Offering in whole or in part.

If all the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Community
Offering. In the event of an oversubscription, purchase orders received during
the Community Offering will be filled up to a maximum of 1,000 shares of Common
Stock issued in the Offering, with any remaining unfilled purchase orders to be
allocated on a pro rata basis based on a fair and equitable manner. If the
Community Offering continues for more than 45 days after the expiration of the
Subscription Offering, subscribers will

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<PAGE> 47
have the right to increase, decrease or rescind subscriptions for stock
previously submitted. All sales of Common Stock in the Community Offering will
be at the same price per share as the sales of Common Stock in the Subscription
Offering.

Cash and checks received in the Community Offering will be placed in
an interest bearing account with the Association, and will earn interest at the
passbook rate, which is currently _____% per annum, from the date of deposit
until completion or termination of the Reorganization. In the event that the
Reorganization is not consummated for any reason, all funds submitted pursuant
to the Community Offering will be promptly refunded with interest as described
above.

SYNDICATED COMMUNITY OFFERING

Any shares of Common Stock not sold in the Subscription Offering or in
the Community Offering, if any, may be offered for sale to the general public
by a selling group of broker-dealers to be managed by Sandler O'Neill in a
Syndicated Community Offering, subject to terms, conditions and procedures as
may be determined by the Association and the Company in a manner that is
intended to achieve the widest distribution of the Common Stock subject to the
rights of the Company to accept or reject in whole or in part all orders in the
Syndicated Community Offering. It is expected that the Syndicated Community
Offering will commence as soon as practicable after termination of the
Subscription Offering and the Community Offering, if any. The Syndicated
Community Offering shall be completed within 45 days after the termination of
the Subscription Offering, unless such period is extended as provided herein.

If for any reason a Syndicated Community Offering of unsubscribed
shares of Common Stock cannot be effected and any shares remain unsold after
the Subscription Offering and any Community Offering, the Boards of Directors
of the Company and the Association will seek to make other arrangements to sell
the remaining shares. Such other arrangements will be subject to OTS approval
and to compliance with applicable state and federal securities laws.

PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING COMMON STOCK

To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the end of the Offering, in accordance with Rule 15c2-8 under the
Securities Exchange Act of 1934, no Prospectus will be mailed later than five
days or hand delivered any later than two days prior to the end of the
Offering. Execution of the Order Form will confirm receipt or delivery of a
Prospectus in accordance with Rule 15c2-8. Order Forms will be distributed
only with a Prospectus. Neither the Company, the Association, nor Sandler
O'Neill is obligated to deliver a Prospectus and an Order Form by any means
other than the U.S. Postal Service.

To ensure that Eligible Account Holders, Supplemental Eligible Account
Holders, and Other Members are properly identified as to their stock purchase
priorities, such parties must list all deposit accounts, or in the case of
Other Members who are borrowers only, loans held at the Association, on the
Order Form giving all names on each deposit account and/or loan and the account
and/or loan numbers at the applicable eligibility date.

Full payment by check, cash (except by mail), money order, bank draft
or withdrawal authorization (payment by wire transfer will not be accepted)
must accompany an original Order Form. THE COMPANY IS NOT OBLIGATED TO ACCEPT
AN ORDER SUBMITTED ON PHOTOCOPIED OR TELECOPIED ORDER FORMS. ORDERS CANNOT AND
WILL NOT BE ACCEPTED WITHOUT THE EXECUTION OF THE CERTIFICATION APPEARING ON
THE ORDER FORM.

If the ESOP purchases shares of Common Stock, it will not be required
to pay for such shares until consummation of the Offering, provided that there
is in force from the time the order is received a loan commitment to lend to
the ESOP the amount of funds necessary to purchase the number of shares
ordered.

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DELIVERY OF CERTIFICATES

Certificates representing shares issued in the Subscription Offering
and in the Community Offering, if any, pursuant to Order Forms will be mailed
to the persons entitled to them at the last addresses of such persons appearing
on the books of the Association or to such other addresses as may be specified
in properly completed Order Forms as soon as practicable following consummation
of the Reorganization. The Company will not accept orders registered "in care
of" or instructed to be mailed to a third party. Any certificates returned as
undeliverable will be held by the Company until claimed by the person legally
entitled to them or otherwise disposed of in accordance with applicable law.
Purchasers may not be able to sell the shares of Common Stock which they
purchase until certificates for the Common Stock are available and delivered to
them, even though trading of the common stock may have commenced. Shares sold
prior to receipt of a stock certificate are the responsibility of the
purchaser.

MARKETING AGENT

The Association has engaged Sandler O'Neill as a consultant and
financial advisor in connection with the offering of the Common Stock, and
Sandler O'Neill has agreed to assist the Association in its solicitation of
subscriptions and purchase orders for shares of Common Stock in the Offerings.
Sandler O'Neill will receive a fee equal to 1.5% of the aggregate purchase
price of all shares sold in the Subscription Offering or Community Offering,
excluding in each case shares purchased by directors, officers of employees of
the Association and any immediate family member thereof and the ESOP, for which
Sandler O'Neill will not receive a fee. In the event that a selected dealers
agreement is entered into in connection with a Syndicated Community Offering,
the Association will pay a fee (to be negotiated at such time under such
agreement) to such selected dealers, any sponsoring dealers fees, and a
management fee to Sandler O'Neill of 1.5% for shares sold by a NASD member firm
pursuant to a selected dealers agreement; provided, however, that the aggregate
fees payable to Sandler O'Neill for Common Stock sold by them pursuant to such
a selected dealers agreement shall not exceed 1.5% of the aggregate purchase
price and provided, further, however, that the aggregate fees payable to
Sandler O'Neill and the selected dealers will not exceed 5% of the aggregate
purchase price of the Common Stock sold by selected dealers. Fees to Sandler
O'Neill and to any other broker-dealer may be deemed to be underwriting fees,
and Sandler O'Neill and such broker-dealers may be deemed to be underwriters.
Sandler O'Neill will also be reimbursed for its reasonable out-of-pocket
expense, including legal fees, in an amount not to exceed $45,000.
Notwithstanding the foregoing, in the event the Offerings are not consummated
or Sandler O'Neill ceases, under certain circumstances after the subscription
solicitation activities are commenced, to provide assistance to the
Association, Sandler O'Neill will be reimbursed for its reasonable
out-of-pocket expenses as described above. The Association has agreed to
indemnify Sandler O'Neill for reasonable costs and expense in connection with
certain claims or liabilities, including certain liabilities under the
Securities Act.

Sandler O'Neill will also perform proxy solicitation services,
Reorganization agent services and records management services for the
Association in the Reorganization and will receive a fee for these services of
$______, plus reimbursement of reasonable out-of-pocket expenses.

Directors and executive officers of the Association may participate in
the solicitation of offers to purchase Common Stock. Questions of prospective
purchasers will be directed to executive officers or registered
representatives. Other employees of the Association may participate in the
Offering in ministerial capacities or providing clerical work in effecting a
sales transaction. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. The Association will rely on Rule 3a4-1 under the Exchange Act,
and sales of Common Stock will be conducted within the requirements of Rule
3a4-1, so as to permit executive officers, directors and employees to
participate in the sale of Common Stock. No executive officer, director or
employee of the Association will be compensated in connection with his or her
participation by the payment of commission or other remuneration based either
directly or indirectly on the transactions in the Common Stock.

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<PAGE> 49
Sandler O'Neill has not prepared any report or opinion constituting
recommendations or advice to the Association. In addition, Sandler O'Neill has
expressed no opinion as to the prices at which the Common Stock to be issued in
the Offering may trade. Furthermore, Sandler O'Neill has not verified the
accuracy or completeness of the information contained in the Prospectus.

LIMITATIONS ON COMMON STOCK PURCHASES

The Plan includes a number of limitations on the number of shares of
Common Stock which may be purchased in the Offering. These are summarized
below:

1. The aggregate amount of outstanding Common Stock owned or
controlled by persons other than the Mutual Holding Company at
the close of the Offering shall be less than 50% of the total
outstanding Common Stock.

2. No Person, Associate thereof, or group of persons acting in
concert, may purchase more than the greater of $300,000 or
1.0% of Common Stock offered in the Offering to persons other
than the Mutual Holding Company except that: (i) the Company
may, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers,
increase the maximum purchase limitation to up to 5% of the
number of shares offered in the Offering; (ii) Tax-qualified
employee benefit plans may purchase up to 10% of the shares
offered in the Offering; and (iii) shares held by any
Tax-Qualified Employee Plan and attributable to a person will
not be aggregated with other shares purchased directly by or
otherwise attributable to such person.

3. The aggregate amount of Common Stock acquired in the Offering
by all officers and directors of the Association or any
affiliate of the Association, and any person acting in concert
with such officer or director and their Associates, exclusive
of any stock acquired by such persons in the secondary market,
may not exceed 30% of the outstanding shares of Common Stock
held by persons other than the Mutual Holding Company at the
close of the Offering. In calculating the number of shares
held by officers or directors of the Association or any
Affiliate of the Association and any person acting in concert
with any such officer or director and their Associates under
this paragraph or under the provisions of Section 4 of this
section, shares held by any Tax-Qualified Employee Benefit
Plans of the Association that are attributable to such persons
shall not be counted.

4. The aggregate amount of Common Stock acquired in the Offering
by all officers and directors of the Association or any
affiliate of the Association and any person acting in concert
with any such officer or director and their Associates,
exclusive of any Common Stock acquired by such plans or
persons in the secondary market, may not exceed 30% of the
stockholders' equity of the Company other than the Mutual
Holding Company at the close of the Offering.

5. The Boards of Directors of the Association and the Company
may, in their sole discretion, increase the maximum purchase
limitation set forth in paragraph 2 above to up to 9.9%,
provided that the percentage amount by which orders for Common
Stock in excess of 5% of the total number of shares of Common
Stock offered in the Offering shall not, in the aggregate
exceed 10% of the total shares of Common Stock offered in the
Offering (except that this limitation shall not apply to
purchases by Tax-qualified employee benefit plans). If such
5% limitation is increased, subscribers for the maximum amount
will be, and certain other large subscribers in the sole
discretion of the Company and the Association may be, given
the opportunity to increase their subscriptions up to the then
applicable limit. Requests to purchase additional shares of
Common Stock under this provision will be determined by the
Board of Directors of the Company, in its sole discretion.

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<PAGE> 50
6. Notwithstanding any other provision of this Plan, no person
shall be entitled to purchase any Common Stock to the extent
such purchase would be illegal under any federal law or state
law or regulation or would violate regulations or policies of
the National Association of Securities Dealers, Inc.,
particularly those regarding free riding and withholding. The
Company and/or its agents may ask for an acceptable legal
opinion from any purchaser as to the legality of such purchase
and may refuse to honor any purchase order if such opinion is
not timely furnished.

7. The Board of Directors of the Company has the right in its
sole discretion to reject any order submitted by a person
whose representations the Board of Directors believes to be
false or who it otherwise believes, either alone or acting in
concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of
this Plan.

OTS regulations define "acting in concert" as (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement, or (ii)
a combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
THE ASSOCIATION WILL PRESUME THAT CERTAIN PERSONS ARE ACTING IN CONCERT BASED
UPON VARIOUS FACTS, INCLUDING THE FACT THAT PERSONS HAVE JOINT ACCOUNT
RELATIONSHIPS OR THE FACT THAT SUCH PERSONS HAVE FILED JOINT SCHEDULES 13D WITH
THE SEC WITH RESPECT TO OTHER COMPANIES.

Directors are not treated as Associates of one another solely because
of their board membership. Compliance with the foregoing limitations does not
necessarily constitute compliance with other regulatory restrictions on
acquisitions of the Common Stock. For a further discussion of limitations on
purchases of the Common Stock during and subsequent to Reorganization, see
"--Restrictions on Sale of Stock by Directors and Officers," "--Restrictions on
Purchase of Stock by Directors and Officers Following Reorganization," and
"Restrictions on Acquisition of the Company."

RESTRICTIONS ON REPURCHASE OF COMMON STOCK BY THE COMPANY

Repurchases of its shares by the Company will be restricted for a
period of three years from the date of the completion of Reorganization. OTS
regulations currently prohibit the Company from repurchasing any of its shares
within three years following the Reorganization except under exceptional
circumstances. The Company may not, for a period of three years from the date
of the Reorganization, repurchase any of its capital stock from any person,
except in the event of an offer to purchase by the Company on a pro rata basis
from all of its shareholders (excluding the Mutual Holding Company) which is
approved in advance by the OTS, the repurchasing of qualifying shares of a
director or purchases of shares required to fund a tax qualified or non-tax
qualified plan. OTS regulations permit limited repurchases of Common Stock
during the second and third year following the Reorganization.

RESTRICTIONS ON SALE OF STOCK BY DIRECTORS AND OFFICERS

Any shares of the Common Stock purchased in the Offering by directors
and officers of the Association or the Company may not be sold or otherwise
disposed of for value for a period of one year following the date of purchase,
except for any disposition of such shares (i) following the death of the
original purchaser or (ii) by reason of an exchange of securities in connection
with a merger or acquisition approved by the applicable regulatory authorities.
Sales of shares of the Common Stock by the Company's directors and officers
will also be subject to certain insider trading and other transfer restrictions
under the federal securities laws. See "Regulation--Federal Securities Laws"
and "Description of Capital Stock."

Each certificate for such restricted shares will bear a legend
prominently stamped on its face giving notice of the restrictions on transfer,
and instructions will be issued to the Company's transfer agent to the effect
that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is

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<PAGE> 51
a violation of the restriction. Any shares of Common Stock issued pursuant to a
stock dividend, stock split or otherwise with respect to restricted shares will
be subject to the same restrictions on sale.

RESTRICTIONS ON PURCHASE OF STOCK BY DIRECTORS AND OFFICERS IN THE
REORGANIZATION AND OFFERING

OTS regulations provide that for a period of three years following the
Reorganization, without prior written approval of the OTS, neither directors or
officers of the Association or the Company, nor their Associates, may purchase
the Common Stock of the Company except from a dealer registered with the SEC.
This restriction, however, does not apply to negotiated transactions involving
more than 1% of the Company's outstanding Common Stock, to shares purchased
pursuant to stock option or other incentive stock plans approved by the
Company's shareholders, or to shares purchased by employee benefit plans
maintained by the Company which may be attributable to individual officers or
directors.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND COMMON STOCK

Prior to the completion of the Reorganization, OTS regulations and the
Plan prohibit any person with subscription rights, under the Plan from
transferring or entering into any agreement or understanding to transfer the
legal or beneficial ownership of the subscription rights issued under the Plan
or the shares of Common Stock to be issued upon their exercise. Such rights may
be exercised only by the person to whom they are granted and only for his or
her account. Each person exercising such subscription rights will be required
to certify that he or she is purchasing shares solely for his or her own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares. The regulations also prohibit any person from offering
or making an announcement of an offer or intent to make an offer to purchase
such subscription rights or shares of Common Stock prior to the completion of
the Reorganization and Offering. THE ASSOCIATION INTENDS TO PURSUE ANY AND ALL
LEGAL AND EQUITABLE REMEDIES IN THE EVENT IT BECOMES AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN TO INVOLVE THE TRANSFER OF
SUCH RIGHTS. IN ADDITION, PERSONS WHO VIOLATE THE PURCHASE LIMITATIONS MAY BE
SUBJECT TO SANCTIONS AND PENALTIES IMPOSED BY THE OTS.

STOCK PRICING

The aggregate purchase price of the Company Common Stock being sold in
the Reorganization will be based on the appraised aggregate pro forma market
value of the Common Stock, as determined by the Independent Valuation. FinPro,
which is experienced in the valuation and appraisal of financial institutions,
including savings associations forming mutual holding companies, has been
retained to prepare the Independent Valuation. FinPro will receive a fee of
$25,000 for its appraisal and business plan services, not including
out-of-pocket expenses. The Association has agreed to indemnify FinPro, under
certain circumstances, against liabilities and expenses (including legal fees)
arising out of FinPro's engagement.

The Independent Valuation states that the pro forma market value of
the Common Stock was $58.9 million as of June 12, 1998. A copy of the
appraisal is on file and available for inspection at the offices of the OTS,
1700 G Street, N.W., Washington, D.C. 20552 and the Northeast Regional Office
of the OTS, 10 Exchange Place, Jersey City, New Jersey. The Independent
Valuation has also been filed as an exhibit to the Company's Registration
Statement with the SEC, and may be reviewed at the SEC's public reference
facilities. See "Additional Information." The Independent Valuation involved a
comparative valuation of the Association's operating and financial statistics
with those of other financial institutions. The Independent Valuation also took
into account such other factors as the market for savings associations
generally, prevailing economic conditions, both nationally and in New York,
which affect the operations of savings associations, the competitive
environment within which the Association operates, and the effect of the
Association becoming a subsidiary of the Company. No detailed individual
analysis of the separate components of the Association's and the Company's
assets and liabilities was performed in connection with the valuation. The
Board of Directors reviewed with management FinPro's methods and assumptions,
and accepted FinPro's appraisal as reasonable and adequate. The Association
has determined to establish an Offering Range of 2,252,925 shares to

47
<PAGE> 52
3,048,075 shares at the minimum and maximum of the Estimated Valuation Range.
Notwithstanding any change in the number of shares sold in the Offering due to
a change to the Independent Valuation, the Minority Ownership Interest sold in
the Offering will remain 45%. The Association, in consultation with Sandler
O'Neill, has determined to offer the Common Stock in the Offering at a price of
$10.00 per share. The Association's decision regarding the Purchase Price was
based solely on its determination that $10.00 per share is a customary purchase
price in initial public offerings for mutual savings associations converting to
stock form. The Offering Range may be increased or decreased to reflect market
and financial conditions prior to the completion of the Offering.

Promptly after the completion of the Subscription Offering and the
Community Offering, if any, FinPro will confirm to the Association that, to the
best of its knowledge and judgment, nothing of a material nature has occurred
which would cause it to conclude that the amount of the aggregate proceeds
received from the sale of the Common Stock in the Offering was incompatible
with FinPro's estimate of the Company's total pro forma market value at the
time of the sale. If, however, the facts do not justify such a statement, a new
Offering Range and price per share may be set. Under such circumstances, the
Company will be required to resolicit subscriptions. In that event, subscribers
would have the right to modify or rescind their subscriptions and to have their
subscription funds returned promptly with interest and holds on funds
authorized for withdrawal from deposit accounts would be released or reduced;
provided that if the Association's pro forma market value upon reorganization
has increased to an amount which does not exceed $77,895,250 (15% above the
maximum of the Independent Valuation), the Company and the Association do not
intend to resolicit subscriptions unless it is determined after consultation
with the OTS that a resolicitation is required.

Depending upon market and financial conditions, the number of shares
issued may be more or less than the range in number of shares shown above. In
the event of an increase in the maximum number of shares being offered, persons
who exercise their maximum subscription rights will be notified of such
increase and of their right to purchase additional shares. Conversely, in the
event of a decrease in the maximum number of shares being offered, persons who
exercise their maximum subscription rights will be notified of such decrease
and of the reduction in the number of shares for which subscriptions may be
made. In the event of a resolicitation, subscribers will be afforded the
opportunity to increase, decrease or maintain their previously submitted order.
The Company will be required to resolicit if the price per share is changed
such that the total aggregate purchase price is not within the minimum and 15%
above the maximum of the Offering Range.

THE INDEPENDENT VALUATION IS NOT INTENDED AND MUST NOT BE CONSTRUED AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF VOTING TO APPROVE THE
REORGANIZATION OR OF PURCHASING THE SHARES OF THE COMMON STOCK. MOREOVER,
BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A
NUMBER OF MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO THE AMOUNT OF NET
PROCEEDS AND THE EARNINGS THEREON), ALL OF WHICH ARE SUBJECT TO CHANGE FROM
TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SHARES IN THE
OFFERING WILL THEREAFTER BE ABLE TO SELL THE SHARES AT PRICES THAT EXCEED THE
PURCHASE PRICE IN THE OFFERING.

NUMBER OF SHARES TO BE ISSUED

It is anticipated that the total offering of Common Stock (the number
of shares of Common Stock issued in the Offering multiplied by the Purchase
Price of $10.00 per share) will be within the current minimum and 15% above the
maximum of the Offering Range. Unless otherwise required by the OTS, no
resolicitation of subscribers will be made and subscribers will not be
permitted to modify or cancel their subscriptions so long as the change in the
number of shares to be issued in the Offering, in combination with the Purchase
Price, results in an offering of at least the minimum and no more than 15%
above the maximum of the Offering Range.

48
<PAGE> 53
Any increase in the total number of shares of Common Stock to be
issued in the Offering would decrease both an individual subscriber's ownership
interest and the Company's pro forma stockholders' equity and net income on a
per share basis while increasing (assuming no change in the per share price)
pro forma stockholders' equity and net income on an aggregate basis. A decrease
in the number of shares to be issued in the Offering would increase both an
individual subscriber's ownership interest and the Company's pro forma
stockholders' equity and net income on a per share basis while decreasing
(assuming no change in the per share price) pro forma stockholders' equity and
net income on an aggregate basis. For a presentation of the effects of such
changes, see "Pro Forma Data."

INTERPRETATION AND AMENDMENT OF THE PLAN

To the extent permitted by law, all interpretations of the Plan by the
Association and the Company will be final. The Plan provides that, if deemed
necessary or desirable by the Boards of Directors of the Company and the
Association, the Plan may be substantively amended by the Boards of Directors,
as a result of comments from regulatory authorities or otherwise, with the
concurrence of the OTS. Moreover, if the Plan is so amended, subscriptions
which have been received prior to such amendment will not be refunded unless
otherwise required by the OTS.

CONDITIONS AND TERMINATION

Completion of the Reorganization requires the approval of the Plan by
the affirmative vote of not less than a majority of the total number of votes
of members eligible to be cast at the Special Meeting and the sale of all
shares of the Common Stock within 24 months following approval of the Plan by
the members. If these conditions are not satisfied, the Plan will be terminated
and the Association will continue business in the mutual form of organization.
The Plan may be terminated by the Board of Directors of the Association at any
time prior to the Special Meeting and, with the approval of the OTS, by such
Board of Directors at any time thereafter. Furthermore, OTS regulations and the
Plan require that the Company complete the sale of Common Stock within 45 days
after the close of the Subscription Offering. The OTS may grant an extension of
this time period if necessary, but no assurance can be given that an extension
would be granted. See "--Offering of Common Stock."

49
<PAGE> 54
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF INCOME

The following Statements of Income of the Association for the fiscal
years ended March 31, 1998, 1997 and 1996 have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, whose report on the
financial statements appears elsewhere in this Prospectus. These Statements of
Income should be read in conjunction with the Financial Statements of the
Association and the Notes thereto included elsewhere in the Prospectus.

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------------
1998 1997 1996
----------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest and dividend income:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,456 $ 9,987 $ 9,468
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,341 4,012 3,536
Federal funds sold and certificates of deposit . . . . . . . . . . 2,667 2,493 2,569
Other earning assets . . . . . . . . . . . . . . . . . . . . . . . 154 145 159
-------- ------- -------
Total interest and dividend income . . . . . . . . . . . . . . . 17,618 16,637 15,732
-------- ------- -------

Interest expense:
Deposits (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . 8,700 7,876 7,809
Borrowings and mortgage escrow . . . . . . . . . . . . . . . . . . 43 41 39
-------- ------- -------
Total interest expense . . . . . . . . . . . . . . . . . . . . . 8,743 7,917 7,848
-------- ------- -------

Net interest income . . . . . . . . . . . . . . . . . . . . . . 8,875 8,720 7,884

Provision for loan losses (Note 3) . . . . . . . . . . . . . . . . . 155 146 98
-------- ------- -------

Net interest income after provision for loan losses . . . . . . 8,720 8,574 7,786
-------- ------- -------

Noninterest income:
Banking service charges and fees . . . . . . . . . . . . . . . . . 186 167 193
Gain on sales of real estate owned . . . . . . . . . . . . . . . . -- 134 15
-------- ------- -------
Total noninterest income . . . . . . . . . . . . . . . . . . . . 186 301 208
-------- ------- -------

Noninterest expense:
Compensation and benefits (Note 9) . . . . . . . . . . . . . . . . 2,147 1,999 1,920
Federal deposit insurance costs, including a special assessment of
$1,232,000 in 1997 (Note 6) . . . . . . . . . . . . . . . . . . 139 1,584 430
Occupancy and equipment . . . . . . . . . . . . . . . . . . . . . 390 376 383
Data processing service fees . . . . . . . . . . . . . . . . . . . 231 212 208
Advertising and promotion . . . . . . . . . . . . . . . . . . . . 170 137 108
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879 952 816
-------- ------- -------
Total noninterest expense . . . . . . . . . . . . . . . . . . . 3,956 5,260 3,865
-------- ------- -------

Income before income tax expense . . . . . . . . . . . . . . . . 4,950 3,615 4,129

Income tax expense (Note 8) . . . . . . . . . . . . . . . . . . . . . 2,065 1,325 1,732
-------- ------- -------

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,885 $ 2,290 $ 2,397
======== ======= =======
</TABLE>

- ---------------------
Note references are to the Notes to Financial Statements beginning on page F-6.

50
<PAGE> 55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Sound Federal Bancorp will be formed as a federal corporation for the
purpose of issuing the Common Stock and owning all of the capital stock of the
Association issued in the Reorganization. Consequently, the Company has no
operating history. All information in this section should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus.

The Association's principal business has historically consisted of
offering savings and other deposits to the general public and using the funds
from such deposits to make loans secured by residential real estate. The
Association's results of operations depend primarily upon its net interest
income, which is the difference between income earned on interest-earning
assets, such as loans and investments, and the interest expense paid on
deposits. The Association's operations are affected to a much lesser degree by
noninterest income, such as banking service charges and fees. The
Association's net income is also affected by, among other things, provisions
for loan losses and noninterest expenses. The Association's principal operating
expenses, aside from interest expense, consist of compensation and benefits,
occupancy and equipment, deposit insurance costs and other expenses. The
Association's results of operations also are affected significantly by general
economic and competitive conditions, particularly changes in market interest
rates, government legislation and policies affecting fiscal affairs, housing
and financial institutions, monetary policies of the Federal Reserve System,
and the actions of bank regulatory authorities. Management intends to
initially invest the net proceeds from the Offering in interest-earning assets
and believes that the Company and the Association will derive additional
interest income from such sources.

CAPABILITY OF THE ASSOCIATION'S DATA PROCESSING TO ACCOMMODATE THE YEAR 2000

Like many financial institutions, the Association relies upon
computers for the daily conduct of its business and for data processing
generally. There is concern that on January 1, 2000 computers will be unable
to "read" the new year and as a consequence, there may be widespread computer
malfunctions. Management has reviewed this issue and has been advised by the
Association's data processing service center that they are addressing this
issue and that it should not affect the Association's external data processing.
The Association is in the process of testing its computer applications and
hardware to ensure that they will be able to read the year 2000. The
Association has contacted each of its vendors to ensure that they will be able
to provide service in light of the year 2000 issue. Most vendors have
represented to management that they are addressing the year 2000 issue and they
expect to be able to provide the services for which the Association has
contracted. Management will continue to monitor this issue and report to the
Board of Directors on a quarterly basis until full compliance is obtained from
all vendors. Costs related to the year 2000 issue will be expensed as they are
incurred, except for the costs, if any, for new hardware and software that is
purchased, which will be capitalized. At March 31, 1998, the costs incurred to
address the year 2000 issue have not been significant. Management does not
expect that the additional costs to be incurred in connection with the year
2000 issue will have a material impact on the Association's financial condition
or results of operations.

The costs of the project are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates
will be achieved, and actual results could differ materially from those plans.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes and similar
uncertainties. In addition, there can be no guarantee that the systems of
other companies on which the Association's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion
that is incompatible with the Association's systems, would not have a material
adverse effect on the Association.

51
<PAGE> 56
OPERATING STRATEGY

In guiding the Association's operations, management has implemented
various strategies designed to continue the institution's profitability
consistent with safety and soundness. These strategies include: (i) operating
a community-oriented financial institution that provides quality service by
monitoring the needs of its customers and offering customers personalized
service; (ii) emphasizing one-to-four family residential real estate lending;
(iii) maintaining high levels of liquidity; and (iv) conservative underwriting
standards to reduce nonperforming loans. It is anticipated, subject to market
conditions, that the strategies presently in place will be continued following
completion of the Reorganization.

COMMUNITY ORIENTED INSTITUTION. The Association was established in
Mamaroneck, New York in 1891 and has been operating continuously since that
time. Throughout its history, the Association has been committed to meeting
the financial needs of the communities in which it operates and is dedicated to
providing quality service to its customers. Management believes that the
Association can be more effective than many of its competitors in serving its
customers because of its ability to promptly and effectively provide senior
management responses to customer needs and inquiries. The Association's ability
to provide these services is enhanced by the stability of senior management
which has an average tenure with the Association of over 20 years. In
addition, the Association intends to use the mutual holding company structure
to maintain the Association as a community-oriented, independent savings
institution, and to establish the Charitable Foundation as a means of
furthering the Association's commitment to the communities in which it conducts
business.

EMPHASIS ON RESIDENTIAL REAL ESTATE LENDING. Historically, the
Association has emphasized the origination of one-to-four family residential
loans within Westchester County. As of March 31, 1998, approximately 83.8% of
the loan portfolio consisted of one-to-four family residential mortgage loans
and 98.5% of the loan portfolio consisted of loans secured by real estate.
During the fiscal year ended March 31, 1998, the Association originated $14.8
million of one-to-four family mortgage loans. The Association has emphasized
traditionally the origination of fixed rate residential mortgage loans. Of the
$28.9 million of total loans originated in fiscal year 1998, $28.6 million had
fixed rates of interest.

MAINTAINING HIGH LEVELS OF LIQUID INVESTMENTS. The Association
primarily originates fixed rate 30 year mortgage loans. At March 31, 1998,
$124.0 million, or 95.1% of the Association's loan portfolio consisted of fixed
rate loans. In the current low interest rate environment, management believes
that the origination of fixed rate loans provides the Association with greater
income than would be available if the Association chose to emphasize adjustable
rate loans which frequently have to be offered with initial below market
interest rates. In addition, the Association's customers have shown a
preference for fixed rate loans in the current low interest rate environment.
However, in order to position the Association to be able to redeploy assets
profitability in a rising interest rate environment, management has determined
to invest a significant portion of its assets in short term liquid investments.
The Association maintains a significant portion of its assets in short term
U.S. Government and agency securities and other interest earning assets (which
consist of federal funds sold and certificates of deposit at other financial
institutions). At March 31, 1998, U.S. Government or agency securities due in
five years or less totalled $8.0 million, and federal funds sold and
certificates of deposit totalled $47.9 million, or 18.8% of the Association's
assets. In addition, at March 31, 1998, $52.2 million, or 20.5% of the
Association's assets were invested in adjustable rate mortgage-backed
securities guaranteed by Fannie Mae and the Government National Mortgage
Association ("GNMA"). See "Risk Factors--Potential Impact of Changes in
Interest Rates and the Current Interest Rate Environment" and "--Management of
Market Risk--Interest Rate Risk."

MAINTAINING ASSET QUALITY. The Association's high asset quality is a
result of its conservative underwriting standards, the diligence of its loan
collection personnel and the stability of the local economy. In addition, the
Association also invests in mortgage-backed securities issued by GNMA, Freddie
Mac and Fannie Mae and other investment securities, primarily U.S. Government
securities and federal agency obligations. At March 31, 1998, the

52
<PAGE> 57
Association's ratio of nonperforming assets to total assets was 0.82% compared
to 0.98% and 1.37% at March 31, 1997 and 1996, respectively.

MANAGEMENT OF MARKET RISK - INTEREST RATE RISK

The Association's most significant form of market risk is interest
rate risk, as the majority of the Association's assets and liabilities are
sensitive to changes in interest rates. The Association's mortgage loan
portfolio, consisting primarily of loans on residential real property located
in Westchester County, is subject to risks associated with the local economy.
The Association does not own any trading assets. At March 31, 1998, the
Association did not have any hedging transactions in place, such as interest
rate swaps and caps. The Association's interest rate risk management program
focuses primarily on evaluating and managing the composition of the
Association's assets and liabilities in the context of various interest rate
scenarios. Factors beyond management's control, such as market interest rates
and competition, also have an impact on interest income and interest expense.
The Association's assets consist primarily of fixed rate mortgage loans which
have longer maturities than the Association's liabilities which consist
primarily of deposits.

A principal part of the Association's business strategy is to manage
interest rate risk and to minimize the Association's exposure to changes in
market interest rates. In recent years, the Association has followed the
following strategies to manage interest rate risk: (i) purchasing adjustable
rate mortgage-backed securities guaranteed by Fannie Mae or GNMA; (ii)
investing in short-term U.S. Government securities and federal agency
obligations; and (iii) maintaining a high level of liquid interest earning
assets such as short-term federal funds sold and certificates of deposit. By
investing in short-term, liquid securities, the Association believes it is
better positioned to react to increases in market interest rates. However,
investments in shorter term securities generally bear lower yields than longer
term investments. In addition, these strategies may result in lower levels of
interest income than would be obtained by investing in longer term fixed rate
loans. Management believes that maintaining a significant portion of its
assets in short term investments reduces the Association's exposure to interest
rate fluctuations and enhances long-term profitability.

NET PORTFOLIO VALUE. Management monitors the Association's interest
rate sensitivity through the use of a model which estimates the change in net
portfolio value ("NPV") in response to a range of assumed changes in market
interest rates. NPV is the present value of expected cash flows from assets,
liabilities, and off-balance sheet items. The model estimates the effect on
the Association's NPV of instantaneous and permanent 100 to 400 basis point
increases and decreases in market interest rates with no effect given to any
steps that management might take to counter the effect of interest rate
movements.

53
<PAGE> 58
The table below sets forth, as of March 31, 1998, the estimated
changes in the Association's NPV which would result from the designated
instantaneous changes in interest rates.

<TABLE>
<CAPTION>
Estimated Increase
Changes in (Decrease) in NPV(1)
Interest Rates Estimated ------------------------------
(basis points) NPV Amount Percent
-------------- ------------- ------------- -------------
(Dollars in Thousands)
<S> <C> <C> <C>
+400 $ 28,163 $ (12,120) (30)%
+300 31,757 (8,526) (21)
+200 35,127 (5,156) (13)
+100 38,133 (2,150) (5)
0 40,283 -- --
-100 41,765 1,482 4
-200 42,620 2,337 6
-300 43,949 3,666 9
-400 46,301 6,018 15
</TABLE>

- --------------------

(1) Represents the increase (decrease) in the estimated NPV at the indicated
change in interest rates compared to the NPV assuming no change in interest
rates.

Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not reflect
any actions management may undertake in response to changes in interest rates.

The table set forth above indicates that, in the event of a 200 basis
point decrease in interest rates, the Association would be expected to
experience a 6% increase in NPV. In the event of a 200 basis point increase in
interest rates, the Association would be expected to experience a 13% decrease
in NPV.

Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurement. Modeling changes in NPV require making certain
assumptions which may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV
table presented assumes that the composition of the Association's interest
sensitive assets and liabilities existing at the beginning of a period remain
constant over the period being measured and assumes that a particular change in
interest rates is reflected uniformly across the yield curve regardless of the
duration or repricing of specific assets and liabilities. Accordingly,
although the NPV table provides an indication of the Association's interest
rate risk exposure at a particular point in time, such measurements are not
intended to and do not provide a precise forecast of the effect of changes in
market interest rates on the Association's net interest income, and will differ
from actual results. Additionally, the guidelines established by the Board of
Directors are not strict limitations. While a goal of the Asset/Liability
Management Committee and the Board of Directors is to limit projected NPV
changes within the Board's guidelines, the Association will not necessarily
limit projected changes in NPV if the required action would present
disproportionate risk to the Association's continued profitability.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND 1997

ASSETS. Total assets increased $11.7 million, or 4.8%, to $254.7
million at March 31, 1998 from $243.0 million at March 31, 1997. The increase
in total assets resulted primarily from: a $7.0 million, or 5.7%, increase in
net loans to $128.6 million from $121.6 million; a $1.5 million, or 2.4%,
increase in held-to-maturity securities to $64.9 million from $63.4 million;
and a $2.6 million, or 6.5%, increase in cash and cash equivalents to $42.1
million from $39.5 million. Asset growth was funded through deposit inflows
and cash provided by the Association's

54
<PAGE> 59
operations. Overall asset growth reflects the Association's strategy of
investing in fixed rate residential loans, short-term liquid investments and
adjustable rate mortgage-backed securities. The increase in net loans
primarily reflects an increase of $5.6 million, or 5.4%, in one-to-four family
mortgage loans and a $3.6 million, or 38.5%, increase in advances on home
equity lines of credit, partially offset by a decrease of $3.3 million in
outstanding construction loans. One-to-four family mortgage loans totalled
$109.2 million, or 83.8% of total loans at March 31, 1998, compared to $103.6
million or 83.6% at March 31, 1997.

LIABILITIES. Total liabilities increased $8.8 million, or 4.1%, to
$222.8 million at March 31, 1998 from $214.0 million at March 31, 1997. The
increase in total liabilities is primarily attributable to an $8.7 million, or
4.1%, increase in deposits to $219.9 million from $211.2 million. The deposit
growth reflects an increase of $9.4 million, or 8.5%, in certificate accounts
partially offset by a $677,000, or 0.7%, decrease in passbook and other
accounts.

EQUITY. Retained earnings increased by $2.9 million, or 10.0%, to
$31.9 million at March 31, 1998 from $29.0 million at March 31, 1997,
reflecting net income of $2.9 million for the fiscal year.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND MARCH 31, 1996

ASSETS. Total assets increased $13.0 million, or 5.6%, to $243.0
million at March 31, 1997 from $230.0 million at March 31, 1996. The increase
in total assets resulted primarily from an $8.1 million, or 7.1%, increase in
net loans to $121.6 million from $113.5 million, and a $4.6 million, or 9.5%,
increase in mortgage-backed securities.

LIABILITIES. Total liabilities increased $10.7 million, or 5.2%, to
$214.0 million at March 31, 1997 from $203.3 million at March 31, 1996. The
increase in total liabilities was due to a $10.6 million, or 5.3%, increase in
deposits to $211.2 million from $200.6 million.

EQUITY. Retained earnings increased by $2.3 million, or 8.6%, to
$29.0 million at March 31, 1997 from $26.7 million at March 31, 1996,
reflecting net income of $2.3 million for the fiscal year.

55
<PAGE> 60
AVERAGE BALANCE SHEETS

The following table sets forth actual and average balance sheets,
average yields and costs, and certain other information at March 31, 1998 and
for the years ended March 31, 1998, 1997 and 1996. The table reflects the
average yield on interest-earning assets and the average cost of
interest-bearing liabilities (derived by dividing interest income or expense by
the monthly average balance of interest-earning assets or interest-bearing
liabilities, respectively), as well as the net yield on interest-earning
assets. No tax-equivalent adjustments were made, as the effect thereof was not
material. Nonaccrual loans were included in the computation of average
balances, but have been included in the table as loans having a zero yield.
The yields set forth below include the effect of deferred fees, discounts and
premiums which are included in interest income.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------
AT MARCH 31, 1998 1998
--------------------------- ------------------------------------------
AVERAGE
ACTUAL AVERAGE OUTSTANDING AVERAGE
BALANCE YIELD/RATE BALANCE INTEREST YIELD/RATE
------------ ----------- --------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)...................................... $ 128,558 8.20% $ 124,646 $ 10,456 8.39%
Mortgage-backed securities(2)................. 53,421 6.91 53,475 3,515 6.57
Other securities(2)........................... 14,471 6.21 13,789 826 5.99
Federal funds sold............................ 36,400 5.45 34,292 1,929 5.63
Certificates of deposit....................... 11,483 6.16 12,002 738 6.15
Other interest-earning assets................. 3,515 6.04 2,512 154 6.13
------------ ------------ -----------
Total interest-earning assets.............. 247,848 7.28 240,716 $ 17,618 7.32
===========
Noninterest earning assets...................... 6,901 7,100
------------ ------------
Total assets............................... $ 254,749 $ 247,816
============ ============

Interest-bearing liabilities:
Passbook and club accounts.................... $ 61,347 2.54% $ 62,197 $ 1,573 2.53%
Money market accounts......................... 17,676 3.05 18,556 510 2.75
NOW and Super NOW accounts.................... 21,261 2.04 20,269 452 2.23
Certificates of deposit ...................... 119,629 5.60 114,015 6,165 5.41
Other interest-bearing liabilities............ 2,451 2.22 1,870 43 2.30
------------ ------------ -----------
Total interest-bearing liabilities......... 222,364 4.18 216,907 $ 8,743 4.03
===========
Noninterest bearing liabilities................. 484 448
------------ ------------
Total liabilities.......................... 222,848 217,355
Equity ........................................ 31,901 30,461
============ ============
Total liabilities and equity............... $ 254,749 $ 247,816
------------ ------------
Net interest income............................. $ 8,875
===========
Net interest rate spread(3)..................... 3.10% 3.29%
Net earning assets(4)........................... $ 25,484 $ 23,809
============ ============
Net interest margin(5).......................... 3.69%
Average interest-earning assets to average
interest-bearing liabilities.................. 111.46% 110.98%

<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------------------------------------------
1997 1996
--------------------------------------- -------------------------------------
AVERAGE AVERAGE
OUTSTANDING AVERAGE OUTSTANDING AVERAGE
BALANCE INTEREST YIELD/RATE BALANCE INTEREST YIELD/RATE
------------ ------------ ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)...................................... $ 118,986 $ 9,987 8.39% $ 111,022 $ 9,468 8.53%
Mortgage-backed securities(2)................. 50,930 3,244 6.37 43,440 2,819 6.49
Other securities(2)........................... 12,956 768 5.93 14,280 717 5.02
Federal funds sold............................ 33,523 1,793 5.35 31,685 1,870 5.90
Certificates of deposit....................... 11,765 700 5.95 11,317 699 6.18
Other interest-earning assets................. 2,360 145 6.14 2,623 159 6.06
------------ ----------- --------- ---------
Total interest-earning assets.............. 230,520 $ 16,637 7.22 214,367 $ 15,732 7.34
=========== =========
Noninterest earning assets...................... 6,606 6,459
------------ ---------
Total assets............................... $ 237,126 $ 220,826
=========== ===========

Interest-bearing liabilities:
Passbook and club accounts.................... $ 64,537 $ 1,640 2.54% $ 67,537 $ 1,903 2.82%
Money market accounts......................... 17,845 525 2.94 16,446 516 3.14
NOW and Super NOW accounts.................... 19,454 393 2.02 17,615 358 2.03
Certificates of deposit ...................... 104,991 5,318 5.07 91,557 5,032 5.50
Other interest-bearing liabilities............ 1,771 41 2.32 1,651 39 2.36
------------ ----------- ----------- -------
Total interest-bearing liabilities......... 208,598 $ 7,917 3.80 194,806 $ 7,848 4.03
=========== ==========
Noninterest bearing liabilities................. 508 395
------------ -----------
Total liabilities.......................... 209,106 195,201
Equity ........................................ 28,020 25,625
------------ ------------
Total liabilities and equity............... $ 237,126 $ 220,826
============ ===========
Net interest income............................. $ 8,720 $ 7,884
=========== ==========
Net interest rate spread(3)..................... 3.42% 3.31%
Net earning assets(4)........................... $ 21,922 $ 19,561
------------ ----------
Net interest margin(5).......................... 3.78% 3.68%
Average interest-earning assets to average
interest-bearing liabilities.................. 110.51% 110.04%
</TABLE>

- ----------------------
(1) Balances are net of deferred loan fees, construction loans in process and
the allowance for loan losses.

(2) Average outstanding balances are based on
amortized cost.

(3) Net interest rate spread represents the difference between the yield on
average interest-earning assets and the cost of average interest-bearing
liabilities.

(4) Net earning assets represent total interest-earning assets less
total interest-bearing liabilities.

(5) Net interest margin represents net interest income divided by average total
interest-earning assets.

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<PAGE> 61

RATE/VOLUME ANALYSIS

The following table presents the dollar amount of changes in interest
income and interest expense for the major categories of the Association's
interest-earning assets and interest-bearing liabilities. Information is
provided for each category of interest-earning assets and interest-bearing
liabilities, with respect to (i) changes attributable to changes in volume
(i.e., changes in balances multiplied by the prior-period rate) and (ii)
changes attributable to rate (i.e., changes in rate multiplied by prior-period
balances). For purposes of this table, changes attributable to both rate and
volume, which cannot be segregated, have been allocated proportionately to the
change due to volume and the change due to rate.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------
1998 VS. 1997 1997 VS. 1996
------------------------------ -----------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO TOTAL DUE TO TOTAL
------------------- INCREASE ------------------- INCREASE
VOLUME RATE (DECREASE) VOLUME RATE (DECREASE)
-------- --------- ---------- -------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans . . . . . . . . . . . . . . . . . $ 475 $ (6) $ 469 $ 672 $ (153) $ 519
Mortgage-backed securities . . . . . . . 163 108 271 483 (58) 425
Other securities . . . . . . . . . . . 50 8 58 (66) 117 51
Federal funds sold . . . . . . . . . . 41 95 136 112 (189) (77)
Certificates of deposit . . . . . . . . 14 24 38 27 (26) 1
Other . . . . . . . . . . . . . . . . . 9 -- 9 (14) -- (14)
------ ------- ------ ------ ------- ------

Total interest-earning assets . . . $ 752 $ 229 $ 981 $1,214 $ (309) $ 905
====== ======= ====== ====== ======= ======

Interest-bearing liabilities:
Passbook and club accounts . . . . . . $ (59) $ (8) $ (67) $ (82) $ (181) $ (263)
Money market accounts . . . . . . . . . 21 (36) (15) 41 (32) 9
NOW and Super NOW accounts . . . . . . 16 43 59 37 (2) 35
Certificates of deposit . . . . . . . . 464 383 847 718 (432) 286
Other . . . . . . . . . . . . . . . . . 2 -- 2 3 (1) 2
------ ------- ------ ------ ------- ------

Total interest-bearing liabilities . $ 444 $ 382 $ 826 $ 717 $ (648) $ 69
====== ======= ====== ====== ======= ======

Net interest income . . . . . . . . . . . . $ 308 $ (153) $ 155 $ 497 $ 339 $ 836
====== ======= ====== ====== ======= ======
</TABLE>

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1998 AND 1997

NET INCOME. Net income increased by $595,000, or 26.0%, to $2.9
million for the year ended March 31, 1998 from $2.3 million for the prior year.
The increase was primarily attributable to a $1.3 million decrease in
noninterest expense (primarily due to the absence in fiscal 1998 of a $1.2
million special assessment incurred in fiscal 1997 to recapitalize the SAIF)
and a $155,000 increase in net interest income. Partially offsetting these
items was a $740,000 increase in income tax expense and a $115,000 decrease in
noninterest income. Tax expense for fiscal 1997 was reduced by a tax benefit
of $250,000 due to a change in New York State tax law. Excluding the after-tax
effect of the special assessment and the State tax benefit, net income for the
year ended March 31, 1997 would have been approximately $2.8 million.

INTEREST INCOME. Interest income increased by $981,000, or 5.9%, to
$17.6 million for the year ended March 31, 1998 from $16.6 million for the year
ended March 31, 1997. The increase in interest income was primarily
attributable to a $10.2 million increase in the average balance of interest
earning assets to $240.7 million for the year ended March 31, 1998 from $230.5
million for the prior year, and an increase in the average yield on interest
earning assets to 7.32% from 7.22%. The increase in the average yield was
primarily attributable to increases in the average yield on mortgage-backed
securities, federal funds and certificates of deposit. Interest income on
loans increased by $469,000, or 4.7%, for the year ended March 31, 1998
compared to the prior year, primarily reflecting a $5.6 million increase in
average loan balances to $124.6 million from $119.0 million. The Association
originated new loans of

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<PAGE> 62
$28.9 million (including one-to-four family fixed rate mortgage loans and home
equity lines of credit which totalled $21.7 million) and collected principal
repayments of $22.4 million during fiscal 1998. Interest income on
mortgage-backed securities increased $271,000, or 8.4%, for the year ended
March 31, 1998 compared to the prior year, reflecting an increase in the
average balance of mortgage-backed securities to $53.5 million from $50.9
million and an increase in the average yield to 6.57% from 6.37%. Interest
income on other securities increased $58,000, or 7.6%, for the year ended March
31, 1998 compared to the prior year, primarily due to an increase in the
average yield to 5.99% from 5.93%. Interest income on federal funds sold
increased by $136,000, or 7.6%, for the year ended March 31, 1998 compared to
the prior year, reflecting an increase in the average balance of federal funds
sold to $34.3 million from $33.5 million and an increase in the average yield
to 5.63% from 5.35%. Interest income on certificates of deposit increased
$38,000, or 5.4%, for the year ended March 31, 1998 compared to the prior year,
due to an increase in the average balance of certificates of deposit to $12.0
million from $11.8 million and an increase in the average yield to 6.15% from
5.95%.

INTEREST EXPENSE. Interest expense increased $826,000, or 10.4%, to
$8.7 million for the year ended March 31, 1998 from $7.9 million for the prior
year. The increase in interest expense was attributable to an increase in the
average balance of interest-bearing liabilities (consisting primarily of
deposits) to $216.9 million from $208.6 million and an increase in the average
cost of interest-bearing liabilities to 4.03% from 3.80%. The increase in the
cost of interest-bearing liabilities reflected the continued change in the mix
of deposit accounts from lower-cost passbook and club accounts to higher-cost
certificate accounts. Certificates of deposit comprised 52.6% of total average
interest-bearing liabilities in fiscal 1998 compared to 50.3% in the prior
year, reflecting growth in certificate accounts attributable to the
Association's marketing efforts. Interest expense on certificate accounts
increased $847,000, or 15.9%, for the year ended March 31, 1998 compared to the
prior year, as the average balance of certificate accounts increased to $114.0
million from $105.0 million and the average rate increased to 5.41% from 5.07%.
Total interest expense on other deposit accounts (passbook, club accounts,
money market and NOW accounts) was relatively unchanged at approximately $2.5
million in both fiscal 1998 and 1997. The average balances of these accounts
totalled $101.0 million in fiscal 1998 compared to $101.8 million in fiscal
1997, and the overall average rate was 2.51% in both years.

NET INTEREST INCOME. For the years ended March 31, 1998 and 1997, net
interest income was $8.9 million and $8.7 million, respectively. The $155,000
increase in net interest income in fiscal 1998 was primarily attributable to
the positive effect of a $1.9 million increase in net earning assets
(interest-earning assets less interest-bearing liabilities), partially offset
by a 13 basis point decrease in the interest rate spread to 3.29% from 3.42%.
The ratio of interest-earning assets to interest-bearing liabilities remained
stable at 110.98% and 110.51% for the years ended March 31, 1998 and 1997,
respectively. The Association's net interest margin decreased to 3.69% in
fiscal 1998 from 3.78% in the prior year.

PROVISION FOR LOAN LOSSES. The provisions for loan losses were
$155,000 and $146,000 for the years ended March 31, 1998 and 1997,
respectively. Provisions for loan losses represent charges to income in order
to maintain the allowance for loan losses at a level deemed appropriate by
management based on historical experience, the volume and type of lending
conducted by the Association, the level of the Association's nonperforming
loans and general economic conditions, particularly as they relate to the
Association's market area. At March 31, 1998 and 1997, nonperforming loans
totaled $2.0 million and $2.3 million, respectively, and the allowance for loan
losses was $984,000 and $845,000, respectively. The increase in the allowance
for loan losses was deemed prudent in light of the increase in the size of the
loan portfolio to $128.6 million at March 31, 1998 from $121.6 million at March
31, 1997. Management regularly reviews the Association's loan portfolio and
makes provisions for loan losses in order to maintain the adequacy of the
allowance. At March 31, 1998 and 1997, the allowance for loan losses as a
percentage of total loans was 0.75% and 0.68%, respectively. The allowance for
loan losses as a percentage of total nonperforming loans was 50.26% and 37.32%,
respectively, at March 31, 1998 and 1997.

NONINTEREST INCOME. Noninterest income totaled $186,000 and $301,000
for the years ended March 31, 1998 and 1997, respectively. The $115,000
decrease in noninterest income was attributable to the absence in fiscal 1998

58
<PAGE> 63
of gains on sale of real estate owned which amounted to $134,000 in fiscal
1997, partially offset by a $19,000 increase in banking service charges and
fees.

NONINTEREST EXPENSE. Noninterest expense decreased by $1.3 million,
or 24.5%, to $4.0 million for the year ended March 31, 1998 from $5.3 million
for the year ended March 31, 1997. The decrease in noninterest expense is
primarily attributable to the absence in fiscal 1998 of a special one-time
assessment of $1.2 million incurred in fiscal 1997 to recapitalize the Savings
Association Insurance Fund (the "SAIF"). In addition, other deposit insurance
costs decreased by $213,000 in fiscal 1998 compared to the prior year
(reflecting lower costs subsequent to the SAIF recapitalization) and other
noninterest expenses decreased by $73,000 (primarily reflecting lower net costs
of real estate owned). Partially offsetting these decreases was a $148,000
increase in compensation and benefits to $2.1 million from $2.0 million
reflecting normal salary increases and an increase in directors' fees.

INCOME TAXES. Income tax expense was $2.1 million for the year ended
March 31, 1998, compared to $1.3 million for the year ended March 31, 1997 and
the effective tax rates were 41.7% and 36.7%, respectively. The change in
income tax expense in fiscal 1998 resulted from higher pre-tax income, as well
as a tax benefit of $250,000 in fiscal 1997 due to a decrease in deferred tax
liabilities caused by an amendment to the New York State tax law enacted in
July 1996. The amendment changed the base-year for tax bad debt reserves and
eliminated the need for a deferred tax liability previously recognized for
reserves in excess of the base-year amount. See Note 8 of the Notes to
Financial Statements.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 1997 AND 1996

NET INCOME. Net income decreased $107,000, or 4.5%, to $2.3 million
for the year ended March 31, 1997 from $2.4 million for the prior year. The
decrease was primarily attributable to a $1.4 million increase in noninterest
expense (primarily due to a $1.2 million special assessment in fiscal 1997 to
recapitalize the SAIF), substantially offset by an $836,000 increase in net
interest income and a $407,000 decrease in income tax expense. Income tax
expense for fiscal 1997 was reduced by a tax benefit of $250,000 due to a
change in New York State tax law. Excluding the after-tax effect of the special
assessment and the state tax benefit, net income for the year ended March 31,
1997 would have been approximately $2.8 million.

INTEREST INCOME. Interest income increased $905,000, or 5.8%, to
$16.6 million for the year ended March 31, 1997 from $15.7 million for the year
ended March 31, 1996. The increase in interest income was primarily
attributable to a $16.1 million increase in the average balance of interest
earning assets to $230.5 million for the year ended March 31, 1997 from $214.4
million for the prior year, partially offset by a decrease in the average yield
on interest earning assets to 7.22% from 7.34%. Interest income on loans
increased $519,000, or 5.5%, for the year ended March 31, 1997 compared to the
prior year, primarily reflecting an $8.0 million increase in average loan
balances to $119.0 million from $111.0 million. The Association originated new
loans of $24.1 million (including fixed rate one-to-four family mortgage loans
and home equity lines of credit which totalled $19.7 million) and collected
principal repayments of $16.6 million during fiscal 1997. Interest income on
mortgage-backed securities increased $425,000, or 15.1%, for the year ended
March 31, 1997 compared to the prior year, reflecting an increase in the
average balance of mortgage-backed securities to $50.9 million from $43.4
million partially offset by a decrease in the average yield to 6.37% from
6.49%. Interest income on other securities increased $51,000, or 7.1%, for the
year ended March 31, 1997 compared to the prior year, primarily due to an
increase in the average yield to 5.93% from 5.02%. Interest income on federal
funds sold decreased $77,000, or 4.1%, for the year ended March 31, 1997
compared to the prior year, reflecting a decrease in the average yield on
federal funds sold to 5.35% from 5.90%, partially offset by an increase in the
average balance to $33.5 million from $31.7 million. Interest income on
certificates of deposit was substantially unchanged at $700,000 for the year
ended March 31, 1997. Interest and dividend income on other interest earning
assets decreased $14,000, or 8.8%, for the year ended March 31, 1997 compared
to the prior fiscal year.

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<PAGE> 64
INTEREST EXPENSE. Interest expense increased $69,000, or 0.9%, to
$7.9 million for the year ended March 31, 1997 from $7.8 million for the prior
year. The increase in interest expense was attributable to an increase in the
average balance of interest-bearing liabilities (consisting primarily of
deposits) to $208.6 million from $194.8 million and a decrease in the average
cost of interest-bearing liabilities to 3.80% from 4.03%. The decrease in the
cost of interest-bearing liabilities reflected the general decrease in market
interest rates. Certificate accounts comprised 50.3% of total average
interest-bearing liabilities in fiscal 1997 compared to 47.0% in the prior
year, reflecting growth in certificate accounts attributable to the
Association's marketing efforts. Interest expense on certificate accounts
increased $286,000, or 5.7%, for the year ended March 31, 1997 compared to the
prior year, as the average balance of certificate accounts increased to $105.0
million from $91.6 million. The effect of the higher average balance was
partially offset by a decrease in the average rate to 5.07% from 5.50%. Total
interest expense on other deposit accounts (passbook, club, money market and
NOW) decreased $219,000 or 7.9%, for the year ended March 31, 1997 compared to
prior year, as the average rate on these accounts decreased to 2.51% from
2.73%.

NET INTEREST INCOME. For the years ended March 31, 1997 and 1996, net
interest income was $8.7 million and $7.9 million, respectively. The $836,000
increase in net interest income was primarily attributable to the positive
effect of a $2.4 million increase in net earning assets (interest-earning
assets less interest-bearing liabilities) and an 11 basis point increase in the
interest rate spread to 3.42% from 3.31%. The ratio of interest-earning assets
to interest-bearing liabilities remained stable at 110.51% and 110.04% for the
years ended March 31, 1997 and 1996, respectively. The Association's net
interest margin increased to 3.78% in fiscal 1997 from 3.68% in the prior year.

PROVISION FOR LOAN LOSSES. The provisions for loan losses were
$146,000 and $98,000 for the years ended March 31, 1997 and 1996, respectively.
At March 31, 1997 and 1996, nonperforming loans totaled $2.3 million and $3.1
million, respectively, and the allowance for loan losses was $845,000 and
$725,000, respectively. Management regularly reviews the Association's loan
portfolio and makes provisions for loan losses in order to maintain the
adequacy of the allowance. At March 31, 1997 and 1996, the allowance for loan
losses as a percentage of total loans was 0.68% and 0.62%, respectively. The
Association's allowance for loan losses as a percentage of total nonperforming
loans was 37.32% and 23.48%, respectively, at March 31, 1997 and 1996.

NONINTEREST INCOME. Noninterest income totaled $301,000 and $208,000
for the years ended March 31, 1997 and 1996, respectively. The $93,000
increase in noninterest income was attributable to a $119,000 increase in gains
on sales of real estate owned, partially offset by a $26,000 decrease in
banking service charges and fees.

NONINTEREST EXPENSE. Noninterest expense increased by $1.4 million,
or 36.1%, to $5.3 million for the year ended March 31, 1997 from $3.9 million
for the year ended March 31, 1996. The increase in noninterest expense was
primarily attributable to the payment in fiscal 1997 of a special one-time
assessment of $1.2 million to recapitalize the SAIF. Other changes in
noninterest expense in fiscal 1997 compared to the prior year included
increases of $79,000 in compensation and benefits and $136,000 in other
noninterest expenses (including increases in real estate owned expense), and a
decrease of $78,000 in other deposit insurance costs subsequent to the SAIF
recapitalization.

INCOME TAXES. Income tax expense was $1.3 million for the year ended
March 31, 1997, compared to $1.7 million for the year ended March 31, 1996.
The effective tax rate decreased to 36.7% from 41.9% primarily as a result of a
tax benefit of $250,000 in fiscal 1997 due to a decrease in deferred tax
liabilities caused by an amendment to the New York State tax law enacted in
July 1996.

CAPITAL RESOURCES AND LIQUIDITY

The objective of the Association's liquidity management is to ensure
the availability of sufficient cash flows to meet all financial commitments and
to capitalize on opportunities for expansion. Liquidity management addresses
the Association's ability to meet deposit withdrawals on demand or at
contractual maturity, to repay borrowings as they mature, and to fund new loans
and investments as opportunities arise.

60
<PAGE> 65
At March 31, 1998, the Association had outstanding $6.4 million in
commitments to originate loans. During the year ended March 31, 1998, the
Association originated $28.9 million in loans. If the Association requires
funds beyond its internal funding capabilities, advances from the FHLB of New
York are available. At March 31, 1998, approximately $108.9 million in
certificates of deposit were scheduled to mature within a year. The
Association's experience has been that a substantial portion of its maturing
certificate of deposit accounts are renewed.

The Association's primary investing activities are the origination of
mortgage loans, and the purchase of short-term investments and adjustable rate
mortgage-backed securities. These activities are funded by deposit growth,
principal repayments on loans, mortgage-backed securities and other investment
securities.

The Association is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five
years or less. Current OTS regulations require that a savings association
maintain liquid assets of not less than 5% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less.
Monetary penalties may be imposed for failure to meet applicable liquidity
requirements. At March 31, 1998, the Association's liquidity, as measured for
regulatory purposes, was 31.5%, or $56.5 million in excess of the minimum OTS
requirement.

Following the Reorganization, the Company will initially conduct no
business other than holding the capital stock of the Association and the loan
it will make to the ESOP. The Company expects to retain up to 50% of the net
proceeds of the Offering. See "Use of Proceeds." In the future, the Company's
primary source of funds, other than income from its investments and principal
and interest payments received on the ESOP loan, is expected to be capital
distributions from the Stock Association. As a stock savings association, the
Stock Association may not declare or pay a cash dividend on or repurchase any
of its capital stock if the effect of such transaction would be to reduce its
equity to an amount which is less than the minimum amount required by
applicable regulatory federal regulations. At March 31, 1998, the Association
was in compliance with all applicable regulatory capital requirements. See
"Historical and Pro Forma Regulatory Capital Compliance."

IMPACT OF INFLATION AND CHANGING PRICES

The Financial Statements and related Notes have been prepared in
conformity with generally accepted accounting principles, which generally
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of the Association's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Association
are financial. As a result, the Association's net income is directly impacted
by changes in interest rates, which are indirectly influenced by inflationary
expectations. The Association's ability to match the interest sensitivity of
its financial assets to the interest sensitivity of its financial liabilities
as part of its interest rate risk management program may reduce the effect of
changes in interest rates on the Association's net income. Changes in interest
rates do not necessarily move to the same extent as changes in the price of
goods and services. In the current interest rate environment, liquidity and the
maturity structure of the Association's assets and liabilities are critical to
the maintenance of acceptable levels of net income. Management has concluded
that by maintaining a significant portion of the Association's assets in
short-term investments and adjustable rate mortgage-backed securities, the
Association will be able to redeploy its assets in a rising interest rate
environment.

IMPACT OF NEW ACCOUNTING STANDARDS

FASB STATEMENT ON EARNINGS PER SHARE. In February 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128. The Statement establishes standards for computing
and presenting earnings per share and applies to entities with publicly held
common stock or potential common stock. This Statement simplifies the prior
accounting standards for computing earnings per share, as set forth in
Accounting Principles Board ("APB") Opinion No. 15. SFAS No. 128 replaces the
presentation of primary EPS

61
<PAGE> 66
with basic EPS and requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock (such as stock options)
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. This Statement
will apply to the Association's earnings per share disclosures which will be
made from the date of completion of the Reorganization and Offering.

FASB STATEMENT ON ACCOUNTING FOR STOCK-BASED COMPENSATION. In October
1995, the FASB issued SFAS No. 123 which addresses accounting for stock-based
compensation arrangements such as the Stock Option Plan and Stock Award Plan
which are expected to be implemented subsequent to the Reorganization. SFAS
No. 123 defines a "fair-value-based method" of accounting whereby compensation
cost is measured at the grant date of a stock-based compensation award based on
the fair value of the award; such compensation cost is recognized as expense
over the service (vesting) period. The FASB has encouraged all entities to
adopt the fair-value-based method; however, SFAS No. 123 allows entities to
continue the use of the "intrinsic-value-based method" prescribed by APB
Opinion No. 25. Under the intrinsic-value-based method, compensation cost is
measured based on the award's intrinsic value, or the excess (if any) of the
market price of the stock at the grant date over the exercise price, i.e., the
amount (if any) that the employee must pay to acquire the stock. However, most
stock option grants have no intrinsic value at the grant date and, as such, no
compensation cost is recognized under APB Opinion No. 25. Entities electing to
continue to apply APB Opinion No. 25 must make certain pro forma disclosures of
net income and earnings per share, as if the fair-value-based method had been
applied to awards granted in fiscal years beginning after December 15, 1994.
The Association expects to adopt the "intrinsic-value-based method" as
prescribed by APB Opinion No. 25. Accordingly, no compensation expense will be
recognized for the Stock Option Plan since the exercise price of the options
will equal the market price of the underlying stock at the grant date. The
grant date fair value of shares awarded under the Stock Award Plan will be
recognized as expense on a straight-line basis over the five-year vesting
period. See "Pro Forma Data."

FASB STATEMENT ON TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. In June 1996, the FASB issued SFAS No. 125
which provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities based on consistent
application of a financial-components approach that focuses on control. SFAS
No. 125 applies to transactions such as loan securitizations, sales of partial
interests in financial assets, repurchase agreements, securities lending,
pledges of collateral, loan syndications and participations, sales of
receivables with recourse, servicing of mortgage and other loans, and
in-substance defeasances of debt. The Statement distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. If a transfer does not
meet the criteria for a sale, the transaction is accounted for as a secured
borrowing with a pledge of collateral. SFAS No. 125 applies prospectively to
transactions occurring after January 1, 1997, although the effective date of
certain provisions was January 1, 1998. SFAS No. 125 has not had, and is not
expected to have, a material impact on the Association's financial statements.

FASB STATEMENT ON REPORTING COMPREHENSIVE INCOME. In June 1997, the
FASB issued SFAS No. 130 which establishes standards for the reporting and
display of comprehensive income (and its components) in financial statements.
The standard does not, however, specify when to recognize or how to measure
items that make up comprehensive income. Comprehensive income represents net
income and certain amounts reported directly in equity, such as the net
unrealized gain or loss on available-for-sale securities. While SFAS No. 130
does not require a specific reporting format, it does require that an
enterprise display in the financial statements an amount representing total
comprehensive income for the period. This Statement will be effective for the
Association's fiscal year ending March 31, 1999. Had this Statement applied to
the Association in fiscal 1998, 1997 and 1996, the Association would have
reported comprehensive substantially equal to its reported net income for each
of those years.

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<PAGE> 67
FASB STATEMENT ON SEGMENT DISCLOSURES AND RELATED INFORMATION. In
June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which changes the way public companies
report information about segments of their business and requires them to report
selected segment information in their quarterly reports issued to shareholders.
Among other things, SFAS No. 131 requires public companies to report (i)
certain financial and descriptive information about its reportable operating
segments (as defined), and (ii) certain enterprise-wide financial information
about products and services, geographic areas and major customers. The
required segment financial disclosures include a measure of profit or loss,
certain specific revenue and expense items, and total assets. This statement
is effective for reporting by public companies in fiscal years beginning after
December 15, 1997 and, accordingly, would be adopted by the Association upon
completion of the Reorganization and Offering. SFAS No. 131 is not expected to
have a significant impact on the Association's financial reporting.

FASB STATEMENT ON EMPLOYER DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS. In February 1998, the FASB issued SFAS No. 132 which
standardizes the disclosure requirements for pensions and other postretirement
benefits; requires additional information on changes in the benefit obligations
and fair values of plan assets; and eliminates certain present disclosure
requirements. The Statement does not change the measurement or recognition
requirements for postretirement benefits. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997 and, accordingly, will be adopted by
the Association in the year ending March 31, 1999. Management does not expect
that this standard will significantly affect the Association's financial
reporting.

FASB STATEMENT ON DERIVATIVES AND HEDGING ACTIVITIES. In June 1998,
the FASB issued SFAS No. 133 which establishes accounting and reporting
standards for derivative instruments and for hedging activities. The Statement
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet at fair value. If certain conditions are met,
a derivative may be specifically designated as a fair value hedge, a cash flow
hedge, or a foreign currency hedge. At specific accounting treatment applies
to each type of hedge. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999 and, accordingly, would apply to the
Association beginning on April 1, 2000. The Association has not engaged in
derivatives and hedging activities covered by the new standard, and does not
expect to do so in the foreseeable future. Accordingly, SFAS No. 133 is not
expected to have a material impact on the Association's financial statements.

BUSINESS OF THE ASSOCIATION

GENERAL

The Association was organized in 1891 as a New York chartered savings
association and obtained its federal charter in 1934. The Association has
operated continuously in Westchester County since its inception. The
Association conducts its business from its main office in Mamaroneck and two
branch offices located in Harrison and Rye Brook, New York. The Association is
primarily engaged in the business of offering savings and other deposits to the
general public, and using the funds from such deposits to make one-to-four
family mortgage loans secured primarily by properties in Westchester County,
New York. The Association's deposit accounts are insured up to applicable
limits by the FDIC.

LENDING ACTIVITIES

Historically, the Association's principal lending activity has been
the origination of fixed rate first mortgage loans for the purchase or
refinancing of one-to-four family residential real property. The Association
retains all loans that it originates. One-to-four family residential mortgage
loans represented $109.2 million, or 83.8%, of the Association's loan portfolio
at March 31, 1998. Home equity lines of credit represented $13.1 million, or
10.1% of the Association's loan portfolio at March 31, 1998. The Association
also offers multi-family real estate loans, commercial mortgage loans and
construction loans. Multi-family mortgage loans totaled $412,000, or 0.3%, of
the loan portfolio at March 31, 1998. Commercial mortgage loans totaled
approximately $3.8 million, or 2.9% of the loan

63
<PAGE> 68
portfolio at March 31, 1998. Construction loans totaled $1.8 million, or 1.4%
of the loan portfolio at March 31, 1998. The Association also makes consumer
loans, which primarily consist of automobile, passbook, home improvement and
secured personal loans. Consumer loans totaled $2.0 million, or 1.5% of the
loan portfolio at March 31, 1998.

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<PAGE> 69
LOAN PORTFOLIO COMPOSITION. The following table sets forth the
composition of the Association's loan portfolio by type of loan at the dates
indicated.

<TABLE>
<CAPTION>
March 31,
----------------------------------------------------------------------------------
1998 1997 1996 1995
----------------- ------------------- -------------------- -------------------
Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- -------- -------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four family . . . . . . $109,207 83.8% $103,595 83.6% $ 98,865 84.7% $ 98,675 89.5%
Home equity lines of credit . 13,138 10.1 9,487 7.7 7,131 6.1 5,146 4.6
Multi-family . . . . . . . . . 412 0.3 348 0.3 373 0.3 395 0.4
Commercial . . . . . . . . . . 3,811 2.9 3,416 2.8 3,469 3.0 3,188 2.9
Construction . . . . . . . . . 1,800 1.4 5,539 4.5 5,193 4.5 1,451 1.3
-------- ------- -------- ------ -------- ------ -------- ------
Total mortgage loans . . . . 128,368 98.5 122,385 98.9 115,031 98.6 108,855 98.7
-------- ------- -------- ------ -------- ------ -------- -------

Consumer loans:
Automobile loans . . . . . . . 1,011 0.8 1,028 0.8 968 0.8 647 0.6
Other(1) . . . . . . . . . . . 1,016 0.7 426 0.3 665 0.6 737 0.7
-------- ------- -------- ------ -------- ------ -------- ------
Total consumer loans . . . . 2,027 1.5 1,454 1.1 1,633 1.4 1,384 1.3
-------- ------- -------- ------ -------- ------ -------- ------

Total loans . . . . . . . . . . . 130,395 100.0% 123,839 100.0% 116,664 100.0% 110,239 100.0 %
======= ====== ====== ======

Construction loans in process . . (573) (1,049) (2,023) (500)
Allowance for loan losses . . . . (984) (845) (725) (652)
Deferred loan origination fees,
net . . . . . . . . . . . . . (280) (328) (384) (503)
-------- -------- -------- --------
Total loans, net . . . . . . . . $128,558 $121,617 $113,532 $108,584
======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
March 31,
------------------
1994
------------------
Amount Percent
-------- -------
(Dollars in Thousands)

<S> <C> <C>
Mortgage loans:
One-to-four family . . . . . . . $ 94,089 89.3%
Home equity lines of credit . . 5,304 5.0
Multi-family . . . . . . . . . . 680 0.7
Commercial . . . . . . . . . . . 3,088 2.9
Construction . . . . . . . . . . 365 0.4
-------- ------
Total mortgage loans . . . . . 103,526 98.3
-------- ------

Consumer loans:
Automobile loans . . . . . . . . 185 0.2
Other(1) . . . . . . . . . . . . 1,625 1.5
-------- ------
Total consumer loans . . . . . 1,810 1.7
-------- ------

Total loans . . . . . . . . . . . . 105,336 100.0%
=======

Construction loans in process . . . (112)
Allowance for loan losses . . . . . (568)
Deferred loan origination fees,
net . . . . . . . . . . . . . . (529)
--------
Total loans, net . . . . . . . . . $104,127
========
</TABLE>
- -------------------------
(1) Primarily secured personal loans, loans secured by deposit accounts and
home improvement loans.

65
<PAGE> 70
The following table sets forth the composition of the Association's
loan portfolio by fixed and adjustable rates at the dates indicated.

<TABLE>
<CAPTION>
March 31,
-----------------------------------------------------------------------------------
1998 1997 1996 1995
------------------- ------------------- ------------------- -------------------
Amount Percent Amount Percent Amount Percent Amount Percent
-------- --------- --------- --------- -------- ---------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Loans
Mortgage loans:
One-to-four family . . . . . . $103,887 79.7% $ 96,801 78.2% $ 90,881 77.9% $ 90,132 81.8%
Home equity lines of credit . . 12,094 9.3 8,145 6.6 5,528 4.7 2,826 2.5
Multi-family . . . . . . . . . 412 0.3 348 0.3 373 0.3 395 0.4
Commercial . . . . . . . . . . 3,811 2.9 3,380 2.7 3,403 2.9 3,087 2.8
Construction . . . . . . . . . 1,800 1.4 5,539 4.5 5,193 4.5 1,451 1.3
-------- ------- -------- ------ -------- ------ -------- ------
Total mortgage loans . . . . 122,004 93.6 114,213 92.3 105,378 90.3 97,891 88.8
Consumer loans(1) . . . . . . . 2,027 1.5 1,454 1.1 1,633 1.4 1,384 1.3
-------- ------- -------- ------ -------- ------ -------- ------
Total fixed rate loans . . . 124,031 95.1 115,667 93.4 107,011 91.7 99,275 90.1
-------- ------- -------- ------ -------- ------ -------- ------

Adjustable Rate Loans
Mortgage loans:
One-to-four family . . . . . . 5,320 4.1 6,794 5.5 7,984 6.8 8,543 7.8
Home equity lines of credit . . 1,044 0.8 1,342 1.1 1,603 1.4 2,320 2.1
Commercial . . . . . . . . . . -- -- 36 -- 66 0.1 101 --
-------- ------- -------- ------ -------- ------ -------- ------
Total adjustable-rate loans 6,364 4.9 8,172 6.6 9,653 8.3 10,964 9.9
-------- ------- -------- ------ -------- ------ -------- ------

Total loans . . . . . . . . . . . . 130,395 100.0% 123,839 100.0% 116,664 100.0% 110,239 100.0 %
======= ====== ====== ======

Construction loans in process . . . (573) (1,049) (2,023) (500)
Allowance for loan losses . . . . . (984) (845) (725) (652)
Deferred loan origination
fees, net . . . . . . . . . . . (280) (328) (384) (503)
-------- -------- -------- --------
Total loans, net . . . . . . . . . $128,558 $121,617 $113,532 $108,584
========= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
March 31,
---------------------
1994
---------------------
Amount Percent
---------- ---------
(Dollars in Thousands)
<S> <C> <C>
Fixed Rate Loans
Mortgage loans:
One-to-four family . . . . . . $ 85,930 81.6%
Home equity lines of credit . . 2,227 2.1
Multi-family . . . . . . . . . 680 0.7
Commercial . . . . . . . . . . 2,959 2.8
Construction . . . . . . . . . 365 0.3
-------- -------
Total mortgage loans . . . . 92,161 87.5
Consumer loans(1) . . . . . . . 1,810 1.7
-------- -------
Total fixed rate loans . . . 93,971 89.2
-------- -------

Adjustable Rate Loans
Mortgage loans:
One-to-four family . . . . . . 8,159 7.8
Home equity lines of credit . . 3,077 2.9
Commercial . . . . . . . . . . 129 0.1
-------- -------
Total adjustable-rate loans 11,365 10.8
-------- -------

Total loans . . . . . . . . . . . . 105,336 100.0%
=======

Construction loans in process . . . (112)
Allowance for loan losses . . . . . (568)
Deferred loan origination
fees, net . . . . . . . . . . . (529)
--------
Total loans, net . . . . . . . . . $104,127
========
</TABLE>

- --------------

(1) Primarily secured personal loans, loans secured by deposit accounts and
home improvement loans.

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<PAGE> 71
LOAN MATURITY SCHEDULE. The following table summarizes the
contractual maturities of the Association's loan portfolio at March 31, 1998.
Loans with adjustable or renegotiable interest rates are shown as maturing in
the period during which the contract is due. The table reflects the entire
unpaid principal balance of a loan in the maturity period that includes the
final payment date, and accordingly, does not reflect the effects of scheduled
payments, possible prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
MULTI-FAMILY, COMMERCIAL,
ONE-TO-FOUR FAMILY(1) CONSTRUCTION AND CONSUMER TOTAL
--------------------- ------------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- -------- -------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Due During the Years Ending
March 31,
1999(2) . . . . . . . . . . . . $ 471 8.13% $2,737 8.95% $ 3,208 8.83%
2000 . . . . . . . . . . . . . 465 8.94 179 7.41 644 8.51
2001 . . . . . . . . . . . . . 621 9.46 399 8.92 1,020 9.25
2002 and 2003 . . . . . . . . . 2,519 8.68 1,131 7.98 3,650 8.46
2004 to 2008 . . . . . . . . . 13,653 8.28 1,585 9.67 15,238 8.42
2009 to 2013 . . . . . . . . . 28,408 7.92 1,316 10.00 29,724 8.01
2014 and following . . . . . . 76,208 8.17 703 8.77 76,911 8.18
-------- ------ --------
Total . . . . . . . . . . . $122,345 8.14 $8,050 9.08 $130,395 8.20
======== ====== ========
</TABLE>
- --------------------------
(1) Includes home equity lines of credit.

(2) Includes demand loans having no stated maturity.

The following table sets forth the dollar amounts of fixed and
adjustable rate loans at March 31, 1998 that are contractually due after March
31, 1999.

<TABLE>
<CAPTION>
DUE AFTER MARCH 31, 1999
------------------------------------
FIXED ADJUSTABLE TOTAL
--------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>

One-to-four family . . . . . . . . . . . . . . . . . . . . . . . . $115,510 $ 6,364 $121,874
Multi-family, commercial, construction and consumer . . . . . . . . 5,313 -- 5,313
-------- ------- --------
Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . $120,823 $ 6,364 $127,187
======== ======= ========
</TABLE>

ONE-TO-FOUR FAMILY RESIDENTIAL LOANS. The Association's primary
lending activity is the origination of one-to-four family residential mortgage
loans secured by property located in the Association's primary lending area.
Generally, one-to-four family residential mortgage loans are made in amounts up
to 80% of the lesser of the appraised value or purchase price of the property.
Since March 31, 1998, the Association has offered one-to-four family loans with
loan-to-value ratios of up to 90%, with private mortgage insurance required.
Generally, fixed rate loans are originated for terms of up to 30 years.
One-to-four family loans are offered with a monthly or bi-weekly payment
feature. The Association does not sell the loans that it originates.

The Association originates fixed rate loans; however, the Association
also offers adjustable rate mortgage ("ARM") loans with one year adjustment
periods. The interest rate on ARM loans is indexed to the prime interest rate
as published in The Wall Street Journal. The Association's ARM loans currently
provide for maximum rate adjustments of 1.75% per year and 6% over the term of
the loan. The Association does not offer ARM loans with initial interest rates
that are below market, referred to as "teaser rates." Residential ARM loans
amortize over terms of up to 30 years. In the current low interest rate
environment, borrowers have shown a preference for fixed rate loans.

ARM loans decrease the risk associated with changes in market interest
rates by periodically repricing, but involve other risks because as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same time, the
marketability of the underlying collateral may be adversely affected by higher
interest rates. Upward adjustment of the contractual interest rate is also
limited by the

67
<PAGE> 72
maximum periodic and lifetime interest rate adjustment permitted by the terms
of the ARM loans, and, therefore, is potentially limited in effectiveness
during periods of rapidly rising interest rates. At March 31, 1998, 4.9% of the
Association's one-to-four family residential loans had adjustable interest
rates.

All one-to-four family residential mortgage loans originated by the
Association include "due-on-sale" clauses, which give the Association the
right to declare a loan immediately due and payable in the event that, among
other things, the borrower sells or otherwise disposes of the real property
subject to the mortgage and the loan is not repaid.

At March 31, 1998, approximately $109.2 million, or 83.8% of the
Association's loan portfolio, consisted of one-to-four family residential
loans. Approximately $1.7 million of such loans (representing 13 loans) were
included in nonperforming loans as of that date. See "--Nonperforming and
Problem Assets."

HOME EQUITY LINES OF CREDIT. The Association offers home equity lines
of credit that are secured by the borrower's primary residence. The borrower is
permitted to draw on the home equity line of credit during the first five years
after it is originated and may repay the outstanding balance over a term not to
exceed 20 years from the date the line of credit is originated. Home equity
lines of credit are generally underwritten under the same criteria that the
Association uses to underwrite one-to-four family fixed rate loans. Home
equity lines of credit may be underwritten with a loan to value ratio of 75%
when combined with the principal balance of the existing mortgage loan, if the
Association has the first mortgage on the property securing the loan, and up to
a 65% loan to value ratio when combined with the principal balance of the
existing mortgage loan if the first mortgage is held by another financial
institution; however, the maximum principal amount of a home equity line of
credit may not exceed $200,000. The Association appraises the property
securing the loan at the time of the loan application (but not thereafter) in
order to determine the value of the property securing the home equity lines of
credit. At March 31, 1998, the outstanding balances of home equity line of
credit totalled $13.1 million, or 10.1% of the Association's loan portfolio.

COMMERCIAL MORTGAGE LOANS. At March 31, 1998, $3.8 million, or 2.9%,
of the total loan portfolio consisted of commercial mortgage loans. Commercial
mortgage loans are secured by office buildings, private schools, religious
facilities and other commercial properties. The Association generally
originates fixed rate and adjustable rate commercial mortgage loans with
maximum terms of up to 10 years. The maximum loan-to-value ratio of commercial
mortgage loans is 75%. At March 31, 1998, the largest commercial mortgage loan
had a principal balance of $721,000 and was secured by a furniture store. As
of March 31, 1998, nonperforming loans included one commercial mortgage loan
with a balance of $236,000. The Association has begun foreclosure proceedings
and does not anticipate incurring any significant loss from the disposition of
the property securing the loan.

In underwriting commercial mortgage loans, the Association reviews the
expected net operating income generated by the real estate to ensure that it is
at least 125% of the amount of the monthly debt service; the age and condition
of the collateral; the financial resources and income level of the borrower;
and the borrower's business experience. Personal guarantees have always been
obtained from all commercial mortgage borrowers.

Loans secured by commercial real estate generally are larger than
one-to-four family residential loans and involve a greater degree of risk.
Commercial mortgage loans often involve large loan balances to single borrowers
or groups of related borrowers. Payments on these loans depend to a large
degree on the results of operations and management of the properties or
underlying businesses, and may be affected to a greater extent by adverse
conditions in the real estate market or the economy in general. Accordingly,
the nature of commercial real estate loans makes them more difficult for
Association management to monitor and evaluate.

MULTI-FAMILY MORTGAGE LOANS. Loans secured by multi-family real
estate totaled approximately $412,000, or 0.3% of the total loan portfolio at
March 31, 1998. Multi-family mortgage loans generally are secured by
multi-family rental properties (including mixed-use buildings and walk-up
apartments). Substantially all multi-family mortgage loans were secured by
properties located within the Association's primary lending area. At March 31,
1998, the Association had four multi-family mortgage loans with an average
principal balance of approximately $103,000.

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<PAGE> 73
The largest multi-family mortgage loan had a principal balance of $257,000.
Multi-family mortgage loans generally are offered with both fixed and
adjustable interest rates, although in the current interest rate environment
the Association has not recently originated adjustable rate multi-family loans.
Multi-family loans are originated for terms of up to 30 years.

In underwriting multi-family mortgage loans, the Association reviews
the expected net operating income generated by the real estate to ensure that
it is at least 125% of the amount of the monthly debt service; the age and
condition of the collateral; the financial resources and income level of the
borrower; and the borrower's experience in owning or managing similar
properties. Multi-family mortgage loans are originated in amounts up to 75% of
the appraised value of the property securing the loan. Personal guarantees are
generally obtained from multi-family mortgage borrowers.

Loans secured by multi-family real estate generally involve a greater
degree of credit risk than one-to-four family residential mortgage loans and
carry larger loan balances. This increased credit risk is a result of several
factors, including the concentration of principal in a limited number of loans
and borrowers, the effects of general economic conditions on income producing
properties, and the increased difficulty of evaluating and monitoring these
types of loans. Furthermore, the repayment of loans secured by multi-family
real estate typically depends upon the successful operation of the related real
estate property. If the cash flow from the project is reduced, the borrower's
ability to repay the loan may be impaired.

CONSTRUCTION LENDING. To a limited extent, the Association originates
residential construction loans to local home builders, generally with whom it
has an established relationship, and to individuals who have a contract with a
builder for the construction of their residence. Construction loans are
disbursed as certain portions of the project are completed. The Association's
construction loans are secured by property located in the Association's market
area. At March 31, 1998, the Association had construction loans totaling $1.8
million, or 1.4% of total loans.

The Association's construction loans to home builders generally have
fixed interest rates, are for a term of 12 months and have a maximum loan to
value ratio of 80%. Loans to builders are made on either a pre-sold or
speculative (unsold) basis. Construction loans to individuals are generally
originated pursuant to the same policy guidelines regarding loan to value
ratios and interest rates that are used in connection with loans secured by
one-to-four family residential real estate. Construction loans to individuals
who intend to occupy the completed dwelling may be converted to permanent
financing after the construction phase is completed.

The Association generally limits the number of outstanding loans on
unsold homes under construction to individual builders, with the amount
dependent on the financial strength, including existing borrowings, of the
builder and prior sales of homes in the development. Prior to making a
commitment to fund a construction loan, the Association requires an appraisal
of the property, and all appraisals are reviewed by management. Loan proceeds
are disbursed after an inspection of the property based on a percentage of
completion. Monthly payment of accrued interest is required.

Construction loans are generally considered to involve a higher degree
of risk than single-family permanent mortgage loans because of the inherent
difficulty in estimating both a property's value at completion of the project
and the estimated cost of the project. If the estimate of construction costs
is inaccurate, the Association may be required to advance funds beyond the
amount originally committed to permit completion of the project. If the
estimate of value upon completion is inaccurate, the value of the property may
be insufficient to assure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no purchaser
has been identified carry more risk because the repayment of the loan depends
on the builder's ability to sell the property prior to the time that the
construction loan is due. The Association has attempted to minimize the
foregoing risks by, among other things, limiting its construction lending
primarily to residential properties and generally requiring personal guarantees
from the principals of its corporate borrowers.

69
<PAGE> 74
CONSUMER LENDING. The Association's consumer loans consist of
automobile loans, passbook loans, home improvement loans and secured personal
loans. At March 31, 1998, consumer loans totaled $2.0 million, or 1.5% of the
total loan portfolio.

Consumer loans generally have shorter terms and higher interest rates
than one-to-four family mortgage loans. In addition, consumer loans expand the
products and services offered by the Association to better meet the financial
services needs of its customers. Consumer loans generally involve greater
credit risk than residential mortgage loans because of the difference in the
underlying collateral. Repossessed collateral for a defaulted consumer loan
may not provide an adequate source of repayment of the outstanding loan balance
because of the greater likelihood of damage to loss of or depreciation in the
underlying collateral. The remaining deficiency often does not warrant further
substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections depend on the
borrower's personal financial stability. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount that can be recovered on such loans.

The Association's underwriting procedures for consumer loans include
an assessment of the applicant's credit history and the ability to meet
existing and proposed debt obligations. Although the applicant's
creditworthiness is the primary consideration, the underwriting process also
includes a comparison of the value of the security, to the proposed loan
amount. The Association underwrites and originates its consumer loans
internally, which the Association believes limits its exposure to credit risks
associated with loans underwritten or purchased from brokers and other external
sources.

ORIGINATION OF LOANS. Generally, the Association originates mortgage
loans pursuant to underwriting standards that generally conform with the Fannie
Mae guidelines. The Association will originate nonconforming loans with
respect to loan principal amount only. Loan origination activities are
primarily concentrated in Westchester, New York. New loans are generated
primarily from customer referrals, local real estate agents, local attorneys
and other parties with whom the Association does business, and from the efforts
of employees and advertising. Historically, the Association has not used
mortgage brokers to obtain loans. Loan applications are underwritten and
processed at the Association's main office.

The loan approval process is intended to assess the borrower's ability
to repay the loan, the viability of the loan, and the adequacy of the value of
the property that will secure the loan. To assess the borrower's ability to
repay, the Association reviews the employment and credit history and
information on the historical and projected income and expenses of borrowers.
Loans of up to $750,000 with loan to value ratios of 70% or less may be
approved by the Association's President and Senior Lending Officer acting
together. Loans up to $500,000 with a loan-to-value ratio between 70% and 80%
(or up to 90% with private mortgage insurance) may be approved by the President
and Senior Lending Officer acting together. All loans in excess of $750,000
must be approved by the Board of Directors. In addition, the Board of
Directors ratifies all loan commitments. Under current policy, the Association
will not originate a loan with a principal balance in excess of $1.0 million.

The Association requires appraisals of all real property securing
loans. Appraisals are performed by independent appraisers who are licensed by
the state, and who are approved by the Board of Directors annually. The
Association requires fire and extended coverage insurance in amounts at least
equal to the principal amount of the loan. Where appropriate, flood insurance
is also required. Subsequent to March 31, 1998, the Association began offering
one-to-four family loans with loan to value ratios up to 90%. Private mortgage
insurance is required for all residential mortgage loans with loan to value
ratios of greater than 80%.

70
<PAGE> 75
The following table sets forth the Association's loan originations,
principal repayments and other portfolio activity for the periods indicated.
The Association did not purchase or sell any loans during the periods
indicated.

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------
1998 1997 1996
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>

Unpaid principal balances at beginning of year . . . . . . . $123,839 $116,664 $110,239
-------- -------- --------

LOANS ORIGINATED BY TYPE:
Fixed rate:
Mortgage loans:
One-to-four family . . . . . . . . . . . . . . . . . . 14,794 15,191 9,609
Advances under home equity lines of credit . . . . . . 6,925 4,525 4,041
Multi-family . . . . . . . . . . . . . . . . . . . . . 257 -- --
Commercial . . . . . . . . . . . . . . . . . . . . . . 660 -- --
Construction . . . . . . . . . . . . . . . . . . . . . 4,159 3,431 5,006
Consumer loans . . . . . . . . . . . . . . . . . . . . . 1,843 942 645
-------- -------- --------
Total fixed rate . . . . . . . . . . . . . . . . . . . 28,638 24,089 19,301

Adjustable rate mortgage loans:
One-to-four family . . . . . . . . . . . . . . . . . . . 225 46 386
Advances under home equity line of credit . . . . . . . . 72 -- 247
-------- -------- --------

Total loans originated . . . . . . . . . . . . . . . . 28,935 24,135 19,934
-------- -------- --------

PRINCIPAL REPAYMENTS:
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . (21,093) (15,445) (12,917)
Consumer loans . . . . . . . . . . . . . . . . . . . . . . (1,270) (1,124) (397)
-------- -------- --------
Total principal repayments . . . . . . . . . . . . . . . (22,363) (16,569) (13,314)
-------- -------- --------

Net charge-offs . . . . . . . . . . . . . . . . . . . . . . . (16) (26) (25)
Transfers to real estate owned . . . . . . . . . . . . . . . -- (365) (170)
-------- -------- --------
Unpaid principal balances at end of year . . . . . . . . . . 130,395 123,839 116,664

Construction loans in process . . . . . . . . . . . . . . . . (573) (1,049) (2,023)
Allowance for loan losses . . . . . . . . . . . . . . . . . . (984) (845) (725)
Deferred loan origination fees, net . . . . . . . . . . . . . (280) (328) (384)
-------- -------- --------
Net loans at end of year . . . . . . . . . . . . . . . . . . $128,558 $121,617 $113,532
======== ======== ========
</TABLE>

FEES. The Association realizes income from late charges and
origination fees. Late charges are generally assessed if payment is not
received within 15 days after it is due. The Association also charges loan
origination fees.

NONPERFORMING AND PROBLEM ASSETS

After a mortgage loan becomes ten days past due, the Association
delivers a computer generated delinquency notice to the borrower. A second
delinquency notice is sent once the loan becomes 15 days past due. When loans
become 30 days past due, the Association sends additional delinquency notices
and attempts to make personal contact by letter or telephone with the borrower
to establish acceptable repayment schedules. The Board of Directors is advised
of all loans delinquent 60 days or more. The Board will consider the
borrower's willingness to comply with the loan terms, the Association's actions
to date, and the value of the loan collateral in determining what actions, if
any, are to be taken. Generally, when a mortgage loan is 90 days delinquent and
no acceptable resolution has been reached, the Association will send the
borrower a demand letter. If the delinquency is not cured within 120 days, the
Association will generally refer the matter to its attorney. Generally,
management will begin foreclosure proceedings on any loan after it is
delinquent over 120 days unless management is engaged in active discussions
with the borrower.

71
<PAGE> 76
Mortgage loans are reviewed on a regular basis and such loans are
placed on nonaccrual status when they become 90 days delinquent. When loans
are placed on nonaccrual status, unpaid accrued interest is fully reserved, and
further income is recognized only to the extent received.

NONPERFORMING ASSETS. The table below sets forth the amounts and
categories of the Association's nonperforming assets at the dates indicated.
At each date presented, the Association had no troubled debt restructurings
(which involve forgiving a portion of interest or principal or making loans at
rates materially less than current market rates).

<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>

Nonaccrual loans:
Mortgage loans:
One-to-four family(1) . . . . . . . . $1,721 $1,832 $ 2,831 $2,246 $1,717
Commercial . . . . . . . . . . . . . . 236 432 236 -- --
Consumer loans . . . . . . . . . . . . . 1 -- 21 -- --
------ ------ ------- ------- ------
Total . . . . . . . . . . . . . . . . 1,958 2,264 3,088 2,246 1,717

Real estate owned:
One-to-four family properties . . . . . 129 129 55 261 55
------ ------ ------- ------ ------

Total nonperforming assets . . . . . . $2,087 $2,393 $ 3,143 $2,507 $1,772
====== ====== ======= ====== ======

Ratios:
Nonperforming loans to total loans . . . 1.50% 1.83% 2.65% 2.04% 1.63%
Nonperforming assets to total assets . . 0.82 0.98 1.37 1.17 0.87
</TABLE>

- --------------
(1) Includes home equity lines of credit.

For the year ended March 31, 1998, gross interest income which would
have been recorded had the non-accrual loans been current in accordance with
their original terms amounted to $205,000. Interest amounts on such loans that
were included in interest income totaled $55,000 for the year ended March 31,
1998.

The following table sets forth certain information with respect to the
Association's loan portfolio delinquencies at the dates indicated.
<TABLE>
<CAPTION>
LOANS DELINQUENT FOR:
-----------------------------------------------
60-89 DAYS 90 DAYS AND OVER TOTAL
--------------------- --------------------- ---------------------
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT
--------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>

At March 31, 1998
- -----------------
Mortgage loans:
One-to-four family . . . 8 $ 526 13 $ 1,721 21 $2,247
Commercial . . . . . . . -- -- 1 236 1 236
Consumer loans . . . . . . 1 4 1 1 2 5
------ ------ ------ ------- ------- ------
Total . . . . . . . . 9 $ 530 15 $ 1,958 24 $2,488
====== ====== ====== ======= ======= ======

At March 31, 1997
- -----------------
Mortgage loans:
One-to-four family . . . 5 $ 469 11 $ 1,832 16 $2,301
Commercial . . . . . . . -- -- 3 432 3 432
Consumer loans . . . . . . 1 2 -- -- 1 2
------ ------ ------ ------- ------- ------
Total . . . . . . . . 6 $ 471 14 $ 2,264 20 $2,735
====== ====== ====== ======= ======= ======

At March 31, 1996
- -----------------
Mortgage loans:
One-to-four family . . . 5 $ 526 22 $ 2,831 27 $3,357
Commercial . . . . . . . 2 203 1 236 3 439
Consumer loans . . . . . . 1 4 1 21 2 25
------ ------ ------ ------- ------- ------
Total . . . . . . . . 8 $ 733 24 $ 3,088 32 $3,821
====== ====== ====== ======= ======= ======
</TABLE>

72
<PAGE> 77
CLASSIFIED ASSETS. Federal regulations and the Association's Asset
Classification Policy provide for the classification of loans and other assets,
such as debt and equity securities, considered by the OTS to be of lesser
quality as "substandard," "doubtful" or "loss" assets. An asset is considered
"substandard" if it is inadequately protected by the current net worth and
paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as "doubtful" have all of the weaknesses inherent
in those classified "substandard," with the added characteristic that the
weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.

An insured institution is required to establish general allowances for
loan losses in an amount deemed prudent by management for loans classified
substandard or doubtful, as well as for other problem loans. General allowances
represent loss allowances which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When an insured
institution classifies problem assets as "loss," it is required either to
establish a specific allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the OTS which can order the
establishment of additional general or specific loss allowances.

At March 31, 1998, the Association's assets classified as substandard
or doubtful totalled $1.2 million and $810,000, respectively. At March 31,
1998 the Association had no assets classified as loss. The loan portfolio is
reviewed on a regular basis to determine whether any loans require
classification in accordance with applicable regulations.

ALLOWANCE FOR LOAN LOSSES

The Association provides for loan losses on the allowance method.
Accordingly, all loan losses are charged to the related allowance and all
recoveries are credited to it. Additions to the allowance for loan losses are
provided by charges to income based on various factors which, in management's
judgment, deserve current recognition in estimating probable losses. Such
factors considered by management include the market value of the underlying
collateral, growth and composition of the loan portfolio, the relationship of
the allowance for loan losses to outstanding loans, delinquency trends, and
economic conditions. The carrying values of loans are periodically evaluated
and the allowance is adjusted accordingly. While management uses the best
information available to make evaluations, future adjustments to the allowance
may be necessary if conditions differ substantially from the assumptions used
in making the evaluations.

In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Association's allowance for loan
losses. Such agencies may require the Association to recognize additions to
the allowance based on their judgments of information available to them at the
time of their examination.

73
<PAGE> 78
The following table sets forth activity in the Association's allowance
for loan losses for the periods indicated.

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>

Balance at beginning of year . . . . . . . . $ 845 $ 725 $ 652 $ 568 $ 480
------ ------ ------- ------ ------

Charge-offs:
One-to-four family mortgage loans . . . . (16) (30) (26) -- --
Consumer loans . . . . . . . . . . . . . . -- (15) -- -- --
------ ------ ------- ------ ------
Total charge-offs . . . . . . . . . . . (16) (45) (26) -- --

Recoveries:
One-to-four family mortgage loans . . . . -- -- 1 -- --
Consumer loans . . . . . . . . . . . . . . -- 19 -- 2 6
------ ------ ------- ------ ------

Net (charge-offs) recoveries . . . . . . . . (16) (26) (25) 2 6
Provision for loan losses . . . . . . . . . . 155 146 98 82 82
------ ------ ------- ------ ------
Balance at end of year . . . . . . . . . . . $ 984 $ 845 $ 725 $ 652 $ 568
====== ====== ======= ====== ======

Ratios:
Net charge-offs to average loans
outstanding . . . . . . . . . . . . . . . 0.01% 0.02% 0.02% --% --%
Allowance for loan losses to
nonperforming loans . . . . . . . . . . . 50.26 37.32 23.48 29.03 33.08
Allowance for loan losses to total
loans . . . . . . . . . . . . . . . . . 0.75 0.68 0.62 0.59 0.54
</TABLE>

74
<PAGE> 79
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table presents
an analysis of the allocation of the allowance for loan losses at the dates
indicated. The allocation of the allowance to each category is not necessarily
indicative of future loss in any particular category and does not restrict the
use of the allowance to absorb losses in other categories.

<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------ ------------------------------ ------------------------------

PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
LOAN EACH LOAN EACH LOAN EACH
BALANCES CATEGORY BALANCES CATEGORY BALANCES CATEGORY
LOAN LOSS BY TO TOTAL LOAN LOSS BY TO TOTAL LOAN LOSS BY TO TOTAL
ALLOWANCE CATEGORY LOANS ALLOWANCE CATEGORY LOANS ALLOWANCE CATEGORY LOANS
--------- -------- ------- --------- ---------- ------- --------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four
family(1) . . $ 668 $122,345 93.9% $ 514 $113,082 91.3% $ 390 $105,996 90.8%
Multi-family . 27 412 0.3 10 348 0.3 11 373 0.3
Commercial . . 152 3,811 2.9 137 3,416 2.8 139 3,469 3.0
Construction . 36 1,800 1.4 111 5,539 4.5 103 5,193 4.5
Consumer . . . 101 2,027 1.5 73 1,454 1.1 82 1,633 1.4
------- -------- ----- ------- -------- ----- ------- -------- -----
Total . . $ 984 $130,395 100.0% $ 845 $123,839 100.0% $ 725 $116,664 100.0%
======= ======== ===== ======= ========= ===== ======= ======== =====
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------------
1995 1994
----------------------------- -------------------------------

PERCENT OF PERCENT OF
LOANS IN LOANS IN
LOAN EACH LOAN EACH
BALANCES CATEGORY BALANCES CATEGORY
LOAN LOSS BY TO TOTAL LOAN LOSS BY TO TOTAL
ALLOWANCE CATEGORY LOANS ALLOWANCE CATEGORY LOANS
--------- ----------- -------- --------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One-to-four
family(1) . . $ 414 $ 103,821 94.1% $ 326 $ 99,393 94.3%
Multi-family . 12 395 0.4 20 680 0.7
Commercial . . 128 3,188 2.9 124 3,088 2.9
Construction . 29 1,451 1.3 7 365 0.4
Consumer . . . 69 1,384 1.3 91 1,810 1.7
------ --------- ----- ------- -------- -----
Total . . $ 652 $ 110,239 100.0% $ 568 105,336 100.0%
====== ========= ===== ======= ======== =====
</TABLE>
- ------------
(1) Includes home equity lines of credit.

75
<PAGE> 80
INVESTMENT ACTIVITIES

The Association's investments include mortgage-backed securities, U.S.
government and agency securities, federal funds sold, certificates of deposit
at other financial institutions, mutual funds and FHLB stock. Management has
determined to invest a significant portion of the Association's assets in
short-term investments and adjustable rate mortgage-backed securities in order
to increase the Association's ability to deploy assets should market interest
rates begin to rise. See "Risk Factors--Potential Impact of Changes in
Interest Rates and the Current Interest Rate Environment."

The Association's mortgage-backed securities portfolio totalled $53.4
million, or 21.0% of total assets at March 31, 1998. Of this amount, $52.2
million of mortgage-backed securities had adjustable rates of interest and $1.2
million had fixed rates of interest. Mortgage-backed securities are created by
the pooling of mortgages and the issuance of a security with an interest rate
that is less than the interest rate on the underlying the mortgages. The
Association's mortgage-backed securities are insured or guaranteed by Fannie
Mae, GNMA or Freddie Mac. Mortgage-backed securities increase the liquidity
and the quality of the Association's assets by virtue of their greater
liquidity compared to individual mortgage loans and the guarantees that back
the securities themselves. The Association has not invested in collateralized
mortgage-backed obligations or privately issued mortgage-backed securities.

A significant portion of the Association's assets are invested in
federal funds sold and certificates of deposit at other financial institutions.
At March 31, 1998, $47.9 million, or 18.8% of total assets were invested in
federal funds sold and certificates of deposit at other financial institutions.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Management of Market Risk--Interest Rate Risk."

At March 31, 1998, the Association's other investment securities
included $11.5 million in U.S. Government and agency securities which consisted
of fixed rate Fannie Mae and FHLB issues generally with maturities of three
years of less, as well as adjustable rate Small Business Administration
participation certificates that are guaranteed by the U.S. Government with
contractual terms of up to 30 years. At March 31, 1998, the Association had a
$3.0 million investment in two mutual funds that provide a rate of return that
adjusts daily.

The following table sets forth the composition of the Association's
mortgage-backed securities (all of which were classified as held to maturity)
at the dates indicated.
<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------------------------------
1998 1997 1996
--------------------- ---------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- -------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Adjustable rate:
GNMA . . . . . . . . . . . . $ 45,260 $ 45,411 $ 44,811 $ 44,741 $ 39,725 $ 39,239
Fannie Mae . . . . . . . . . 6,935 6,940 6,438 6,424 6,534 6,552
Fixed rate:
GNMA . . . . . . . . . . . . 1,129 1,211 1,518 1,593 1,873 1,978
Freddie Mac . . . . . . . . 97 99 134 134 175 177
--------- -------- -------- --------- --------- --------
Total mortgage-backed
securities . . . . . . . . $ 53,421 $ 53,661 $ 52,901 $ 52,892 $ 48,307 $ 47,946
========= ======== ======== ========= ========= ========
</TABLE>

76
<PAGE> 81
The following table sets forth the composition of the Association's
other securities portfolio, and certain other categories of earning assets, at
the dates indicated.

<TABLE>
<CAPTION>
AT MARCH 31,
------------------------------------------------------------------------
1998 1997 1996
--------------------- --------------------- ---------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- -------- --------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
U.S. Government securities . $ 4,012 $ 4,030 $ 6,004 $ 5,993 $ 6,003 $ 6,005
Federal agency obligations . 7,465 7,400 4,448 4,407 5,181 5,170
Securities available for sale:
Mutual fund investments . . 3,000 2,994 2,000 1,995 2,000 1,994
--------- -------- -------- --------- --------- --------
Total other securities . . $ 14,477 $ 14,424 $ 12,452 $ 12,395 $ 13,184 $ 13,169
========= ======== ======== ========= ========= ========

Average remaining contractual
term of other securities . . . 7.2 years 2.8 years 3.8 years

Other earning assets:
Federal funds sold . . . . . $ 36,400 $ 35,200 $ 34,800
Certificates of deposit . . 11,483 11,986 11,594
FHLB stock . . . . . . . . . 1,745 1,607 1,513
--------- -------- ---------
Total . . . . . . . . . . $ 49,628 $ 48,793 $ 47,907
========= ======== =========
</TABLE>

77
<PAGE> 82
The composition and contractual maturities of mortgage-backed
securities and other debt securities at March 31, 1998 are indicated in the
following table. The table does not reflect the impact of prepayments or
redemptions which may occur.

<TABLE>
<CAPTION>
MORE THAN ONE YEAR MORE THAN FIVE YEARS
ONE YEAR OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS
------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AMORTIZED AVERAGE AMORTIZED AVERAGE AMORTIZED AVERAGE
COST YIELD COST YIELD COST YIELD
--------- -------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>

Mortgage-backed securities:
GNMA . . . . . . . . . . $ -- --% $ 123 6.85% $ 432 8.25%
Fannie Mae . . . . . . . . -- -- -- -- -- --
Freddie Mac . . . . . . . -- -- 69 7.22 28 8.00
------ ------- ------

Total . . . . . . . . . $ -- -- $ 192 6.98 $ 460 8.23
====== ======= ======

Other debt securities:
U.S. Government securities $4,012 6.15% $ -- --% $ -- --%
Federal agency obligations -- -- 3,998 5.91 -- --
------ ------- ------

Total . . . . . . . . . $4,012 6.15 $ 3,998 5.91 $ -- --
====== ======= ======
</TABLE>

MORE THAN TEN YEARS TOTAL SECURITIES
------------------- -----------------------------
WEIGHTED WEIGHTED
AMORTIZED AVERAGE AMORTIZED FAIR AVERAGE
COST YIELD COST VALUE YIELD
--------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>

Mortgage-backed securities:
GNMA . . . . . . . . . . $45,834 6.88% $46,389 $46,622 6.89%
Fannie Mae . . . . . . . . 6,935 6.99 6,935 6,940 6.99
Freddie Mac . . . . . . . -- -- 97 99 7.45
------- ------- ------

Total . . . . . . . . . $52,769 6.89 $53,421 $53,661 6.91
======= ======= =======

Other debt securities:
U.S. Government securities $ -- --% $ 4,012 $ 4,030 6.15%
Federal agency obligations 3,467 6.62 7,465 7,400 6.24
------- ------- ------

Total . . . . . . . . . $ 3,467 6.62 $11,477 $11,430 6.21
======= ======= =======
</TABLE>

78
<PAGE> 83
The following table sets forth the activity in the mortgage-backed
securities portfolio for the periods indicated.

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------
1998 1997 1996
----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>

Amortized cost at beginning of year . . . . . . . . . . . . . $ 52,901 $ 48,307 $ 40,046
Purchases of adjustable rate pass-through securities . . . . 12,237 13,276 15,311
Principal repayments . . . . . . . . . . . . . . . . . . . . (11,591) (8,493) (7,028)
Premium amortization and discount accretion, net . . . . . . (126) (189) (22)
------- ------- -------
Amortized cost at end of year . . . . . . . . . . . . . . . . $ 53,421 $ 52,901 $ 48,307
======== ======== ========
</TABLE>

SOURCES OF FUNDS

GENERAL. Deposits have traditionally been the primary source of funds
for use in lending and investment activities. In addition to deposits, funds
are derived from scheduled loan payments, investment maturities, loan
prepayments, retained earnings, income on earning assets and borrowings. While
scheduled loan payments and income on earning assets are relatively stable
sources of funds, deposit inflows and outflows can vary widely and are
influenced by prevailing interest rates, market conditions and levels of
competition. Borrowings from the FHLB of New York may be used in the short-term
to compensate for reductions in deposits and to fund growth, although the
Association has not had to borrow funds in recent periods.

DEPOSITS. Deposits are obtained primarily from customers who live or
work in Westchester County. The Association offers a selection of deposit
instruments, including passbook and club accounts, money market accounts, NOW
accounts and fixed-term certificate of deposit accounts. Deposits are not
actively solicited outside of the Association's market area. Deposit account
terms vary, with the principal differences being the minimum balance required,
the amount of time the funds must remain on deposit and the interest rate. The
Association does not pay broker fees for any deposits.

Interest rates paid, maturity terms, service fees and withdrawal
penalties are established on a periodic basis. Deposit rates and terms are
based primarily on current operating strategies and market rates, liquidity
requirements, rates paid by competitors and growth goals. Personalized customer
service and long-standing relationships with customers are relied upon to
attract and retain deposits.

The flow of deposits is influenced significantly by general economic
conditions, changes in money markets and other prevailing interest rates and
competition. The variety of deposit accounts offered allows the Association to
be competitive in obtaining funds and responding to changes in consumer demand.
In recent years, the Association has become more susceptible to short-term
fluctuations in deposit flows as customers have become more interest rate
conscious. Deposits are priced to reflect the Association's interest rate risk
management and profitability objectives. Based on experience, management
believes that passbook accounts and money market accounts are relatively stable
sources of deposits. However, the ability to attract and maintain certificates
of deposit, and the rates paid on these deposits, have been and will continue
to be significantly affected by market conditions. At March 31, 1998, $119.6
million, or 54.4% of the Association's deposit accounts were certificates of
deposit, of which $108.9 million have maturities of one year or less.

79
<PAGE> 84
The following table sets forth the distribution of the Association's
deposit accounts by account type at the dates indicated.

<TABLE>
<CAPTION>
MARCH 31,
---------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ------------------------------ ------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
AMOUNT PERCENT RATE AMOUNT PERCENT RATE AMOUNT PERCENT RATE
-------- --------- -------- --------- --------- -------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Transaction accounts and
savings deposits:
Passbook and club accounts $ 61,347 27.9% 2.54% $ 63,579 30.1% 2.54% $ 67,637 33.7% 2.54%
Money market accounts . . 17,676 8.0 3.05 17,497 8.3 3.10 16,561 8.3 3.10
NOW and Super NOW accounts 21,261 9.7 2.04 19,885 9.4 2.04 19,320 9.6 2.04
-------- ----- --------- ---- --------- ----
Total . . . . . . . . . 100,284 45.6 2.52 100,961 47.8 2.54 103,518 51.6 2.54
-------- ----- --------- ---- --------- ----

Certificates of deposit maturing:
Within one year . . . . . 108,902 49.5 5.60 101,169 47.9 5.39 82,431 41.1 5.44
After one but within
three years . . . . . . 9,613 4.4 5.72 7,597 3.6 5.72 12,160 6.1 5.44
After three years . . . . 1,114 0.5 4.49 1,496 0.7 4.53 2,502 1.2 5.05
-------- ----- --------- ---- --------- ----
Total . . . . . . . . . 119,629 54.4 5.60 110,262 52.2 5.40 97,093 48.4 5.43
-------- ----- --------- ---- --------- ----

Total deposits . . . . . . . $219,913 100.0% 4.20% $ 211,223 100.0% 4.03% $ 200,611 100.0% 3.94%
======== ===== ========= ===== ========= =====
</TABLE>

The following table sets forth the deposit activity of the Association
for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------
1998 1997 1996
----------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>

Balance at beginning of year . . . . . . . . . . . . . . . . $ 211,223 $200,611 $186,951
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 279,709 278,371 241,365
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . (279,719) (275,635) (235,514)
Interest credited . . . . . . . . . . . . . . . . . . . . . . 8,700 7,876 7,809
--------- -------- --------

Balance at end of year . . . . . . . . . . . . . . . . . . . $ 219,913 $211,223 $200,611
========= ======== ========

Net increase during the year:
Amount . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,690 $ 10,612 $ 13,660
Percent . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 % 5.3% 7.3%
========= ======== ========
</TABLE>

The following table indicates the amount of the Association's
certificates of deposits by time remaining until maturity as of March 31, 1998.

<TABLE>
<CAPTION>
MATURITY
---------------------------------------------
3 MONTHS OVER 3 TO 6 OVER 6 TO 12 OVER 12
OR LESS MONTHS MONTHS MONTHS TOTAL
-------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less
than $100,000 . . . . . . . . . . $26,673 $ 38,485 $30,508 $9,855 $105,521
Certificates of deposit of
$100,000 or more(1) . . . . . . . 4,136 4,855 4,245 872 14,108
------- -------- ------- ------- --------

Total of certificates of deposit . . $30,809 $ 43,340 $34,753 $10,727 $119,629

======= ======== ======= ======= ========
</TABLE>

- -----------------

(1) The weighted average interest rates for these accounts, by maturity period,
are 5.25% for 3 months or less; 5.51% for 3 to 6 months; 5.58% for 6 to 12
months; and 5.57% for over 12 months. The overall weighted average rate
for accounts of $100,000 or more was 5.46%.

BORROWINGS. The Association's other available sources of funds
include advances from the FHLB of New York. As a member of the FHLB of New
York, the Association is required to own capital stock in the FHLB of New York
and is authorized to apply for advances from the FHLB of New York. Each FHLB
credit program has its own

80
<PAGE> 85
interest rate, which may be fixed or variable, and range of maturities. The
FHLB of New York may prescribe the acceptable uses for these advances, as well
as limitations on the size of the advances and repayment provisions. At March
31, 1998, the Association had an outstanding FHLB advance of $87,000 which it
obtained during fiscal 1996. This advance bears interest at a fixed rate of
8.29% and matures in 2002. At March 31, 1998, the Association had a collateral
pledge arrangement with FHLB of New York pursuant to which the Association may
borrow up to $63.7 million. The Association had no borrowings other than the
foregoing FHLB advance during the years ended March 31, 1998, 1997 and 1996.

PROPERTIES

The following table provides certain information with respect to the
Association's offices as of March 31, 1998:

<TABLE>
<CAPTION>
NET BOOK VALUE OF REAL
LOCATION LEASED OR OWNED YEAR ACQUIRED PROPERTY
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Main Office Owned 1954 $569,000
300 Mamaroneck Avenue
Mamaroneck, NY 10543

Branch Office Owned 1961 203,000
189 Halstead Avenue
Harrison, NY 10528

Branch Office Owned 1972 487,000
115 Ridge Street
Rye Brook, NY 10573
</TABLE>

The total net book value of the Association's premises, land and
equipment was approximately $1.6 million at March 31, 1998.

SERVICE CORPORATION SUBSIDIARY

The Association does not have any subsidiary corporations. However,
OTS regulations permit federal savings associations to invest in the capital
stock, obligations or other specified types of securities of subsidiaries
(referred to as "service corporations") and to make loans to such subsidiaries
and joint ventures in which such subsidiaries are participants in an aggregate
amount not exceeding 2% of an association's assets, plus an additional 1% of
assets if the amount over 2% is used for specified community or inner-city
development purposes. In addition, federal regulations permit associations to
make specified types of loans to such subsidiaries (other than special purpose
finance subsidiaries) in which the association owns more than 10% of the stock,
in an aggregate amount not exceeding 50% of the association's regulatory
capital if the association's regulatory capital is in compliance with
applicable regulations.

EMPLOYEES

As of March 31, 1998, the Association employed 37 persons on a
full-time basis and 11 persons on a part-time basis. None of the Association's
employees is represented by a collective bargaining group and management
considers employee relations to be good.

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<PAGE> 86
LEGAL PROCEEDINGS

Although the Association is involved, from time to time, in various
legal proceedings in the normal course of business, there are no material legal
proceedings to which the Association presently is a party or to which any of
its property is subject.

MANAGEMENT OF SOUND FEDERAL BANCORP

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The Board of Directors of the Company consists of the same individuals
who serve as directors of the Association. The Company's Federal charter and
bylaws require that directors be divided into three classes with each class of
directors to serve for a three-year period. Approximately one-third of the
directors will be elected each year. The Company's officers will be elected
annually by its Board of Directors and will serve at the Board's discretion.
The Company's President and Chief Executive Officer will be Richard P.
McStravick and the Chairman of the Board will be Bruno J. Gioffre. For
information regarding the directors and officers, see "Management of the
Association."

MANAGEMENT OF THE ASSOCIATION

DIRECTORS AND OFFICERS OF THE ASSOCIATION

The Board of Directors currently consists of eight persons. Each
director holds office for a term of three years, and one-third of the Board is
elected at each annual meeting of members. During the year ended March 31,
1998, Paul F. Starck retired as Chairman of the Board of Directors of the
Association.

The Board of Directors met 15 times during the fiscal year ended March
31, 1998. No director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the Board's committees in the past 12
months.

Listed below are the current directors and officers of the
Association:

<TABLE>
<CAPTION>
AGE AT CURRENT TERM
NAME MARCH 31, 1998 POSITION DIRECTOR SINCE EXPIRES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Bruno J. Gioffre 63 Chairman of the 1975 1999
Board

Richard P. McStravick 49 President, Chief 1996 1999
Executive Officer
and Director

Joseph Dinolfo 64 Director 1985 2001

Donald H. Heithaus 63 Director 1978 2000

Robert P. Joyce 69 Director 1980 2001

Joseph A. Lanza 51 Director 1998 2000

Arthur C. Phillips, Jr. 74 Director 1976 2001

James Staudt 45 Director 1987 1999

Stephen P. Milliot 50 Treasurer

William H. Morel 65 Senior Vice
President and
Secretary
</TABLE>

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<PAGE> 87
The business experience for the past five years for each of the
Association's directors and officers is as follows:

BRUNO J. GIOFFRE is the Chairman of the Board of Directors and has
been so since December 1997. Mr. Gioffre is also general counsel to the
Association. Mr. Gioffre is a principal of the law firm Gioffre & Gioffre and
the Senior Justice for the Town of Rye, New York.

RICHARD P. MCSTRAVICK is President and Chief Executive Officer of the
Association. Mr. McStravick has been employed by the Association in various
capacities since 1977. Mr. McStravick was appointed to the Board of Directors
in 1996.

JOSEPH DINOLFO is the President of the Dinolfo Wilson Agency, Inc. an
insurance agency located in Mamaroneck, New York.

DONALD H. HEITHAUS is the President and Chief Executive Officer of the
Happiness Laundry Service, Inc. in Mamaroneck, New York.
ROBERT P. JOYCE is retired. Prior to his retirement, Mr. Joyce was
the President of Joyce Marketing Corporation.

JOSEPH A. LANZA is the Mayor of the Village of Mamaroneck. Mr. Lanza
is the President of Lanza Electric, a private electrical contractor.

JAMES STAUDT is an attorney practicing with the firm of McCullough,
Goldberger & Staudt.

ARTHUR C. PHILLIPS, JR. is the Pension and Welfare Funds Manager for
the Industry and Local 338 Pension and Welfare Fund.

STEPHEN P. MILLIOT has been the Treasurer and Chief Financial Officer
since 1996. Prior to that time, Mr. Milliot was the Association's internal
auditor.

WILLIAM H. MOREL is the Association's Senior Vice President, Chief
Lending Officer and Corporate Secretary.

COMMITTEES OF THE BOARDS OF DIRECTORS OF THE ASSOCIATION AND THE COMPANY

The Board of Directors of the Association has the following
committees: The Audit Committee meets quarterly to review audit reports. It
also recommends to the Board of Directors the appointment of the independent
auditors for the upcoming fiscal year. The Audit Committee is composed of
Directors Phillips, Joyce and Staudt.

The Executive Committee acts as the Association's Compensation
Committee. No employee director is a member of the Executive Committee. The
Executive Committee is composed of Directors Gioffre, Phillips, Heithaus and
Joyce. The Executive Committee met three times in fiscal 1998.

The Association has no nominating committee.

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<PAGE> 88
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF THE ASSOCIATION

REMUNERATION OF NAMED EXECUTIVE OFFICER

The following table sets forth information as to annual and other
compensation for services in all capacities for the President and Chief
Executive Officer during the fiscal year ended March 31, 1998. No other
executive officer earned more than $100,000 in salary and bonuses during fiscal
year 1998.

<TABLE>
<CAPTION>
=============================================================================================================

SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
- -------------------------------------------------------------------------------------------------
OTHER RESTRICTED OPTIONS/
NAME AND PRINCIPAL FISCAL ANNUAL STOCK SARS ALL OTHER
POSITION YEAR(1) SALARY BONUS COMPENSATION(2) AWARDS (#) COMPENSATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

Richard P. McStravick,
President and Chief
Executive Officer 1998 $124,375 $7,491 $14,175 -- -- $3,807(3)
=============================================================================================================
</TABLE>

- ----------------

(1) In accordance with the rules on executive officer and director
compensation disclosure adopted by the SEC, Summary Compensation
information is excluded for the fiscal years ended March 31, 1997 and
1996, as the Association was not a public company during such periods.

(2) Represents director's fees.

(3) Consists of the use of the Association's automobile.

COMPENSATION OF DIRECTORS

Directors of the Association receive $1,250 for each regular meeting
of the Board of Directors, except for the Chairman of the Board who receives
$2,500 for each regular meeting of the Board of Directors and $175 for each
committee meeting of the Board of Directors. Each committee chairman receives
$250 for each committee meeting. The Chairman of the Executive Committee
receives $2,500 for each committee meeting attended and the other members of
the Executive Committee receive $1,250.

Directors of the Company are not currently paid directors' fees. The
Company may adopt a policy of paying directors' fees if it believes it is
necessary to attract qualified directors or is otherwise beneficial or
appropriate for to the Company,

BENEFITS

DIRECTORS DEFERRED FEE PLAN. The Director Deferred Fee Plan
("Directors Plan") is a non-qualified deferred compensation plan into which a
director can defer up to 100% of his or her board fees earned during the
calendar year. All amounts deferred by a director are fully vested at all
times. Amounts credited to a deferred fee account are assumed to be invested,
without charge, at a 6% interest rate. Upon cessation of a director's service
with the Association, the Association will pay the director the amounts
credited to the director's deferred fee account. The amounts will be paid in
substantially equal ANNUAL installments, as selected by the director. The date
of the first installment payment also will be selected by the director. In
connection with the Reorganization and the Offering, the Directors Plan has
been amended to permit each director to determine whether to invest all or a
portion of his account in Common Stock. If a director elects to invest all or
a portion of his account

84
<PAGE> 89
in Common Stock, the amount so invested will be credited with earnings and
appreciation (or depreciation) equivalent to that which would be earned on such
investment and the amount not invested in Common Stock will continue to earn
interest at a 6% interest rate.

If the director dies before all payments have been made, the remaining
payments will be made to the beneficiary designated by the director, at the
election of the director, in a single payment or in the same manner as provided
with respect to payments to the participant. The director may request a
distribution of all or part of his or her benefits if the director suffers a
severe financial hardship. A severe financial hardship would include, among
other things, an immediate and heavy financial need to the director due to
medical and/or educational expenses.

DIRECTOR EMERITUS PLAN. The Director Emeritus Plan is a non-qualified
retirement plan. Under the Director Emeritus Plan, any director that attains
the age of 70 years after the completion of 15 years of service as a director
qualifies for director emeritus status. A director that has completed five
years of service as a director qualifies for director emeritus if termination
of service is due to the merger, consolidation, takeover or dissolution of the
Association. Under the Director Emeritus Plan, a director emeritus is entitled
to the same compensation that he received when he retired as a director,
without the obligation of attendance at meetings of the Board of Directors.
Compensation is paid to the director emeritus for a period of 15 years, or
until the director emeritus reaches age 85 or dies, whichever occurs first.

EXECUTIVE AGREEMENTS. The Association has employment agreements with
Messrs. McStravick and Morel. Each of these agreements has a term of three
years and may be extended for an additional 12 months on each anniversary date
so that the remaining term shall be 36 months. If the agreement is not renewed,
the agreement will expire 36 months following the anniversary date. Under the
agreements, the base salaries for Messrs. McStravick and Morel are $130,000 and
$95,000, respectively. In addition to the base salary, each agreement provides
for, among other things, participation in retirement plans, stock option plans
and other employee and fringe benefits applicable to other employees. The
agreements provide for termination by the Association for cause at any time, in
which event, the executive would have no right to receive compensation or other
benefits for any period after termination. In the event the Bank terminates
the executive's employment for reasons other than disability or for cause, or
in the event of the executive's termination of employment upon (i) failure by
the Association to comply with any material provision of the agreement, (ii)
following a change in control of the Association where there is a material
change in the executive's positions, duties or responsibilities, or a removal
of the executive from, or any failure to reelect the executive to any of these
positions, a reduction in salary or failure of the Association to continue in
effect, or reduction in benefits under, any bonus, benefit or compensation plan
or fringe benefit plan, or (iii) any purported termination of the executive's
employment which is not pursuant to a valid notice of termination, the
executive would be entitled to severance pay in an amount equal to three times
the average annual compensation (computed on the basis of the most recent five
(5) taxable years) includable in gross income for federal income tax purposes.
Messrs. McStravick and Morel would receive an aggregate of $337,773 and
$233,926, respectively, pursuant to their employment agreements upon a change
in control of the Association, based upon current levels of compensation. The
Association would also continue, at the Association's expense, the executive's
life, health, dental and other applicable benefit plan coverage until the
executive attains the age of 70 years, provided, however, that the
Association's obligation terminates if the executive receives equivalent
medical or dental coverage from a new employer. The executive is entitled to
participate in the Association's medical, dental and life insurance coverage
and reimbursement plans to the extent that such plans exist, until the
executive's death.

Under the agreement, if the executive becomes disabled or
incapacitated to the extent that the executive is unable to perform his duties,
he will be entitled to 100% of his compensation for the first six months, and
60% thereafter of the remaining term of the agreement. Any disability payment
is reduced to the extent benefits are received under disability insurance,
workers' compensation or other similar program.

DEFINED BENEFIT PENSION PLAN. The Association maintains the Sound
Federal Savings and Loan Association Retirement Income Plan ("Retirement Plan")
which is a qualified, tax-exempt defined benefit plan. Employees age

85
<PAGE> 90
21 or older who have worked at the Association for a period of one year and
have been credited with 1,000 or more hours of service with the Association
during the year are eligible to accrue benefits under the Retirement Plan. The
Association contributes each year, if necessary, an amount to the Retirement
Plan to satisfy the actuarially determined minimum funding requirements in
accordance with the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). For the plan year ended December 31, 1997, no contribution was
required to be made to the Retirement Plan, however, the Association elected to
make a contribution of approximately $62,000. At December 31, 1997, the total
market value of the assets in the Retirement Plan trust fund was approximately
$3.8 million.

In the event of retirement on or after the normal retirement date
(i.e., the first day of the calendar month coincident with or next following
the later of age 65 or the 5th anniversary of participation in the Retirement
Plan, or, for a participant prior to January 1, 1992, age 65), the plan is
designed to provide a single life annuity. For a married participant, the
normal form of benefit is an actuarially reduced joint and survivor annuity
where, upon the participant's death, the participant's spouse is entitled to
receive a benefit equal to 50% of that paid during the participant's lifetime.
Alternatively, a participant may elect (with proper spousal consent, if
necessary) from various other options, including a joint and 100% survivor
annuity, joint and 66-2/3% survivor annuity, joint and 50% survivor annuity,
years certain option and social security option. The normal retirement benefit
provided is an amount equal to the difference between 4% of final earnings (as
defined in the plan) and 0.65% of the final average compensation (average
earnings during the last three (3) calendar years of service) up to the Social
Security taxable wage base, multiplied by the participant's years of credited
service (up to a maximum of 15 years). Retirement benefits are also payable
upon retirement due to early and late retirement or death. A reduced benefit
is payable upon early retirement at age 55 and the completion of 5 years of
vested service with the Association. Fifty percent of the normal retirement
benefit will be paid to a surviving spouse if the participant dies while in
active service and has attained age 50 and 10 years of vested service. The
preretirement death benefit is reduced by 2% for each year the spouse is more
than 10 years younger than the participant. If the participant has not
attained age 50 with 10 years of service, but has completed 5 years of service,
the spouse will be eligible for a reduced benefit payable as a joint and 50%
annuity. Upon termination of employment other than as specified above, a
participant who has five years of vested service is eligible to receive his or
her accrued benefit commencing, generally, on his normal retirement date, or,
if elected, on or after reaching age 55.

The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in calendar year
1998, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.

<TABLE>
<CAPTION>
Years of Service and Benefit Payable at Retirement
Final Average --------------------------------------------------
Compensation 15 20 25 30
------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>

$50,000 $26,965 $26,965 $26,965 $26,965
$75,000 $41,965 $41,965 $41,965 $41,965
$100,000 $56,965 $56,965 $56,965 $56,965
$125,000 $71,965 $71,965 $71,965 $71,965
$160,000 and above $92,965 $92,965 $92,965 $92,965
</TABLE>

As of December 31, 1997, Mr. McStravick had 20 years of credited
service (i.e., benefit service) under the Retirement Plan.

401(k) PLAN. The Association maintains the Sound Federal Savings and
Loan Association 401(k) Savings Plan in RSI Retirement Trust (the "401(k)
Plan") which is a qualified, tax-exempt profit sharing plan with a salary
deferral feature under Section 401(k) of the Code. Employees who have attained
age 21 and have completed one year of employment are eligible to participate,
provided, however, that leased employees, employees paid on an hourly or
contract basis, employees covered by a collective bargaining agreement and
owner employees (as defined in the plan) are not eligible to participate.
Eligible employees are entitled to enter the 401(k) Plan on a monthly basis.

86
<PAGE> 91
Under the 401(k) Plan, participants are permitted to make salary
reduction contributions (in whole percentages) equal to the lesser of (i) from
1% to 10% of compensation or (ii) $10,000 (as indexed annually). For these
purposes, "compensation" includes wages, salary, fees and other amounts
received for personal services prior to reduction for the participant
contribution to the 401(k) plan, commissions, compensation based on profits,
overtime, bonuses, wage continuation payments due to illness or disability of a
short-term nature, amounts paid or reimbursed for moving expenses, and the
value of any nonqualified stock option granted to the extent includable in
gross income for the year granted. Compensation does not include contributions
made by the Association to any other pension, deferred compensation, welfare or
other employee benefit plan, amounts realized from the exercise of a
nonqualified stock option or the sale of a qualified stock option, and other
amounts which received special tax benefits. Compensation does not include
compensation in excess of the Code Section 401(a)(17) limits (i.e., $160,000 in
1997). The Association will match 50% of the first 10% of salary that a
participant contributes to the 401(k) Plan. All contributions and earnings are
fully and immediately vested. A participant may withdraw salary reduction
contributions, rollover contributions and matching contributions in the event
the participant suffers a financial hardship. A participant may make a
withdrawal from his accounts for any reason after age 59 1/2.

The 401(k) Plan permits employees to direct the investment of his or
her own accounts into various investment options. In connection with the
Offering, the 401(k) Plan intends to offer participants the opportunity to
invest in an "Employer Stock Fund" which intends to purchase Common Stock in
the Offering. Each participant who directs the trustee to invest all or part of
his or her account in the Employer Stock Fund will have assets in his or her
account applied to the purchase of shares of Common Stock. Participants will
be entitled to direct the trustee as to how to vote his or her allocable shares
of Common Stock.

Plan benefits will be paid to each participant in the form of a single
cash payment at normal retirement age unless earlier payment is selected. If a
participant dies prior to receipt of the entire value of his or her 401(k) Plan
accounts, payment will generally be made to the beneficiary in a single cash
payment as soon as possible following the participant's death. Payment will be
deferred if the participant had previously elected a later payment date. If
the beneficiary is not the participant's spouse, payment will be made within
one year of the date of death. If the spouse is the designated beneficiary,
payment will be made no later than the date the participant would have attained
age 70 1/2. Normal retirement age under the 401(k) Plan is age 65. Early
retirement age is age 55.

At December 31, 1997, the total market value of the assets in the
401(k) Plan was approximately $760,000. The Association's matching
contributions to the 401(k) Plan for the Plan year ended December 31, 1997
totalled approximately $30,000.

EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

The Association has established an ESOP for eligible employees
effective in January 1998, subject to the completion of the Offering. Employees
age 21 or older who have worked at the Association for a period of one year and
have been credited with 1,000 or more hours of service during the year are
eligible to participate. As part of the Offering, the ESOP intends to borrow
funds from the Company and use those funds to purchase a number of shares equal
to up to 8.0% of the Minority Ownership Interest. Collateral for the loan will
be the Common Stock purchased by the ESOP. The loan will be repaid principally
from the Association's discretionary contributions to the ESOP and dividends on
unallocated shares over a period expected to be no more than 10 years. It is
anticipated that the interest rate for the loan will be a floating rate equal
to the prime interest rate published in The Wall Street Journal from time to
time. Shares purchased by the ESOP will be held in a suspense account for
allocation among participants as the loan is repaid.

Contributions to the ESOP and shares released from the suspense
accounts in an amount proportional to the repayment of the ESOP loan will be
allocated among ESOP participants on the basis of compensation in the year of
allocation. Participants in the ESOP will receive credit for service prior to
the effective date of the ESOP. Benefits generally vest over a seven year
period. A participant will vest in 20% of his or her account balance after 3
years of

87
<PAGE> 92
credited service and will vest in an additional 20% for each subsequent year of
credited service until a participant is 100% vested after seven years. A
participant who terminates employment for reasons other than death, retirement,
disability or following a change in control prior to seven years of credited
service will forfeit the nonvested portion of his or her benefits under the
ESOP. Benefits will be payable in the form of Common Stock and cash upon
death, retirement, disability or separation from service. Contributions by the
Association to the ESOP are discretionary, subject to the loan terms and tax
law limits, and, therefore, benefits payable under the ESOP cannot be
estimated. In November 1993, the Accounting Standards Executive Committee of
the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") No. 93-6, which requires the Association to record
compensation expense in an amount equal to the fair market value of the shares
committed to be released from the suspense account to participant accounts.

In connection with the establishment of the ESOP, the Association will
establish a committee of non-employee directors to administer the ESOP. The
Association will either appoint its non-employee directors or an independent
financial institution to serve as trustee of the ESOP. The ESOP committee may
instruct the trustee regarding investment of funds contributed to the ESOP. The
ESOP trustee, subject to its fiduciary duty, must vote all allocated shares
held in the ESOP in accordance with the instructions of participating
employees. Under the ESOP, nondirected shares, and shares held in the suspense
account, will be voted in a manner calculated to most accurately reflect the
instructions it has received from participants regarding the allocated stock so
long as such vote is in accordance with the provisions of ERISA.

STOCK OPTION PLAN

At a meeting of the Company's shareholders to be held no earlier than
six months after the completion of the Reorganization, the Board of Directors
intends to submit for shareholder approval the Stock Option Plan for directors
and officers of the Association and of the Company. If approved by the
shareholders, Common Stock in an aggregate amount equal to 10% of the Minority
Ownership Interest would be reserved for issuance by the Company upon the
exercise of the stock options granted under the Stock Option Plan. No options
would be granted under the Stock Option Plan until the date on which
shareholder approval is received.

It is anticipated that options would be granted for terms of 10 years
(in the case of incentive options) or 10 years and one day (in the case of
non-qualified options), and at an option price per share equal to the fair
market value of the shares on the date of grant of the stock options. If the
Stock Option Plan is adopted within one year following the Reorganization,
options will become exercisable at a rate of 20% at the end of each 12 months
of service with the Association after the date of grant, subject to early
vesting in the event of death or disability. Options granted under the Stock
Option Plan would be adjusted for capital changes such as stock splits and
stock dividends. Notwithstanding the foregoing, awards will be 100% vested upon
termination of employment due to death or disability, and if the Stock Option
Plan is adopted more than 12 months after the Reorganization, awards would be
100% vested upon normal retirement or a change in control of the Association or
the Company. Unless the Company decides to call an earlier special meeting of
shareholders, the date of grant of these options is expected to be the date of
the Company's annual meeting of shareholders to be held at least six months
after the Reorganization. Under OTS rules, if the Stock Option Plan is adopted
within the first 12 months after the Reorganization, no individual officer can
receive more than 25% of the awards under the plan, no outside director can
receive more than 5% of the awards under the plan, and all outside directors as
a group can receive no more than 30% of the awards under the plan in the
aggregate. These restrictions would not be applicable if the Stock Option Plan
is adopted more than one year after the completion of the Reorganization.

The Stock Option Plan would be administered by a committee of
non-employee members of the Company's Board of Directors. Options granted
under the Stock Option Plan to employees may be treated as "incentive" stock
options which offer beneficial tax treatment to the employee but no tax
deduction to the Company. Non-qualified stock options may also be granted under
the Stock Option Plan, and will be granted to the non-employee directors who

88
<PAGE> 93
receive grants of stock options. In the event an option recipient terminates
his or her employment or service as an employee or director, the options would
terminate during certain specified periods.

STOCK AWARD PLAN

At a meeting of the Company's shareholders to be held no earlier than
six months after the completion of the Reorganization, the Board of Directors
also intends to submit a Stock Award Plan for shareholder approval. The Stock
Award Plan will grant directors and officers an ownership interest in the
Company in a manner designed to encourage their continued service with the
Association. The Association will contribute funds to the Stock Award Plan from
time to time to enable it to acquire an aggregate amount of Common Stock equal
to up to 4% of the Minority Ownership Interest, or a larger percentage of the
Common Stock issued in the Offering if the Stock Award Plan is adopted more
than a year after the completion of the Offering, either directly from the
Company or in open market purchases. In the event that additional authorized
but unissued shares would be acquired by the Stock Award Plan after the
Reorganization, the interests of existing shareholders would be diluted.
Executive officers and directors will be awarded Common Stock under the Stock
Award Plan without having to pay cash for the shares. No awards under the
Stock Award Plan would be made until the date the Stock Award Plan is approved
by the Company's shareholders.

Awards would be nontransferable and nonassignable, and during the
lifetime of the recipient could only be earned by him or her. If the Stock
Award Plan is adopted within one year following the Reorganization, the shares
which are subject to an award would vest and be earned by the recipient at a
rate of 20% of the shares awarded at the end of each full 12 months of service
with the Association after the date of grant of the award. Any Common Stock
purchased by the Stock Award Plan will represent unearned compensation and,
accordingly, will be reflected on the Company's financial statement as a
reduction to stockholders' equity. As shares of the Common Stock awarded under
the Stock Award Plan vest, the Association will recognize a proportionate
amount of compensation expense with a corresponding reduction in the charge to
stockholders' equity. Awards would be adjusted for capital changes such as
stock dividends and stock splits. Notwithstanding the foregoing, awards would
be 100% vested upon termination of employment or service due to death or
disability, and if the Stock Award Plan is adopted more than 12 months after
the Reorganization, awards would be 100% vested upon normal retirement or a
change in control of the Association or the Company. If employment or service
were to terminate for other reasons, the award recipient would forfeit any
nonvested award. If employment or service is terminated for cause (as would be
defined in the Stock Award Plan), shares not already delivered under the Stock
Award Plan would be forfeited. Under OTS rules, if the Stock Award Plan is
adopted within the first 12 months after the Reorganization, shares of Common
Stock granted under the Stock Award Plan may not exceed 4% of the Minority
Ownership Interest, no individual officer may receive more than 25% of the
awards under the plan, no outside director may receive more than 5% of the
awards under the plan, and all outside directors as a group may receive no more
than 30% of the awards under the plan in the aggregate. These restrictions
would not be applicable if the Stock Award Plan is adopted more than one year
after the completion of the Reorganization.

When shares become vested under the Stock Award Plan, the participant
will recognize income equal to the fair market value of the common stock
earned, determined as of the date of vesting, unless the recipient makes an
election under Section 83(b) of the Code to be taxed earlier. The amount of
income recognized by the participant would be a deductible expense for tax
purposes for the Company. If the Stock Award Plan is adopted within one year
following the Reorganization, dividends and other earnings will accrue and be
payable to the award recipient when the shares vest. Shares not yet vested
under the Stock Award Plan will be voted by the Trustee of the Stock Award
Plan, taking into account the best interests of the recipients of the awards
under the plan.

TRANSACTIONS WITH CERTAIN RELATED PERSONS

The Association offers to directors, officers, and employees mortgage
loans secured by their principal residence. All loans to the Association's
directors, officers and employees are made on substantially the same terms,

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including interest rates and collateral, as those prevailing at the time for
comparable transactions, and do not involve more than minimal risk of
collectibility.

Bruno J. Gioffre, in addition to his duties as Chairman of the Board
of the Association, is a partner in the law firm of Gioffre & Gioffre, P.C.
which represents the Association in mortgage loan transactions. Mr. Gioffre
also acts as general counsel to the Association. For the year ended March 31,
1998, the Association paid Gioffre & Gioffre fees of $23,100 and Mr. Gioffre
legal fees of $15,300 for his services as general counsel.

REGULATION

GENERAL

As a federally chartered, SAIF-insured savings association, the
Association is subject to extensive regulation by the OTS and the FDIC. For
example, the Association must obtain OTS approval before it may engage in
certain activities and must file reports with the OTS regarding its activities
and financial condition. The OTS periodically examines the Association's books
and records and, in conjunction with the FDIC in certain situations, has
examination and enforcement powers. This supervision and regulation are
intended primarily for the protection of depositors and the FDIC insurance
funds. The Association's present semi-annual assessment owed to the OTS, which
is based upon a specified percentage of assets, is approximately $34,000.

The Association is also subject to federal and state regulation as to
such matters as loans to officers, directors, or principal shareholders,
required reserves, limitations as to the nature and amount of its loans and
investments, regulatory approval of any merger or consolidation, and the
issuance or retirements of its securities. In addition, the Association's
activities and operations are subject to a number of additional detailed,
complex and sometimes overlapping federal and state laws and regulations.
These include state usury and consumer credit laws, state laws relating to
fiduciaries, the Federal Truth-In-Lending Act and Regulation Z, the Federal
Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act,
the Community Reinvestment Act, the Fair Lending Act and antitrust laws.

The United States Congress is considering legislation that would
require all federal savings associations, such as the Association, to either
convert to a national bank or a state-chartered bank by a specified date to be
determined. In addition, under the legislation, the Mutual Holding Company and
the Company likely would not be regulated as savings and loan holding companies
but rather as bank holding companies. This proposed legislation would abolish
the OTS and transfer its functions to other federal banking regulators. No
assurance can be given as to whether or in what form the legislation will be
enacted or its effect on the Company and the Association.

SAVINGS AND LOAN HOLDING COMPANY REGULATION

Upon completion of the Reorganization, the Mutual Holding Company and
the Company will be regulated as savings and loan holding companies under the
Home Owners' Loan Act (the "HOLA"). As such, the Mutual Holding Company and the
Company will register with and will be subject to OTS regulation and
examination and supervision as well as certain reporting requirements. The OTS
has indicated that the Company will be regulated in the same manner as a mutual
holding company pursuant to Section 10(o) of the HOLA. As a federally-insured
subsidiary of a savings and loan holding company, the Company will be subject
to certain restrictions in dealing with the Mutual Holding Company and with
other persons affiliated with the Mutual Holding Company and the Company, and
will continue to be subject to examination and supervision by the OTS.

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Pursuant to Section 10(o) of the HOLA, and OTS regulations and policy,
a mutual holding company and a federally chartered mid-tier holding company may
engage in the following activities: (i) investing in the stock of a savings
association; (ii) acquiring a mutual association through the merger of such
association into a savings association subsidiary of such holding company or an
interim savings association subsidiary of such holding company; (iii) merging
with or acquiring another holding company, one of whose subsidiaries is a
savings association; (iv) investing in a corporation, the capital stock of
which is available for purchase by a savings association under federal law or
under the law of any state where the subsidiary savings association or
associations share their home offices; (v) furnishing or performing management
services for a savings association subsidiary of such company; (vi) holding,
managing or liquidating assets owned or acquired from a savings subsidiary of
such company; (vii) holding or managing properties used or occupied by a
savings association subsidiary of such company properties used or occupied by a
savings association subsidiary of such company; (viii) acting as trustee under
deeds of trust; (ix) any other activity (A) that the Federal Reserve Board, by
regulation, has determined to be permissible for bank holding companies under
Section 4(c) of the Bank Holding Company Act of 1956, unless the Director, by
regulation, prohibits or limits any such activity for savings and loan holding
companies; or (B) in which multiple savings and loan holding companies were
authorized (by regulation) to directly engage on March 5, 1987; and (x)
purchasing, holding, or disposing of stock acquired in connection with a
qualified stock issuance if the purchase of such stock by such savings and loan
holding company is approved by the Director. If a mutual holding company
acquires or merges with another holding company, the holding company acquired
or the holding company resulting from such merger or acquisition may only
invest in assets and engage in activities listed in (i) through (x) above, and
has a period of two years to cease any non-conforming activities and divest of
any non-conforming investments.

HOLA prohibits a savings and loan holding company, including the
Company and the Mutual Holding Company, directly or indirectly, or through one
or more subsidiaries, from acquiring another savings institution or holding
company thereof, without prior written approval of the OTS. It also prohibits
the acquisition or retention of, with certain exceptions, more than 5% of a
non-subsidiary savings institution, a non-subsidiary holding company, or a
non-subsidiary company engaged in activities other than those permitted by the
HOLA; or acquiring or retaining control of an institution that is not federally
insured. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources,
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the insurance fund, the convenience and needs of the
community and competitive factors.

OTS is prohibited from approving any acquisition that would result in
a multiple savings and loan holding company controlling savings institutions in
more than one state, subject to two exceptions: (i) the approval of interstate
supervisory acquisitions by savings and loan holding companies; and (ii) the
acquisition of a savings institution in another state if the laws of the state
of the target savings institution specifically permit such acquisitions. The
states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.

In addition, OTS regulations require the Mutual Holding Company to
notify the OTS of any proposed waiver of its right to receive dividends. The
OTS reviews dividend waiver notices on a case-by-case basis, and, in general,
does not object to a waiver if: (i) the mutual holding company's board of
directors determines that waiver is consistent with its fiduciary duties to the
mutual holding company's members; (ii) for as long as the savings association
subsidiary is controlled by the mutual holding company, the dollar amount of
dividends waived by the mutual holding company is considered as a restriction
in the retained earnings of the savings association, which restriction, if
material, is disclosed in the public financial statements of the savings
association as a note to the financial statements; (iii) the amount of any
dividend waived by the mutual holding company is available for declaration as a
dividend solely to the mutual holding company, and, in accordance with SFAS No.
5, where the savings association determines that the payment of such dividend
to the mutual holding company is probable, an appropriate dollar amount is
recorded as a liability; (iv) the amount of any waived dividend is considered
as having been paid by the savings association in evaluating any proposed
dividend under OTS capital distribution regulations; and (v) in the event the
mutual holding company converts to stock form, the appraisal submitted to the
OTS in connection with the conversion application takes into account the
aggregate amount of the dividends waived by the mutual holding company.

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FEDERAL HOME LOAN BANK SYSTEM

The Association is a member of the FHLB of New York, which is one of
twelve regional FHLBs. Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from funds deposited
by savings associations and proceeds derived from the sale of consolidated
obligations of the FHLB system. It makes loans to members ("FHLB advances") in
accordance with policies and procedures established by the Board of Directors
of the FHLB. All FHLB advances must be fully secured by sufficient collateral
as determined by the FHLB. The Federal Housing Finance Board ("FHFB"), an
independent agency, controls the FHLB System, including the FHLB of New York.

As a member, the Association is required to purchase and maintain
stock in the FHLB of New York in an amount equal to at least 1% of its
aggregate unpaid residential mortgage loans, home purchase contracts, or
similar obligations at the beginning of each year. At March 31, 1998, the
Association's investment in stock of the FHLB of New York was $1.7 million. The
FHLB imposes various limitations on advances such as limiting the amount of
certain types of real estate-related collateral to 30% of a member's capital
and limiting total advances to a member. Interest rates charged for advances
vary depending upon maturity, the cost of funds to the FHLB of New York and the
purpose of the borrowing.

The FHLBs are required to provide funds for the resolution of troubled
savings associations and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community
investment and low- and moderate-income housing projects. These contributions
have adversely affected the level of FHLB dividends paid and could continue to
do so in the future. For the fiscal year ended March 31, 1998, dividends paid
by the FHLB of New York to the Association were approximately $111,000 for an
annual rate of 6.86%.

INSURANCE OF DEPOSITS

DEPOSIT INSURANCE. The FDIC is an independent federal agency that
insures deposits of banks and thrift institutions up to certain specified
limits and regulates such institutions for safety and soundness. The FDIC
administers two separate insurance funds, the Bank Insurance Fund ("BIF") for
commercial banks and state savings banks, and the SAIF for savings associations
such as the Association and banks that have acquired deposits from savings
associations. The FDIC is required to maintain designated levels of reserves in
each fund.

ASSESSMENTS. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and members of
the SAIF. The FDIC may increase assessment rates for either fund if necessary
to restore the fund's ratio of reserves to insured deposits to the target level
within a reasonable time, and may decrease these rates if the target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's risk level is
determined based on its capital levels, and the FDIC's level of supervisory
concern about the institution.

In 1996, federal legislation was enacted to recapitalize the SAIF and
eliminate the significant premium disparity between the BIF and the SAIF. Under
that law, the Association and other institutions with SAIF-insured deposits
were charged a one-time special assessment equal to $0.657 per $100 of
assessable deposits at March 31,1995. The Association recognized this one-time
assessment as a charge to noninterest expense of $1.2 million during the
three-month period ended September 30, 1996. The assessment was fully
deductible for both federal and state income tax purposes. Beginning January
1,1997, the Association's deposit insurance costs (annual premiums and the FICO
assessment described below) were reduced from 0.23% to 0.0644% of total
assessable deposits. BIF institutions pay lower assessments than comparable
SAIF institutions because BIF institutions pay only 20% of the rate paid by
SAIF institutions on their deposits with respect to obligations issued by the
Financing Corporation ("FICO") which provided some of the financing to resolve
failing thrift institutions in the 1980's. The 1996 law also provides for the
merger of the SAIF and the BIF by 1999, but not until such time as bank and
thrift charters are combined. Until the charters are

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combined, savings associations with SAIF deposits may not transfer deposits to
the BIF without paying various exit and entrance fees, and SAIF institutions
will continue to pay higher FICO assessments. Such exit and entrance fees need
not be paid if a SAIF institution converts to a bank charter or merges with a
bank, as long as the resulting bank continues to pay applicable insurance
assessments to the SAIF, and as long as certain other conditions are met.

SAVINGS ASSOCIATION REGULATORY CAPITAL

Currently, savings associations are subject to three separate minimum
capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. The leverage limit
requires that savings associations maintain "core capital" of at least 3% of
total assets. Core capital is generally defined as common shareholders' equity
(including retained earnings), noncumulative perpetual preferred stock and
related surplus, certain minority equity interests in subsidiaries, qualifying
supervisory goodwill, purchased mortgage servicing rights and purchased credit
card relationships (subject to certain limits) less nonqualifying intangibles.
Under the tangible capital requirement, a savings association must maintain
tangible capital (core capital less all intangible assets except a limited
amount of purchased mortgage servicing rights and credit card relationships of
at least 1.5% of total assets. Under the risk-based capital requirements, a
minimum amount of capital must be maintained by a savings association to
account for the relative risks inherent in the type and amount of assets held
by the savings association. The risk-based capital requirement requires a
savings association to maintain capital (defined generally for these purposes
as core capital plus general valuation allowances and permanent or maturing
capital instruments such as preferred stock and subordinated debt, less assets
required to be deducted) equal to 8.0% of risk-weighted assets. Assets are
ranked as to risk in one of four risk-weight categories (0%, 20%, 50% or 100%).
A credit risk-free asset, such as cash, requires no risk-based capital, while
an asset with a potentially greater credit risk, such as a nonaccrual loan,
requires a risk weight of 100%. Moreover, a savings association must deduct
from capital, for purposes of meeting the core capital, tangible capital and
risk-based capital requirements, its entire investment in and loans to a
subsidiary engaged in activities not permissible for a national bank (other
than exclusively agency activities for its customers or mortgage banking
subsidiaries). At March 31, 1998, the Association was in compliance with all
capital requirements imposed by law. See "Historical and Pro Form Regulatory
Capital Compliance" and Note 11 of the Notes to Financial Statements.

The OTS has promulgated a rule which sets forth the methodology for
calculating an interest rate risk component to be used by savings associations
in calculating regulatory capital. The OTS has delayed the implementation of
this rule, however. The rule requires savings associations with "above normal"
interest rate risk (institutions whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move
in interest rates) to maintain additional capital for interest rate risk under
the risk-based capital framework. If the OTS were to implement this regulation,
the Association would be exempt from its provisions because it has less than
$300 million in assets and a risk-based capital ratio in excess of 12%. The
Association nevertheless measures its interest rate risk in conformity with the
OTS regulation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Asset Liability Management."

If an association is not in compliance with the capital requirements,
the OTS is required to prohibit asset growth and to impose a capital directive
that may restrict, among other things, the payment of dividends and officers
compensation. In addition, the OTS and the FDIC generally are authorized to
take enforcement actions against a savings association that fails to meet its
capital requirements. These actions may include restricting the operations and
activities of the association, imposing a capital directive, cease and desist
order, or civil money penalties, or imposing harsher measures such as
appointing a receiver or conservator or forcing the association to merge into
another institution.

PROMPT CORRECTIVE REGULATORY ACTION

Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to institutions that
do not meet minimum capital requirements. For these purposes, federal law

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establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. At March 31, 1998, the Association was categorized as "well
capitalized," meaning that the Association's total risk-based capital ratio
exceeded 10%, Tier I risk-based capital ratio exceeded 6%, leverage capital
ratio exceeded 5%, and the Association was not subject to a regulatory order,
agreement or directive to meet and maintain a specific capital level for any
capital measure.

The FDIC may order savings associations which have insufficient
capital to take corrective actions. For example, a savings association which is
categorized as "undercapitalized" would be subject to growth limitations and
would be required to submit a capital restoration plan, and a holding company
that controls such a savings association would be required to guarantee that
the savings association complies with the restoration plan. "Significantly
undercapitalized" savings associations would be subject to additional
restrictions. Savings associations deemed by the FDIC to be "critically
undercapitalized" would be subject to the appointment of a receiver or
conservator.

DIVIDEND LIMITATIONS

An OTS regulation imposes limitations upon all "capital distributions"
by savings associations, including cash dividends, payments by an association
to repurchase or otherwise acquire its shares, payments to shareholders of
another institution in a cash-out merger and other distributions charged
against capital. The regulation establishes a three-tiered system of
regulation, with the greatest flexibility given to well-capitalized
associations. A savings association which has total capital (immediately prior
to and after giving effect to the capital distribution) that is at least equal
to its fully phased-in capital requirements would be a Tier 1 institution
("Tier 1 Institution"). An association that has total capital at least equal to
its minimum capital requirements, but less than its capital requirements, would
be a Tier 2 institution ("Tier 2 Institution"). An institution having total
capital that is less than its minimum capital requirements would be a Tier 3
institution ("Tier 3 Institution"). However, an institution which otherwise
qualifies as a Tier 1 Institution may be designated by the OTS as a Tier 2 or
Tier 3 Institution if the OTS determines that the institution is "in need of
more than normal supervision." The Association is currently a Tier 1
Institution.

A Tier 1 Institution may, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year up to the greater
of (a) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" at the beginning of
the calendar year (the smallest excess over its capital requirements), or (b)
75% of its net income over the most recent four-quarter period. Any additional
amount of capital distributions would require prior regulatory approval.
Accordingly, at March 31, 1998, the Association had available approximately
$12.0 million available for distribution, without consideration of any capital
infusion from the Reorganization.

The OTS has proposed revisions to these regulations which would permit
savings associations to declare dividends in amounts which would assure that
they remain adequately capitalized following the dividend declaration. Savings
associations in a holding company system which are rated Camel 1 or 2 and which
are not in troubled condition would need to file a prior notice with the OTS
concerning such dividend declaration.

LIMITATIONS ON RATES PAID FOR DEPOSITS

FDIC regulations place limitations on the ability of insured
depository institutions to accept, renew or roll over deposits by offering
rates of interest which are significantly higher than the prevailing rates of
interest on deposits offered by other insured depository institutions having
the same type of charter in the institution's normal market area. Under these
regulations, "well-capitalized" depository institutions may accept, renew or
roll such deposits over without restriction, "adequately capitalized"
depository institutions may accept, renew or roll such deposits over with a
waiver from the FDIC (subject to certain restrictions on payments of rates),
and "undercapitalized" depository institutions may not accept, renew or roll
such deposits over. The regulations contemplate that the definitions of "well
capitalized," "adequately capitalized" and "undercapitalized" will be the same
as the definition adopted by the agencies to implement

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the prompt corrective action provisions of federal law. Management does do not
believe that these regulations will have a materially adverse effect on the
Association's current operations.

SAFETY AND SOUNDNESS STANDARDS

The federal banking agencies have also adopted safety and soundness
standards for all insured depository institutions. The standards, which were
issued in the form of guidelines rather than regulations, relate to internal
controls, information systems, internal audit systems, loan underwriting and
documentation, compensation and interest rate exposure. In general, the
standards are designed to assist the federal banking agencies in identifying
and addressing problems at insured depository institutions before capital
becomes impaired. If an institution fails to meet these standards, the
appropriate federal banking agency may require the institution to submit a
compliance plan. Failure to submit a compliance plan may result in enforcement
proceedings. On August 27, 1996, the federal banking agencies added asset
quality and earnings standards to the safety and soundness guidelines.

LOANS TO ONE BORROWER

Under OTS regulations, a savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of
unimpaired capital and surplus. Additional amounts may be lent, not in excess
of 10% of unimpaired capital and surplus, if such loans or extensions of credit
are fully secured by readily marketable collateral, including certain debt and
equity securities, but not including real estate. In some cases, a savings
association may lend up to 30% of unimpaired capital and surplus to one
borrower for purposes of developing domestic residential housing, provided that
the association meets its regulatory capital requirements and the OTS
authorizes the association to use this expanded lending authority. At March
31, 1998, the Association had no loans to a single or related group of
borrowers in excess of its lending limits. Management does not believe that
the loans-to-one-borrower limits will have a significant impact on the
Association's business operations or earnings following the Reorganization.

QUALIFIED THRIFT LENDER

Savings associations must meet a QTL test. If the Association
maintains an appropriate level of qualified thrift investments ("QTIs")
(primarily residential mortgages and related investments, including certain
mortgage-related securities) and otherwise qualify as a QTL, it may exercise
full borrowing privileges from the FHLB of New York. The required percentage
of QTIs is 65% of portfolio assets (defined as all assets minus intangible
assets, property used by the association in conducting its business and liquid
assets equal to 10% of total assets). Certain assets are subject to a
percentage limitation of 20% of portfolio assets. In addition, savings
associations may include shares of stock of the FHLBs, FNMA, and FHLMC as QTIs.
Compliance with the QTL test is determined on a monthly basis in nine out of
every twelve months.

Recent legislation also expands the QTL test to provide savings
associations with greater authority to lend and diversify their portfolios. In
particular, credit card and education loans may now be made by savings
associations without regard to any percentage-of-assets limit, and commercial
loans may be made in an amount up to 10% of total assets, plus an additional
10% for small business loans. Loans for personal, family and household
purposes (other than credit card, small business and educational loans) are now
included without limit with other assets that, in the aggregate, may account
for up to 20% of total assets. At March 31, 1998, under the expanded QTL test,
approximately 87.0% of the Association's portfolio assets were qualified thrift
investments.

A savings association that fails to meet the QTL test must either
convert to a bank (but its deposit insurance assessments and payments will be
those of and paid to the SAIF) or be subject to the following penalties: (i) it
may not enter into any new activity except for those permissible for a national
bank and for a savings association; (ii) its branching activities will be
limited to those of a national bank; (iii) it will not be eligible for any new
FHLB advances; and (iv) it will be bound by regulations applicable to national
banks regarding the payment of dividends. Three years after failing the QTL
test, the association must (i) dispose of any investment or activity not
permissible for a national

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bank and a savings association, and (ii) repay all outstanding FHLB advances.
If such a savings association is controlled by a savings and loan holding
company, then such holding company must, within a prescribed time period,
become registered as a bank holding company and become subject to all rules and
regulations applicable to bank holding companies (including restrictions as to
the scope of permissible business activities).

ACQUISITIONS AND BRANCHING

The Bank Holding Company Act specifically authorizes a bank holding
company, upon receipt of appropriate regulatory approvals, to acquire control
of any savings association or holding company thereof wherever located.
Similarly, a savings and loan holding company may acquire control of a bank.
Moreover, federal savings associations may acquire or be acquired by any
insured depository institution. Regulations promulgated by the FRB restrict the
branching authority of savings associations acquired by bank holding companies.
Savings associations acquired by bank holding companies may be converted to
banks if they continue to pay SAIF premiums, but as such they become subject to
branching and activity restrictions applicable to banks.

Subject to certain exceptions, commonly-controlled banks and savings
associations must reimburse the FDIC for any losses suffered in connection with
a failed bank or savings association affiliate. Institutions are commonly
controlled if one is owned by another or if both are owned by the same holding
company. Such claims by the FDIC under this provision are subordinate to claims
of depositors, secured creditors, and holders of subordinated debt, other than
affiliates.

The OTS has adopted regulations which permit nationwide branching to
the extent permitted by federal statute. Federal statutes permit federal
savings associations to branch outside of their home state if the association
meets the domestic building and loan test in Section 7701(a)(19) of the Code or
the asset composition test of Section 7701(c) of the Code. Branching that would
result in the formation of a multiple savings and loan holding company
controlling savings associations in more than one state is permitted if the law
of the state in which the savings association to be acquired is located
specifically authorizes acquisitions of its state-chartered associations by
state-chartered associations or their holding companies in the state where the
acquiring association or holding company is located.

Finally, The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to acquire
banks in other states and, with state consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through
merger or de novo expansion.

TRANSACTIONS WITH AFFILIATES

The Association is subject to Sections 22(h), 23A and 23B of the
Federal Reserve Act, which restrict financial transactions between banks and
affiliated companies. The statute limits credit transactions between a bank or
savings association and its executive officers and its affiliates, prescribes
terms and conditions for bank affiliate transactions deemed to be consistent
with safe and sound banking practices, and restricts the types of collateral
security permitted in connection with a bank's extension of credit to an
affiliate.

FEDERAL SECURITIES LAW

The shares of Common Stock of the Company will be registered with the
SEC under the Securities Exchange Act of 1934 (the "1934 Act"). The Company
will be subject to the information, proxy solicitation, insider trading
restrictions and other requirements the 1934 Act and the rules of the SEC
thereunder. After three years following the reorganization to stock form, if
the Company has fewer than 300 shareholders, it may deregister its shares under
the 1934 Act and cease to be subject to the foregoing requirements.

Shares of Common Stock held by persons who are affiliates of the
Company may not be resold without registration unless sold in accordance with
the resale restrictions of Rule 144 under the 1933 Act. If the Company

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meets the current public information requirements under Rule 144, each
affiliate of the Company that complies with the other conditions of Rule 144
(including those that require the affiliate's sale to be aggregated with those
of certain other persons) would be able to sell in the public market, without
registration, a number of shares not to exceed, in any three-month period, the
greater of (i) 1% of the outstanding shares of the Company or (ii) the average
weekly volume of trading in such shares during the preceding four calendar
weeks.

COMMUNITY REINVESTMENT ACT MATTERS

Federal law requires that ratings of depository institutions under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure
includes both a four-unit descriptive rating--outstanding, satisfactory, needs
to improve, and substantial noncompliance--and a written evaluation of an
institution's performance. Each FHLB is required to establish standards of
community investment or service that its members must maintain for continued
access to long-term advances from the FHLBs. The standards take into account a
member's performance under the CRA and its record of lending to first time home
buyers. The OTS has designated the Association's record of meeting community
credit needs as "satisfactory."

TAXATION

FEDERAL TAXATION

Historically, savings associations, such as the Association, were
permitted to compute bad debt deductions using either the experience method or
the percentage of taxable income method. However, for years beginning after
December 31, 1995, no savings association may use the percentage of taxable
income method of computing its allowable bad debt deduction for tax purposes.
Instead, all savings associations are required to compute their allowable
deduction using either the experience method or the specific charge-off method.
As a result of the repeal of the percentage of taxable income method, reserve
additions (tax bad debt deductions) after 1987 using the percentage of taxable
income method generally must be included in future taxable income over a
six-year period, although a two-year delay may be permitted for associations
meeting a residential mortgage loan origination test. The Association has
established a deferred tax liability for the amount of taxes to be paid under
this recapture rule. In addition, the pre-1988 reserve, for which a deferred
tax liability has not been recorded, need not be recaptured into income unless:
(i) the Association's retained earnings represented by the pre-1988 reserve are
used for purposes other than to absorb losses from bad debts, including excess
dividend distributions or distributions in liquidation; (ii) the Association
redeems its stock; (iii) the Association fails to meet the definition provided
by the Code for a bank; or (iv) there is a change in the federal tax law. See
Note 8 of the Notes to Financial Statements for a discussion of the
Association's tax bad debt reserves.

Depending on the composition of its items of income and expense, a
savings association may be subject to the alternative minimum tax. A savings
association must pay an alternative minimum tax on the amount (if any) by which
20% of alternative minimum taxable income ("AMTI"), as reduced by an exemption
varying with AMTI, exceeds the regular tax due. AMTI equals regular taxable
income increased or decreased by certain tax preferences and adjustments,
including depreciation deductions in excess of that allowable for alternative
minimum tax purposes, tax-exempt interest on most private activity bonds issued
after August 7, 1986 (reduced by any related interest expense disallowed for
regular tax purposes), the amount of any bad debt reserve deduction claimed in
excess of the deduction based on the experience method and 75% of the excess of
adjusted current earnings over AMTI (before this adjustment and before any
alternative tax net operating loss). AMTI may be reduced only up to 90% by net
operating loss carryovers, but alternative minimum tax paid can be credited
against regular tax due in later years.

For federal income tax purposes, the Association files a calendar year
tax return and reports its income and expenses on the accrual method of
accounting. The Association's federal income tax returns have been audited for
tax years through ___________, and all tax deficiencies have been satisfied.

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NEW YORK STATE TAXATION

The Company and the Association will report income on a combined
calendar year basis to New York State. The New York State Franchise Tax on
corporations is imposed in an amount equal to the greater of (a) 9% of "entire
net income" allocable to New York State, (b) 3% of "alternative entire net
income" allocable to New York State, (c) 0.01% of the average value of assets
allocable to New York State or (d) a nominal minimum tax. Entire net income is
based on federal taxable income, subject to certain modifications. Alternative
entire net income is equal to entire net income without certain modifications.

A temporary Metropolitan Transportation Business Tax Surcharge on
banking corporations doing business in the Metropolitan District has been
applied since 1982. The Association transacts a significant portion of its
business within this District and is subject to this surcharge. The current
surcharge rate is 17% of the State franchise tax liability.

In July 1996, New York State enacted legislation to preserve the use
of the percentage of taxable income bad debt deduction for state tax purposes.
In general, the legislation provides for a deduction equal to 32% of the
Association's New York State taxable income, which is comparable to the
deductions permitted under the prior tax law. The legislation also provides
for a floating base year, which will allow the Association to change from the
percentage of taxable income method to the experience method without recapture
of any reserve. Previously, the Association had established a deferred New
York State tax liability for the excess of its New York State tax bad debt
reserves over the amount of its base-year New York State reserves. Since the
new legislation effectively eliminated the reserves in excess of the base-year
balances, the Association reduced its deferred tax liability by $250,000 (with
a corresponding reduction in income tax expense) during the year ended March
31, 1997.

Generally, New York State tax law has requirements similar to federal
requirements regarding the recapture of base-year tax bad debt reserves. One
notable exception is that, after the 1996 legislation, New York continues to
require that at least 60% of the Association's assets consist of specified
assets (generally, loans secured by residential real estate or deposits,
educational loans, cash and certain government obligations). The Association
expects to continue to meet the 60% requirement and does not anticipate
engaging in any of the transactions which would require recapture of its
base-year reserves (such as changing to a commercial bank charter).
Accordingly, under SFAS No. 109, it has not provided any deferred tax liability
on such reserves. See also Note 8 of the Notes to Financial Statements.

For further information relating to the tax consequences of the
Reorganization, see "The Reorganization--Principal Effects of
Reorganization--Tax Effects."

RESTRICTIONS ON THE ACQUISITION OF THE COMPANY

GENERAL

The following discussion is a general summary of regulatory and other
restrictions on the acquisition of the Common Stock. In addition, the
following discussion generally summarizes certain provisions of the Company's
Federal Charter ("Charter") and Bylaws and certain regulatory provisions that
may be deemed to have an "anti-takeover" effect.

MUTUAL HOLDING COMPANY STRUCTURE

The mutual holding company structure restricts the ability of
stockholders of the Company to effect a change of control of management because
the Mutual Holding Company, as long as it remains in existence, will control a
majority of the voting stock of the Company. In addition, the Mutual Holding
Company will be owned by members of the Association (i.e., depositors) and such
members have granted proxies to the Board of Directors of the

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Association. In the future, proxies will be granted to the Mutual Holding
Company. As such, the Board of Directors of the Mutual Holding Company will be
able to exert voting control over the Company.

CHANGE IN BANK CONTROL ACT AND SAVINGS AND LOAN HOLDING COMPANY PROVISIONS OF
THE HOLA

The Change in Bank Control Act provides that no person, acting
directly or indirectly or through or in concert with one or more other persons,
may acquire control of a savings association unless the OTS has been given 60
days' prior written notice. The Home Owners' Loan Act provides that no company
may acquire "control" of a savings association without the prior approval of
the OTS. Any company that acquires such control becomes a "savings and loan
holding company" subject to registration, examination, and regulation by the
OTS. Pursuant to federal regulations, control of a savings association is
conclusively deemed to have been acquired by, among other things, the
acquisition of more than 25% of any class of voting stock of an association or
the ability to control the election of a majority of the directors of an
association. Moreover, control is presumed to have been acquired, subject to
rebuttal, upon the acquisition of more than 10% of any class of voting stock,
or of more than 25% of any class of stock, of a savings association, where
certain enumerated "control factors" are also present in the acquisition. The
OTS may prohibit an acquisition of control if (i) it would result in a
monopoly or substantially lessen competition, (ii) the financial condition of
the acquiring person might jeopardize the financial stability of the
institution, or (iii) the competence, experience, or integrity of the acquiring
person indicates that it would not be in the interest of the depositors or of
the public to permit the acquisition of control by such person. The foregoing
restrictions do not apply to the acquisition of the Company's capital stock by
one or more tax-qualified employee stock benefit plans, provided that the plan
or plans do not have beneficial ownership in the aggregate of more than 25% of
any class of equity security of the Company.

THE COMPANY'S CHARTER AND BYLAWS

The Company's Charter and Bylaws contain provisions that affect
corporate governance as well as the voting and ownership rights of
stockholders. The following discussion is a general summary of certain
provisions of the Company's Charter and Bylaws relating to provisions which may
be deemed to have an "anti-takeover" effect. The description of these
provisions is necessarily general, and reference should be made in each case to
the Charter and Bylaws of the Company.

CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS

The Company's Charter provides that the Board of Directors is to be
divided into three classes which shall be as nearly equal in number as
possible. The initial directors in each class will hold office for terms of
either one year, two years or three years, and, upon reelection, will serve for
terms of three years and until their successors are elected and qualified.
Each director serves until his successor is elected and qualified. The Bylaws
provide that a director may be removed only by the affirmative vote of the
holders of at least a majority of the outstanding shares entitled to vote.

A classified board of directors may make it more difficult for
stockholders, including those holding a majority of the outstanding shares, to
force an immediate change in the composition of a majority of the Board of
Directors. Because the terms of only one-third of the incumbent directors
expire each year, it requires at least two annual elections for the
stockholders to change a majority, whereas a majority of a non-classified board
may be changed in one year. In the absence of provisions in the Company's
Charter or Bylaws that classify the Board of Directors, all of the directors
would be elected each year.

Management of the Company believes that the staggered election of
directors tends to promote continuity of management, although continuity of
management has not been a problem in the past, because only one-third of the
Board of Directors is subject to election each year. Staggered terms guarantee
that in the ordinary course approximately two-thirds of the directors at any
one time have had at least one year's experience as directors of the

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Company, and moderate the pace of changes in the Board of Directors by
extending the minimum time required to elect a majority of directors from one
to two years.

ABSENCE OF CUMULATIVE VOTING

The Company's Charter provides that there shall be no cumulative
voting for the election of directors.

AUTHORIZATION OF PREFERRED STOCK

The Federal Charter authorizes 10,000,000 shares of serial preferred
stock, without par value. The Company is authorized to issue preferred stock
from time to time in one or more series subject to applicable provisions of
law, and the Board of Directors is authorized to fix the designations, and
relative preferences, limitations, voting rights, if any, including without
limitation, conversion rights of such shares (which could be multiple or as a
separate class). In the event of a proposed merger, tender offer or other
attempt to gain control of the Company that the Board of Directors does not
approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible
issuance of preferred stock, therefore, may be to deter a future takeover
attempt. The Board of Directors has no present plans or understandings for the
issuance of any preferred stock but it may issue any preferred stock on terms
which the Board deems to be in the best interests of the Company and its
stockholders.

INSIDER VOTING CONTROL

Directors and executive officers are expected to purchase up to
147,700 shares of Common Stock in the Offering and are expected to control the
voting of 5.57% of the shares of Common Stock sold in the Offering
(approximately 2.5% of all shares outstanding), assuming the sale of 2,650,500
shares, and may control the voting of an additional 8% of the Minority
Ownership Interest through the ESOP. In addition, current officers and
directors of the Association will be officers and directors of the Mutual
Holding Company which, after the Reorganization and Stock Offering, will own
53% of the total shares outstanding. The Company intends to adopt (i) a Stock
Option Plan which may award options to purchase shares of Common Stock in an
amount equal to up to 10% of the Minority Ownership Interest, and (ii) a Stock
Award Plan which may award shares of Common Stock in an amount equal to at
least 4% of the Minority Ownership Interest.

DESCRIPTION OF CAPITAL STOCK

COMPANY CAPITAL STOCK

The 30,000,000 shares of capital stock authorized by the Company's
Federal Charter are divided into two classes, consisting of 20,000,000 shares
of common stock ($0.10 par value) and 10,000,000 shares of serial preferred
stock. The Company currently expects to issue between 2,252,925 and 3,048,075
shares of Common Stock in the Offering, with an adjusted maximum of 3,505,286
shares. The aggregate stated value of the issued shares will constitute the
capital account of the Company on a consolidated basis. The balance of the
Purchase Price of Common Stock, less expenses of the Reorganization and
Offering, will be reflected as paid-in capital on a consolidated basis. See
"Capitalization." Upon payment of the Purchase Price for the Common Stock, all
such stock will be duly authorized, fully paid, validly issued and
nonassessable.

COMMON STOCK. Each share of the Common Stock will have the same
relative rights and will be identical in all respects with each other share of
the Common Stock. THE COMMON STOCK OF THE COMPANY WILL REPRESENT
NON-WITHDRAWABLE CAPITAL, WILL NOT BE OF AN INSURABLE TYPE AND WILL NOT BE
INSURED BY THE FDIC.

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The holders of the Common Stock will possess exclusive voting power in
the Company. Each stockholder will be entitled to one vote for each share held
on all matters voted upon by stockholders. If the Company issues preferred
stock subsequent to the Reorganization, holders of the preferred stock may also
possess voting powers.

LIQUIDATION OR DISSOLUTION. In the unlikely event of the complete
liquidation or dissolution of the Association, the holders of the Common Stock
will be entitled to receive all the assets of the Association available for
distribution in or in kind, after payment or provision for payment of (i) all
debts and liabilities of the Association, (ii) any accrued dividend claims, and
(iii) the liquidation preference of any serial preferred stock that may be
issued in the future.

NO PREEMPTIVE RIGHTS. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock may not be redeemed at the option of the stockholders and,
upon receipt by the Company of the full purchase price for the stock, each
share of the Common Stock will be fully paid and nonassessable.

PREFERRED STOCK. After the Reorganization, the Board of Directors of
the Company will be authorized to issue preferred stock in series and to fix
and state the voting powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. Preferred
stock may rank prior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full or limited voting rights. The holders
of preferred stock will be entitled to vote as a separate class or series under
certain circumstances, regardless of any other voting rights which such holders
may have.

Except as discussed in this Prospectus, the Company has no present
plans for the issuance of the additional authorized shares of Common Stock or
for the issuance of any shares of preferred stock. In the future, the
authorized but unissued and unreserved shares of Common Stock will be available
for general corporate purposes including but not limited to possible issuance
as stock dividends or stock splits, in future mergers or acquisitions, under a
cash dividend reinvestment and stock purchase plan, in a future underwritten or
other public offering or under an employee stock ownership plan, stock option
or restricted stock plan. The authorized but unissued shares of preferred
stock will similarly be available for issuance in future mergers or
acquisitions, in a future underwritten public offering or private placement or
for other general corporate purposes. Except as described above or as
otherwise required to approve the transaction in which the additional
authorized shares of Common Stock or authorized shares of preferred stock would
be issued, no stockholder approval will be required for the issuance of these
shares. Accordingly, the Board of Directors of the Company, without
stockholder approval, can issue preferred stock with voting and conversion
rights which could adversely affect the voting power of the holders of Common
Stock.

DIVIDENDS. When the Reorganization is completed, the Company's only
asset will be the common stock of the Association and up to 50% of the net
proceeds of the Offering. As a result, dividends from the Association will be
an important source of future income for the Company. Should the Association
elect to retain its income, the ability of the Company to pay dividends to its
own shareholders may be adversely affected. Furthermore, if at any time in the
future the Company owns less than 100% of the outstanding stock of the
Association, certain tax benefits under the Code as to inter-company
distributions would not be fully available to the Company and it would be
required to pay federal income tax on a portion of the dividends received from
the Association, thereby reducing the amount of income available for
distribution to the shareholders of the Company.

TRANSFER AGENT

________________________ will act as transfer agent and registrar for
the Common Stock. __________________'s phone number is (_____) ________________
or (800) __________________.

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REGISTRATION REQUIREMENTS

The Company's Common Stock will be registered pursuant to Section
12(g) of the 1934 Act and may not be deregistered for a period of at least
three years following the Reorganization. As a result of the registration under
the 1934 Act, certain holders of Common Stock will be subject to certain
reporting and other requirements imposed by the 1934 Act. For example,
beneficial owners of more than 5% of the outstanding Common Stock will be
required to file reports pursuant to Section 13(d) or Section 13(g) of the 1934
Act, and officers, directors and 10% shareholders of the Company will generally
be subject to reporting requirements of Section 16(a) and to the liability
provisions for profits derived from purchases and sales of Company Common
Stock occurring within a six-month period pursuant to Section 16(b) of the 1934
Act. In addition, certain transactions in Common Stock, such as proxy
solicitations and tender offers, will be subject to the disclosure and filing
requirements imposed by Section 14 of the 1934 Act and the regulations
promulgated thereunder.

LEGAL AND TAX MATTERS

Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C. 20015,
special counsel to the Association, will pass upon the legality and validity of
the shares of Common Stock being issued in the Offering. Luse Lehman Gorman
Pomerenk & Schick, P.C. has issued an opinion concerning certain federal income
tax aspects of the Reorganization and that the Reorganization, as proposed,
constitutes a tax-free reorganization under federal law. KPMG Peat Marwick LLP
has issued an opinion concerning certain state income tax aspects of the
Reorganization. Luse Lehman Gorman Pomerenk & Schick, P.C. and KPMG Peat
Marwick LLP have consented to the references herein to their opinions. Certain
legal matters related to the Offering will be passed upon for Sandler O'Neill
by Thacher Proffitt & Wood, New York, New York.

EXPERTS

The Association's financial statements as of March 31,1998 and 1997
and for each of the years in the three-year period ended March 31, 1998,
included in this Prospectus and Registration Statement, have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, as indicated
in their report thereon appearing elsewhere herein, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.

FinPro has consented to the publication of the summary herein of its
appraisal report as to the estimated pro forma market value of the Common Stock
of the Company to be issued in the Offering, to the reference to its opinion
relating to the value of the subscription rights, and to the filing of the
Independent Valuation as an exhibit to the registration statement filed by the
Company under the 1933 Act.

ADDITIONAL INFORMATION

The Company has filed with the SEC a registration statement under the
1933 Act with respect to the Common Stock offered hereby. As permitted by the
rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement. Such information can be
inspected and copied at the SEC's public reference facilities located at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Office in
New York (Seven World Trade Center, 13th Floor, New York, New York 10048) and
Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511) and copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. This information can also be found
on the SEC's website, located at http://www.sec.gov.

In connection with the Reorganization, the Association filed with the
OTS a notice of its intent to reorganize into a mutual holding company and to
conduct a minority stock issuance, and the Company filed with the OTS an
application to become a savings and loan holding company. This Prospectus omits
certain information contained in such

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applications. The applications may be inspected at the offices of the OTS, 1700
G Street, N.W., Washington, D.C. 20552 and at the Northeast Regional Office of
the OTS, 10 Exchange Place, Jersey City, New Jersey 07302.

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GLOSSARY

<TABLE>
<S> <C>
1933 Act Securities Act of 1933, as amended.

1934 Act Securities Exchange Act of 1934, as amended.

Associate The term "Associate" of a person means:

(i) any corporation or organization (other
than the Association or its subsidiaries or
the Company) of which such person is a
director, officer, partner or 10%
shareholder;

(ii) any trust or other estate in which such
person has a substantial beneficial interest
or serves as trustee or in a similar
fiduciary capacity; provided, however that
such term shall not include any employee
stock benefit plan of the Company or the
Association in which such a person has a
substantial beneficial interest or serves as
a trustee or in a similar fiduciary
capacity; and

(iii) any relative or spouse of such person,
or relative of such spouse, who either has
the same home as such person or who is a
director or officer of the Association or
its subsidiaries or the Company.

Association Sound Federal Savings and Loan Association
in its pre-Reorganization mutual form

BIF Bank Insurance Fund of the FDIC

Charitable Foundation Sound Federal Savings and Loan Association
Charitable Foundation

Code The Internal Revenue Code of 1986, as
amended

Common Stock The shares of Common Stock, par value of
$.10 per share, issued by Sound Federal
Bancorp in connection with the
Reorganization and Offering

Community Offering The offering for sale to members of the
general public of any shares of Common Stock
not subscribed for in the Subscription
Offering with a preference given to natural
persons who are residents of Westchester
County, New York.

Company Sound Federal Bancorp

Eligible Account Holders Deposit account holders of the Association
with aggregate account balances of at least
$50 as of the close of business on March 31,
1997

ERISA Employee Retirement Income Security Act of
1974, as amended

ESOP The Sound Federal Savings and Loan
Association Employee Stock Ownership Plan and Trust

Estimated Valuation Range The range of the estimated pro forma market
value of the total number of shares of Common Stock
to be issued by the Company to the Mutual Holding
Company and to Minority Stockholders, as determined
by FinPro.
</TABLE>

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<TABLE>
<S> <C>
Expiration Date ______________, New York Time, on
__________,1998

FASB Financial Accounting Standards Board

FDIC Federal Deposit Insurance Corporation

FHLB Federal Home Loan Bank

FinPro FinPro, Inc.

Independent Valuation The estimated pro forma market value of the
Company and the Association prepared by FinPro

IRA Individual retirement account or arrangement

IRS Internal Revenue Service

Minority Ownership Interest The shares of Common Stock of the Company
owned by persons other than the Mutual Holding Company

Mutual Holding Company Sound Federal, MHC, a federal mutual holding
company and the majority stockholder of the Company

NASD National Association of Securities Dealers, Inc.

NPV Net portfolio value

Offering The Subscription Offering and to the extent
shares remain available for subscription,
the Community Offering and Syndicated
Community Offering of Common Stock of the
Company

Offering Range The offering of the Common Stock in the
Offering at an aggregate Purchase Price
ranging from $22.5 million to $30.5 million,
subject to adjustment up to $35.1 million

Order Form The form for ordering stock accompanied by a
certification concerning certain matters

Other Members Persons holding a deposit account at the
Association (other than Eligible Account
Holders and Supplemental Eligible Account
Holders) on the Voting Record Date or who
have borrowings outstanding from the
Association on the Voting Record Date, and
who are entitled to vote at the Special
Meeting

OTS Office of Thrift Supervision

Plan or Plan of Reorganization The Sound Federal Savings and Loan
Association Plan of Reorganization from a
Mutual Savings Association to a Mutual
Holding Company and Stock Issuance Plan,
which will (i) establish the Stock
Association as a wholly-owned subsidiary of
the Company; (ii) establish the Company as a
mid-tier stock holding company which will
own all of the outstanding capital stock of
the Stock Association; and
</TABLE>

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<TABLE>
<S> <C>
(iii) establish the Mutual Holding Company
as the majority stockholder of the Company

Purchase Price $10.00 per share price of the Common Stock

QTI Qualified thrift investment

QTL Qualified thrift lender

REO Real Estate Owned

Reorganization The simultaneous (i) reorganization of the
Association into the mutual holding company
form of ownership, (ii) sale of up to 45% of
the Common Stock of the Company in the
Offering, (iii) contribution of 2%of the
Common Stock to the Charitable Foundation,
and (iv) issuance of the remaining 53% of
the Common Stock of the Company to the
Mutual Holding Company. The Reorganization
will create (i) the Mutual Holding Company
as a federal mutual holding company, (ii)
the Company as a federal stock holding
company that is majority-owned by the Mutual
Holding Company and (iii) the Stock
Association, as a federal stock savings
association wholly-owned by the Company.

SAIF Savings Association Insurance Fund of the FDIC

SEC Securities and Exchange Commission

Special Meeting Special Meeting of members of the
Association called for the purpose of
approving the Plan

Stock Association Sound Federal Savings and Loan Association,
in its post-Reorganization stock form.

Stock Award Plan The stock award plan that will grant Common
Stock to certain officers and directors of
the Association and that will be established
and submitted for approval of the Company's
stockholders no earlier than six months
after the completion of the Reorganization

Stock Option Plan The stock option plan that will authorize
the granting of to certain officers and
directors to purchase up to 10% of the
Minority Ownership Interest which will be
established and submitted for approval at a
meeting of the Company's stockholders no
earlier than six months after the completion
of the Reorganization

Subscription Offering The offering of non-transferable rights to
subscribe for the Common Stock, in order of
priority, to Eligible Account Holders, the
ESOP, Supplemental Eligible Account Holders,
Other Members and employees, officers and
directors of the Association

Supplemental Depositor account holders of the Association
Eligible Account Holders with aggregate account balances of at least
$50 as of the close of business on June 30,
1998, who are not Eligible Account Holders
or Supplemental Eligible Account Holders
</TABLE>

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Voting Record Date The close of business on _____________,
1998, the date for determining members
entitled to vote at the Special Meeting

G-4

<PAGE> 112
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Balance Sheets at March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Statements of Income for the Years Ended March 31, 1998, 1997 and 1996 . . . . . . . . . . 50

Statements of Changes in Equity for the Years Ended March 31, 1998,
1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Statements of Cash Flows for the Years Ended March 31, 1998, 1997 and 1996 . . . . . . . . F-5

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
</TABLE>

The Financial Statements of the Company are omitted because the Company has not
yet issued any stock, has no assets or liabilities, and has not conducted any
business other than that of an organizational nature.

All schedules are omitted because the required information is not applicable or
is included in the Financial Statements and related Notes.

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INDEPENDENT AUDITORS' REPORT

The Board of Directors
Sound Federal Savings and Loan Association:

We have audited the accompanying balance sheets of Sound Federal Savings and
Loan Association as of March 31, 1998 and 1997, and the related statements of
income, changes in equity, and cash flows for each of the years in the
three-year period ended March 31, 1998. These financial statements are the
responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sound Federal Savings and Loan
Association as of March 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the years in the three-year period ended March
31, 1998 in conformity with generally accepted accounting principles.

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

June 5, 1998
Stamford, Connecticut

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SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

BALANCE SHEETS

(In Thousands)

<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------
1998 1997
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . $ 5,711 $ 4,352
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 36,400 35,200
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . 11,483 11,986
Securities (Note 2):
Held-to-maturity, at amortized cost (fair value of
$65,091 in 1998 and $63,292 in 1997) . . . . . . . . . . . . . . 64,898 63,353
Available-for-sale, at fair value . . . . . . . . . . . . . . . . . 2,994 1,995
---------- ----------
Total securities . . . . . . . . . . . . . . . . . . . . . . . . 67,892 65,348
---------- ----------

Loans, net (Note 3):
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . 127,515 121,008
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . 2,027 1,454
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . (984) (845)
---------- ----------
Total loans, net . . . . . . . . . . . . . . . . . . . . . . . . 128,558 121,617
---------- ----------

Accrued interest receivable (Note 4) . . . . . . . . . . . . . . . . . 888 877
Federal Home Loan Bank stock . . . . . . . . . . . . . . . . . . . . . 1,745 1,607
Office properties and equipment, net (Note 5) . . . . . . . . . . . . . 1,552 1,452
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 544
---------- ----------

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 254,749 $ 242,983
========== ==========

LIABILITIES AND EQUITY

Liabilities:
Deposits (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . $ 219,913 $ 211,223
Mortgage escrow funds . . . . . . . . . . . . . . . . . . . . . . . 2,364 2,348
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 571 395
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 222,848 213,966
---------- ----------

Commitments and contingencies (Note 10)

Equity (Note 11):
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 31,905 29,020
Net unrealized loss on securities available-
for-sale, net of taxes . . . . . . . . . . . . . . . . . . . . . (4) (3)
---------- ----------
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . 31,901 29,017
---------- ----------

Total liabilities and equity . . . . . . . . . . . . . . . . . . $ 254,749 $ 242,983
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 115

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

STATEMENTS OF CHANGES IN EQUITY

(In Thousands)

<TABLE>
<CAPTION>
NET
UNREALIZED
RETAINED LOSS ON TOTAL
EARNINGS SECURITIES EQUITY
-------- ---------- ------
<S> <C> <C> <C>
Balances at March 31, 1995 . . . . . . . . . . . $ 24,333 $ (8) $ 24,325

Net income . . . . . . . . . . . . . . . . . . . 2,397 - 2,397

Net decrease in net unrealized loss on
available-for-sale securities, net of taxes . . - 4 4
------- ----- -------

Balances at March 31, 1996 . . . . . . . . . . . 26,730 (4) 26,726

Net income . . . . . . . . . . . . . . . . . . . 2,290 - 2,290

Net decrease in net unrealized loss on
available-for-sale securities, net of taxes . . - 1 1
------- ----- -------

Balances at March 31, 1997 . . . . . . . . . . . 29,020 (3) 29,017

Net income . . . . . . . . . . . . . . . . . . . 2,885 - 2,885

Net increase in net unrealized loss on
available-for-sale securities, net of taxes . . - (1) (1)
------- ----- -------

Balances at March 31, 1998 . . . . . . . . . . . $ 31,905 $ (4) $ 31,901
======= ===== =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 116

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

STATEMENTS OF CASH FLOWS

(In Thousands)

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,885 $ 2,290 $ 2,397
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . 155 146 98
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . 115 106 94
Amortization of deferred fees, discounts and premiums, net . . . . . . 54 110 (58)
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . (170) (337) (32)
Other adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . 440 (22) 248
---------- --------- --------
Net cash provided by operating activities . . . . . . . . . . . . . 3,479 2,293 2,747
---------- --------- --------
Cash flows from investing activities:
Purchases of securities:
Held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,445) (22,772) (22,039)
Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000) - -
Proceeds from principal payments, maturities and
calls of securities held-to-maturity . . . . . . . . . . . . . . . . . 19,778 18,723 15,587
Disbursements for loan originations . . . . . . . . . . . . . . . . . . . (29,391) (25,088) (18,460)
Principal collections on loans . . . . . . . . . . . . . . . . . . . . . . 22,363 16,569 13,314
Net decrease (increase) in certificates of deposit . . . . . . . . . . . 503 (392) (1,605)
Other investing cash flows, net . . . . . . . . . . . . . . . . . . . . . (434) 166 (227)
--------- ------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . (9,626) (12,794) (13,430)
--------- ------- --------
Cash flows from financing activities:
Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . 8,690 10,612 13,660
Net increase (decrease) in mortgage escrow funds . . . . . . . . . . . . . 16 237 (186)
---------- --------- --------
Net cash provided by financing activities . . . . . . . . . . . . . 8,706 10,849 13,474
---------- --------- --------

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . 2,559 348 2,791
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . 39,552 39,204 36,413
---------- --------- --------

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . $ 42,111 $ 39,552 $ 39,204
========== ========= ========
Supplemental information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,736 $ 7,910 $ 7,841
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,876 1,650 1,772
Loans transferred to real estate owned . . . . . . . . . . . . . . . . . . - 365 170
========== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 117

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS

March 31, 1998, 1997 and 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sound Federal Savings and Loan Association (the "Association") is a
community-oriented savings institution whose business primarily consists of
accepting deposits from customers within its market area (Westchester
County, New York) and investing those funds in mortgage loans secured by
one-to-four family residences and in mortgage-backed and other securities.
To a significantly lesser extent, funds are invested in commercial
mortgage, construction and consumer loans.

Deposits are insured up to applicable limits by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation. The
Association is a federally-chartered mutual savings association, and its
primary regulator is the Office of Thrift Supervision ("OTS"). As discussed
in Note 14, the Association's Board of Directors has adopted a Plan of
Reorganization pursuant to which the Association will convert to a stock
savings and loan association under a mutual holding company structure.

BASIS OF PRESENTATION

The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expense. A material
estimate that is particularly susceptible to near-term change is the
allowance for loan losses, which is discussed below.

For purposes of reporting cash flows, cash equivalents represent Federal
funds sold for one-day periods.

SECURITIES

The Association classifies and accounts for its securities in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Securities classified as held-to-maturity under SFAS No. 115 are limited
to debt securities for which the entity has the positive intent and
ability to hold to maturity. Trading securities are debt and equity
securities that are bought principally for the purpose of selling them in
the near term. All other debt and equity securities are classified as
available-for-sale.

Held-to-maturity securities are carried at amortized cost.
Available-for-sale securities are carried at fair value, with unrealized
gains and losses excluded from earnings and reported on a net-of-tax
basis as a separate component of equity. The Association has no trading
securities. Federal Home Loan Bank stock is a non-marketable security
held in accordance with certain regulatory requirements and, accordingly,
is carried at cost.

F-6
<PAGE> 118

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Premiums and discounts on debt securities are amortized to interest income on a
level-yield basis over the terms of the securities. Realized gains and losses
on sales of securities are determined based on the amortized cost of the
specific securities sold. Unrealized losses on securities are charged to
earnings when the decline in fair value of a security is judged to be other
than temporary.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is increased by provisions for losses charged to
income. Losses are charged to the allowance when all or a portion of a loan is
deemed to be uncollectible. Recoveries of loans previously charged-off are
credited to the allowance for loan losses when realized. Management's periodic
evaluation of the adequacy of the allowance for loan losses is based on the
Association's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect a borrower's ability to repay,
estimated value of underlying collateral, and current economic conditions. In
management's judgment, the allowance for loan losses is adequate to absorb
probable losses in the existing loan portfolio.

Establishing the allowance for loan losses involves significant management
judgments utilizing the best information available at the time of review.
Those judgments are subject to further review by various sources, including the
Association's regulators. Adjustments to the allowance may be necessary in the
future based on changes in economic and real estate market conditions, further
information obtained regarding known problem loans, the identification of
additional problem loans, and other factors.

In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by SFAS No. 118, a loan is considered to be impaired when,
based on current information and events, it is probable that the Association
will be unable to collect all principal and interest contractually due. Under
SFAS No. 114, creditors are permitted to measure impaired loans based on (i)
the present value of expected future cash flows discounted at the loan's
effective interest rate, (ii) the loan's observable market price or (iii) the
fair value of the collateral if the loan is collateral dependent. If the
measure of an impaired loan is less than its recorded investment, an impairment
loss is recognized as part of the allowance for loan losses. SFAS No. 118
allows creditors to continue to use existing methods for recognizing interest
income on impaired loans.

F-7
<PAGE> 119

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

INTEREST AND FEES ON LOANS

Interest is accrued monthly based on outstanding principal balances unless
management considers the collection of interest to be doubtful (generally, when
loans are contractually past due ninety days or more). When loans are placed
on nonaccrual status, unpaid interest is reversed by charging interest income
and crediting an allowance for uncollected interest. Interest payments
received on nonaccrual loans (including impaired loans) are recognized as
income unless future collections are doubtful. Loans are returned to accrual
status when collectibility is no longer considered doubtful (generally, when
all payments have been brought current).

Loan origination fees and certain direct loan origination costs are deferred
and the net fee or cost is amortized to interest income, using the level-yield
method, over the contractual term of the related loan. Unamortized fees and
costs applicable to prepaid loans are recognized in interest income at the time
of prepayment.

REAL ESTATE OWNED

Real estate properties acquired through foreclosure are recorded initially at
fair value less estimated sales costs, with the resulting writedown charged to
the allowance for loan losses. Thereafter, an allowance for losses on real
estate owned is established by a charge to expense to reflect any subsequent
declines in fair value. Fair value estimates are based on recent appraisals
and other available information. Costs incurred to develop or improve
properties are capitalized, while holding costs are charged to expense.

OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment are comprised of land (carried at cost) and
buildings, improvements, furniture, fixtures and equipment (carried at cost
less accumulated depreciation). Depreciation expense is recognized on a
straight-line basis over the estimated useful lives of the related assets.
Costs incurred to improve or extend the life of existing assets are
capitalized. Repairs and maintenance, as well as renewals and replacements of
a routine nature, are charged to expense.

INCOME TAXES

In accordance with the asset and liability method required by SFAS No. 109,
"Accounting for Income Taxes," deferred taxes are recognized for the estimated
future tax effects attributable to "temporary differences" between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. A deferred tax liability is recognized for all
temporary differences that will result in future taxable income. A deferred
tax asset is recognized for all temporary differences that will result in
future tax deductions, subject to reduction of the asset by a valuation
allowance in certain circumstances. This

F-8
<PAGE> 120

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

valuation allowance is recognized if, based on an analysis of available
evidence, management determines that it is more likely than not that a
portion or all of the deferred tax asset will not be realized. The
valuation allowance is subject to ongoing adjustment based on changes in
circumstances that affect management's judgment about the realizability of
the deferred tax asset. Adjustments to increase or decrease the valuation
allowance are charged or credited, respectively, to income tax expense.

Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of an enacted change in tax laws or
rates is recognized in income tax expense in the period that includes the
enactment date of the change.

(2) SECURITIES

The following is a summary of securities at March 31, 1998 and 1997:

<TABLE>
<CAPTION> GROSS UNREALIZED
AMORTIZED -------------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
MARCH 31, 1998
Securities held-to-maturity:
Mortgage-backed securities $ 53,421 $ 445 $ (205) $ 53,661
U.S. Government and agency
securities . . . . . . . . . . 11,477 21 (68) 11,430
------- ------- ----- --------
$ 64,898 $ 466 $ (273) $ 65,091
======= ======= ===== ========
Securities available-for-sale:
Mutual fund investments . . . . . . $ 3,000 $ - $ (6) $ 2,994
======= ======= ===== =======

MARCH 31, 1997
Securities held-to-maturity:
Mortgage-backed securities $ 52,901 $ 326 $ (335) $ 52,892
U.S. Government and agency
securities . . . . . . . . . . 10,452 3 (55) 10,400
------- ------- ----- --------
$ 63,353 $ 329 $ (390) $ 63,292
======= ======= ===== ========
Securities available-for-sale:
Mutual fund investments . . . . . . $ 2,000 $ - $ (5) $ 1,995
======= ======= ===== ========
</TABLE>

F-9
<PAGE> 121

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Debt securities at March 31, 1998 consisted of adjustable rate securities and
fixed rate securities with amortized costs of $55.7 million and $9.2 million,
respectively, and weighted average yields of 6.85% and 6.37%, respectively.
Adjustable rate and fixed rate debt securities at March 31, 1997 totaled $52.2
million and $11.2 million, respectively, with weighted average yields of 6.79%
and 6.54%, respectively.

Mortgage-backed securities consist of pass-through securities guaranteed by the
Government National Mortgage Association, Fannie Mae and Freddie Mac with
amortized costs of $46.4 million, $6.9 million and $0.1 million, respectively,
at March 31, 1998 ($46.4 million, $6.4 million and $0.1 million, respectively,
at March 31, 1997).

There were no sales of securities or transfers between classifications during
the years ended March 31, 1998, 1997 and 1996.

The following is a summary of the amortized cost and fair value of debt
securities held-to-maturity at March 31, 1998, by remaining term to contractual
maturity. Actual maturities may differ from these amounts because certain
issuers have the right to call or redeem their obligations prior to contractual
maturity.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
(IN THOUSANDS)
<S> <C> <C>
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . $ 53,421 $ 53,661
U.S. Government and agency securities:
One year or less . . . . . . . . . . . . . . . . . . . . . . . 4,012 4,030
Over one to five years . . . . . . . . . . . . . . . . . . . . 3,998 3,982
Over ten years . . . . . . . . . . . . . . . . . . . . . . . . 3,467 3,418
----- -----
Total . . . . . . . . . . . . . . . . . . . . $ 64,898 $ 65,091
======= ======
</TABLE>

F-10
<PAGE> 122

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

(3) LOANS

A summary of loans at March 31 follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Mortgage loans:
Residential properties:
One-to-four family . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,207 $ 103,595
Home equity lines of credit . . . . . . . . . . . . . . . . . . . . . . 13,138 9,487
Multi-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 348
Commercial properties . . . . . . . . . . . . . . . . . . . . . . . . . . 3,811 3,416
Construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 5,539
Construction loans in process . . . . . . . . . . . . . . . . . . . . . . (573) (1,049)
Deferred loan origination fees, net . . . . . . . . . . . . . . . . . . . (280) (328)
-------- --------
127,515 121,008
-------- --------

Consumer loans:
Automobile loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,011 1,028
Secured personal loans . . . . . . . . . . . . . . . . . . . . . . . . . 707 132
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 294
----- -----
2,027 1,454
----- -----

Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,542 122,462

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . (984) (845)
------ ------

Total loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,558 $ 121,617
======= =======
</TABLE>

Gross loans at March 31, 1998 consisted of fixed rate loans of $124.0 million
and adjustable rate loans of $6.4 million with weighted average yields of 8.18%
and 8.64%, respectively. Fixed rate and adjustable rate loans at March 31,
1997 totaled $115.6 million and $8.2 million, respectively, with weighted
average yields of 8.33% and 8.59%, respectively.

F-11
<PAGE> 123

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The Association primarily originates mortgage loans secured by existing
single-family residential properties. The Association also originates
multi-family and commercial mortgage loans, construction loans and consumer
loans. Substantially all of the mortgage loan portfolio is secured by real
estate properties located in Westchester County, New York. The ability of the
Association's borrowers to make principal and interest payments is dependent
upon, among other things, the level of overall economic activity and the real
estate market conditions prevailing within the Association's concentrated
lending area.

Activity in the allowance for loan losses is summarized as follows for the
years ended March 31:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . $ 845 $ 725 $ 652
Provision for losses . . . . . . . . . . . . . . . . . . . . . . . . 155 146 98
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (45) (26)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 19 1
----- ---- ----

Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . $ 984 $ 845 $ 725
===== ==== ====
</TABLE>

The principal balances of nonaccrual loans past due ninety days or more at
March 31 are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Mortgage loans:
One-to-four family . . . . . . . . . . . . . . . . . . . . . . . . $ 1,721 $ 1,832 $ 2,671
Home equity lines of credit . . . . . . . . . . . . . . . . . . . . - - 160
Commercial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 432 236
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 21
----- ----- -----

Total nonaccrual loans . . . . . . . . . . . . . . . . . . . . . $ 1,958 $ 2,264 $ 3,088
===== ===== =====
</TABLE>

Gross interest income that would have been recorded if the foregoing nonaccrual
loans had remained current in accordance with their contractual terms totaled
$205,000, $231,000 and $288,000 for the years ended March 31, 1998, 1997 and
1996, respectively, compared to interest income actually recognized of $55,000,
$52,000 and $77,000, respectively.

SFAS No. 114 applies to loans that are individually evaluated for
collectibility in accordance with the Association's normal loan review
procedures (principally loans in the multi-family, commercial mortgage and
construction loan portfolios). The standard does not generally apply to
smaller-balance homogeneous loans that are collectively evaluated for
impairment, such as residential mortgage and consumer loans. The Association's
impaired loans consisted of nonaccrual commercial mortgage loans with a
recorded investment totaling $236,000 and $432,000 at March 31, 1998 and 1997,
respectively. All of these loans were

F-12
<PAGE> 124

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

collateral-dependent loans measured based on the fair value of the
collateral in accordance with SFAS No. 114. The Association determines
the need for an allowance for loan impairment under SFAS No. 114 on a
loan-by-loan basis. At March 31, 1998 and 1997, such an allowance was not
required with respect to the Association's impaired loans due to the
sufficiency of the related collateral values. The Association's average
recorded investment in impaired loans was approximately $330,000, $299,000
and $142,000 for the years ended March 31, 1998, 1997 and 1996,
respectively. Interest collections and income recognized on impaired
loans (while such loans were considered impaired) were insignificant
during each of these years.

Other assets at both March 31, 1998 and 1997 include single-family real
estate owned properties with net carrying values of $129,000. Provisions
for losses and other activity in the allowance for losses on real estate
owned were insignificant during the years ended March 31, 1998, 1997 and
1996.

(4) ACCRUED INTEREST RECEIVABLE

A summary of accrued interest receivable at March 31 follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 780 $ 749
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 105
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 23
-- --

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 888 $ 877
=== ===
</TABLE>

(5) OFFICE PROPERTIES AND EQUIPMENT

A summary of office properties and equipment at March 31 follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 537 $ 537
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . 1,501 1,482
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . 1,325 1,129
------ ------
3,363 3,148

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . (1,811) (1,696)
------ ------

Office properties and equipment, net . . . . . . . . . . . . . . . . . . . $ 1,552 $ 1,452
====== ======
</TABLE>

F-13
<PAGE> 125

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

(6) DEPOSITS

The following is a summary of deposit balances and weighted average stated
interest rates at March 31:

<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
RATE AMOUNT RATE AMOUNT
---- ------ ---- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Passbook and club accounts . . . . . . 2.54% $ 61,347 2.54% $ 63,579
Money market accounts . . . . . . . . . 3.05 17,676 3.10 17,497
NOW and Super NOW accounts . . . . . . 2.04 21,261 2.04 19,885
-------- ------
Total . . . . . . . . . . . . . . . 2.52 100,284 2.54 100,961
-------- -------
Certificates of deposit by remaining
term to contractual maturity:
Within one year . . . . . . . . . . 5.60 108,902 5.39 101,169
After one but within three years . . 5.72 9,613 5.72 7,597
After three years . . . . . . . . . 4.49 1,114 4.53 1,496
----- -----
Total . . . . . . . . . . . . . . . 5.60 119,629 5.40 110,262
------- -------
Total deposits . . . . . . . . . . . 4.20% $ 219,913 4.03% $ 211,223
======= =======
</TABLE>

Certificates of deposit in denominations of $100,000 or more totaled $14.1
million and $12.3 million at March 31, 1998 and 1997, respectively. The
Federal Deposit Insurance Corporation generally insures deposit accounts up
to $100,000, as defined in the applicable regulations.

The following is a summary of interest expense on deposits for the years
ended March 31:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Passbook and club accounts . . . . . . . . . . . . . . . . . . . . . $ 1,573 $ 1,640 $ 1,903
Money market, NOW and Super NOW accounts . . . . . . . . . . . . . . 962 918 874
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . 6,165 5,318 5,032
----- ----- -----

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,700 $ 7,876 $ 7,809
===== ===== =====
</TABLE>

F-14
<PAGE> 126

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The Deposit Insurance Funds Act of 1996 (the "Funds Act") was enacted into
law on September 30, 1996. Among other things, the Funds Act required
depository institutions to pay a one-time special assessment of 65.7 basis
points on their SAIF-assessable deposits held on March 31, 1995, in order
to recapitalize the SAIF to the level required by law. The Association's
special assessment of $1.2 million was paid in November 1996 and is
reflected in non-interest expense for the year ended March 31, 1997.

(7) FEDERAL HOME LOAN BANK BORROWINGS

As a member of the Federal Home Loan Bank ("FHLB") of New York, the
Association may have outstanding FHLB borrowings of up to 25% of its total
assets, or approximately $63.7 million at March 31, 1998, in a combination
of term advances and overnight funds. Borrowings are secured by the
Association's investment in FHLB stock and by a blanket security
agreement. This agreement requires the Association to maintain as
collateral certain qualifying assets (such as securities and single-family
residential mortgage loans) with a fair value, as defined, at least equal
to 115% of any outstanding advances.

At March 31, 1998 and 1997, an outstanding FHLB advance of $87,000 is
included in other liabilities in the balance sheets. This advance bears
interest at a fixed rate of 8.29% and matures in 2002.

(8) INCOME TAXES

Income tax expense consists of the following components for the years ended
March 31:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>

Federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,679 $ 1,173 $ 1,321
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135) 121 (37)
------ ------ ------
1,544 1,294 1,284
------ ------ ------
New York State:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 489 443
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35) (458) 5
------ ------ ------
521 31 448
------ ------ ------
Total:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,235 1,662 1,764
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170) (337) (32)
------ ------ ------

$ 2,065 $ 1,325 $ 1,732
====== ====== ======
</TABLE>

F-15
<PAGE> 127

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The following is a reconciliation of expected income taxes (computed at the
applicable Federal statutory tax rate of 34%) to the Association's actual
income tax expense for the years ended March 31:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxes at Federal statutory rate . . . . . . . . . . . . . . . . . . . $ 1,683 $ 1,229 $ 1,404
State tax expense, net of Federal tax benefit . . . . . . . . . . . . 344 20 296
Other reconciling items, net . . . . . . . . . . . . . . . . . . . . 38 76 32
----- ----- -----

Actual income tax expense . . . . . . . . . . . . . . . . . . . . . . $ 2,065 $ 1,325 $ 1,732
===== ===== =====

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . 41.7% 36.7% 41.9%
==== ==== ====
</TABLE>

The tax effects of temporary differences that give rise to the Association's
deferred tax assets and liabilities at March 31 are as follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)

<S> <C> <C>
Deferred tax assets:
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . $ 403 $ 347
Loan origination fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 135
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 173
Other deductible temporary differences . . . . . . . . . . . . . . . . . . 81 2
--- ---
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . 789 657
--- ---

Deferred tax liabilities:
Tax bad debt reserves in excess of base-year reserves . . . . . . . . . . . 522 545
Other taxable temporary differences . . . . . . . . . . . . . . . . . . . . - 15
--- ---
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . 522 560
--- ---

Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267 $ 97
=== ===
</TABLE>

Based on the Association's historical and anticipated future pre-tax earnings,
management believes that it is more likely than not that the deferred tax
assets will be realized.

As a thrift institution, the Association is subject to special provisions in
the Federal and New York State tax laws regarding its allowable tax bad debt
deductions and related tax bad debt reserves. These deductions historically
were determined using methods based on loss experience or a percentage of
taxable income. Tax bad debt reserves represent the excess of

F-16
<PAGE> 128

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

allowable deductions over actual bad debt losses and other reserve
reductions. These reserves consist of a defined base-year amount, plus
additional amounts ("excess reserves") accumulated after the base year.
SFAS No. 109 requires recognition of deferred tax liabilities with respect
to such excess reserves, as well as any portion of the base-year amount
which is expected to become taxable (or "recaptured") in the foreseeable
future.

Certain amendments to the Federal and New York State tax laws regarding bad
debt deductions were enacted in 1996. The Federal amendments include
elimination of the percentage-of-taxable-income method for tax years
beginning after December 31, 1995 and imposition of a requirement to
recapture into taxable income (over a six-year period) the reserves in
excess of the base-year amounts. The Association previously established,
and continues to maintain, a deferred tax liability with respect to such
excess Federal reserves. The New York State amendments redesignate the
Association's State bad debt reserves as the base-year amount and provide
for future additions to the base-year reserve using the
percentage-of-taxable-income method. These changes effectively eliminated
the excess New York State reserves for which a deferred tax liability had
been recognized and, accordingly, the Association reduced its deferred tax
liability by $250,000 (with a corresponding reduction in income tax
expense) during the year ended March 31, 1997.

At March 31, 1998, the Association's base-year tax bad debt reserves
totaled $5.2 million for Federal tax purposes and $8.7 million for State
tax purposes. In accordance with SFAS No. 109, deferred tax liabilities
have not been recognized with respect to these reserves, since the
Association does not expect that these amounts will become taxable in the
foreseeable future. Under the tax laws as amended, events that would
result in taxation of these reserves include failure of the Association to
maintain a specified qualifying assets ratio or meet other thrift
definition tests for New York State tax purposes. At March 31, 1998, the
Association's unrecognized deferred tax liabilities with respect to the
Federal and State tax bad debt reserves were approximately $1.8 million
and $0.6 million, respectively.

(9) EMPLOYEE BENEFIT PLANS

PENSION PLAN

The Association maintains a non-contributory defined benefit pension plan
which covers substantially all full-time employees who meet certain age
and length of service requirements. Benefits are based on the employee's
years of accredited service and average compensation for the three
consecutive years that produce the highest average. The Association's
funding policy is to contribute the amounts required by applicable
regulations, although additional amounts may be contributed from time to
time.

F-17
<PAGE> 129

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The following is a reconciliation of the funded status of the pension plan and
the accrued cost recognized in the balance sheets at March 31:

<TABLE>
<CAPTION>
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $4,019 in 1998 and $3,443 in 1997 . . . . . . . . . . . . . . . . . . $ (4,042) $ (3,454)
Effect of projected future compensation levels . . . . . . . . . . . . . . . (773) (808)
------ ------
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . (4,815) (4,262)
Plan assets (primarily insurance contract, at contract value) . . . . . . . . . 4,108 3,602
------ ------

Excess of projected benefit obligation over plan assets . . . . . . . . . . . . (707) (660)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526 335
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . . 100 146
Unrecognized net transition obligation . . . . . . . . . . . . . . . . . . . . 54 40
------ ------

Accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . $ (27) $ (139)
====== ======
</TABLE>

A discount rate of 6.75% and a rate of increase in future compensation levels
of 4.50% were used in determining the actuarial present value of the projected
benefit obligation at March 31, 1998 (7.50% and 5.50%, respectively, at March
31, 1997). The expected long-term rate of return on plan assets was 9.00% for
1998, 1997 and 1996.

The net periodic pension cost consisted of the following for the years ended
March 31:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost (benefits earned during the year) . . . . . . . . . . . $ 64 $ 74 $ 63
Interest cost on projected benefit obligation . . . . . . . . . . . . 318 283 273
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . (343) (295) (295)
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . 53 58 52
-- -- --

Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . $ 92 $ 120 $ 93
==== ==== ====
</TABLE>

SAVINGS PLAN

The Association also maintains an employee savings plan under Section 401(k) of
the Internal Revenue Code. Eligible employees may make contributions to the
plan of up to 10% of their compensation. The Association makes matching
contributions of 50% of the participant's contributions to the plan.
Participants vest immediately in both their own contributions and Association
contributions. Savings plan expense was $41,000, $21,000 and $21,000 for the
years ended March 31, 1998, 1997 and 1996, respectively.

F-18
<PAGE> 130

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

(10) COMMITMENTS AND CONTINGENCIES

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

The Association's off-balance sheet financial instruments at March 31,
1998 and 1997 were limited to loan origination commitments of $6.4 million
and $2.7 million, respectively, and unused lines of credit (principally
home equity lines) extended to customers of $7.0 million and $5.4 million,
respectively. Substantially all of these commitments and lines of credit
carry fixed interest rates and have been provided to customers within the
Association's primary lending area described in Note 3.

These instruments involve elements of credit risk and interest rate risk
in addition to the amounts recognized in the balance sheets. The
contractual amounts represent the Association's maximum potential exposure
to credit loss, but do not necessarily represent future cash requirements
since certain commitments and lines of credit may expire without being
fully funded. Loan commitments generally have fixed expiration dates or
other termination clauses and may require the payment of a fee by the
customer. Commitments and lines of credit are subject to the same credit
approval process applied in the Association's general lending activities,
including a case-by-case evaluation of the customer's creditworthiness and
related collateral requirements.

LEGAL PROCEEDINGS

In the normal course of business, the Association is involved in various
outstanding legal proceedings. In the opinion of management, after
consultation with legal counsel, the outcome of such legal proceedings
should not have a material effect on the Association's financial
condition, results of operations or liquidity.

(11) REGULATORY CAPITAL REQUIREMENTS

OTS regulations require savings institutions to maintain a minimum ratio
of tangible capital to total adjusted assets of 1.5%; a minimum ratio of
Tier I (core) capital to total adjusted assets of 3.0%; and a minimum
ratio of Tier I (core and supplementary) capital to risk-weighted assets
of 8.0%.

Under its prompt corrective action regulations, the OTS is required to
take certain supervisory actions with respect to an undercapitalized
institution. Such actions could have a direct material effect on the
institution's financial statements. The regulations establish a framework
for the classification of depository institutions into five categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, an
institution is considered well capitalized if it has a Tier I (core)
capital ratio of at least 5.0%; a Tier I risk-based capital ratio of at
least 6.0%; and a total risk-based capital ratio of at least 10.0%.

F-19
<PAGE> 131

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the OTS about
capital components, risk weightings and other factors.

Management believes that, as of March 31, 1998 and 1997, the Association
met all capital adequacy requirements to which it was subject. Further,
the most recent OTS notification categorized the Association as a
well-capitalized institution under the prompt corrective action
regulations. There have been no conditions or events since that
notification that management believes have changed the Association's
capital classification.

The following is a summary of the Association's actual capital amounts and
ratios as of March 31, 1998 and 1997, compared to the OTS requirements for
minimum capital adequacy and for classification as a well-capitalized
institution:

<TABLE>
<CAPTION>
OTS REQUIREMENTS
--------------------------------------------
MINIMUM CAPITAL CLASSIFICATION AS
ASSOCIATION ACTUAL ADEQUACY WELL CAPITALIZED
------------------- -------------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998
--------------
Tangible capital . . . . $ 31,901 12.5% $ 3,821 1.5%
Tier I (core) capital. . 31,901 12.5 7,642 3.0 $ 12,737 5.0%
Risk-based capital:
Tier I . . . . . . . 31,901 33.9 5,645 6.0
Total . . . . . . . 32,885 34.9 7,527 8.0 9,409 10.0

March 31, 1997
--------------
Tangible capital . . . . $ 29,017 11.9% $ 3,650 1.5%
Tier I (core) capital. . 29,017 11.9 7,301 3.0 $ 12,168 5.0%
Risk-based capital:
Tier I . . . . . . . 29,017 34.4 5,068 6.0
Total . . . . . . . 29,862 35.4 6,757 8.0 8,446 10.0
</TABLE>

(12) FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107 requires disclosures about the fair values of 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 Association's balance sheets, as well as
certain off-balance sheet items. Fair value is defined in SFAS No. 107 as
the amount at which a financial instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale.

F-20
<PAGE> 132

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

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 in accordance with SFAS No.
107 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 is a summary of the carrying amounts and estimated fair values of
the Association's financial assets and liabilities at March 31:

<TABLE>
<CAPTION>
1998 1997
--------------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks . . . . . . . . . . . . . . . . . $ 5.7 $ 5.7 $ 4.4 $ 4.4
Federal funds sold . . . . . . . . . . . . . . . . . . . 36.4 36.4 35.2 35.2
Certificates of deposit . . . . . . . . . . . . . . . . . 11.5 11.5 12.0 12.0
Securities . . . . . . . . . . . . . . . . . . . . . . . 67.9 68.1 65.3 65.3
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 128.6 130.3 121.6 120.7
Accrued interest receivable . . . . . . . . . . . . . . . 0.9 0.9 0.9 0.9
Federal Home Loan Bank stock . . . . . . . . . . . . . . 1.7 1.7 1.6 1.6
Financial liabilities:
Savings certificate accounts . . . . . . . . . . . . . . 119.6 119.6 110.3 109.8
Other deposit accounts . . . . . . . . . . . . . . . . . 100.3 100.3 101.0 101.0
Mortgage escrow funds . . . . . . . . . . . . . . . . . . 2.4 2.4 2.3 2.3
FHLB advance . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 0.1 0.1
======= ======== ========= ========
</TABLE>

The following is a description of the principal valuation methods used by the
Association to estimate the fair values of its financial instruments:

SECURITIES

The fair values of securities were based on market prices or dealer quotes.

F-21
<PAGE> 133

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

LOANS

For valuation purposes, the loan portfolio was segregated into its
significant categories, such as residential mortgage loans and consumer
loans. These categories were further analyzed, where appropriate, into
components based on significant financial characteristics such as type of
interest rate (fixed or adjustable). Generally, management estimated fair
values by discounting the anticipated cash flows at current market rates
for loans with similar terms to borrowers of similar credit quality.

DEPOSIT LIABILITIES

The fair values of savings certificate accounts represent contractual cash
flows discounted using interest rates currently offered on certificates
with similar characteristics and remaining maturities. In accordance with
SFAS No. 107, the fair values of other deposit accounts (those with no
stated maturity such as passbook and money market accounts) are equal to
the carrying amounts payable on demand.

These fair values do not include the value of core deposit relationships
which comprise a significant portion of the Association's deposit base.
Management believes that the Association's core deposit relationships
provide a relatively stable, low-cost funding source which has a
substantial unrecognized value separate from the deposit balances.

OTHER FINANCIAL INSTRUMENTS

The other financial assets and liabilities listed in the preceding table
have fair values which approximate the respective carrying amounts in the
balance sheets because the instruments are payable on demand or have
short-term maturities and present relatively low credit risk and interest
rate risk. Fair values of the loan origination commitments and unused
lines of credit described in Note 10 were estimated based on an analysis
of the interest rates and fees currently charged to enter into similar
transactions, considering the remaining terms of the instruments and the
creditworthiness of the potential borrowers. At March 31, 1998 and 1997,
the fair values of these instruments approximated the related carrying
amounts which were not significant.

(13) RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for the reporting and display of comprehensive income (and its
components) in financial statements. The standard does not, however,
specify when to recognize or how to measure items that make up
comprehensive income. Comprehensive income represents net income and
certain amounts reported directly in equity, such as the net unrealized
gain or loss on available-for-sale securities. While SFAS No. 130 does
not require a specific reporting format, it does require that an
enterprise display in the financial statements an amount representing
total comprehensive income for the period.

F-22
<PAGE> 134

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," to revise present
disclosure requirements applicable to those benefits. Although the
standard does not change the measurement or recognition requirements for
postretirement benefit plans, it standardizes the disclosure requirements;
requires additional information on changes in benefit obligations and fair
values of plan assets; and eliminates certain present disclosure
requirements.

SFAS Nos. 130 and 132 are effective for fiscal years beginning after
December 15, 1997 and, accordingly, will be adopted by the Association in
the year ending March 31, 1999. Management does not expect that these
standards will significantly affect the Association's financial reporting.

(14) MUTUAL HOLDING COMPANY REORGANIZATION AND OFFERING

On May 13, 1998, the Board of Directors of the Association adopted a Plan
of Reorganization ("the Plan") pursuant to which the Association will
convert to a stock savings and loan association under a two-tier mutual
holding company structure. As part of the Plan, the Association will
establish a federally-chartered mutual holding company known as Sound
Federal, MHC (the "Mutual Holding Company") and a capital stock holding
company known as Sound Federal Bancorp ("the Company"). The Association
will become a federally-chartered capital stock savings and loan
association, wholly owned by the Company.

The Company plans to offer for sale 45% of its common shares in a
subscription offering ("the Offering") initially to eligible Association
depositors; tax-qualified employee benefit plans of the Association;
certain other Association depositors and borrowers; and employees,
officers and directors of the Association. Any shares of common stock not
sold in the Offering will be offered to certain members of the general
public in a community offering, with a preference for natural persons
residing in Westchester County. The Company also plans to contribute 2%
of its common shares to a charitable foundation to be established pursuant
to the Plan. Such contribution will result in the Company 's recognition
of expense, equal to the fair value of the shares contributed, in the
period in which the contribution occurs. After completion of these
transactions, the MHC will own the remaining 53% of the Company's issued
common shares.

F-23
<PAGE> 135

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

NOTES TO FINANCIAL STATEMENTS, CONTINUED

Following the completion of the reorganization, all depositors who had
liquidation rights with respect to the Association as of the effective date of
the reorganization will continue to have such rights solely with respect to the
Mutual Holding Company so long as they continue to hold deposit accounts with
the Association. In addition, all persons who become depositors of the
Association subsequent to the reorganization will have such liquidation rights
with respect to the Mutual Holding Company.

Offering costs will be deferred and reduce the proceeds from the shares sold in
the Offering. If the Offering is not completed, all costs will be charged to
expense. The Association had incurred no offering costs as of March 31, 1998.

F-24
<PAGE> 136
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------
<TABLE>
<CAPTION>

TABLE OF CONTENTS
PAGE
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING ............................... 1
SUMMARY ...................................................................... 4
SELECTED FINANCIAL AND OTHER DATA OF SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
9
RISK FACTORS ................................................................. 11
PROPOSED PURCHASES BY DIRECTORS AND EXECUTIVE OFFICERS ....................... 17
SOUND FEDERAL, MHC ........................................................... 17
SOUND FEDERAL BANCORP ........................................................ 18
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION ................................... 19
SUMMARY DESCRIPTION OF THE REORGANIZATION .................................... 19
MARKET AREA .................................................................. 20
COMPETITION .................................................................. 20
USE OF PROCEEDS .............................................................. 20
DIVIDENDS .................................................................... 21
MARKET FOR THE COMMON STOCK .................................................. 22
CAPITALIZATION ............................................................... 22
PRO FORMA DATA ............................................................... 24
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE ....................... 30
THE REORGANIZATION AND OFFERING .............................................. 31
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION STATEMENTS OF INCOME .............. 51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ............................................................. 52
BUSINESS OF THE ASSOCIATION .................................................. 64
MANAGEMENT OF SOUND FEDERAL BANCORP .......................................... 82
MANAGEMENT OF THE ASSOCIATION ................................................ 82
EXECUTIVE COMPENSATION AND RELATED TRANSACTIONS OF THE ASSOCIATION ........... 84
REGULATION ................................................................... 90
TAXATION ..................................................................... 97
RESTRICTIONS ON THE ACQUISITION OF THE COMPANY ............................... 98
DESCRIPTION OF CAPITAL STOCK ................................................. 100
TRANSFER AGENT ............................................................... 101
REGISTRATION REQUIREMENTS .................................................... 101
LEGAL AND TAX MATTERS ........................................................ 101
EXPERTS ...................................................................... 101
ADDITIONAL INFORMATION ....................................................... 102

</TABLE>
------------------

Until _____________, or 25 days after the commencement of the offering of Common
Stock, all dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

SOUND FEDERAL BANCORP

(PROPOSED HOLDING COMPANY FOR
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION)

UP TO 3,505,286 SHARES

Common Stock
($.10 par value per share)

PROSPECTUS

SANDLER O'NEILL & PARTNERS, L.P.

_________________, 1998

THESE SECURITIES ARE NOT DEPOSITS OR
ACCOUNTS AND ARE NOT FEDERALLY
INSURED OR GUARANTEED
===============================================================================
<PAGE> 137

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Amount
------
<S> <C> <C>
* Legal Fees and Expenses . . . . . . . . . . . . . . . $ 100,000
* Underwriter's fees . . . . . . . . . . . . . . . . . 390,000
* Printing, Postage and Mailing . . . . . . . . . . . . 140,000
* Appraisal and Business Plan Fees and Expenses . . . . 25,000
* Accounting Fees and Expenses . . . . . . . . . . . . 125,000
* Underwriter's Counsel Fees . . . . . . . . . . . . . 45,000
* Filing Fees (NASD, OTS and SEC) . . . . . . . . . . . 74,000
* Other Expenses . . . . . . . . . . . . . . . . . . . 30,000
----------
* Total . . . . . . . . . . . . . . . . . . . . . . . $ 937,000
==========

</TABLE>
- ----------------
* Estimated
** Sound Federal Bancorp has retained Sandler O'Neill & Partners,
LP ("Sandler O'Neill") to assist in the sale of common stock on
best efforts basis in the Offerings. Sandler O'Neill will
receive fees of approximately $390,000, at the mid-point of the
Offering, exclusive of estimated expenses of $45,000.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF SOUND FEDERAL
SAVINGS AND LOAN ASSOCIATION, AND SOUND FEDERAL BANCORP

Generally, federal regulations define areas for indemnity coverage for federal
savings associations, and proposed federal regulations define areas for
indemnity coverage for federal MHC subsidiary holding companies, as follows:

(a) Any person against whom any action is brought or
threatened because that person is or was a director or officer of the savings
association shall be indemnified by the savings association for:

(i) Any amount for which that person becomes liable
under a judgment in such action; and

(ii) Reasonable costs and expenses, including reasonable
attorneys' fees, actually paid or incurred by that person in
defending or settling such action, or in enforcing his or her
rights under this section if he or she attains a favorable
judgement in such enforcement action.

(b) Indemnification shall be made to such person under
paragraph (b) of this Section only if:

(i) Final judgement on the merits is in his or her favor;
or

(ii) In case of:

a. Settlement,
b. Final judgement against him or her, or
c. Final judgement in his or her favor, other
than on the merits, if a majority of the
disinterested directors of the savings
association determine that he or she was
acting in good faith within the scope of his
or her employment or authority as he or she
could reasonably have perceived it under the
circumstances and for a purpose he or she
could reasonably have believed under the
circumstances was in the best interest of
the savings association or its members.
However, no indemnification

<PAGE> 138
shall be made unless the association gives
the Office at least 60 days notice of its
intention to make such indemnification.
Such notice shall state the facts on which
the action arose, the terms of any
settlement, and any disposition of the
action by a court. Such notice, a copy
thereof, and a certified copy of the
resolution containing the required
determination by the board of directors
shall be sent to the Regional Director, who
shall promptly acknowledge receipt thereof.
The notice period shall run from the date of
such receipt. No such indemnification shall
be made if the OTS advises the association
in writing, within such notice period, of
its objection thereto.

(i) "Action" means any judicial or administrative
proceeding, or threatened proceeding, whether civil, criminal,
or otherwise, including any appeal or other proceeding for
review;

(ii) "Court" includes, without limitation, any court to
which or in which any appeal or any proceeding for review is
brought;

(iii) "Final Judgment" means a judgment, decree, or
order which is not appealable or as to which the period for
appeal has expired with no appeal taken;

(iv) "Settlement" includes the entry of a judgment by
consent or confession or a plea of guilty or of nolo contendere.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Not Applicable.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:

The exhibits filed as part of this registration statement are as
follows:

(a) LIST OF EXHIBITS

1.1 Engagement Letter between Sound Federal Savings and Loan Association and
Sandler O'Neill & Partners, LP.

1.2 Agency Agreement among Sound Federal Bancorp, Sound Federal Savings and
Loan Association and Sandler O'Neill & Partners, LP.*

2 Plan of Reorganization from Mutual Savings Association to Mutual Holding
Company and Stock Issuance Plan

3.1 Proposed Federal Holding Company Charter of Sound Federal Bancorp

3.2 Proposed Bylaws of Sound Federal Bancorp

4 Form of Common Stock Certificate of Sound Federal Bancorp

5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered

8.1 Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.

<PAGE> 139

8.2 Opinion of FinPro, Inc. with respect to Subscription Rights

10.1 Form of Employee Stock Ownership Plan

10.2 Employment Agreement with Richard P. McStravick

10.3 Employment Agreement with William H. Morel

10.4 Directors Deferred Fee Plan

10.5 Directors Emeritus Program

21 Subsidiaries of the Registrant

23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
Opinions included on Exhibits 5 and 8.1)

23.2 Consent of KPMG Peat Marwick LLP.

23.3 Consent of FinPro, Inc.

24 Power of Attorney (set forth on signature page)

27.1 EDGAR Financial Data Schedule

99.1 Appraisal Agreement between Sound Federal Savings and Loan Association
and FinPro, Inc.

99.2 Appraisal Report of FinPro, Inc.

99.3 Proxy Statement

99.4 Marketing Materials

99.5 Order and Acknowledgment Form and Certification Form

99.6 401(k) Supplement

- ---------------------------------------------
* To be filed supplementally or by amendment

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to:

(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any duration from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no

<PAGE> 140
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;

(iii) Include any additional or changed material
information on the plan of distribution.

(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.

(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.

The registrant will provide to the underwriter at the closing
specified in the Underwriting Agreement certificates in such documentation and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

<PAGE> 141
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, in the city of Mamaroneck, State of New York on June
19, 1998.

SOUND FEDERAL BANCORP (IN FORMATION)

By: /s/ Richard P. McStravick
--------------------------------------
Richard P. McStravick
President and Chief Executive Officer
(Duly Authorized Representative)

POWER OF ATTORNEY

We, the undersigned directors and officers of Sound Federal Bancorp (the
"Company") hereby severally constitute and appoint Richard P. McStravick as our
true and lawful attorney and agent, to do any and all things in our names in
the capacities indicated below which said Richard P. McStravick may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration statement on Form S-1
relating to the offering of the Company's Common Stock, including specifically,
but not limited to, power and authority to sign for us in our names in the
capacities indicated below the registration statement and any and all
amendments (including post-effective amendments) thereto; and we hereby
approve, ratify and confirm all that said Richard P. McStravick shall do or
cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>

/s/ Richard P. McStravick President, Chief Executive June 19, 1998
- ------------------------- Officer and Director
Richard P. McStravick (Principal Executive Officer)

/s/ Stephen P. Milliot Senior Vice President and Chief June 19, 1998
- ---------------------- Financial Officer
Stephen P. Milliot (Principal Financial and
Accounting Officer)

/s/ Bruno J. Gioffre Chairman of the Board June 19, 1998
- --------------------
Bruno J. Gioffre

/s/ Joseph Dinolfo Director June 19, 1998
- ------------------
Joseph Dinolfo

/s/ Donald H. Heithaus Director June 19, 1998
- ----------------------
Donald H. Heithaus

</TABLE>

<PAGE> 142

Signatures Title Date
---------- ----- ----
<S> <C> <C>

/s/ James Staudt Director June 19, 1998
- -------------------
James Staudt

/s/ Robert P. Joyce Director June 19, 1998
- -------------------
Robert P. Joyce

/s/ Joseph A. Lanza Director June 19, 1998
- -------------------
Joseph A. Lanza

/s/ Arthur C. Phillips, Jr. Director June 19, 1998
- ---------------------------
Arthur C. Phillips, Jr.

</TABLE>
<PAGE> 143
EXHIBIT INDEX

1.1 Engagement Letter between Sound Federal Savings and Loan Association and
Sandler O'Neill & Partners, LP.

1.2 Agency Agreement among Sound Federal Bancorp, Sound Federal Savings and
Loan Association and Sandler O'Neill & Partners, LP.*

2 Plan of Reorganization from Mutual Savings Association to Mutual Holding
Company and Stock Issuance Plan

3.1 Proposed Federal Holding Company Charter of Sound Federal Bancorp

3.2 Proposed Bylaws of Sound Federal Bancorp

4 Form of Common Stock Certificate of Sound Federal Bancorp

5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered

8.1 . Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C

8.2 Opinion of FinPro, Inc. with respect to Subscription Rights

10.1 Form of Employee Stock Ownership Plan

10.2 Employment Agreement with Richard P. McStravick

10.3 Employment Agreement with William H. Morel

10.4 Directors Deferred Fee Plan

10.5 Directors Emeritus Program

21 Subsidiaries of the Registrant

23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
Opinions included on Exhibits 5 and 8.1)

23.2 Consent of KPMG Peat Marwick LLP.

23.3 Consent of FinPro, Inc.

24 Power of Attorney (set forth on signature page)

27.1 EDGAR Financial Data Schedule

99.1 Appraisal Agreement between Sound Federal Savings and Loan Association
and FinPro, Inc.

99.2 Appraisal Report of FinPro, Inc.

99.3 Proxy Statement

99.4 Marketing Materials

99.5 Order and Acknowledgment Form and Certification Form

99.6 401(k) Supplement

- ---------------------------------
* To be filed supplementally or by amendment.

<PAGE> 1
EXHIBIT 1.1

[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]

SANDLER O'NEILL

April 14, 1998

Mr. Bruno J. Gioffre, Esq.
Chairman of the Board
Sound Federal Savings and Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543

Dear Mr. Gioffre:

Sandler O'Neill & Partners, L.P. ("Sandler O'Neill"), is pleased to
act as an independent financial advisor to Sound Federal Savings and Loan
Association (the "Association") in connection with the Association's proposed
reorganization into mutual holding company form (the "Reorganization"),
including the offer and sale of certain shares of the common stock (the "Common
Stock") of the Association (or a middle-tier stock holding company) to the
Association's depositors in a Subscription Offering, to members of the
Association's community in a Direct Community Offering and, under certain
circumstances, to the general public in a Syndicated Community Offering
(collectively, the "Offerings"). For purposes of this letter, the term "Actual
Purchase Price" shall mean the price at which the shares of the common stock
are sold in the Offerings. This letter is to confirm the terms and conditions
of our engagement.

ADVISORY SERVICES

Sandler O'Neill will act as a consultant and advisor to the
Association and will work with the Association's management, counsel,
accountants and other advisors in connection with the Reorganization and the
Offerings. We anticipate that our services will include the following, each as
may be necessary and as the Association may reasonably request:

1. Consulting as to the securities marketing implications of any
aspect of the Plan of Reorganization or related corporate
documents;

2. Reviewing with the Board of Directors the independent
appraiser's appraisal of the
<PAGE> 2
Sound Federal Savings and Loan Association
April 14, 1998
Page 2 SANDLER O'NEILL

Common Stock, particularly with regard to aspects of the
appraisal involving the methodology employed;

3. Reviewing all offering documents, including the Prospectus,
stock order forms and related offering materials (it being
understood that preparation and filing of such documents will
be the responsibility of the Association and its counsel);

4. Assisting in the design and implementation of a marketing
strategy for the Offerings;

5. Assisting in obtaining all requisite regulatory approvals;

6. Assisting Association management in scheduling and preparing
for meetings with potential investors and broker-dealers; and

7. Providing such other general advice and assistance as may be
requested to promote the successful completion of the
Offering.

SYNDICATED COMMUNITY OFFERING

If any shares of the Common Stock remain available after the
expiration of the Subscription Offering and the Direct Community Offering, at
the request of the Association and subject to the continued satisfaction of the
conditions set forth in the second paragraph under the caption "Definitive
Agreement" below, Sandler O'Neill will seek to form a syndicate of registered
dealers to assist in the sale of such Common Stock in a Syndicated Community
Offering on a best efforts basis, subject to the terms and conditions set forth
in a selected dealers agreement. Sandler O'Neill will endeavor to limit the
aggregate fees to be paid by the Association under any such selected dealers
agreement to an amount competitive with gross underwriting discounts charged at
such time for underwritings of comparable amounts of stock sold at a comparable
price per share in a similar market environment, which shall not exceed 5% of
the Aggregate Actual Purchase Price of the shares sold under such agreements.
Sandler O'Neill will endeavor to distribute the Common Stock among dealers in a
fashion which best meets the distribution objectives of the Association and the
requirements of the Plan of Reorganization, which may result in limiting the
allocation of stock to certain selected dealers. It is understood that in no
event shall Sandler O'Neill be obligated to act as a selected dealer or to take
or purchase any shares of the Common Stock.
<PAGE> 3
Sound Federal Savings and Loan Association
April 14, 1998
Page 3 SANDLER O'NEILL

FEES

If the Reorganization is consummated, the Association agrees to pay
Sandler O'Neill for its services hereunder the fees set forth below:

1. a fee of one and one-half percent (1.5%) of the aggregate
Actual Purchase Price of the shares of common stock sold in
the Subscription Offering and in the Direct Community
Offering, excluding in each case shares purchased by (i) any
employee benefit plan of the Association (or any holding
company of the Association) established for the benefit of the
Association's directors, officers and employees, and (ii) any
director, officer or employee of the Association or members of
their immediate families; and

2. with respect to any shares of the Common Stock sold by any
NASD member firm (other than Sandler O'Neill) under any
selected dealers agreement in the Syndicated Community
Offering, (a) the sales commission payable to the selected
dealer under such agreement, (b) any sponsoring dealer's fees,
and (c) a management fee to Sandler O'Neill of one and
one-half percent (1.5%). Any fees payable to Sandler O'Neill
for common stock sold by Sandler O'Neill under any such
agreement shall be limited to an aggregate of one and one-half
percent (1.5%) of the Actual Purchase Price of such shares.

If (i) Sandler O'Neill's engagement hereunder is terminated for any of
the reasons provided for under the second paragraph of the section of this
letter captioned "Definitive Agreement," or (ii) the Reorganization is
terminated by the Association, no fees shall be payable by the Association to
Sandler O'Neill hereunder; however, the Association shall reimburse Sandler
O'Neill for its reasonable out-of-pocket expenses incurred in connection with
its engagement hereunder.

All fees payable to Sandler O'Neill hereunder shall be payable in cash
at the time of the closing of the Reorganization, or upon the termination of
Sandler O'Neill's engagement hereunder or termination of the Reorganization, as
the case may be. In recognition of the long lead times involved in the
reorganization process, the Association agrees to make advance payments to
Sandler O'Neill in the aggregate amount of $50,000, $20,000 of which shall be
payable upon execution of this letter and the remaining $30,000 of which shall
be payable upon commencement of the Subscription Offering, which shall be
credited against any fees or reimbursement of expenses payable hereunder.
<PAGE> 4
Sound Federal Savings and Loan Association
April 14, 1998
Page 4 SANDLER O'NEILL

COSTS AND EXPENSES

In addition to any fees that may be payable to Sandler O'Neill
hereunder and the expenses to be borne by the Association pursuant to the
following paragraph, the Association agrees to reimburse Sandler O'Neill, upon
request made from time to time, for its reasonable out-of-pocket expenses
incurred in connection with its engagement hereunder, regardless of whether the
Reorganization is consummated, including, without limitation, legal fees (up to
a maximum of $45,000), advertising, promotional, syndication, and travel
expenses; provided, however, that Sandler O'Neill shall document such expenses
to the reasonable satisfaction of the Association, and no individual expense
(other than legal fees) in excess of $1,000 will be incurred by Sandler O'Neill
without the prior approval of the Association, such approval not to be
unreasonably withheld. The provisions of this paragraph are not intended to
apply to or in any way impair the indemnification provisions of this letter.

As is customary, the Association will bear all other expenses incurred
in connection with the Reorganization and the Offerings, including, without
limitation, (i) the cost of obtaining all securities and bank regulatory
approvals, including any required NASD filing fees; (ii) the cost of printing
and distributing the offering materials; (iii) the costs of blue sky
qualification (including fees and expenses of blue sky counsel) of the shares
in the various states; (iv) listing fees; and (v) all fees and disbursements of
the Association's counsel, accountants, conversion agent and other advisors.
In the event Sandler O'Neill incurs any such fees and expenses on behalf of the
Association, the Association will reimburse Sandler O'Neill for such fees and
expenses whether or not the Reorganization is consummated; provided, however,
that Sandler O'Neill shall not incur any substantial expenses on behalf of the
Association pursuant to this paragraph without the prior approval of the
Association.

DUE DILIGENCE REVIEW

Sandler O'Neill's obligation to perform the services contemplated by
this letter shall be subject to the satisfactory completion of such
investigation and inquiries relating to the Association, its respective
directors, officers, agents and employees, as Sandler O'Neill and its counsel
in their sole discretion may deem appropriate under the circumstances. In this
regard, the Association agrees that, at its expense, it will make available to
Sandler O'Neill all information which Sandler O'Neill requests, and will allow
Sandler O'Neill the opportunity to discuss with the Association's management
the financial condition, business and operations of the Association. The
Association acknowledges that Sandler O'Neill will rely upon the accuracy and
completeness of all information received from the Association and its
directors, trustees, officers, employees, agents, independent accountants and
counsel.
<PAGE> 5
Sound Federal Savings and Loan Association
April 14, 1998
Page 5 SANDLER O'NEILL

BLUE SKY MATTERS

The Association agrees that if Sandler O'Neill's counsel does not
serve as counsel with respect to blue sky matters in connection with the
Offerings, the Association will cause the counsel performing such services to
prepare a Blue Sky Memorandum related to the Offerings including Sandler
O'Neill's participation therein and shall furnish Sandler O'Neill a copy
thereof addressed to Sandler O'Neill or upon which such counsel shall state
Sandler O'Neill may rely.

CONFIDENTIALITY

Other than disclosure to other firms made part of any syndicate of
selected dealers or as required by law or regulation or legal process, Sandler
O'Neill agrees that it will not disclose any Confidential Information relating
to the Association obtained in connection with its engagement hereunder
(whether or not the Reorganization is consummated) and will use such
information only in connection with the Reorganization. As used in this
paragraph, the term "Confidential Information" shall not include information
which (i) is or becomes generally available to the public other than as a
result of a disclosure by Sandler O'Neill, (ii) was available to Sandler
O'Neill on a non-confidential basis prior to its disclosure to Sandler O'Neill
by the Association, or (iii) becomes available to Sandler O'Neill on a
non-confidential basis from a person other than the Association who is not
otherwise known to Sandler O'Neill upon due inquiry to be bound not to disclose
such information pursuant to a contractual, legal or fiduciary obligation.

INDEMNIFICATION

Since Sandler O'Neill will be acting on behalf of the Association (and
any holding companies created as part of the Reorganization) in connection with
the Reorganization and the Offerings, the holding companies and the Association
agree to indemnify and hold Sandler O'Neill and its affiliates and their
respective partners, directors, officers, employees, agents and controlling
persons within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities Exchange Act of 1934 (Sandler O'Neill and each
such person being an "Indemnified Party") harmless from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under applicable federal or state law, or
otherwise, related to or arising out of the Reorganization or the engagement of
Sandler O'Neill pursuant to, or the performance by Sandler O'Neill of the
services contemplated by, this letter, and will reimburse any Indemnified Party
for all expenses (including reasonable legal fees and expenses) as they are
incurred, including expenses incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified
<PAGE> 6
Sound Federal Savings and Loan Association
April 14, 1998
Page 6 SANDLER O'NEILL

Party is a party; provided, however, that the Association and the holding
companies will not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense (i) arises out of or is based upon any
untrue statement of a material fact or the omission of a material fact required
to be stated therein or necessary to make not misleading any statements
contained in any proxy statement or prospectus (preliminary or final), or any
amendment or supplement thereto, or any of the applications, notices, filings
or documents related thereto made in reliance on and in conformity with written
information furnished to the Association by Sandler O'Neill expressly for use
therein, or (ii) is primarily attributable to the gross negligence, willful
misconduct or bad faith of Sandler O'Neill. If the foregoing indemnification is
unavailable for any reason (other than as a result of clause (i) or (ii) of the
preceding sentence), the Association and the holding companies agree to
contribute to such losses, claims, damages, liabilities and expenses in the
proportion that its financial interest in the Reorganization and offerings
bears to that of Sandler O'Neill.

DEFINITIVE AGREEMENT

Sandler O'Neill and the Association agree that (a) except as set forth
in clause (b), the foregoing represents the general intention of the
Association and Sandler O'Neill with respect to the services to be provided by
Sandler O'Neill in connection with the Offerings, which will serve as a basis
for Sandler O'Neill commencing activities, and (c) the only legal and binding
obligations of the Association, the holding companies and Sandler O'Neill with
respect to the subject matter hereof shall be (1) the Association's obligation
to reimburse costs and expenses pursuant to the section captioned "Costs and
Expenses," (2) those set forth under the captions "Confidentiality" and
"Indemnification," and (3) as set forth in a duly negotiated and executed
definitive Agency Agreement to be entered into prior to the commencement of the
Subscription Offering relating to the services of Sandler O'Neill in connection
with the Offerings. Such Agency Agreement shall be in form and content
satisfactory to Sandler O'Neill, the Association and the holding companies and
their respective counsel and shall contain standard indemnification provisions
consistent herewith.

Sandler O'Neill's execution of such Agency Agreement shall also be
subject to (i) Sandler O'Neill's satisfaction with its investigation of the
Association's business, financial condition and results of operations, (ii)
preparation of offering materials that are satisfactory to Sandler O'Neill and
its counsel, (iii) compliance with all relevant legal and regulatory
requirements to the reasonable satisfaction of Sandler O'Neill's counsel, (iv)
agreement that the price established by the independent appraiser is reasonable
and (v) market conditions at the time of the proposed offering. Sandler
O'Neill or the Association may terminate this agreement if such Agency
Agreement is not entered into prior to September 30, 1999.
<PAGE> 7
Sound Federal Savings and Loan Association
April 14, 1998
Page 7 SANDLER O'NEILL

Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.

Very truly yours,

Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner

By: /s/ CATHERINE A. LAWTON
----------------------------------
Catherine A. Lawton
Vice President

Accepted and agreed to as of
the date first above written:

Sound Federal Savings and Loan Association

By: /s/ BRUNO J. GIOFFRE
-------------------------------------------
Mr. Bruno J. Gioffre, Esq.
Chairman of the Board

cc: Mr. Eric Luse, Esq.
Luse, Lehman, Pomerenk & Schick

<PAGE> 1

EXHIBIT 2
<PAGE> 2

SOUND FEDERAL SAVINGS & LOAN ASSOCIATION
PLAN OF REORGANIZATION
FROM MUTUAL SAVINGS ASSOCIATION
TO MUTUAL HOLDING COMPANY
AND STOCK ISSUANCE PLAN
<PAGE> 3

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Introduction.............................................................1
2. Definitions..............................................................1
3. The Reorganization.......................................................6
4. Conditions to Implementation of the Reorganization.......................8
5. Special Meeting of Members...............................................9
6. Rights of Members of the MHC.............................................9
7. Conversion of MHC to Stock Form..........................................9
8. Timing of the Reorganization and Sale of Capital Stock..................10
9. Number of Shares to be Offered..........................................11
10. Independent Valuation and Purchase Price of Shares......................11
11. Method of Offering Shares and Rights to Purchase Stock..................12
12. Additional Limitations on Purchases of Common Stock.....................15
13. Payment for Stock.......................................................17
14. Manner of Exercising Subscription Rights Through Order Forms............18
15. Undelivered, Defective or Late Order Form; Insufficient Payment.........19
16. Completion of the Stock Offering........................................19
17. Market for Common Stock.................................................19
18. Stock Purchases by Management Persons After the Offering................19
19. Resales of Stock by Directors and Officers..............................20
20. Stock Certificates......................................................20
21. Restriction on Financing Stock Purchases................................20
22. Stock Benefit Plans.....................................................20
23. Post-Reorganization Filing and Market Making............................21
24. Payment of Dividends and Repurchase of Stock............................21
25. Reorganization and Stock Offering Expenses..............................21
26. Employment and Other Severance Agreements...............................21
27. Establishment and Funding of Charitable Foundation......................21
28. Interpretation..........................................................22
29. Amendment or Termination of the Plan....................................22
</TABLE>

<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Exhibit A Charter and Bylaws of the Bank
Exhibit B Charter and Bylaws of the Holding Company
Exhibit C Charter and Bylaws of the Mutual Holding Company
</TABLE>

<PAGE> 4
1. INTRODUCTION

The Board of Directors of Sound Federal Savings & Loan Association
(the "Bank") has adopted this Plan of Reorganization from Mutual Savings
Association to Mutual Holding Company and Stock Issuance Plan (the "Plan")
pursuant to which the Bank proposes to reorganize from a federally-chartered
mutual savings association into the mutual holding company structure (the
"Reorganization") under the laws of the United States of America and the
regulations of the Office of Thrift Supervision ("OTS"). The mutual holding
company (the "MHC") will be a mutually-owned federal corporation, and all of
the current ownership and voting rights of the Members of the Bank will be
transferred to the MHC. As part of the Reorganization and the Plan, the Bank
will convert to a federal stock savings bank (the "Stock Bank") and will
establish a stock holding company (the "Holding Company") which will be a
majority-owned subsidiary of the MHC at all times so long as the MHC remains in
existence. Concurrently with the Reorganization, the Holding Company intends
to offer for sale up to 49.9% of its Common Stock in the Stock Offering. The
Common Stock will be offered on a priority basis to depositors and
Tax-Qualified Employee Plans of the Bank, with any remaining shares offered to
the public in a Community Offering.

The primary purpose of the Reorganization is to establish a holding
company and to convert the Bank to the stock form of ownership, which will
enable the Bank to compete and expand more effectively in the financial
services marketplace. The Reorganization will permit the Holding Company to
issue Capital Stock, which is a source of capital not available to mutual
savings associations. Since the Holding Company will not be offering all of
its Common Stock for sale to depositors and the public in the Stock Offering,
the Reorganization will result in less capital raised in comparison to a
standard mutual-to-stock conversion. The Reorganization, however, will also
offer the Bank the opportunity to raise additional capital since a majority of
the Holding Company's common stock will be available for sale in the future. It
will also provide the Bank with greater flexibility to structure and finance
the expansion of its operations, including the potential acquisition of other
financial institutions. Lastly, the Reorganization will enable the Bank to
better manage its capital by (i) providing broader acquisition and investment
opportunities through the holding company structure, and (ii) enabling the Bank
to distribute capital to stockholders of the Holding Company in the form of
dividends and (iii) by enabling the Holding Company to repurchase its common
stock as market conditions warrant. Although the Reorganization and Stock
Offering will create a stock savings bank and stock holding company, only a
minority of the Common Stock will be offered for sale in the Stock Offering.
As a result, the Bank's mutual form of ownership and its ability to remain an
independent savings bank and to provide community-oriented financial services
will be preserved through the mutual holding company structure. The
Reorganization is subject to the approval of the OTS, and must be adopted by
the affirmative vote of a majority of the total votes eligible to be cast by
Members.

2. DEFINITIONS

As used in this Plan, the terms set forth below have the following
meanings:

ACTING IN CONCERT: The term "acting in concert" shall have
the definition given in 12 C.F.R. Section 574.2(c). The determination of
whether a group is acting in concert shall be made solely by the Board of
Directors of the Bank or officers delegated by such Board and may be based on
any evidence upon which the Board or such delegatee chooses to rely.

ACTUAL SUBSCRIPTION PRICE: The price per share, determined as
provided in this Plan, at which the Common Stock will be sold in the
Subscription Offering.

AFFILIATE: Any Person that controls, is controlled by, or is
under common control with another person.

<PAGE> 5
ASSOCIATE: The term "Associate," when used to indicate a
relationship with any Person, means: (i) any corporation or organization
(other than the Bank, the Holding Company, the MHC or a majority-owned
subsidiary of any thereof) of which such Person is a director, officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as trustee or in a similar fiduciary capacity; (iii) any relative or spouse of
such Person or any relative of such spouse, who has the same home as such
Person or who is a director or officer of the Bank, the MHC, the Stock Holding
Company or any subsidiary of the MHC or the Holding Company or any affiliate
thereof; and (iv) any person acting in concert with any of the persons or
entities specified in clauses (i) through (iii) above; provided, however, that
any Tax-Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be
an associate of any director or officer of the MHC, the Holding Company or the
Bank, to the extent provided in Sections 11-13 hereof. When used to refer to a
Person other than an officer or director of the Bank, the Bank in its sole
discretion may determine the Persons that are Associates of other Persons.

BANK: Sound Federal Savings & Loan Association in its
pre-Reorganization form.

CAPITAL STOCK: Any and all authorized stock of the Bank or
the Holding Company.

COMMON STOCK: Common stock issuable by the Holding Company in
connection with the Reorganization, including securities convertible into
Common Stock, pursuant to its stock charter.

COMMUNITY: Westchester County.

COMMUNITY OFFERING: The offering to certain members of the
general public of any unsubscribed shares in the Subscription Offering which
may be effected pursuant to Section 11 of this Plan. The Community Offering may
include a Syndicated Community Offering or public offering.

DEPOSIT ACCOUNT(S): Any withdrawable deposit(s) offered by
the Bank, including NOW account deposits, certificates of deposit, demand
deposits and IRA accounts and Keogh plans for which the Bank acts as custodian
or trustee.

EFFECTIVE DATE: The date upon which all necessary approvals
have been obtained to complete the Reorganization, and the Reorganization and
Stock Offering have been completed.

ELIGIBLE ACCOUNT HOLDER: Any person holding a Qualifying
Deposit on the Eligibility Record Date.

ELIGIBILITY RECORD DATE: March 31, 1997, the date for
determining who qualifies as an Eligible Account Holder.

ESOP: The Bank's employee stock ownership plan.

EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended.

FDIC: The Federal Deposit Insurance Corporation.

HOLA: The Home Owners' Loan Act, as amended.

2
<PAGE> 6
HOLDING COMPANY: Sound Federal Bancorp, the federal
corporation which will be majority-owned by the MHC and which will own 100% of
the common stock of the Bank.

HOLDING COMPANY APPLICATION: The Holding Company Application
on Form H(e)-1 to be submitted by the Bank to the OTS to have the Holding
Company acquire the common stock of the Bank.

INDEPENDENT APPRAISER: The appraiser retained by the Bank to
prepare an appraisal of the pro forma market value of the Bank and the Holding
Company.

MANAGEMENT PERSON: Any Officer or director of the Bank or any
Affiliate of the Bank, and any person acting in concert with any such Officer
or director.

MARKETING AGENT: The broker-dealer responsible for organizing
and managing the Stock Offering and sale of the Common Stock.

MARKET MAKER: A dealer (i.e., any person who engages directly
or indirectly as agent, broker, or principal in the business of offering,
buying, selling or otherwise dealing or trading in securities issued by another
person) who, with respect to a particular security, (1) regularly publishes
bona fide competitive bid and offer quotations on request, and (2) is ready,
willing and able to effect transactions in reasonable quantities at the
dealer's quoted prices with other brokers or dealers.

MEMBERS: Any person or entity who qualifies as a member of
the Bank pursuant to its charter and bylaws.

MHC: Sound Federal MHC, the mutual holding company resulting
from the Reorganization.

MINORITY OWNERSHIP INTEREST: The shares of the Holding
Company's Common Stock owned by persons other than the MHC, expressed as a
percentage of the total shares of Holding Company Common Stock outstanding.

MINORITY STOCK OFFERING: One or more offerings of less than
50% in the aggregate of the outstanding Common Stock of the Holding Company to
persons other than the MHC.

MINORITY STOCKHOLDER: Any owner of the Holding Company's
Common Stock, other than the MHC.

NON-VOTING STOCK: Any Capital Stock other than Voting Stock.

NOTICE: The Notice of Mutual Holding Company Reorganization
to be submitted by the Bank to the OTS to notify the OTS of the Reorganization
and the Stock Offering.

OFFICER: An executive officer of the Holding Company or the
Bank, including the Chief Executive Officer, President, Senior Vice Presidents
in charge of principal business functions, Secretary, Treasurer and any other
person performing similar functions.

3
<PAGE> 7

OTHER MEMBER: Any person who is a Member of the Bank at the
close of business on the Voting Record Date who is not an Eligible Account
Holder or Supplemental Eligible Account Holder, or Tax-Qualified Employee Plan.

OTS: The Office of Thrift Supervision, and any successor
thereto.

PARENT: A company that controls another company, either
directly or indirectly through one or more subsidiaries.

PERSON: An individual, corporation, partnership, association,
joint-stock company, trust (including Individual Retirement Accounts and KEOGH
Accounts), unincorporated organization, government entity or political
subdivision thereof or any other entity.

PLAN: This Plan of Reorganization from Mutual Savings Bank to
Mutual Holding Company and Stock Issuance Plan.

QUALIFYING DEPOSIT: The aggregate balance of each Deposit
Account of an Eligible Account Holder as of the close of business on the
Eligibility Record Date or of a Supplemental Eligible Account Holder as of the
close of business on the Supplemental Eligibility Record Date, as the case may
be, provided such aggregate balance is not less than $50.

REGULATIONS: The regulations of the OTS regarding mutual
holding companies.

REORGANIZATION: The reorganization of the Bank into the
mutual holding company structure including the organization of the MHC, the
Holding Company and the Bank in stock form pursuant to this Plan.

RESIDENCE: The terms "residence," "reside," "resided" or
"residing" as used herein with respect to any person shall mean any person who
occupied a dwelling within the Bank's Community, has an intent to remain with
the Community for a period of time, and manifests the genuineness of that
intent by establishing an ongoing physical presence within the Community
together with an indication that such presence within the Community is
something other than merely transitory in nature. To the extent the Person is
a corporation or other business entity, the principal place of business or
headquarters shall be in the Community. To the extent a person is a personal
benefit plan, the circumstances of the beneficiary shall apply with respect to
this definition. In the case of all other benefit plans, the circumstances of
the trustee shall be examined for purposes of this definition. The Bank may
utilize deposit or loan records or such other evidence provided to it to make a
determination as to whether a person is a resident. In all cases, however,
such a determination shall be in the sole discretion of the Bank.

SAIF: The Savings Association Insurance Fund, which is a
division of the FDIC.

SEC: The Securities and Exchange Commission.

SPECIAL MEETING: The Special Meeting of Members called for
the purpose of voting on the Plan.

STOCK BANK: The federally chartered stock savings bank that
will succeed to the Bank upon completion of the Reorganization.

4
<PAGE> 8
STOCK OFFERING: The offering of Common Stock of the Holding
Company to persons other than the MHC, in a Subscription Offering and, to the
extent shares remain available, in a Community Offering.

SUBSCRIPTION OFFERING: The offering of Common Stock of the
Holding Company for subscription and purchase pursuant to Section 11 of this
Plan.

SUBSIDIARY: A company that is controlled by another company,
either directly or indirectly through one or more subsidiaries.

SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER: Any Person holding a
Qualifying Deposit on the Supplemental Eligibility Record Date, who is not an
Eligible Account Holder, a Tax-Qualified Employee Plan or an Officer or
director of the Bank.

SUPPLEMENTAL ELIGIBILITY RECORD DATE: The last day of the
calendar quarter preceding approval of the Plan by the OTS.

SYNDICATED COMMUNITY OFFERING: The offering of Common Stock
following or contemporaneously with the Community Offering through a syndicate
of broker-dealers.

TAX-QUALIFIED EMPLOYEE PLAN: Any defined benefit plan or
defined contribution plan (including any employee stock ownership plan, stock
bonus plan, profit-sharing plan, or other plan) of the Bank, the Holding
Company, the MHC or any of their affiliates, which, with its related trusts,
meets the requirements to be qualified under Section 401 of the Internal
Revenue Code. The term Non-Tax-Qualified Employee Stock Benefit Plan means any
defined benefit plan or defined contribution plan which is not so qualified.

VOTING MEMBERS: Those Members of the Bank as of the Voting
Record Date.

VOTING RECORD DATE: The date established by the Bank for
determining which Members are entitled to vote on the Plan.

VOTING STOCK:

(1) Voting Stock means common stock or preferred stock,
or similar interests if the shares by statute, charter or in any manner,
entitle the holder:

(i) To vote for or to select directors of
the Bank or the Holding Company; and

(ii) To vote on or to direct the conduct of
the operations or other significant
policies of the Bank or the Holding
Company.

(2) Notwithstanding anything in paragraph (1) above,
preferred stock is not "Voting Stock" if:

(i) Voting rights associated with the
preferred stock are limited solely to
the type customarily provided by
statute with regard to matters that
would

5
<PAGE> 9
significantly and adversely affect the
rights or preferences of the preferred
stock, such as the issuance of
additional amounts or classes of senior
securities, the modification of the
terms of the preferred stock, the
dissolution of the Bank, or the payment
of dividends by the Bank when preferred
dividends are in arrears;

(ii) The preferred stock represents an
essentially passive investment or
financing device and does not otherwise
provide the holder with control over
the issuer; and

(iii) The preferred stock does not at the
time entitle the holder, by statute,
charter, or otherwise, to select or to
vote for the selection of directors of
the Bank or the Holding Company.

(3) Notwithstanding anything in paragraphs (1) and (2)
above, "Voting Stock" shall be deemed to include preferred stock and other
securities that, upon transfer or otherwise, are convertible into Voting Stock
or exercisable to acquire Voting Stock where the holder of the stock,
convertible security or right to acquire Voting Stock has the preponderant
economic risk in the underlying Voting Stock. Securities immediately
convertible into Voting Stock at the option of the holder without payment of
additional consideration shall be deemed to constitute the Voting Stock into
which they are convertible; other convertible securities and rights to acquire
Voting Stock shall not be deemed to vest the holder with the preponderant
economic risk in the underlying Voting Stock if the holder has paid less than
50% of the consideration required to directly acquire the Voting Stock and has
no other economic interest in the underlying Voting Stock.

3. THE REORGANIZATION

A. ORGANIZATION OF THE HOLDING COMPANIES AND THE BANK

As part of the Reorganization the Bank will convert to a federal stock
savings bank, and will establish the Holding Company and the MHC as federal
corporations. The Reorganization will be effected as follows, or in any manner
approved by the OTS that is consistent with the purposes of this Plan and
applicable laws and regulations.

As part of the Reorganization: (i) the Bank will organize an interim
stock savings bank as a wholly-owned subsidiary ("Interim One"); (ii) Interim
One will organize an interim stock savings bank as a wholly-owned subsidiary
("Interim Two"); (iii) Interim One will organize the Holding Company as a
wholly-owned subsidiary; (iv) the Bank will exchange its charter for a federal
stock savings bank charter to become the Stock Bank and Interim One will
exchange its charter for a federal mutual holding company charter to become the
MHC; (v) simultaneously with step (iv), Interim Two will merge with and into
the Stock Bank with the Stock Bank as the resulting institution; (vi) all of
the initially issued stock of the Stock Bank will be transferred to the MHC in
exchange for membership interests in the MHC; and (vii) the MHC will contribute
the capital stock of the Stock Bank to the Holding Company, and the Stock Bank
will become a wholly-owned subsidiary of the Holding Company. Contemporaneously
with the Reorganization, the Holding Company will offer for sale in the Stock
Offering shares of Common Stock representing the pro forma market value of the
Holding Company and the Bank. Upon consummation of the Reorganization, the
legal existence of the Bank will not terminate, but the Stock Bank will be a
continuation of the Bank, and all property of the Bank, including its right,
title, and interest in and to all property of whatsoever kind

6
<PAGE> 10
and nature, interest and asset of every conceivable value or benefit then
existing or pertaining to the Bank, or which would inure to the Bank
immediately by operation of law and without the necessity of any conveyance or
transfer and without any further act or deed, will vest in the Stock Bank. The
Stock Bank will have, hold, and enjoy the same in its right and fully and to
the same extent as the same was possessed, held, and enjoyed by the Bank. The
Stock Bank will continue to have, succeed to, and be responsible for all the
rights, liabilities and obligations of the Bank and will maintain its
headquarters and operations at the Bank's present locations.

Upon consummation of the Reorganization, substantially all of the
assets and liabilities (including the savings accounts, demand accounts, tax
and loan accounts, United States Treasury general accounts, or United States
Treasury Time Deposit Accounts, as defined in the OTS regulations) of the Bank
shall be become the assets and liabilities of the Stock Bank, which will
thereupon become an operating savings bank subsidiary of the Holding Company
and of the MHC. The Bank will apply to the OTS to have the Holding Company
receive or retain (as the case may be) up to 50% of the net proceeds of the
Stock Offering, or such other amount as may be determined by the Board of
Directors. The Stock Bank may distribute additional capital to the Holding
Company following the Reorganization, subject to the OTS regulations governing
capital distributions.

B. EFFECT ON DEPOSIT ACCOUNTS AND BORROWINGS

Each deposit account in the Bank on the Effective Date will remain a
deposit account in the Stock Bank in the same amount and upon the same terms
and conditions, and will continue to be federally insured up to the legal
maximum by the FDIC in the same manner as the deposit account existed in the
Bank immediately prior to the Reorganization. Upon consummation of the
Reorganization, all loans and other borrowings from the Bank shall retain the
same status with the Stock Bank after the Reorganization as they had with the
Bank immediately prior to the Reorganization.

C. THE BANK

Upon completion of the Reorganization the Stock Bank will be
authorized to exercise any and all powers, rights and privileges of, and will
be subject to all limitations applicable to, capital stock savings banks under
federal law. A copy of the proposed Charter and Bylaws of the Stock Bank is
attached hereto as Exhibit A and made a part of this Plan. The Reorganization
will not result in any reduction of the amount of retained earnings (other than
the assets of the Bank retained by or distributed to the Holding Company or the
MHC), undivided profits, and general loss reserves that the Bank had prior to
the Reorganization. Such retained earnings and general loss reserves will be
accounted for by the MHC, the Holding Company and the Stock Bank on a
consolidated basis in accordance with generally accepted accounting principles.

The initial members of the Board of Directors of the Stock Bank will
be the members of the existing Board of Directors of the Bank. The Stock Bank
will be wholly-owned by the Holding Company. The Holding Company will be
wholly-owned by its stockholders who will consist of the MHC and the persons
who purchase Common Stock in the Stock Offering and any subsequent Minority
Stock Offering. Upon the Effective Date of the Reorganization, the voting and
membership rights of Members will be transferred to the MHC, subject to the
conditions specified below.

7
<PAGE> 11

D. THE HOLDING COMPANY

The Holding Company will be authorized to exercise any and all powers,
rights and privileges, and will be subject to all limitations applicable to
savings and loan holding companies and mutual holding companies under federal
law and regulations. The initial members of the Board of Directors of the
Holding Company will be the existing Board of Directors of the Bank.
Thereafter, the voting stockholders of the Holding Company will elect
approximately one-third of the Holding Company's directors annually. A copy of
the proposed Charter and Bylaws of the Holding Company is attached as Exhibit B
and are made part of this Plan.

The Holding Company will have the power to issue shares of Capital
Stock to persons other than the MHC. However, so long as the MHC is in
existence, the MHC will be required to own at least a majority of the Voting
Stock of the Holding Company. The Holding Company may issue any amount of
Non-Voting Stock to persons other than the MHC. The Holding Company will be
authorized to undertake one or more Minority Stock Offerings of less than 50%
in the aggregate of the total outstanding Common Stock of the Holding Company,
and the Holding Company intends to offer for sale up to 49.9% of its Common
Stock in the Stock Offering.

E. THE MUTUAL HOLDING COMPANY

As a mutual corporation, the MHC will have no stockholders. The
members of the MHC will have exclusive voting authority as to all matters
requiring a vote of members under the Charter of the MHC. Persons who have
membership rights with respect to the Bank under its existing Charter
immediately prior to the Reorganization shall continue to have such rights
solely with respect to the MHC after the Reorganization so long as such persons
remain depositors or borrowers, as the case may be, of the Bank after the
Reorganization. In addition, all persons who become depositors of the Stock
Bank following the Reorganization will have membership rights with respect to
the MHC. The rights and powers of the MHC will be defined by the MHC's Charter
and Bylaws (a copy of which is attached to this Plan as Exhibit C and made a
part hereof) and by the statutory and regulatory provisions applicable to
savings and loan holding companies and mutual holding companies. In
particular, the MHC shall be subject to the limitations and restrictions
imposed on savings and loan holding companies by Section 10(o)(5) of the HOLA.

The initial members of the Board of Directors of the MHC will be the
existing Board of Directors of the Bank. Thereafter, approximately one-third
of the directors of the MHC will be elected annually by the members of the MHC
who will consist of the former Members of the Bank and all persons who become
depositors of the Bank after the Reorganization.

4. CONDITIONS TO IMPLEMENTATION OF THE REORGANIZATION

Consummation of the Reorganization is expressly conditioned upon the
following:

A. Approval of the Plan by a majority of the Board of Directors
of the Bank.

B. The filing of a Reorganization Notice, including the Plan,
with the OTS and either:

(i) The OTS has given written notice of its intent not to
disapprove the Reorganization; or

8
<PAGE> 12

(ii) Sixty days have passed since the OTS received the
Reorganization Notice and deemed it sufficient under
Section 516.2(c) of the OTS regulations, and the OTS
has not given written notice that the Reorganization
is disapproved or extended for an additional 30 days
the period during which disapproval may be issued.

C. The filing of a holding company application with and approval
by the OTS pursuant to the HOLA for the Holding Company and
MHC to become savings and loan holding companies by owning or
acquiring 100% of the common stock of the Stock Bank and the
Holding Company, respectively, to be issued in connection with
the Reorganization.

D. Submission of the Plan to the Members for approval pursuant to
a Proxy Statement and form of proxy cleared in advance by the
OTS, and such Plan is approved by a majority of the total
votes of the Voting Members eligible to be cast at a meeting
held at the call of the directors in accordance with the
procedures prescribed by the Bank's Charter and Bylaws.

E. All necessary approvals have been obtained from the OTS in
connection with the adoption of the charter and bylaws of the
MHC, the Holding Company and the Stock Bank, the conversion of
the Bank to a stock charter, and any transfer of assets and
liabilities of the Bank to the Stock Bank pursuant to the
Plan; and all conditions specified or otherwise imposed by the
OTS in connection with the issuance of a notice of intent not
to disapprove the Notice have been satisfied.

5. SPECIAL MEETING OF MEMBERS

Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Bank's Bylaws. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Bank shall distribute proxy solicitation materials to all
Voting Members. The proxy solicitation materials shall include a proxy
statement, and other documents authorized for use by the regulatory
authorities. A copy of the Plan will be made available to Voting Members upon
request. Pursuant to the Regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Voting Members is required for
approval of the Plan. Voting may be in person or by proxy. The OTS shall be
notified promptly of the actions of the Voting Members.

6. RIGHTS OF MEMBERS OF THE MHC

Following the Reorganization, all persons who had membership rights
with respect to the Bank as of the date of the Reorganization will continue to
have such rights solely with respect to the MHC. All existing proxies granted
by members of the Bank to the Board of Directors of the Bank shall
automatically become proxies granted to the Board of Directors of the MHC. In
addition, all persons who become depositors of the Stock Bank subsequent to the
Reorganization also will have membership rights with respect to the MHC. In
each case, no person who ceases to be the holder of a deposit account with the
Stock Bank after the Reorganization shall have any membership or rights with
respect to the MHC. Borrowers of the Stock Bank who were borrower members of
the Bank at the time of Reorganization will have the same membership rights in
the MHC as they had in the Bank immediately prior to the Reorganization for so
long as their pre-Reorganization borrowings remain outstanding. Borrowers will
not receive membership rights in connection with any new borrowings made after
the Reorganization.

9
<PAGE> 13

7. CONVERSION OF MHC TO STOCK FORM

Following the completion of the Reorganization, the MHC may elect to
convert to stock form in accordance with applicable law (a "Conversion
Transaction"). There can be no assurance when, if ever, a Conversion
Transaction will occur.

In a Conversion Transaction, the MHC would merge with and into the
Stock Bank or the Holding Company, with the Stock Bank or the Holding Company
as the resulting entity, and the depositors of the Stock Bank would receive the
right to subscribe for a number of shares of common stock of the Holding
Company, as determined by the formula set forth in the following paragraphs.
The additional shares of Common stock of the Holding Company issued in the
Conversion Transaction would be sold at their aggregate pro forma market value
as determined by an Independent Appraisal.

Any Conversion Transaction shall be fair and equitable to Minority
Stockholders. In any Conversion Transaction, Minority Stockholders, if any,
will be entitled without additional consideration to maintain the same
percentage ownership interest in the Holding Company after the Conversion
Transaction as their percentage ownership interest in the Holding Company
immediately prior to the Conversion Transaction (i.e., the "Minority Ownership
Interest"), subject only to the following adjustments (if required by federal
or state law, regulation, or regulatory policy) to reflect: (i) the cumulative
effect of the aggregate amount of dividends waived by the MHC; and (ii) the
market value of assets of the MHC (other than common stock of the Holding
Company).

The adjustment referred to in clause (i) of the preceding paragraph
above would require that the Minority Ownership Interest (expressed as a
percentage) be adjusted by multiplying the Minority Ownership Interest by the
following fraction:

(Holding Company stockholders' equity immediately prior to Conversion
Transaction) - (aggregate amount of dividends waived by MHC)
- --------------------------------------------------------------------------------
Holding Company stockholders' equity immediately prior to Conversion Transaction

The Minority Ownership Interest shall also be adjusted to reflect any
assets of the MHC (other than Common Stock of the Holding Company) by
multiplying it by the following fraction:

(pro forma market value of Holding Company) - (market value of assets of MHC
other than Holding Company common stock)
----------------------------------------------------------------------------
pro forma market value of Holding Company

At the sole discretion of the Board of Directors of the MHC and the
Holding Company, a Conversion Transaction may be effected in any other manner
necessary to qualify the Conversion Transaction as a tax-free reorganization
under applicable federal and state tax laws, provided such Conversion
Transaction does not diminish the rights and ownership interest of Minority
Stockholders as set forth in the preceding paragraphs. If a Conversion
Transaction does not occur, the MHC will always own a majority of the voting
stock of the Holding Company. Management of the Bank has no current intention
to conduct a Conversion Transaction.

A Conversion Transaction would require the approval of applicable
federal regulators, and would be presented to a vote of the members of the MHC.
Federal regulatory policy requires that in any Conversion Transaction the
members of the MHC will be accorded the same stock purchase priorities as if
the MHC were a mutual savings bank converting to stock form.

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<PAGE> 14

8. TIMING OF THE REORGANIZATION AND SALE OF CAPITAL STOCK

The Bank intends to consummate the Reorganization as soon as feasible
following the receipt of all approvals referred to in Section 4 of the Plan.
Subject to the approval of the OTS, the Holding Company intends to commence the
Stock Offering concurrently with the proxy solicitation of Members. The Holding
Company may close the Stock Offering before the Special Meeting, provided that
the offer and sale of the Common Stock shall be conditioned upon approval of
the Plan by the Members at the Special Meeting. The Bank's proxy solicitation
materials may permit certain Members to return to the Bank by a reasonable date
certain a postage paid card or other written communication requesting receipt
of the prospectus if the prospectus is not mailed concurrently with the proxy
solicitation materials. The Stock Offering shall be conducted in compliance
with the securities offering regulations of the SEC. The Bank will not finance
or loan funds to any person to purchase Common Stock.

9. NUMBER OF SHARES TO BE OFFERED

A. The total number of shares (or range thereof) of Common Stock
to be issued and offered for sale pursuant to the Plan shall be determined
initially by the Board of Directors of the Bank and the Holding Company in
conjunction with the determination of the Independent Appraiser. The number of
shares to be offered may be adjusted prior to completion of the Stock Offering.
The total number of shares of Common Stock that may be issued to persons other
than the MHC at the close of the Stock Offering must be less than 50% of the
issued and outstanding shares of Common Stock of the Holding Company.

B. For a period of 15 days following the completion of the
Reorganization, the Boards of Directors of the Holding Company and the MHC, in
their sole discretion, may determine to issue or allocate shares of Common
Stock ("Contingent Shares") to subscribers to fill orders resulting from (i)
any allocation oversights in the event of an oversubscription, or (ii) orders
initially rejected but later found to be legitimate. Contingent Shares shall
be authorized but unissued shares and shall include no more than a number of
shares equal to 1% of the shares issued in the Stock Offering. Contingent
Shares will not be included in the total number of shares for purposes of
determining any individual or maximum purchase limitation or the number of
shares of stock to be purchased by Tax-Qualified Employee Plans. In the event
of an oversubscription in the Stock Offering, Contingent Shares will be
allocated to a subscriber based upon the allocation of shares to persons who
had the same or similar deposit account balance as that subscriber.

10. INDEPENDENT VALUATION AND PURCHASE PRICE OF SHARES

All shares of Common Stock sold in the Stock Offering shall be sold at
a uniform price per share. The purchase price and number of shares to be
outstanding shall be determined by the Board of Directors of the Holding
Company on the basis of the estimated pro forma market value of the Holding
Company and the Bank. The aggregate purchase price for the Common Stock will
not be inconsistent with such market value of the Holding Company and the Bank.
The pro forma market value of the Holding Company and the Bank will be
determined for such purposes by the Independent Appraiser.

Prior to the commencement of the Stock Offering, an estimated
valuation range will be established, which range may vary within 15% above to
15% below the midpoint of such range, and up to 15% greater than the maximum of
such range, as determined by the Board of Directors at the time of the Stock
Offering and consistent with OTS regulations. The Holding Company intends to
issue up to 49.9% of its common in the Stock Offering. The number of shares of
Common Stock to be issued and the ownership interest

11
<PAGE> 15
of the MHC may be increased or decreased by the Holding Company, taking into
consideration any change in the independent valuation and other factors, at the
discretion of the Board of Directors of the Bank and the Holding Company.

Based upon the independent valuation as updated prior to the
commencement of the Stock Offering, the Board of Directors may establish the
minimum and maximum ownership percentage applicable to the Stock Offering, or
may fix the ownership percentage of the Minority Stockholders. In the event
the ownership percentage of the Minority Stockholders is not fixed in the Stock
Offering, the minority ownership percentage (the "Minority Ownership
Percentage") will be determined as follows: (a) the product of (x) the total
number of shares of Common Stock issued by the Holding Company and (y) the
purchase price per share divided by (b) the estimated aggregate pro forma
market value of the Bank and the Holding Company immediately after the Stock
Offering as determined by the Independent Appraiser, expressed in terms of a
specific aggregate dollar amount rather than as a range, upon the closing of
the Stock Offering or sale of all the Common Stock.

Notwithstanding the foregoing, no sale of Common Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Holding Company, the Bank and to the OTS that, to the best
knowledge of the Independent Appraiser, nothing of a material nature has
occurred which, taking into account all relevant factors, would cause the
Independent Appraiser to conclude that the aggregate value of the Common Stock
at the Purchase Price is incompatible with its estimate of the aggregate
consolidated pro forma market value of the Holding Company and the Bank. If
such confirmation is not received, the Holding Company may cancel the Stock
Offering, extend the Stock Offering and establish a new price range and/or
estimated price range, extend, reopen or hold a new Stock Offering or take such
other action as the OTS may permit.

The estimated market value of the Holding Company and the Bank shall
be determined for such purpose by an Independent Appraiser on the basis of such
appropriate factors as are not inconsistent with OTS regulations. The Common
Stock to be issued in the Stock Offering shall be fully paid and nonassessable.

The aggregate amount of outstanding Common Stock that may be owned or
controlled by persons other than the MHC parent at the close of the Stock
Offering shall be less than 50% of the Holding Company's total outstanding
Common Stock.

If there is a Community Offering or Syndicated Community Offering of
shares of Common Stock not subscribed for in the Subscription Offering, the
price per share at which the Common Stock is sold in such Community Offering or
Syndicated Community Offering shall be equal to the purchase price per share at
which the Common Stock is sold to persons in the Subscription Offering. Shares
sold in the Community Offering or Syndicated Community Offering will be subject
to the same limitations as shares sold in the Subscription Offering.

11. METHOD OF OFFERING SHARES AND RIGHTS TO PURCHASE STOCK

In descending order of priority, the opportunity to purchase Common
Stock shall be given in the Subscription Offering to: (1) Eligible Account
Holders; (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible Account
Holders; (4) Other Members; and (5) directors, officers and employees of the
Bank pursuant to priorities established by the Board of Directors. Any shares
of Common Stock that are not subscribed for in the Subscription Offering may at
the discretion of the Bank and the Holding

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<PAGE> 16
Company be offered for sale in a Community Offering or a Syndicated Community
Offering. The minimum purchase by any Person shall be 25 shares. The Holding
Company may use its discretion in determining whether prospective purchasers
are "residents," "associates," or "acting in concert" as defined in the Plan,
and in interpreting any and all other provisions of the Plan. All such
determinations are in the sole discretion of the Holding Company, and may be
based on whatever evidence the Holding Company chooses to use in making any
such determination.

In addition to the priorities set forth below, the Board of Directors
may establish other priorities for the purchase of Common Stock, subject to the
approval of the OTS. The priorities for the purchase of shares in the Stock
Offering are as follows:

A. SUBSCRIPTION OFFERING

PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder
shall be given the opportunity to purchase up to $150,000 of Common Stock
offered in the Stock Offering; provided that the Holding Company may, in its
sole discretion and without further notice to or solicitation of subscribers or
other prospective purchasers, increase such maximum purchase limitation to 5%
of the maximum number of shares offered in the Stock Offering or decrease such
maximum purchase limitation to .1% of the maximum number of shares offered in
the Stock Offering, subject to the overall purchase limitation set forth in
Section 12. If there are insufficient shares available to satisfy all
subscriptions of Eligible Account Holders, shares will be allocated to Eligible
Account Holders so as to permit each such subscribing Eligible Account Holder
to purchase a number of shares sufficient to make his total allocation equal to
the lesser of 100 shares or the number of shares subscribed for. Thereafter,
unallocated shares will be allocated pro rata to remaining subscribing Eligible
Account Holders whose subscriptions remain unfilled in the same proportion that
each such subscriber's Qualifying Deposit bears to the total amount of
Qualifying Deposits of all subscribing Eligible Account Holders whose
subscriptions remain unfilled. To ensure proper allocation of stock, each
Eligible Account Holder must list on his subscription order form all accounts
in which he had an ownership interest as of the Eligibility Record Date.

PRIORITY 2: TAX-QUALIFIED EMPLOYEE PLANS. The Tax-Qualified Employee
Plans shall be given the opportunity to purchase in the aggregate up to 10% of
the shares issued, excluding shares issued to the MHC. In the event of an
oversubscription in the Stock Offering, subscriptions for shares by the
Tax-Qualified Employee Plans may be satisfied, in whole or in part, out of
authorized but unissued shares of the Holding Company subject to the maximum
purchase limitations applicable to such plans and set forth in Section 12, or
may be satisfied, in whole or in part, through open market purchases by the
Tax-Qualified Employee Plans subsequent to the closing of the Stock Offering.
In the event that the number of shares offered is increased as a result of an
increase in the Independent Valuation, the ESOP will have a priority right to
fill its subscription in whole or in part prior to all other subscriptions.

PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders, and the Tax-Qualified Employee Plans, each
Supplemental Eligible Account Holder shall have the opportunity to purchase up
to $150,000 of Common Stock offered in the Stock Offering, provided that the
Bank may, in its sole discretion and without further notice to or solicitation
of subscribers or other prospective purchasers, increase such maximum purchase
limitation to 5% of the maximum number of shares offered in the Stock Offering
or decrease such maximum purchase limitation to 0.1% of the maximum number of
shares offered in the Stock Offering subject to the overall purchase
limitations set forth in Section 12. In the event Supplemental Eligible
Account Holders subscribe for a number of shares which, when added to the
shares subscribed

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<PAGE> 17
for by Eligible Account Holders, and the Tax-Qualified Employee Plans, the
shares of Common Stock will be allocated among subscribing Supplemental
Eligible Account Holders so as to permit each subscribing Supplemental Eligible
Account Holder to purchase a number of shares sufficient to make his total
allocation equal to the lesser of 100 shares or the number of shares subscribed
for. Thereafter, unallocated shares will be allocated to each subscribing
Supplemental Eligible Account Holder whose subscription remains unfilled in the
same proportion that such subscriber's Qualifying Deposits on the Supplemental
Eligibility Record Date bear to the total amount of Qualifying Deposits of all
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unfilled.

PRIORITY 4: OTHER MEMBERS. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by Eligible Account
Holders, the Tax-Qualified Employee Plans and Supplemental Eligible Account
Holders, each Other Member shall have the opportunity to purchase up to
$150,000 of Common Stock offered in the Stock Offering, provided that the Bank
may, in its sole discretion and without further notice to or solicitation of
subscribers or other prospective purchasers, increase such maximum purchase
limitation to 5% of the maximum number of shares offered in the Stock Offering
or decrease such maximum purchase limitation to .1% of the maximum number of
shares offered in the Stock Offering, subject to the overall purchase
limitations set forth in Section 12. In the event Other Members subscribe for
a number of shares which, when added to the shares subscribed for by the
Eligible Account Holders, Tax-Qualified Employee Plans and Supplemental
Eligible Account Holders is in excess of the total number of shares offered in
the Stock Offering, the subscriptions of such Other Members will be allocated
among subscribing Other Members on a pro rata basis based on the size of such
Other Members' orders.

PRIORITY 5: DIRECTORS, OFFICERS AND EMPLOYEES. To the extent that
shares remain available for purchase after satisfaction of all subscriptions of
the Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, and Other Members, employees, officers and directors
of the Bank shall have the opportunity to purchase up to $150,000 of the Common
Stock offered in the Stock Offering; provided that the Bank may, in its sole
discretion, and without further notice to or solicitation of subscribers or
other prospective purchasers, increase such maximum purchase limitation to 5%
of the maximum number of shares offered in the Stock Offering or decrease such
maximum purchase limitation to .1% of the maximum number of shares offered in
the Stock Offering, subject to the overall purchase limitations set forth in
Section 12. In the event that directors, officers and employees subscribe for
a number of shares, which, when added to the shares subscribed for by Eligible
Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, and Other Members is in excess of the total shares offered in the
Stock Offering, the subscriptions of such Persons will be allocated among
directors, officers and employees on a pro rata basis based on the size of each
Person's orders.

B. COMMUNITY OFFERING

Any shares of Common Stock not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering. This will involve an
offering of all unsubscribed shares directly to the general public with a
preference to those natural persons residing in the county in which the Bank
maintains its offices. The Community Offering, if any, shall be for a period
of not more than 45 days unless extended by the Holding Company and the Bank,
and shall commence concurrently with, during or promptly after the Subscription
Offering. The Holding Company and the Bank may use an investment banking firm
or firms on a best efforts basis to sell the unsubscribed shares in the
Subscription and

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<PAGE> 18
Community Offering. The Holding Company and the Bank may pay a commission or
other fee to such investment banking firm or firms as to the shares sold by
such firm or firms in the Subscription and Community Offering and may also
reimburse such firm or firms for expenses incurred in connection with the sale.
The Community Offering may include a syndicated community offering managed by
such investment banking firm or firms. The Common Stock will be offered and
sold in the Community Offering, in accordance with OTS regulations, so as to
achieve the widest distribution of the Common Stock. No person, by himself or
herself, or with an Associate or group of Persons acting in concert, may
subscribe for or purchase more than $150,000 of Common Stock offered in the
Community Offering. Further, the Bank may limit total subscriptions under this
Section 11(B) so as to assure that the number of shares available for the
public offering may be up to a specified percentage of the number of shares of
Common Stock. Finally, the Bank may reserve shares offered in the Community
Offering for sales to institutional investors.

In the event of an oversubscription for shares in the Community
Offering, shares may be allocated (to the extent shares remain available) first
to cover any reservation of shares for a public offering or institutional
orders, next to cover orders of natural persons residing in the counties in
which the Bank maintains its offices, then to cover the orders of any other
person subscribing for shares in the Community Offering so that each such
person may receive 1,000 shares, and thereafter, on a pro rata basis to such
persons based on the amount of their respective subscriptions.

The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any Person under this Section
11(B).

C. SYNDICATED COMMUNITY OFFERING

Any shares of Common Stock not sold in the Subscription Offering or in
the Community Offering, if any, may be offered for sale to the general public
by a selling group of broker-dealers in a Syndicated Community Offering,
subject to terms, conditions and procedures, including the timing of the
offering, as may be determined by the Bank and the Holding Company in a manner
that is intended to achieve the widest distribution of the Common Stock subject
to the rights of the Holding Company to accept or reject in whole or in part
all order in the Syndicated Community Offering. It is expected that the
Syndicated Community Offering would commence as soon as practicable after
termination of the Subscription Offering and the Community Offering, if any.
The Syndicated Community Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is extended as
provided herein. The Syndicated Community Offering price and the underwriting
discount in the Syndicated Community Offering shall be determined by an
underwriting agreement between the Holding Company, the Bank and the
underwriters. Such underwriting agreement shall be filed with the OTS and the
SEC.

If for any reason a Syndicated Community Offering of unsubscribed
shares of Common Stock cannot be effected and any shares remain unsold after
the Subscription Offering and the Community Offering, if any, the Boards of
Directors of the Holding Company and the Bank will seek to make other
arrangements for the sale of the remaining shares. Such other arrangements
will be subject to the approval of the OTS and to compliance with applicable
securities laws.

12. ADDITIONAL LIMITATIONS ON PURCHASES OF COMMON STOCK

Purchases of Common Stock in the Stock Offering will be subject to the
following purchase limitations:

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<PAGE> 19

A. The aggregate amount of outstanding Common Stock of the
Holding Company owned or controlled by persons other than MHC
at the close of the Stock Offering shall be less than 50% of
the Holding Company's total outstanding Common Stock.

B. No Person, Associate thereof, or group of persons acting in
concert, may purchase more than the greater of $300,000 or
1.0% of the Common Stock offered in the Stock Offering to
persons other than the MHC, except that: (i) the Holding
Company may, in its sole discretion and without further notice
to or solicitation of subscribers or other prospective
purchasers, increase such maximum purchase limitation to 5% of
the number of shares offered in the Stock Offering; (ii)
Tax-Qualified Employee Plans may purchase up to 10% of the
shares offered in the Stock Offering; and (iii) for purposes
of this subsection 12(B) shares to be held by any
Tax-Qualified Employee Plan and attributable to a person shall
not be aggregated with other shares purchased directly by or
otherwise attributable to such person.

C. The aggregate amount of Common Stock acquired in the Stock
Offering by all Management Persons and their Associates,
exclusive of any stock acquired by such persons in the
secondary market, shall not exceed 30% of the outstanding
shares of Common Stock of the Holding Company held by persons
other than the MHC at the close of the Stock Offering. In
calculating the number of shares held by Management Persons
and their Associates under this paragraph or under the
provisions of paragraph D of this section, shares held by any
Tax-Qualified Employee Benefit Plans of the Bank that are
attributable to such persons shall not be counted.

D. The aggregate amount of Common Stock acquired in the Stock
Offering by all Management Persons and their Associates,
exclusive of any Common Stock acquired by such plans or
persons in the secondary market, shall not exceed 30% of the
stockholders' equity of the Holding Company other than the MHC
at the close of the Stock Offering.

E. The Boards of Directors of the Bank and the Holding Company
may, in their sole discretion, increase the maximum purchase
limitation set forth in paragraph 12(B) hereof to up to 9.9%,
provided that orders for Common Stock in excess of 5% of the
number of shares of Common Stock offered in the Stock Offering
shall not in the aggregate exceed 10% of the total shares of
Common Stock offered in the Stock Offering (except that this
limitation shall not apply to purchases by Tax-Qualified
Employee Plans). If such 5% limitation is increased,
subscribers for the maximum amount will be, and certain other
large subscribers in the sole discretion of the Holding
Company and the Bank may be, given the opportunity to increase
their subscriptions up to the then applicable limit. Requests
to purchase additional shares of Common Stock under this
provision will be determined by the Board of Directors of the
Holding Company, in its sole discretion.

F. Notwithstanding any other provision of this Plan, no person
shall be entitled to purchase any Common Stock to the extent
such purchase would be illegal under any federal law or state
law or regulation or would violate regulations or policies of
the National Association of Securities Dealers, Inc.,
particularly those regarding free riding and withholding. The
Holding Company and/or its agents may ask for an acceptable
legal opinion from any purchaser as to the legality of such
purchase and may refuse to honor any purchase order if such
opinion is not timely furnished.

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<PAGE> 20
G. The Board of Directors of the Holding Company has the right in
its sole discretion to reject any order submitted by a person
whose representations the Board of Directors believes to be
false or who it otherwise believes, either alone or acting in
concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of
this Plan.

Prior to the consummation of the Stock Offering, no person shall offer
to transfer, or enter into any agreement or understanding to transfer the legal
or beneficial ownership of any subscription rights or shares of Common Stock,
except pursuant to this Plan. Each person purchasing Common Stock shall be
deemed to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.

EACH PERSON PURCHASING COMMON STOCK IN THE STOCK OFFERING WILL BE
DEEMED TO CONFIRM THAT SUCH PURCHASE DOES NOT CONFLICT WITH THE PURCHASE
LIMITATIONS IN THIS PLAN. ALL QUESTIONS CONCERNING WHETHER ANY PERSONS ARE
ASSOCIATES OR A GROUP ACTING IN CONCERT OR WHETHER ANY PURCHASE CONFLICTS WITH
THE PURCHASE LIMITATIONS IN THIS PLAN OR OTHERWISE VIOLATES ANY PROVISION OF
THIS PLAN SHALL BE DETERMINED BY THE BANK IN ITS SOLE DISCRETION. SUCH
DETERMINATION SHALL BE CONCLUSIVE, FINAL AND BINDING ON ALL PERSONS AND THE
BANK MAY TAKE ANY REMEDIAL ACTION, INCLUDING WITHOUT LIMITATION REJECTING THE
PURCHASE OR REFERRING THE MATTER TO THE OTS FOR ACTION, AS IN ITS SOLE
DISCRETION THE BANK MAY DEEM APPROPRIATE.

13. PAYMENT FOR STOCK

All payments for Common Stock subscribed for or ordered in the Stock
Offering must be delivered in full to the Bank, together with a properly
completed and executed order form, or purchase order in the case of the
Syndicated Community Offering, on or prior to the expiration date specified on
the order form or purchase order, as the case may be, unless such date is
extended by the Bank; provided, that if the Employee Plans subscribe for shares
during the Subscription Offering, such plans will not be required to pay for
the shares at the time they subscribe but rather may pay for such shares of
Common Stock subscribed for by such plans at the Actual Subscription Price upon
consummation of the Stock Offering, provided that, in the case of the ESOP
there is in force from the time of its subscription until the consummation of
the Stock Offering, a loan commitment to lend to the ESOP, at such time, the
aggregated Actual Subscription Price of the shares for which it subscribed.
The Holding Company or the Bank may make scheduled discretionary contributions
to an Employee Plan provided such contributions from the Bank, if any, do not
cause the Bank to fail to meet its regulatory capital requirement.

Payment for Common Stock shall be made either by check or money order,
or if a purchaser has a Deposit Account in the Bank, such purchaser may pay for
the shares subscribed for by authorizing the Bank to make a withdrawal from the
purchaser's passbook, money market or certificate account at the Bank in an
amount equal to the purchase price of such shares. Such authorized withdrawal,
whether from a savings passbook or certificate account, shall be without
penalty as to premature withdrawal. If the authorized withdrawal is from a
certificate account, and the remaining balance does not meet the applicable
minimum balance requirements, the certificate shall be canceled at the time of
withdrawal, without penalty, and the remaining balance will earn interest at
the passbook rate. Funds for which a withdrawal is authorized will remain in
the purchaser's Deposit Account but may not be used by the purchaser until the
Common Stock has been sold or the 45-day period (or such longer period as may
be approved by the

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<PAGE> 21
Commissioner) following the Stock Offering has expired, whichever occurs first.
Thereafter, the withdrawal will be given effect only to the extent necessary to
satisfy the subscription (to the extent it can be filled) at the purchase price
per share. Interest will continue to be earned on any amounts authorized for
withdrawal until such withdrawal is given effect. Interest will be paid by the
Bank at a rate established by the Bank on payment for Common Stock received in
cash or by check. Such interest will be paid from the date payment is received
by the Bank until consummation or termination of the Stock Offering. If for
any reason the Stock Offering is not consummated, all payments made by
subscribers in the Stock Offering will be refunded to them with interest. In
case of amounts authorized for withdrawal from Deposit Accounts, refunds will
be made by canceling the authorization for withdrawal.

14. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS

As soon as practicable after the prospectus prepared by the Holding
Company and the Bank has been declared effective by the OTS and the SEC, copies
of the prospectus and order forms will be distributed to all Eligible Account
Holders, Supplemental Eligible Account Holders, the Employee Plans and
employees, officers and directors at their last known addresses appearing on
the records of the Bank for the purpose of subscribing for shares of Common
Stock in the Subscription Offering and will be made available for use by those
persons entitled to purchase in the Community Offering.

Each order form will be preceded or accompanied by the prospectus
describing the Holding Company, the Bank, the Common Stock and the Subscription
and Community Offerings. Each order form will contain, among other things, the
following:

A. A specified date by which all order forms must be received by
the Bank, which date shall be not less than 20, nor more than
45 days, following the date on which the order forms are
mailed by the Bank, and which date will constitute the
termination of the Subscription Offering;

B. The purchase price per share for shares of Common Stock to be
sold in the Subscription and Community Offerings;

C. A description of the minimum and maximum number of shares of
Common Stock that may be subscribed for pursuant to the
exercise of Subscription Rights or otherwise purchased in the
Community Offering;

D. Instructions as to how the recipient of the order form is to
indicate thereon the number of shares of Common Stock for
which such Person elects to subscribe and the available
alternative methods of payment therefor;

E. An acknowledgment that the recipient of the order form has
received a final copy of the prospectus prior to execution of
the order form;

F. A statement indicating the consequences of failing to properly
complete and return the order form, including a statement to
the effect that all subscription rights are nontransferable,
will be void at the end of the Subscription Offering, and can
only be exercised by delivering to the Bank within the
subscription period such properly completed and executed order
form, together with cash (if delivered in person), check or
money order in the full amount of the purchase price as
specified in the order form for the shares

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<PAGE> 22
of Common Stock for which the recipient elects to subscribe in
the Subscription Offering (or by authorizing on the order form
that the Bank withdraw said amount from the subscriber's
Deposit Account at the Bank); and

G. A statement to the effect that the executed order form, once
received by the Bank, may not be modified or amended by the
subscriber without the consent of the Bank.

Notwithstanding the above, the Bank and the Holding Company reserve
the right in their sole discretion to accept or reject orders received on
photocopied or facsimilied order forms.

15. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT

In the event order forms (a) are not delivered and are returned to the
Bank by the United States Postal Service or the Bank is unable to locate the
addressee, (b) are not received back by the Bank or are received by the Bank
after the expiration date specified thereon, (c) are defectively filled out or
executed, (d) are not accompanied by the full required payment for the shares
of Common Stock subscribed for (including cases in which Deposit Accounts from
which withdrawals are authorized are insufficient to cover the amount of the
required payment), or (e) are not mailed pursuant to a "no mail" order placed
in effect by the account holder, the subscription rights of the Person to whom
such rights have been granted will lapse as though such Person failed to return
the contemplated order form within the time period specified thereon; provided,
that the Bank may, but will not be required to, waive any immaterial
irregularity on any order form or require the submission of corrected order
forms or the remittance of full payment for subscribed shares by such date as
the Bank may specify. The interpretation by the Bank of terms and conditions
of this Plan and of the order forms will be final, subject to the authority of
the OTS.

16. COMPLETION OF THE STOCK OFFERING

The Stock Offering will be terminated if not completed within 90 days
from the date of approval by the OTS, unless an extension is approved by the
OTS.

17. MARKET FOR COMMON STOCK

If at the close of the Stock Offering the Holding Company has more
than 100 shareholders of any class of stock, the Holding Company shall use its
best efforts to:

(i) encourage and assist a market maker to establish and maintain
a market for that class of stock; and

(ii) list that class of stock on a national or regional securities
exchange, or on the Nasdaq system.

18. STOCK PURCHASES BY MANAGEMENT PERSONS AFTER THE OFFERING

For a period of three years after the proposed Stock Offering, no
Management Person or his or her Associates may purchase, without the prior
written approval of the OTS, any Common Stock of the Holding Company, except
from a broker-dealer registered with the SEC, except that the foregoing shall
not apply to:

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<PAGE> 23

A. Negotiated transactions involving more than 1% of the
outstanding stock in the class of stock; or

B. Purchases of stock made by and held by any Tax-Qualified or
Non-Tax Qualified Employee Plan of the Stock Bank or the
Holding Company even if such stock is attributable to
Management Persons or their Associates.

19. RESALES OF STOCK BY DIRECTORS AND OFFICERS

Common Stock purchased by directors and officers in the Stock Offering
may not be resold for a period of at least one year following the date of
purchase, except in the case of death of the director or officer.

20. STOCK CERTIFICATES

Each stock certificate shall bear a legend giving appropriate notice
of the restrictions set forth in Section 19 above. Appropriate instructions
shall be issued to the Holding Company's transfer agent with respect to
applicable restrictions on transfers of such stock. Any shares of stock issued
as a stock dividend, stock split or otherwise with respect to such restricted
stock, shall be subject to the same restrictions as apply to the restricted
stock.

21. RESTRICTION ON FINANCING STOCK PURCHASES

The Holding Company will not offer or sell any of the Common Stock
proposed to be issued to any person whose purchase would be financed by funds
loaned to the person by the Holding Company, the Bank or any of their
Affiliates.

22. STOCK BENEFIT PLANS

The Board of Directors of the Bank and/or the Holding Company intend
to adopt one or more stock benefit plans for its employees, officers and
directors, including an ESOP, stock award plans and stock option plans, which
will be authorized to purchase Common Stock and grant options for Common Stock.
However, only the Tax-Qualified Employee Plans will be permitted to purchase
Common Stock in the Stock Offering subject to the purchase priorities set forth
in this Plan. The Board of Directors of the Bank intends to establish the ESOP
and authorize the ESOP and any other Tax-Qualified Employee Plans to purchase
in the aggregate up to 10% of the shares issued, excluding shares issued to the
MHC. The Stock Bank or the Holding Company may make scheduled discretionary
contributions to one or more Tax-Qualified Employee Plans to purchase Common
Stock issued in the Stock Offering or to purchase issued and outstanding shares
of Common Stock or authorized but unissued shares of Common Stock subsequent to
the completion of the Stock Offering, provided such contributions do not cause
the Stock Bank to fail to meet any of its regulatory capital requirements.
This Plan specifically authorizes the grant and issuance by the Holding Company
of (i) awards of Common Stock after the Stock Offering pursuant to one or more
stock recognition and award plans (the "Recognition Plans") in an amount equal
to up to 4% of the number of shares of Common Stock issued in the Stock
Offering (and in an amount equal to up to 5% of the Common Stock issued in the
Stock Offering if the Recognition Plans are adopted more than one year after
the completion of the Stock Offering), (ii) options to purchase a number of
shares of the Holding Company's Common Stock in an amount equal to up to 10% of
the number of shares of Common Stock issued in the Stock Offering and shares of
Common Stock issuable upon exercise of such options, and (iii)

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<PAGE> 24
Common Stock to one or more Tax Qualified Employee Plans, including the ESOP,
at the closing of the Stock Offering or at any time thereafter, in an amount
equal to up to 8% of the shares issued, excluding shares issued to the MHC if
the Recognition Plans award Common Stock sooner than one year after the
completion of the Stock Offering, and up to 10% of the shares issued, excluding
shares issued to the MHC if the Recognition Plans are adopted more than one
year after the completion of the Stock Offering. Shares awarded to the Tax
Qualified Employee Plans or pursuant to the Recognition Plans, and shares
issued upon exercise of options may be authorized but unissued shares of the
Holding Company's Common Stock, or shares of Common Stock purchased by the
Holding Company or such plans on the open market. Any awards of Common Stock
under the Recognition Plans and the stock option plans will be subject to prior
stockholder approval.

23. POST-REORGANIZATION FILING AND MARKET MAKING

It is likely that there will be a limited market for the Common Stock
sold in the Stock Offering, and purchasers must be prepared to hold the Common
Stock for an indefinite period of time. If the Holding Company has more than
35 stockholders of any class of stock, the Holding Company shall register its
Common Stock with the SEC pursuant to the Exchange Act, and shall undertake not
to deregister such Common Stock for a period of three years thereafter.

24. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK

The Holding Company may not declare or pay a cash dividend on its
Common Stock if the effect thereof would cause the regulatory capital of the
Bank to be reduced below the amount required under Section 567.2 of the OTS
rules and regulations. Otherwise, the Holding Company may declare dividends or
make other capital distributions in accordance with applicable laws and
regulations. Following completion of the Stock Offering, the Holding Company
may repurchase its Common Stock subject to Section 563b.3(g) of the OTS rules
and regulations, as long as such repurchases do not cause the regulatory
capital of the Bank to be reduced below the amount required under 12 C.F.R.
Section 567.2. The MHC may from time to time purchase Common Stock of the
Holding Company. Subject to the approval of the OTS, the MHC may waive its
right to receive dividends declared by the Holding Company.

25. REORGANIZATION AND STOCK OFFERING EXPENSES

The Regulations require that the expenses of any Stock Offering must
be reasonable. The Bank will use its best efforts to assure that the expenses
incurred by the Bank and the Holding Company in effecting the Reorganization
and the Stock Offering will be reasonable.

26. EMPLOYMENT AND OTHER SEVERANCE AGREEMENTS

Following or contemporaneously with the Reorganization, the Bank
and/or the Holding Company may enter into employment and/or severance
arrangements with one or more executive officers of the Bank and/or the Holding
Company. It is anticipated that any employment contracts entered into by the
Bank and/or the Holding Company will be for terms not exceeding three years and
that such contracts will provide for annual renewals of the term of the
contracts, subject to approval by the Board of Directors. The Bank and/or the
Holding Company also may enter into severance arrangements with one or more
executive officers which provide for the payment of severance compensation in
the event of a change in control of the Bank and/or the Holding Company. The
terms of such employment and severance

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<PAGE> 25
arrangements have not been determined as of this time, but will be described in
any prospectus circulated in connection with the Stock Offering and will be
subject to and comply with all regulations of the OTS.

27. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION

As part of the Reorganization, the Holding Company and the Bank may
establish a charitable foundation that will qualify as an exempt organization
under Section 501(c)(3) of the Internal Revenue Code (the "Charitable
Foundation") and to donate to the Charitable Foundation cash, securities, or
Common Stock in an amount up to 5% of the number of shares of Common Stock sold
in the Stock Offering. The Charitable Foundation would be formed to complement
the Bank's existing community reinvestment activities and to share with the
Bank's local community a part of the Bank's financial success as a locally
headquartered, community-oriented, financial services institution. The
Charitable Foundation will be dedicated to the promotion of charitable purposes
including community development, grants or donations to support housing
assistance, not-for-profit community groups and other types of organizations or
civic-minded projects. It is expected that the Charitable Foundation will
annually distribute total grants to assist charitable organizations or to fund
projects within its local community of not less than 5% of the average fair
value of Charitable Foundation assets each year. In order to serve the
purposes for which it was formed and maintain its Section 501(c)(3)
qualification, the Charitable Foundation may sell, on an annual basis, a
limited portion of any securities contributed to it by the Holding Company.

The board of directors of the Charitable Foundation will be comprised
of individuals who are officers or directors of the Bank, or other persons with
a business or other relationship with the communities in which the Bank does
business. The board of directors of the Charitable Foundation will be
responsible for establishing the policies of the Charitable Foundation with
respect to grants or donations, consistent with the stated purposes of the
Charitable Foundation. The establishment and funding of the Charitable
Foundation as part of the Reorganization is subject to the approval of the OTS.

28. INTERPRETATION

All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the OTS.

29. AMENDMENT OR TERMINATION OF THE PLAN

If necessary or desirable, the terms of the Plan may be substantially
amended by a majority vote of the Bank's Board of Directors as a result of
comments from regulatory authorities or otherwise, at any time prior to
submission of the Plan and proxy materials to the Members. At any time AFTER
submission of the Plan and proxy materials to the Members, the terms of the
Plan that relate to the Reorganization may be amended by a majority vote of the
Board of Directors only with the concurrence of the OTS. Terms of the Plan
relating to the Stock Offering including, without limitation, Sections 8
through 20, may be amended by a majority vote of the Bank's Board of Directors
as a result of comments from regulatory authorities or otherwise at any time
prior to the approval of the Plan by the OTS and at any time thereafter with
the concurrence of the OTS. The Plan may be terminated by a majority vote of
the Board of Directors at any time prior to the earlier of approval of the Plan
by the OTS and the date of the Special Meeting, and may be terminated by a
majority vote of the Board of Directors at any time thereafter with the
concurrence of the OTS. In its discretion, the Board of Directors may modify
or terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another meeting of the Members; however,

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<PAGE> 26
any material amendment of the terms of the Plan that relate to the
Reorganization which occur after the Special Meeting shall require a
resolicitation of Members.

The Plan shall be terminated if the Reorganization is not completed
within 24 months from the date upon which the Members of the Bank approve the
Plan, and may not be extended by the Bank or the OTS.

Dated: May 13, 1998.

<PAGE> 1

EXHIBIT 3.1

SOUND FEDERAL BANCORP

STOCK HOLDING COMPANY CHARTER

SECTION 1. CORPORATE TITLE. The full corporate title of the MHC
subsidiary holding company is Sound Federal Bancorp (the "Company").

SECTION 2. DOMICILE. The domicile of the Company shall be in the
Town of Mamaroneck in the State of New York.

SECTION 3. DURATION. The duration of the Company is perpetual.

SECTION 4. PURPOSE AND POWERS. The purpose of the Company is to
pursue any or all of the lawful objectives of a federal mutual holding company
chartered under Section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o),
and to exercise all of the express, implied, and incidental powers conferred
thereby and by all acts amendatory thereof and supplemental thereto, subject to
the Constitution and laws of the United States as they are now in effect, or as
they may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision (the "Office").

SECTION 5. CAPITAL STOCK. The total number of shares of all classes
of the capital stock which the Company has authority to issue is 30,000,000 of
which 20,000,000 shares shall be common stock of par value $.10 per share, and
of which 10,000,000 shares shall be serial preferred stock. The shares may be
issued from time to time as authorized by the board of directors without the
approval of its shareholders, except as otherwise provided in this Section 5 or
to the extent that such approval is required by governing law, rule, or
regulation. The consideration for the issuance of the shares shall be paid in
full before their issuance and shall not be less than the par value. Neither
promissory notes nor future services shall constitute payment or part payment
for the issuance of shares of the Company. The consideration for the shares
shall be cash, tangible or intangible property (to the extent direct investment
in such property would be permitted to the Company), labor, or services
actually performed for the Company, or any combination of the foregoing. In
the absence of actual fraud in the transaction, the value of such property,
labor, or services, as determined by the board of directors of the Company,
shall be conclusive. Upon payment of such consideration, such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock dividend,
that part of the retained earnings of the Company that is transferred to common
stock or paid in capital accounts upon the issuance of shares as a stock
dividend shall be deemed to be the consideration for their issuance.

Except for shares issued in the initial organization of the Company,
no shares of capital stock (including shares issuable upon conversion,
exchange, or exercise of other securities) shall be issued, directly or
indirectly, to officers, directors, or controlling persons (except for shares
issued to the parent mutual holding company) of the Company other than as part
of a general public offering or as qualifying shares to a director, unless
their issuance or the plan under which they would be issued has been approved
by a majority of the total votes eligible to be cast at a legal meeting.

Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote

<PAGE> 2
per share, and there shall be no cumulation of votes for the election of
directors. Provided, that this restriction on voting separately by class or
series shall not apply:

(i) To any provision which would authorize the holders
of preferred stock, voting as a class or series,
to elect some members of the board of directors,
less than a majority thereof, in the event of
default in the payment of dividends on any class
or series of preferred stock;

(ii) To any provision which would require the holders
of preferred stock, voting as a class or series,
to approve the merger or consolidation of the
Company with another corporation or the sale,
lease, or conveyance (other than by mortgage or
pledge) of properties or business in exchange for
securities of a corporation other than the Company
if the preferred stock is exchanged for securities
of such other corporation: Provided, that no
provision may require such approval for
transactions undertaken with the assistance or
pursuant to the direction of the Office or the
Federal Deposit Insurance Corporation;

(iii) To any amendment which would adversely change the
specific terms of any class or series of capital
stock as set forth in this Section 5 (or in any
supplementary sections hereto), including any
amendment which would create or enlarge any class
or series ranking prior thereto in rights and
preferences. An amendment which increases the
number of authorized shares of any class or series
of capital stock, or substitutes the surviving
Company in a merger or consolidation for the
Company, shall not be considered to be such an
adverse change.

A description of the different classes and series of the Company's
capital stock and a statement of the designations, and the relative rights,
preferences and limitations of the shares of each class of and series of
capital stock are as follows:

A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder.

Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to payment of dividends, the full amount of
dividends and of sinking fund, retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class
or series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.

In the event of any liquidation, dissolution, or winding up of the
Company, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the Company available for distribution remaining after: (i) payment
or provision for payment of the Company's debts and liabilities; (ii)
distributions or provision for distributions in settlement of its liquidation
account; and (iii) distributions or provisions for distributions to holders of
any class or series of stock having preference over the common stock in the
liquidation, dissolution, or winding up of the Company. Each share of

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<PAGE> 3
common stock shall have the same rights as and be identical in all respects
with all the other shares of common stock.

B. PREFERRED STOCK. The Company may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to distinguish
the shares thereof from the shares of all other series and classes. The terms
of each series shall be set forth in a supplementary section to the charter.
All shares of the same class shall be identical, except as to the following
relative rights and preferences, as to which there may be variations between
different series:

(a) The distinctive serial designation and the number of shares
constituting such series;

(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for
dividends, and the participating or other special rights, if
any, with respect to dividends;

(d) Whether the shares of such series shall be redeemable and, if
so, the price(s) at which, and the terms and conditions of
which, such shares may be redeemed;

(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution, or
winding up of the Company;

(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application,
including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;

(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of
stock of the Company and, if so, the conversion price(s) or
the rate(s) of exchange, and the adjustments thereof, if any,
at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;

(h) The price or other consideration for which the shares of such
series shall be issued; and

(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.

Each share of each series of serial preferred stock shall have the
same relative rights as and be identical in all respects with all the other
shares of the same series.

The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series and, within the limitations set forth in this

3
<PAGE> 4
section and the remainder of this charter, fix and determine the relative
rights and preferences of the shares of any series so established.

Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Company shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.

SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the
Company shall not be entitled to preemptive rights with respect to any shares
of the Company which may be issued.

SECTION 7. DIRECTORS. The Company shall be under the direction of a
board of directors. The authorized number of directors, as stated in the
Company's bylaws, shall not be fewer than five nor more than fifteen except
when a greater or lesser number is approved by the Director of the Office, or
his or her delegate.

SECTION 8. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be
made, unless such is proposed by the board of directors of the Company,
approved by the shareholders by a majority of the votes eligible to be cast at
a legal meeting, unless a higher vote is otherwise required, and approved or
preapproved by the Office.

4
<PAGE> 5
SOUND FEDERAL BANCORP

Attest:
--------------------------
--------------------------
Secretary

By:
------------------------------
Richard P. McStravick
President and Chief Executive Officer

Attest:
--------------------------

Secretary of the Office of Thrift Supervision

By:
------------------------------

Director of the Office of Thrift Supervision

Effective Date:
------------------

<PAGE> 1
EXHIBIT 3.2

SOUND FEDERAL BANCORP

BYLAWS

ARTICLE I - HOME OFFICE

The home office of Sound Federal Bancorp (the "Company") shall be 300
Mamaroneck Avenue, Mamaroneck, New York.

ARTICLE II - SHAREHOLDERS

SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the Company or at such other
convenient place as the board of directors may determine.

SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the
Company for the election of directors and for the transaction of any other
business of the Company shall be held annually within 150 days after the end of
the Company's fiscal year on the _____ ________ in ___ if not a legal holiday,
and if a legal holiday, then on the next day following which is not a legal
holiday, at __________, or at such other date and time within such 150-day
period as the board of directors may determine.

SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by the regulations of
the Office of Thrift Supervision (the "Office"), may be called at any time by
the chairman of the board, the president, or a majority of the board of
directors, and shall be called by the chairman of the board, the president, or
the secretary upon the written request of the holders of not less than
one-tenth of all of the outstanding capital stock of the Company entitled to
vote at the meeting. Such written request shall state the purpose or purposes
of the meeting and shall be delivered to the home office of the Company
addressed to the chairman of the board, the president, or the secretary.

SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of
Order unless otherwise prescribed by regulations of the Office or these bylaws
or the Board of Directors adopts another written procedure for the conduct of
meetings. The Board of Directors shall designate, when present, either the
chairman of the board or president to preside at such meetings.

SECTION 5. NOTICE OF MEETINGS. Written notice stating the place,
day, and hour of the meeting and the purpose(s) for which the meeting is called
shall be delivered not fewer than 20 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, or the secretary, or the directors
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the mail, addressed to the shareholder at the address as it appears on the
stock transfer books or records of the Company as of the record date prescribed
in Section 6 of this Article II with postage prepaid. When any shareholders
meeting, either annual or special, is adjourned for 30 days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting. It
shall not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.

<PAGE> 2

SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors shall fix in advance a date as the record date
for any such determination of shareholders. Such date in any case shall be not
more than 60 days and, in case of a meeting of shareholders, not fewer than 10
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.

SECTION 7. VOTING LIST. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books
for shares of the Company shall make a complete list of the shareholders of
record entitled to vote at such meeting, or any adjournment, arranged in
alphabetical order, with the address and the number of shares held by each.
This list of shareholders shall be kept on file at the home office of the
Company and shall be subject to inspection by any shareholder of record or the
shareholder's agent at any time during usual business hours for a period of 20
days prior to such meeting. Such list also shall be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
shareholder of record or the shareholder's agent during the entire time of the
meeting. The original stock transfer book shall constitute prima facie
evidence of the shareholders entitled to examine such list or transfer books or
to vote at any meeting of shareholders.

In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the board of directors may
elect to follow the procedures described in Section 552.6(d) of the Office's
regulations as now or hereafter in effect.

SECTION 8. QUORUM. A majority of the outstanding shares of the
Company entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If less than a majority of the
outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. The shareholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to constitute less than a quorum. If a
quorum is present the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless the vote of a greater number of
shareholders voting together or voting by classes is required by law or the
charter. Directors, however, are elected by a plurality of the votes cast at an
election of directors.

SECTION 9. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the
identity of the shareholder. Proxies solicited on behalf of the management
shall be voted as directed by the shareholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy
shall be valid more than eleven months from the date of its execution except
for a proxy coupled with an interest.

SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS.
When ownership stands in the name of two or more persons, in the absence of
written directions to the Company to the contrary,

Page 2
<PAGE> 3
at any meeting of the shareholders of the Company any one ore more of such
shareholders may cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast conflicting votes, in
person or by proxy, by the several persons in whose names shares of stock
stand, the vote or votes to which those persons are entitled shall be cast as
directed by a majority of those holding such and present in person or by proxy
at such meeting, but no votes shall be cast for such stock if a majority cannot
agree.

SECTION 11. VOTING OF SHARES OF CERTAIN HOLDERS. Shares standing in
the name of another corporation may be voted by any officer, agent, or proxy as
the bylaws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine. Shares
held by an administrator, executor, guardian, or conservator may be voted by
him or her, either in person or by proxy, without a transfer of such shares
into his or her name. Shares standing in the name of a trustee may be voted by
him or her, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him or her without a transfer of such shares into his name.
Shares held in trust in an IRA or Keogh Account, however, may be voted by the
Company if no other instructions are received. Shares standing in the name of
a receiver may be voted by such receiver, and shares held by or under the
control of a receiver may be voted by such receiver without the transfer into
his or her name if authority to do so is contained in an appropriate order of
the court or other public authority by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither treasury shares of its own stock held by the Company nor
shares held by another corporation, if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Company, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.

SECTION 12. CUMULATIVE VOTING. Stockholders may not cumulate their
votes for election of directors.

SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.

Unless otherwise prescribed by regulations of the Office, the duties
of such inspectors shall include: determining the number of shares and the
voting power of each share, the shares represented at the meeting, the
existence of a quorum, and the authenticity, validity and effect of proxies;
receiving votes, ballots, or consents; hearing and determining all challenges
and questions in any way arising in connection

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<PAGE> 4
with the rights to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders.

SECTION 14. NOMINATING COMMITTEE. The board of directors shall act
as a nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the
death or other incapacity of a management nominee, the nominating committee
shall deliver written nominations to the secretary at least 20 days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the Company. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the Company at least five days prior to the
date of the annual meeting. Upon delivery, such nominations shall be posted in
a conspicuous place in each office of the Company. Ballots bearing the names
of all persons nominated by the nominating committee and by shareholders shall
be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.

SECTION 15. NEW BUSINESS. Any new business to be taken up at the
annual meeting shall be stated in writing and filed with the secretary of the
Company at least five days prior to the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees; but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated and filed
as herein provided.

SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to
be taken at a meeting of the shareholders, or any other action which may be
taken at a meeting of shareholders, may be taken without a meeting if consent
in writing, setting forth the action to be taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.

ARTICLE III - BOARD OF DIRECTORS

SECTION 1. GENERAL POWERS. The business and affairs of the Company
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.

SECTION 2. NUMBER AND TERM. The board of directors shall consist of
8 members and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified. One class shall be
elected by ballot annually.

SECTION 3. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The board of directors may

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<PAGE> 5
provide, by resolution, the time and place for the holding of additional
regular meetings without notice other than such resolution. Directors may
participate in a meeting by means of a conference telephone or similar
communications device through which all persons participating can hear each
other at the same time. Participation by such means shall constitute presence
in person for all purposes.

SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Company
unless the company is a wholly-owned subsidiary of a holding company.

SECTION 5. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the chairman of the board, the
president, or one-third of the directors. The persons authorized to call
special meetings of the board of directors may fix any place, within the
Company's normal lending territory, as the place for holding any special
meeting of the board of directors called by such persons.

Members of the board of directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person for all purposes.

SECTION 6. NOTICE. Written notice of any special meeting shall be
given to each director at least 24 hours prior thereto when delivered
personally or by telegram or at least five days prior thereto when delivered by
mail at the address at which the director is most likely to be reached. Such
notice shall be deemed to be delivered when deposited in the mail so addressed,
with postage prepaid if sent by mail, when delivered to the telegraph company
if sent by telegram or when the Company receives notice of delivery if
electronically transmitted. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any meeting of the board
of directors need be specified in the notice of waiver of notice of such
meeting.

SECTION 7. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall
be given in the same manner as prescribed by Section 5 of this Article III.

SECTION 8. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, unless a greater number is prescribed by regulation of
the Office or by these bylaws.

SECTION 9. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.

SECTION 10. RESIGNATION. Any director may resign at any time by
sending a written notice of such resignation to the home office of the Company
addressed to the chairman of the board or the president.

Page 5
<PAGE> 6
Unless otherwise specified, such resignation shall take effect upon receipt by
the chairman of the board or the president. More than three consecutive
absences from regular meetings of the board of directors, unless excused by
resolution of the board of directors, shall automatically constitute a
resignation, effective when such resignation is accepted by the board of
directors.

SECTION 11. VACANCIES. Any vacancy occurring on the board of
directors may be filled by the affirmative vote of a majority of the remaining
directors although less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected to serve until the next election of
directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the board of
directors for a term of office continuing only until the next election of
directors by the shareholders.

SECTION 12. COMPENSATION. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a
reasonable fixed sum, and reasonable expenses of attendance, if any, may be
allowed for actual attendance at each regular or special meeting of the board
of directors. Members of either standing or special committees may be allowed
such compensation for actual attendance at committee meetings as the board of
directors may determine.

SECTION 13. PRESUMPTION OF ASSENT. A director of the Company who is
present at a meeting of the board of directors at which action on any Company
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent or abstention shall be entered in the minutes of the meeting
or unless he or she shall file a written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the secretary of the Company within
five days after the date a copy of the minutes of the meeting is received.
Such right to dissent shall not apply to a director who voted in favor of such
action.

SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders
called expressly for that purpose, any director may be removed for cause by a
vote of the holders of a majority of the shares then entitled to vote at an
election of directors. Whenever the holders of the shares of any class are
entitled to elect one or more directors by the provisions of the charter or
supplemental sections thereto, the provisions of this section shall apply, in
respect to the removal of a director or directors so elected, to the vote of
the holders of the outstanding shares of that class and not to the vote of the
outstanding shares as a whole.

SECTION 15. AGE LIMITATIONS ON DIRECTORS. No member shall be
eligible to serve as a director who shall have attained the age of 75 years;
provided, however, that a director shall be permitted to complete the terms of
office to which such director was elected prior to attaining such age of 75
years.

ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES

SECTION 1. APPOINTMENT. The board of directors, by resolution
adopted by a majority of the full board, may designate the chief executive
officer and two or more of the other directors to constitute an executive
committee. The designation of any committee pursuant to this Article IV and
the delegation of authority shall not operate to relieve the board of
directors, or any director, of any responsibility imposed by law or regulation.

SECTION 2. AUTHORITY. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority
of the board of directors except to the extent, if any, that

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<PAGE> 7
such authority shall be limited by the resolution appointing the executive
committee; and except also that the executive committee shall not have the
authority of the board of directors with reference to: the declaration of
dividends; the amendment of the charter or bylaws of the Company or
recommending to the shareholders a plan of merger, consolidation, or
conversion; the sale, lease, or other disposition of all or substantially all
of the property and assets of the Company otherwise than in the usual and
regular course of its business; a voluntary dissolution of the Company; a
revocation of any of the foregoing; or the approval of a transaction in which
any member of the executive committee, directly or indirectly, has any material
beneficial interest.

SECTION 3. TENURE. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.

SECTION 4. MEETINGS. Regular meetings of the executive committee may
be held without notice at such times and places as the executive committee may
fix from time to time by resolution. Special meetings of the executive
committee may be called by any member thereof upon not less than one days
notice stating the place, date, and hour of the meeting, which notice may be
written or oral. Any member of the executive committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person. The notice of a meeting of the executive committee need not
state the business proposed to be transacted at the meeting.

SECTION 5. QUORUM. A majority of the members of the executive
committee shall constitute a quorum for the transaction of business at any
meeting thereof, and action of the executive committee must be authorized by
the affirmative vote of a majority of the members present at a meeting at which
a quorum is present.

SECTION 6. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the executive committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the executive committee.

SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.

SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution
adopted by a majority of the full board of directors. Any member of the
executive committee may resign from the executive committee at any time by
giving written notice to the president or secretary of the Company. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.

SECTION 9. PROCEDURE. The executive committee shall elect a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these bylaws. It shall keep regular minutes of
its proceedings and report the same to the board of directors for its
information at the meeting held next after the proceedings shall have occurred.

SECTION 10. OTHER COMMITTEES. The board of directors may by
resolution establish an audit, loan, or other committee composed of directors
as they may determine to be necessary or appropriate for

Page 7
<PAGE> 8
the conduct of the business of the Company and may prescribe the duties,
constitution, and procedures thereof.

ARTICLE V - OFFICERS

SECTION 1. POSITIONS. The officers of the Company shall be a
president, one or more vice presidents, a secretary, and a treasurer, each of
whom shall be elected by the board of directors. The board of directors also
may designate the chairman of the board as an officer. [The president shall be
the chief executive officer, unless the board of directors designates the
chairman of the board as chief executive officer. The president shall be a
director of the Company. The offices of the secretary and treasurer may be
held by the same person and a vice president also may be either the secretary
or the treasurer. The board of directors may designate one or more vice
presidents as executive vice president or senior vice president.] The board of
directors also may elect or authorize the appointment of such other officers as
the business of the Company may require. The officers shall have such
authority and perform such duties as the board of directors may from time to
time authorize or determine. In the absence of action by the board of
directors, the officers shall have such powers and duties as generally pertain
to their respective offices.

SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Company
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officers death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board of
directors may authorize the Company to enter into an employment contract with
any officer in accordance with regulations of the Office; but no such contract
shall impair the right of the board of directors to remove any officer at any
time in accordance with Section 3 of this Article V.

SECTION 3. REMOVAL. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the Company will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.

SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.

SECTION 5. REMUNERATION. The remuneration of the officers shall be
fixed from time to time by the board of directors.

ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS

SECTION 1. CONTRACTS. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee or agent of the Company to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Company. Such
authority may be general or confined to specific instances.

Page 8
<PAGE> 9

SECTION 2. LOANS. No loans shall be contracted on behalf of the
Company and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or
confined to specific instances.

SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the Company shall be signed by one or more officers, employees, or
agents of the Company in such manner as shall from time to time be determined
by the board of directors.

SECTION 4. DEPOSITS. All funds of the Company not otherwise employed
shall be deposited from time to time to the credit of the association in any
duly authorized depositors as the board of directors may select.

ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER

SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of capital stock of the Company shall be in such form as shall be determined by
the board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the Company
authorized by the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof. The
signature of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the Company itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books of the Company. All certificates surrendered to the Company for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
cancelled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the Company as the
board of directors may prescribe.

SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock
of the Company shall be made only on its stock transfer books. Authority for
such transfer shall be given only by the holder of record or by his or her
legal representative, who shall furnish proper evidence of such authority, or
by his or her attorney authorized by a duly executed power of attorney and
filed with the Company. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the Company shall be deemed by
the Company to be the owner for all purposes.

ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT

The fiscal year of the Company shall end on the last day of March of
each year. The Company shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the board of directors.

Page 9
<PAGE> 10
ARTICLE IX - DIVIDENDS

Subject only to the terms of the Company's charter and the regulations
and orders of the Office, the board of directors may, from time to time,
declare, and the Company may pay, dividends on its outstanding shares of
capital stock.

ARTICLE X - CORPORATE SEAL

The board of directors shall provide a Company seal which shall be two
concentric circles between which shall be the name of the Company. The year of
incorporation or an emblem may appear in the center.

ARTICLE XI - AMENDMENTS

These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized board of directors, or by a majority vote of
the votes cast by the shareholders of the Company at any legal meeting; and
(ii) receipt of any applicable regulatory approval. When a Company fails to
meet its quorum requirements, solely due to vacancies on the board, then the
affirmative vote of a majority of the sitting board will be required to amend
the bylaws.

Page 10

<PAGE> 1
EXHIBIT 4

CHARTERED UNDER THE LAWS OF THE UNITED STATES OF AMERICA

============= =============

No. Shares

============= =============

SOUND FEDERAL BANCORP

FULLY PAID AND NON-ASSESSABLE
PAR VALUE $.10 EACH

THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO
RESTRICTIONS, SEE REVERSE SIDE

THIS CERTIFIES that is the owner of

SHARES OF COMMON STOCK OF

SOUND FEDERAL BANCORP
a Federal corporation

The shares evidenced by this certificate are transferable only on the
books of Sound Federal Bancorp by the holder hereof, in person or by attorney,
upon surrender of this certificate properly endorsed. The capital stock
evidenced hereby is not an account of an insurable type and is not insured by
the Federal Deposit Insurance Corporation or any other Federal or state
governmental agency.

IN WITNESS WHEREOF, Sound Federal Bancorp has caused this certificate to
be executed, by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its seal to be hereunto affixed.

By [SEAL] By
-------------------------- ----------------------------
WILLIAM H. MOREL, RICHARD P. MCSTRAVICK,
CORPORATE SECRETARY PRESIDENT AND
CHIEF EXECUTIVE OFFICER

<PAGE> 2

The Board of Directors of Sound Federal Bancorp (the "Company") is
authorized by resolution or resolutions, from time to time adopted, to provide
for the issuance of more than one class of stock, including preferred stock in
series, and to fix and state the voting powers, designations, preferences,
limitations and restrictions thereof. The Company will furnish to any
shareholder upon request and without charge a full description of each class of
stock and any series thereof.

The shares represented by this Certificate may not be cumulatively voted
on any matter.

The shares of common stock evidenced by this certificate are subject to a
limitation contained in the Stock Holding Company Charter of the Company to the
effect that, for a period of five years from the date of the reorganization from
mutual to stock form of Sound Federal Savings and Loan Association, no person
other than Sound Federal, MHC, the parent mutual holding company of the Company,
shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of any equity security of the Company
unless such offer to acquire or acquisition is approved by a majority of the
Board of Directors. This limitation shall not apply to the purchase of shares by
underwriters in connection with a public offering or certain purchases of shares
by a tax-qualified employee stock benefit plan or a subsidiary of the Company
and any trustee of such a plan or arrangement. In the event shares are acquired
in violation of this provision, all shares beneficially owned by any person in
excess of 10% shall be considered "excess shares" and shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matters submitted to stockholders for a
vote.

Special meetings of the Company's stockholders relating to a change in
control of the Company or to an amendment of the Charter of the Company may be
called only by the Company's Board of Directors. Special meetings of the
stockholders for any other purpose or purposes shall be called upon the written
request of the holders of not less than 10% of all the outstanding capital stock
of the Company entitled to vote at the meeting.

The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.

<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
---------- ----------
(Cust) (Minor)
TEN ENT - as tenants by the entireties
Under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
of survivorship and not as ----------------------------------
tenants in common (State)
</TABLE>

Additional abbreviations may also be used though not in the above list

For value received, ____________________ hereby sell, assign and transfer unto

- ----------------------------------------------------------------
| |
- ----------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER

- --------------------------------------------------------------------------------
(please print or typewrite name and address including postal zip code of
assignee)

- --------------------------------------------------------------------------------

______________________________________________________________________ Shares of
the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
Attorney to transfer the said shares on the books of the within named
corporation with full power of substitution in the premises.

Dated, _____________________________

In the presence of Signature:

- ---------------------------------- ------------------------------------------

NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.

<PAGE> 1
EXHIBIT 5

[LUSE LEHMAN GORMAN POMERENK & SCHICK LETTERHEAD]

WRITER'S DIRECT DIAL NUMBER

(202) 274-2000

June 19, 1998

The Board of Directors
Sound Federal Savings and Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543-2647

RE: SOUND FEDERAL BANCORP
COMMON STOCK PAR VALUE $.10 PER SHARE

Gentlemen:

You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of Sound Federal Bancorp
(the "Company") Common Stock, par value $.10 per share ("Common Stock"). We have
reviewed the Company's proposed Stock Holding Company Charter, Registration
Statement on Form S-1 ("Form S-1"), as well as applicable statutes and
regulations governing the Company and the offer and sale of the Common Stock.

We are of the opinion that upon the declaration of effectiveness of the
Form S-1 and the incorporation of the Company as a federal corporation, the
Common Stock, when sold, will be legally issued, fully paid and non-assessable.

This Opinion has been prepared for the use of the Company in connection
with its registration statement on Form S-1, and we hereby consent to the filing
of this Opinion as an exhibit to such registration statement and to our firm
being referenced under the caption "Legal Matters."

Very truly yours,

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

/s/ ALAN SCHICK
--------------------------
By: Alan Schick

<PAGE> 1

EXHIBIT 8.1

[LUSE LEHMAN GORMAN POMERENK & SCHICK LETTERHEAD]

WRITER'S DIRECT DIAL NUMBER

June 18, 1998

Board of Directors
Sound Federal Savings and Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543-2647

RE: MUTUAL HOLDING COMPANY FORMATION AND STOCK ISSUANCE

Gentlemen:

We have been requested as special counsel to Sound Federal Savings and
Loan Association ("Association") to express our opinion concerning the Federal
income tax consequences relating to the proposed conversion of the Association
from a federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association ("Stock Association") and the
formation of Sound Federal, MHC, a federal mutual holding company ("Mutual
Holding Company") which will acquire the outstanding stock of Stock Association
and subsequently contribute Stock Association's stock to Sound Federal Bancorp
("Stock Holding Company").

In connection therewith, we have examined the Plan of Reorganization (as
defined below) and certain other documents of or relating to the Reorganization
(as defined below), some of which are described or referred to in the Plan of
Reorganization and which we deemed necessary to examine in order to issue the
opinions set forth below. Unless otherwise defined, all terms used herein have
the meanings given to such terms in the Plan of Reorganization.

In our examination, we have assumed the authenticity of original
documents, the accuracy of copies and the genuineness of signatures. We have
further assumed the absence of adverse facts not apparent from the face of the
instruments and documents we examined.

In issuing our opinions, we have assumed that the Plan of Reorganization
has been duly and validly authorized and has been approved and adopted by the
board of directors of the Association at a meeting duly called and held; that
the Association will comply with the terms and conditions of the Plan of
Reorganization, and that the various representations and warranties which are
provided to us are accurate, complete, true and correct. Accordingly, we express
no opinion concerning the effect, if any, of variations from the foregoing. We
specifically express no opinion concerning tax matters relating to the Plan of
Reorganization under state and local tax laws and under Federal income tax laws
except on the basis of the documents and assumptions described above.

<PAGE> 2

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 2

For purposes of this opinion, we are relying on the representations
provided to us by the Association, which are incorporated herein by reference.

In issuing the opinions set forth below, we have referred solely to
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder, current
administrative rulings, notices and procedures and court decisions. Such laws,
regulations, administrative rulings, notices and procedures and court decisions
are subject to change at any time. Any such change could affect the continuing
validity of the opinions set forth below. This opinion is as of the date hereof,
and we disclaim any obligation to advise you of any change in any matter
considered herein after the date hereof.

In rendering our opinions, we have assumed that the persons and entities
identified in the Plan of Reorganization will at all times comply with the
requirements of Code sections 368 and 351, the other applicable state and
Federal laws and the representations of the Association. In addition, we have
assumed that the activities of the persons and entities identified in the Plan
of Reorganization will be conducted strictly in accordance with the Plan of
Reorganization. Any variations may affect the opinions we are rendering.

We emphasize that the outcome of litigation cannot be predicted with
certainty and, although we have attempted in good faith to opine as to the
probable outcome of the merits of each tax issue with respect to which an
opinion was requested, there can be no assurance that our conclusions are
correct or that they would be adopted by the IRS or a court.

SUMMARY OF OPINIONS

Based on the facts, representations and assumptions set forth herein, we
are of the opinion that:

WITH RESPECT TO THE EXCHANGE OF THE ASSOCIATION'S CHARTER FOR A STOCK
CHARTER ("ASSOCIATION CONVERSION"):

1. Association's exchange of its charter for a federal stock savings
association charter is a mere change in identity and form and therefore
qualifies as a reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code ("Code").

<PAGE> 3

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 3

2. No gain or loss will be recognized by Association upon the transfer
of its assets to Stock Association solely in exchange for shares of Stock
Association stock and the assumption by Stock Association of the liabilities of
Association. (Code Sections 361(a) and 357(a)).

3. No gain or loss will be recognized by Stock Association upon the
receipt of the assets of Association in exchange for shares of Stock Association
common stock. (Code Section 1032(a)).

4. Stock Association's holding period in the assets received from
Association will include the period during which such assets were held by the
Association. (Code Section 1223(2)).

5. Stock Association's basis in the assets of Association will be the
same as the basis of such assets in the hands of Association immediately prior
to the proposed transaction. (Code Section 362(b)).

6. Association members will recognize no gain or loss upon the
constructive receipt of Stock Association common stock solely in exchange for
their membership interests in Association. (Code Section 354(a)(1)).

7. The basis of the Stock Association common stock to be constructively
received by the Association's members (which basis is -0-) will be the same as
their basis in their membership interests in the Association surrendered in
exchange therefor. (Code Section 358(a)(1)).

8. The holding period of the Stock Association common stock
constructively received by the members of the Association will include the
period during which the Association members held their membership interests,
provided that the membership interests were held as capital assets on the date
of the exchange. (Code Section 1223(1)).

9. The Stock Association will succeed to and take into account the
Association's earnings and profits or deficit in earnings and profits, as of the
date of the proposed transaction. (Code Section 381).

<PAGE> 4

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 4

WITH RESPECT TO THE TRANSFER OF STOCK ASSOCIATION STOCK TO MUTUAL HOLDING
COMPANY FOR MEMBERSHIP INTERESTS (THE "351 TRANSACTION"):

10. The exchange of stock by the Stock Association stockholders in
exchange for membership interests in the Mutual Holding Company will constitute
a tax-free exchange of property solely for "stock" pursuant to Section 351 of
the Internal Revenue Code.

11. Stock Association's stockholders will recognize no gain or loss
upon the transfer of the Stock Association stock they constructively received in
the Association conversion to the Mutual Holding Company solely in exchange for
membership interests in the Mutual Holding Company. (Code Section 351).

12. Stock Association stockholder's basis in the Mutual Holding Company
membership interests received in the transaction (which basis is -0-) will be
the same as the basis of the property transferred in exchange therefor, reduced
by the sum of the liabilities assumed by Mutual Holding Company or to which
assets transferred are taken subject. (Code Section 358(a)(1)).

13. Stock Association stockholder's holding period for the membership
interests in Mutual Holding Company received in the transaction will include the
period during which the property exchanged was held by Stock Association
stockholders, provided that such property was a capital asset on the date of the
exchange. (Code Section 1223(1)).

14. Mutual Holding Company will recognize no gain or loss upon the
receipt of property from Stock Association stockholders in exchange for
membership interests in the Mutual Holding Company. (Code Section 1032(a)).

15. Mutual Holding Company's basis in the property received from Stock
Association stockholders (which basis is -0-) will be the same as the basis of
such property in the hands of Stock Association stockholders immediately prior
to the transaction. (Code Section 362(a)).

16. Mutual Holding Company's holding period for the property received
from Stock Association's stockholders will include the period during which such
property was held by Stock Association stockholders. (Code Section 1223(2)).

17. Stock Association depositors will recognize no gain or loss solely
by reason of the transaction.

<PAGE> 5

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 5

WITH RESPECT TO THE TRANSFERS TO THE STOCK HOLDING COMPANY IN EXCHANGE FOR
COMMON STOCK IN THE STOCK HOLDING COMPANY

18. The Mutual Holding Company and the persons who purchased Common
Stock of the Stock Holding Company in the Subscription and Community Offering
("Minority Stockholders") will recognize no gain or loss upon the transfer of
Stock Association stock and cash, respectively, to the Stock Holding Company in
exchange for stock in the Stock Holding Company. Code Sections 351(a).

19. Stock Holding Company will recognize no gain or loss on its receipt
of Stock Association stock and cash in exchange for Stock Holding Company Stock.
(Code Section 1032(a)).

20. The basis of the Stock Holding Company Common Stock to the Minority
Stockholders will be the actual purchase price thereof, and a shareholders
holding period for Common Stock acquired through the exercise of subscription
rights will begin on the date the rights are exercised.

PROPOSED TRANSACTION

On May 13, 1998, the board of directors of the Association adopted that
certain Plan of Reorganization From Mutual Savings Association to Mutual Holding
Company and Stock Issuance Plan (the "Plan of Reorganization"). For what are
represented to be valid business purposes, the Association's board of directors
has decided to convert to a mutual holding company structure pursuant to
statutes. The following steps are proposed:

(i) The Association will organize an interim stock savings association
(Interim One) as its wholly-owned subsidiary;

(ii) Interim One will organize a federal mid-tier holding company as its
wholly-owned subsidiary (Stock Holding Company); and

(iii) Interim One will also organize another interim stock savings
association as its wholly-owned subsidiary (Interim Two).

The following transactions will occur simultaneously:

<PAGE> 6

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 6

(iv) The Association will exchange its charter for a federal stock
savings association charter and become a stock savings association
that will constructively issue its common stock to members of the
Association;

(v) Interim One will cancel its outstanding stock and exchange its
charter for a federal mutual holding company charter and thereby
become the Mutual Holding Company;

(vi) Interim Two will merge with and into the Association with the
Association as the surviving entity, the former members of the
Association who constructively hold stock in the Association will
exchange their stock in the Association for membership interests in
the Mutual Holding Company; and

(vii) The Mutual Holding Company will contribute the Association's stock
to the Stock Holding Company, a wholly-owned subsidiary of the
Mutual Holding Company for additional shares of Association stock.

(viii) Contemporaneously, with the contribution set forth in "(vii)" the
Stock Holding Company will offer to sell up to 49.9% of its Common
Stock in the Subscription Offering and, if applicable, the
Community Offering.

These transactions are referred to herein collectively as the
"Reorganization."

Those persons who, as of the date of the Association Conversion (the
"Effective Date"), hold depository rights with respect to the Association will
thereafter have such rights solely with respect to the Stock Association. Each
deposit account with the Association at the time of the exchange will become a
deposit account in the Stock Association in the same amount and upon the same
terms and conditions. Following the completion of the Reorganization, all
depositors and borrowers who had membership rights with respect to the
Association immediately prior to the Reorganization will continue to have such
rights solely with respect to the Mutual Holding Company so long as they
continue to hold deposit accounts or borrowings with the Stock Association. All
new depositors of the Stock Association after the completion of the
Reorganization will have ownership rights solely with respect to the Mutual
Holding Company so long as they continue to hold deposit accounts with the Stock
Association.

The shares of Interim Two common stock owned by the Mutual Holding Company
prior to the Reorganization shall be converted into and become shares of common
stock of the Stock

<PAGE> 7

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 7

Association on the Effective Date. The shares of Stock Association common stock
constructively received by the Stock Association stockholders (formerly the
members holding liquidation rights of the Association) will be transferred to
the Mutual Holding Company by such persons in exchange for liquidation rights in
the Mutual Holding Company.

The Stock Holding Company will have the power to issue shares of capital
stock (including common and preferred stock) to persons other than the Mutual
Holding Company. So long as the Mutual Holding Company is in existence, however,
it must own a majority of the voting stock of Stock Holding Company. Stock
Holding Company may issue any amount of non-voting stock to persons other than
Mutual Holding Company. No such non-voting stock will be issued as of the date
of the Reorganization.

* * *

The opinions set forth above represent our conclusions as to the
application of existing Federal income tax law to the facts of the instant
transaction, and we can give no assurance that changes in such law, or in the
interpretation thereof, will not affect the opinions expressed by us. Moreover,
there can be no assurance that contrary positions may not be taken by the IRS,
or that a court considering the issues would not hold contrary to such opinions.

All of the opinions set forth above are qualified to the extent that the
validity of any provision of any agreement may be subject to or affected by
applicable Associationruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally. We do not express any opinion
as to the availability of any equitable or specific remedy upon any breach of
any of the covenants, warranties or other provisions contained in any agreement.
We have not examined, and we express no opinion with respect to the
applicability of, or liability under, any Federal, state or local law,
ordinance, or regulation governing or pertaining to environmental matters,
hazardous wastes, toxic substances, asbestos, or the like.

It is expressly understood that the opinions set forth above represent our
conclusions based upon the documents reviewed by us and the facts presented to
us. Any material amendments to such documents or changes in any significant fact
would affect the opinions expressed herein.

<PAGE> 8

LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION

Board of Directors
Sound Federal Savings and Loan Association
June 18, 1998
Page 8

We have not been asked to, and we do not, render any opinion with respect
to any matters other than those expressly set forth above.

We hereby consent to the filing of the opinion as an exhibit to the
Association's combined Form MHC-1/MHC-2 Notice of Mutual Holding Company
Reorganization and Application for Approval of a Minority Stock Issuance by a
Subsidiary of Mutual Holding Company as filed with the OTS and to the Stock
Holding Company's Registration Statement on Form SB-1 as filed with the SEC. We
also consent to the references to our firm in the Prospectus contained in the
Forms MHC-1/MHC-2 and SB-1 under the captions "The Reorganization and Offering -
Tax Effects of the Reorganization" and "Legal and Tax Matters," and to the
summarization of our opinion in such Prospectus.

Very truly yours,

/s/ LUSE LEHMAN GORMAN POMERENK & SCHICK

LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation

<PAGE> 1

EXHIBIT 8.2

[FINPRO LETTERHEAD]

June 19, 1998

Board of Directors
Sound Federal Savings & Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543-0160

Dear Board Members:

All capitalized terms not otherwise defined in this letter have the meanings
given such terms in the Plan of Reorganization from Mutual Savings Association
to Mutual Holding Company and Stock Issuance Plan (the "Plan") adopted by the
Board of Directors of Sound Federal Savings & Loan Association (the "Bank"),
whereby the Bank will reorganize into the Mutual Holding Company form of
organization by converting from a federally chartered mutual savings association
into the mutual holding company structure. As part of the Reorganization and
Plan, the Bank will convert to a federal stock savings bank (the "Stock Bank")
and will establish a stock holding company (the "Holding Company") which will be
a majority owned subsidiary of a mutual holding company (the "MHC"), a mutually
owned federal corporation, so long as the MHC remains in the mutual form.

We understand that in accordance with the Plan, Subscription Rights to purchase
shares of the Common Stock are to be issued to (i) Eligible Account Holders;
(ii) the ESOP; (iii) Supplemental Eligible Account Holders; (iv) Other Members;
and (v) Directors, Officers and Employees, collectively referred to as the
"Recipients". Based solely on our observation that the Subscription Rights will
be available to such Recipients without cost, will be legally non- transferable
and of short duration, and will afford the Recipients the right only to purchase
shares of Common Stock at the same price as will be paid by members of the
general public in the Selected Community Offering, but without undertaking any
independent investigation of state or federal law or the position of the
Internal Revenue Service with respect to this issue, we are of the opinion that:

(1) the Subscription Rights will have no ascertainable market value;
and

(2) the price at which the Subscription Rights are excercisable will
not be more or less than the pro forma market value of the shares
upon issuance.

Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Company's value alone. Accordingly, no assurance can be
given that persons who subscribe to shares of Conversion Stock in the conversion
will thereafter be able to buy or sell such shares at the same price paid in the
Subscription Offering.

Very Truly Yours,
FinPro, Inc.

/s/ DONALD J. MUSSO

Donald J. Musso
President

<PAGE> 1
EXHIBIT 10.1

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

EMPLOYEE STOCK OWNERSHIP PLAN

(adopted effective January 1, 1998)
<PAGE> 2
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN

This Employee Stock Ownership Plan, executed on the ____ day of
_____________, 1998, by Sound Federal Savings and Loan Association, a federal
stock savings association (the "Association"),

W I T N E S S E T H T H A T

WHEREAS, the board of directors of the Association has resolved to
adopt an employee stock ownership plan for eligible employees in accordance
with the terms and conditions presented to the directors;

NOW, THEREFORE, the Association hereby adopts the following Plan
setting forth the terms and conditions pertaining to contributions by the
Employer and the payment of benefits to Participants and Beneficiaries.

IN WITNESS WHEREOF, the Association has adopted this Plan and caused
this instrument to be executed by its duly authorized officers as of the above
date.

ATTEST:

By:
- --------------------------- -------------------------------
Secretary President

<PAGE> 3
C 0 N T E N T S

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SECTION 1. PLAN IDENTITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
-------------
1.1 NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
----
1.2 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
-------
1.3 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
--------------
1.4 FISCAL PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
-------------
1.5 SINGLE PLAN FOR ALL EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
-----------------------------
1.6 INTERPRETATION OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
----------------------------
SECTION 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
-----------
SECTION 3. ELIGIBILITY FOR PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
-----------------------------
3.1 INITIAL ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
-------------------
3.2 DEFINITION OF ELIGIBILITY YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
------------------------------
3.3 TERMINATED EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
--------------------
3.4 CERTAIN EMPLOYEES INELIGIBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
----------------------------
3.5 PARTICIPATION AND REPARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
---------------------------------
3.6 OMISSION OF ELIGIBLE EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
-----------------------------
3.7 INCLUSION OF INELIGIBLE EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
--------------------------------
SECTION 4. CONTRIBUTIONS AND CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
-------------------------
4.1 DISCRETIONARY CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
---------------------------
4.2 CONTRIBUTIONS FOR STOCK OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
-----------------------------------
4.3 DEFINITIONS RELATED TO CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
------------------------------------
4.4 CONDITIONS AS TO CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
------------------------------
SECTION 5. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
--------------------------------------------
5.1 LIMITATION ON ANNUAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
------------------------------
5.2 COORDINATED LIMITATION WITH OTHER PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
---------------------------------------
5.3 EFFECT OF LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
---------------------
5.4 LIMITATIONS AS TO CERTAIN PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
--------------------------------------
SECTION 6. TRUST FUND AND ITS INVESTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
-----------------------------
6.1 CREATION OF TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
----------------------
6.2 STOCK FUND AND INVESTMENT FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
------------------------------
6.3 ACQUISITION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
--------------------
6.4 PARTICIPANTS' OPTION TO DIVERSIFY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
---------------------------------
SECTION 7. VOTING RIGHTS AND DIVIDENDS ON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
------------------------------------
7.1 VOTING AND TENDERING OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
-----------------------------
7.2 DIVIDENDS ON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
------------------

</TABLE>

(i)
<PAGE> 4
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
SECTION 8. ADJUSTMENTS TO ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
-----------------------
8.1 ADJUSTMENTS FOR TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
----------------------------
8.2 VALUATION OF INVESTMENT FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
----------------------------
8.3 ADJUSTMENTS FOR INVESTMENT EXPERIENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
-------------------------------------
SECTION 9. VESTING OF PARTICIPANTS' INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
----------------------------------
9.1 DEFERRED VESTING IN ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
----------------------------
9.2 COMPUTATION OF VESTING YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
----------------------------
9.3 FULL VESTING UPON CERTAIN EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
--------------------------------
9.4 FULL VESTING UPON PLAN TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
----------------------------------
9.5 FORFEITURE, REPAYMENT, AND RESTORAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
-----------------------------------
9.6 ACCOUNTING FOR FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
--------------------------
9.7 VESTING AND NONFORFEITABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
-----------------------------
SECTION 10. PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
-------------------
10.1 BENEFITS FOR PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
-------------------------
10.2 TIME FOR DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
---------------------
10.3 MARITAL STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
--------------
10.4 DELAY IN BENEFIT DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
------------------------------
10.5 ACCOUNTING FOR BENEFIT PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
-------------------------------
10.6 OPTIONS TO RECEIVE AND SELL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
---------------------------------
10.7 RESTRICTIONS ON DISPOSITION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
------------------------------------
10.8 CONTINUING LOAN PROVISIONS; CREATIONS OF PROTECTIONS AND RIGHTS . . . . . . . . . . . . . . . . . . . . . -21-
---------------------------------------------------------------
10.9 DIRECT ROLLOVER OF ELIGIBLE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
----------------------------------------
10.10 WAIVER OF 30 DAY PERIOD AFTER NOTICE OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
----------------------------------------------------
SECTION 11. RULES GOVERNING BENEFIT CLAIMS AND REVIEW OF APPEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
----------------------------------------------------
11.1 CLAIM FOR BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
------------------
11.2 NOTIFICATION BY COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
-------------------------
11.3 CLAIMS REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
-----------------------
SECTION 12. THE COMMITTEE AND ITS FUNCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
-------------------------------
12.1 AUTHORITY OF COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
----------------------
12.2 IDENTITY OF COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
---------------------
12.3 DUTIES OF COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
-------------------
12.4 VALUATION OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
------------------
12.5 COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
---------------------
12.6 ACTION BY COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
-------------------
12.7 EXECUTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
----------------------
12.8 ADOPTION OF RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
-----------------
12.9 RESPONSIBILITIES TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
--------------------------------
12.10 ALTERNATIVE PAYEES IN EVENT OF INCAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
-----------------------------------------
12.11 INDEMNIFICATION BY EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
----------------------------
12.12 NONPARTICIPATION BY INTERESTED MEMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-------------------------------------

</TABLE>

(ii)
<PAGE> 5
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
SECTION 13. ADOPTION, AMENDMENT, OR TERMINATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-----------------------------------------------
13.1 ADOPTION OF PLAN BY OTHER EMPLOYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-----------------------------------
13.2 ADOPTION OF PLAN BY SUCCESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
-----------------------------
13.3 PLAN ADOPTION SUBJECT TO QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
--------------------------------------
13.4 RIGHT TO AMEND OR TERMINATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
---------------------------
SECTION 14. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
------------------------
14.1 PLAN CREATES NO EMPLOYMENT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
---------------------------------
14.2 NONASSIGNABILITY OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
----------------------------
14.3 LIMIT OF EMPLOYER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
---------------------------
14.4 TREATMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
---------------------
14.5 NUMBER AND GENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
-----------------
14.6 NONDIVERSION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
----------------------
14.7 SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
--------------------------
14.8 SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
------------------
14.9 GOVERNING STATE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
-------------------
14.10 EMPLOYER CONTRIBUTIONS CONDITIONED ON DEDUCTIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
---------------------------------------------------
14.11 UNCLAIMED ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
------------------
14.12 QUALIFIED DOMESTIC RELATIONS ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
----------------------------------
SECTION 15. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
--------------------
15.1 TOP-HEAVY PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
--------------
15.2 SUPER TOP-HEAVY PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
--------------------
15.3 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
-----------
15.4 TOP-HEAVY RULES OF APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
------------------------------
15.5 TOP-HEAVY RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
---------------
15.6 MINIMUM CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
---------------------
15.7 MINIMUM VESTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
---------------
15.8 TOP-HEAVY PROVISIONS CONTROL IN TOP-HEAVY PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
----------------------------------------------

</TABLE>

(iii)
<PAGE> 6
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN

SECTION 1. PLAN IDENTITY.

1.1 NAME. The name of this Plan is "Sound Federal Savings and
Loan Association Employee Stock Ownership Plan."

1.2 PURPOSE. The purpose of this Plan is to describe the terms
and conditions under which contributions made pursuant to the Plan will be
credited and paid to the Participants and their Beneficiaries.

1.3 EFFECTIVE DATE. The Effective Date of this Plan is January 1,
1998.

1.4 FISCAL PERIOD. This Plan shall be operated on the basis of a
January 1 to December 31 fiscal year for the purpose of keeping the Plan's
books and records and distributing or filing any reports or returns required by
law.

1.5 SINGLE PLAN FOR ALL EMPLOYERS. This Plan shall be treated as
a single plan with respect to all participating Employers for the purpose of
crediting contributions and forfeitures and distributing benefits, determining
whether there has been any termination of Service, and applying the limitations
set forth in Section 5.

1.6 INTERPRETATION OF PROVISIONS. The Employers intend this Plan
and the Trust to be a qualified stock bonus plan under Section 401(a) of the
Code and an employee stock ownership plan within the meaning of Section
407(d)(6) of ERISA and Section 4975(e)(7) of the Code. The Plan is intended to
have its assets invested primarily in qualifying employer securities of one or
more Employers within the meaning of Section 407(d)(3) of ERISA, and to satisfy
any requirement under ERISA or the Code applicable to such a plan.

Accordingly, the Plan and Trust Agreement shall be interpreted and
applied in a manner consistent with this intent and shall be administered at
all times and in all respects in a nondiscriminatory manner.

SECTION 2. DEFINITIONS.

The following capitalized words and phrases shall have the meanings
specified when used in this Plan and in the Trust Agreement, unless the context
clearly indicates otherwise:

"ACCOUNT" means a Participant's interest in the assets accumulated
under this Plan as expressed in terms of a separate account balance which is
periodically adjusted to reflect his Employer's contributions, the Plan's
investment experience, and distributions and forfeitures.

"ACTIVE PARTICIPANT" means any Employee who has satisfied the
eligibility requirements of Section 3 and who qualifies as an Active
Participant for a particular Plan Year under Section 4.3.

<PAGE> 7
"ASSOCIATION" means Sound Federal Savings and Loan Association and any
entity which succeeds to the business of Sound Federal Savings and Loan
Association and adopts this Plan as its own pursuant to Section 13.2.

"BENEFICIARY" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated
Beneficiaries shall die before the Participant dies or shall die before all
benefits have been paid, the Participant's Beneficiary shall be his surviving
Spouse, if any, or his estate if he is not survived by a Spouse. The Committee
may rely upon the advice of the Participant's executor or administrator as to
the identity of the Participant's Spouse.

"BREAK IN SERVICE" means any Plan Year in which an Employee has 500 or
fewer Hours of Service. Solely for this purpose, an Employee shall be
considered employed for his normal hours of paid employment during a Recognized
Absence (said Employee shall not be credited with more than 501 Hours of
Service to avoid a Break in Service), unless he does not resume his Service at
the end of the Recognized Absence. Further, if an Employee is absent for any
period beginning on or after January 1, 1985, (i) by reason of the Employee's
pregnancy, (ii) by reason of the birth of the Employee's child, (iii) by reason
of the placement of a child with the Employee in connection with the Employee's
adoption of the child, or (iv) for purposes of caring for such child for a
period beginning immediately after such birth or placement, the Employee shall
be credited with the Hours of Service which would normally have been credited
but for such absence, up to a maximum of 501 Hours of Service.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COMMITTEE" means the committee responsible for the administration of
this Plan in accordance with Section 12.

"COMPANY" means Sound Federal Bancorp, Inc., the stock holding company
of Association.

"DISABILITY" means only a disability which renders the Participant
totally unable, as a result of bodily or mental disease or injury, to perform
any duties for an Employer for which he is reasonably fitted, which disability
is expected to be permanent or of long and indefinite duration. However, this
term shall not include any disability directly or indirectly resulting from or
related to habitual drunkenness or addiction to narcotics, a criminal act or
attempt, service in the armed forces of any country, an act of war, declared or
undeclared, any injury or disease occurring while compensation to the
Participant is suspended, or any injury which is intentionally self-inflicted.
Further, this term shall apply only if (i) the Participant is sufficiently
disabled to qualify for the payment of disability benefits under the federal
Social Security Act or Veterans Disability Act, or (ii) the Participant's
disability is certified by a physician selected by the Committee. Unless the
Participant is sufficiently disabled to qualify for disability benefits under
the federal Social Security Act or Veterans Disability Act, the Committee may
require the Participant to be appropriately examined from time to time by one
or more physicians chosen by the Committee, and no Participant who refuses to
be examined shall be treated as having a Disability. In any event, the
Committee's good faith decision as to whether a Participant's Service has been
terminated by Disability shall be final and conclusive.

"EARLY RETIREMENT" means retirement on or after a Participant's
attainment of age 55 and the completion of ten years of employment with an
Employer. If the Participant terminates employment before

-2-
<PAGE> 8
satisfying the age requirement, but has satisfied the employment requirement,
the Participant will be entitled to elect early retirement upon satisfaction of
the age requirement.

"EFFECTIVE DATE" means January 1, 1998.

"EMPLOYEE" means any individual who is or has been employed or
self-employed by an Employer. "Employee" also means an individual employed by
a leasing organization who, pursuant to an agreement between an Employer and
the leasing organization, has performed services for the Employer and any
related persons (within the meaning of Section 414(n)(6) of the Code) on a
substantially full-time basis for more than one year, if such services are
performed under the primary direction or control of the Employer. However,
such a "leased employee" shall not be considered an Employee if (i) he
participates in a money purchase pension plan sponsored by the leasing
organization which provides for immediate participation, immediate full
vesting, and an annual contribution of at least 10 percent of the Employee's
415 Compensation, and (ii) leased employees do not constitute more than 20
percent of the Employer's total work force (including leased employees, but
excluding Highly Paid Employees and any other Employees who have not performed
services for the Employer on a substantially full-time basis for at least one
year).

"EMPLOYER" means the Association or any affiliate within the purview
of section 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Association's
consent pursuant to Section 13.1, and any entity which succeeds to the business
of any Employer and adopts the Plan pursuant to Section 13.2.

"ENTRY DATE" means the Effective Date of the Plan and each January 1
and July 1 of each Plan Year after the Effective Date.

"ERISA" means the Employee Retirement Income Security Act of 1974
(P.L. 93-406, as amended).

"415 COMPENSATION"

(a) shall mean wages, as defined in Code Section 3401(a)
for purposes of income tax withholding at the source.

(b) Any elective deferral as defined in Code Section
402(g)(3) (any Employer contributions made on behalf of a Participant
to the extent not includible in gross income and any Employer
contributions to purchase an annuity contract under Code Section
403(b) under a salary reduction agreement) and any amount which is
contributed or deferred by the Employer at the election of the
Participant and which is not includible in gross income of the
Participant by reason of Code Section 125 (Cafeteria Plan) shall also
be included in the definition of 415 Compensation.

(c) 415 Compensation in excess of $160,000 (as indexed)
shall be disregarded for all Participants. For purposes of this
sub-section, the $160,000 limit shall be referred to as the
"applicable limit" for the Plan Year in question. The $160,000 limit
shall be adjusted for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code, effective for the Plan Year
which begins within the applicable calendar year. For purposes of the
applicable limit, 415 Compensation shall be prorated over short Plan
Years.

-3-
<PAGE> 9
"HIGHLY PAID EMPLOYEE" for any Plan Year means an Employee who, during
either of that or the immediately preceding Plan Year was at any time a five
percent owner of the Employer (as defined in Code Section 416(i)(1)) or, during
the immediately preceding Plan Year, had 415 Compensation exceeding $80,000 and
was among the most highly compensated one-fifth of all Employees. For this
purpose:

(a) "415 Compensation" shall include any amount which is
excludable from the Employee's gross income for tax purposes pursuant
to Sections 125, 402(a)(8), 402(h)(1)(B), or 403(b) of the Code.

(b) The number of Employees in "the most highly
compensated one-fifth of all Employees" shall be determined by taking
into account all individuals working for all related Employer entities
described in the definition of "Service", but excluding any individual
who has not completed six months of Service, who normally works fewer
than 17-1/2 hours per week or in fewer than six months per year, who
has not reached age 21, whose employment is covered by a collective
bargaining agreement, or who is a nonresident alien who receives no
earned income from United States sources.

"HOURS OF SERVICE" means hours to be credited to an Employee under the
following rules:

(a) Each hour for which an Employee is paid or is entitled
to be paid for services to an Employer is an Hour of Service.

(b) Each hour for which an Employee is directly or
indirectly paid or is entitled to be paid for a period of vacation,
holidays, illness, disability, lay-off, jury duty, temporary military
duty, or leave of absence is an Hour of Service. However, except as
otherwise specifically provided, no more than 501 Hours of Service
shall be credited for any single continuous period which an Employee
performs no duties. No more than 501 Hours of Service will be
credited under this paragraph for any single continuous period
(whether or not such period occurs in a single computation period).
Further, no Hours of Service shall be credited on account of payments
made solely under a plan maintained to comply with worker's
compensation, unemployment compensation, or disability insurance laws,
or to reimburse an Employee for medical expenses.

(c) Each hour for which back pay (ignoring any mitigation
of damages) is either awarded or agreed to by an Employer is an Hour
of Service. However, no more than 501 Hours of Service shall be
credited for any single continuous period during which an Employee
would not have performed any duties. The same Hours of Service will
not be credited both under paragraph (a) or (b) as the case may be,
and under this paragraph (c). These hours will be credited to the
employee for the computation period or periods to which the award or
agreement pertains rather than the computation period in which the
award agreement or payment is made.

(d) Hours of Service shall be credited in any one period
only under one of the foregoing paragraphs (a), (b) and (c); an
Employee may not get double credit for the same period.

(e) If an Employer finds it impractical to count the
actual Hours of Service for any class or group of non-hourly
Employees, each Employee in that class or group shall be credited with
45 Hours of Service for each weekly pay period in which he has at
least one Hour of Service. However, an Employee shall be credited
only for his normal working hours during a paid absence.

-4-
<PAGE> 10
(f) Hours of Service to be credited on account of a
payment to an Employee (including back pay) shall be recorded in the
period of Service for which the payment was made. If the period
overlaps two or more Plan Years, the Hours of Service credit shall be
allocated in proportion to the respective portions of the period
included in the several Plan Years. However, in the case of periods
of 31 days or less, the Administrator may apply a uniform policy of
crediting the Hours of Service to either the first Plan Year or the
second.

(g) In all respects an Employee's Hours of Service shall
be counted as required by Section 2530.200b-2(b) and (c) of the
Department of Labor's regulations under Title I of ERISA.

"INVESTMENT FUND" means that portion of the Trust Fund consisting of
assets other than Stock. Notwithstanding the above, assets from the Investment
Fund may be used to purchase Stock in the open market or otherwise, or used to
pay on the Stock Obligation, and shares so purchased will be allocated to a
Participant's Stock Fund.

"NORMAL RETIREMENT" means retirement on or after the later of a
Participant's 65th birthday or fifth year of Service.

"NORMAL RETIREMENT DATE" means the date on which a Participant attains
age 65 and completes five years of Service.

"PARTICIPANT" means any Employee who is participating in the Plan, or
who has previously participated in the Plan and still has a balance credited to
his Account.

"PLAN YEAR" means the twelve month period commencing January 1 and
ending December 31, 1998 and each period of 12 consecutive months beginning on
January 1 of each succeeding year.

"RECOGNIZED ABSENCE" means a period for which --

(a) an Employer grants an Employee a leave of absence for
a limited period, but only if an Employer grants such leave on a
nondiscriminatory basis; or

(b) an Employee is temporarily laid off by an Employer
because of a change in business conditions; or

(c) an Employee is on active military duty, but only to
the extent that his employment rights are protected by the Military
Selective Service Act of 1967 (38 U.S.C. Sec. 2021).

"SERVICE" means an Employee's period(s) of employment or
self-employment with an Employer, excluding for initial eligibility purposes
any period in which the individual was a nonresident alien and did not receive
from an Employer any earned income which constituted income from sources within
the United States. An Employee's Service shall include any Service which
constitutes Service with a predecessor Employer within the meaning of Section
414(a) of the Code. An Employee's Service shall also include any Service with
an entity which is not an Employer, but only either (i) for a period after 1975
in which the other entity is a member of a controlled group of corporations or
is under common control with other trades and businesses within the meaning of
Section 414(b) or 414(c) of the Code, and a member of the controlled group or
one of the trades and businesses is an Employer, (ii) for a period after 1979
in which

-5-
<PAGE> 11
the other entity is a member of an affiliated service group within the meaning
of Section 414(m) of the Code, and a member of the affiliated service group is
an Employer, or (iii) all Employers aggregated with the Employer under Section
414(o) of the Code (but not until the Proposed Regulations under Section 414(o)
become effective). Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.

"SPOUSE" means the individual, if any, to whom a Participant is
lawfully married on the date benefit payments to the Participant are to begin,
or on the date of the Participant's death, if earlier. A former Spouse shall
be treated as the Spouse or surviving Spouse to the extent provided under a
qualified domestic relations order as described in section 414(p) of the Code.

"STOCK" means shares of the Company's voting common stock or preferred
stock meeting the requirements of Section 409(e)(3) of the Code issued by an
Employer which is a member of the same controlled group of corporations within
the meaning of Code Section 414(b).

"STOCK FUND" means that portion of the Trust Fund consisting of Stock.

"STOCK OBLIGATION" means an indebtedness arising from any extension of
credit to the Plan or the Trust which satisfies the requirements set forth in
Section 6.3 and which was obtained for any or all of the following purposes:

(i) to acquire qualifying Employer securities as defined
in Treasury Regulations Section 54.4975-12

(ii) to repay such Stock Obligation; or

(iii) to repay a prior exempt loan.

"TRUST" OR "TRUST FUND" means the trust fund created under this Plan.

"TRUST AGREEMENT" means the agreement between the Association and the
Trustee concerning the Trust Fund. If any assets of the Trust Fund are held in
a co-mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that
co-mingled trust fund. With respect to the allocation of investment
responsibility for the assets of the Trust Fund, the provisions of Article II
of the Trust Agreement are incorporated herein by reference.

"TRUSTEE" means one or more corporate persons or individuals selected
from time to time by the Association to serve as trustee or co-trustees of the
Trust Fund.

"UNALLOCATED STOCK FUND" means that portion of the Stock Fund
consisting of the Plan's holding of Stock which have been acquired in exchange
for one or more Stock obligations and which have not yet been allocated to the
Participant's Accounts in accordance with Section 4.2

"VALUATION DATE" means the last day of the Plan Year and each other
date as of which the Committee shall determine the investment experience of the
Investment Fund and adjust the Participants' Accounts accordingly.

-6-
<PAGE> 12
"VALUATION PERIOD" means the period following a Valuation Date and
ending with the next Valuation Date.

"VESTING YEAR" means a unit of Service credited to a Participant
pursuant to Section 9.2 for purposes of determining his vested interest in his
Account.

SECTION 3. ELIGIBILITY FOR PARTICIPATION.

3.1 INITIAL ELIGIBILITY. An Employee shall enter the Plan as of
the Entry Date coincident with or next following the later of the following
dates:

(a) the last day of the Employee's first Eligibility Year,
and

(b) the Employee's 21st birthday. However, if an Employee
is not in active Service with an Employer on the date he would
otherwise first enter the Plan, his entry shall be deferred until the
next day he is in Service.

3.2 DEFINITION OF ELIGIBILITY YEAR. An "Eligibility Year" means
an applicable eligibility period (as defined below) in which the Employee has
completed 1,000 Hours of Service for the Employer. For this purpose:

(a) an Employee's first "eligibility period" is the
12-consecutive month period beginning on the first day on which he has
an Hour of Service, and

(b) his subsequent eligibility periods will be
12-consecutive month periods beginning on each January 1 after that
first day of Service.

3.3 TERMINATED EMPLOYEES. No Employee shall have any interest or
rights under this Plan if he is never in active Service with an Employer on or
after the Effective Date.

3.4 CERTAIN EMPLOYEES INELIGIBLE. No Employee shall participate
in the Plan while his Service is covered by a collective bargaining agreement
between an Employer and the Employee's collective bargaining representative if
(i) retirement benefits have been the subject of good faith bargaining between
the Employer and the representative and (ii) the collective bargaining
agreement does not provide for the Employee's participation in the Plan.

3.5 PARTICIPATION AND REPARTICIPATION. Subject to the
satisfaction of the foregoing requirements, an Employee shall participate in
the Plan during each period of his Service from the date on which he first
becomes eligible until his termination. For this purpose, an Employee who
returns before five (5) consecutive Breaks in Service who previously satisfied
the initial eligibility requirements or who returns after five (5) consecutive
one year Breaks in Service with a vested Account balance in the Plan shall
re-enter the Plan as of the date of his return to Service with an Employer.

3.6 OMISSION OF ELIGIBLE EMPLOYEE. If, in any Plan Year, any
Employee who should be included as a Participant in the Plan is erroneously
omitted and discovery of such omission is not made until after a contribution
by his Employer for the year has been made, the Employer shall make a
subsequent contribution with respect to the omitted Employee in the amount
which the said Employer

-7-
<PAGE> 13
would have contributed shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under applicable provisions
of the Code.

3.7 INCLUSION OF INELIGIBLE EMPLOYEE. If, in any Plan Year, any
person who should not have been included as a Participant in the Plan is
erroneously included and discovery of such incorrect inclusion is not made
until after a contribution for the year has been made, the Employer shall not
be entitled to recover the contribution made with respect to the ineligible
person regardless of whether or not a deduction is allowable with respect to
the ineligible person shall constitute a forfeiture for the Plan Year in which
the discovery is made.

SECTION 4. CONTRIBUTIONS AND CREDITS.

4.1 DISCRETIONARY CONTRIBUTIONS. The Employer shall from time to
time contribute, with respect to a Plan Year, such amounts as it may determine
from time to time. The Employer shall have no obligation to contribute any
amount under this Plan except as so determined in its sole discretion. The
Employer's contributions and available forfeitures for a Plan Year shall be
credited as of the last day of the year to the Accounts of the Active
Participants in proportion to their amounts of 415 Compensation.

4.2 CONTRIBUTIONS FOR STOCK OBLIGATIONS. If the Trustee, upon
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer may contribute for each Plan Year an amount sufficient
to cover all payments of principal and interest as they come due under the
terms of the Stock Obligation. If there is more than one Stock Obligation, the
Employer shall designate the one to which any contribution is to be applied.
Investment earnings realized on Employer contributions and any dividends paid
by the Employer on Stock held in the Unallocated Stock Account, shall be
applied to the Stock Obligation related to that Stock, subject to Section 7.2.

In each Plan Year in which Employer contributions, earnings on
contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii)
the sum of (i) above, and the remaining principal and interest payments
required (or projected to be required on the basis of the interest rate in
effect at the end of the Plan Year) to satisfy the Stock Obligation.

At the direction of the Committee, the current and projected payments
of interest under a Stock Obligation may be ignored in calculating the number
of shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it
would be determined to be interest under standard loan amortization tables, and
(iii) the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.

4.3 DEFINITIONS RELATED TO CONTRIBUTIONS. For the purposes of this
Plan, the following terms have the meanings specified:

-8-
<PAGE> 14
"ACTIVE PARTICIPANT" means a Participant who has satisfied the
eligibility requirements under Section 3 and who has at least 1000 Hours of
Service during the current Plan Year. However, a Participant shall not qualify
as an Active Participant unless (i) he is in active Service with an Employer as
of the last day of the Plan Year, or (ii) he is on a Recognized Absence as of
that date, or (iii) his Service terminated during the Plan Year by reason of
Disability, death, Early or Normal Retirement.

In the event a Plan Year is a period of less than 12 months for any
reason, then 415 Compensation for the short period shall not exceed the pro
rata portion of this limit created by multiplying a fraction which is the
number of months in the short period divided by twelve times the annual
compensation limit.

4.4 CONDITIONS AS TO CONTRIBUTIONS. Employers' contributions
shall in all events be subject to the limitations set forth in Section 5.
Contributions may be made in the form of cash, or securities and other property
to the extent permissible under ERISA, including Stock, and shall be held by
the Trustee in accordance with the Trust Agreement. In addition to the
provisions of Section 13.3 for the return of an Employer's contributions in
connection with a failure of the Plan to qualify initially under the Code, any
amount contributed by an Employer due to a good faith mistake of fact, or based
upon a good faith but erroneous determination of its deductibility under
Section 404 of the Code, shall be returned to the Employer within one year
after the date on which the contribution was originally made, or within one
year after its nondeductibility has been finally determined. However, the
amount to be returned shall be reduced to take account of any adverse
investment experience within the Trust Fund in order that the balance credited
to each Participant's Account is not less that it would have been if the
contribution had never been made.

SECTION 5. LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS.

5.1 LIMITATION ON ANNUAL ADDITIONS. Notwithstanding anything
herein to the contrary, allocation of Employer contributions for any Plan Year
shall be subject to the following:

5.1-1 If allocation of Employer contributions in accordance
with Section 4.1 will result in an allocation of more than one-third
the total contributions for a Plan Year to the Accounts of Highly Paid
Employees, then allocation of such amount shall be adjusted so that
such excess will not occur.

5.1-2 After adjustment, if any, required by the preceding
paragraph, the annual additions during any Plan Year to any
Participant's Account under this and any other defined contribution
plans maintained by the Employer or an affiliate (within the purview
of Section 414(b), (c) and (m) and Section 415(h) of the Code, which
affiliate shall be deemed the Employer for this purpose) shall not
exceed the lesser of $30,000 (or such other dollar amount which
results from cost-of-living adjustments under Section 415(d) of the
Code) or "25 percent of the Participant's 415 Compensation for such
limitation year." In the event that annual additions exceed the
aforesaid limitations, they shall be reduced in the following
priority:

(i) If the Participant is covered by the Plan at the end
of the Plan Year, any excess amount at the end of the Plan Year that
cannot be allocated to the Participant's Account shall be used to
reduce the employer contribution for such Participant in the next
limitation year and any succeeding limitation years if necessary.

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<PAGE> 15
(ii) If the Participant is not covered by the Plan at the
end of the Plan Year, the excess amount will be held unallocated in a
suspense account. The suspense account will be applied to reduce
future Employer contributions for all remaining Participants in the
next limitation year and each succeeding limitation year if necessary.

(iii) If a suspense account is in existence at any time
during a limitation year, it will not participate in any allocation of
investment gains and losses. All amounts held in suspense accounts
must be allocated to Participant's Accounts before any contributions
may be made to the Plan for the limitation year.

(iv) If a suspense account exists at the time of Plan
termination, amounts held in the suspense account that cannot be
allocated shall revert to the Employer.

5.1-3 For purposes of this Section 5.1 and the following
Section 5.2, the "annual addition" to a Participant's Accounts means
the sum of (i) Employer contributions, (ii) Employee contributions, if
any, and (iii) forfeitures. Annual additions to a defined
contribution plan also include amounts allocated, after March 31,
1984, to an individual medical account, as defined in Section
415(l)(2) of the Internal Revenue Code, which is part of a pension or
annuity plan maintained by the Employer, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of
a Key Employee under a welfare benefit fund, as defined in Section
419A(d) of the Internal Revenue Code, maintained by the Employer. For
these purposes, annual additions to a defined contribution plan shall
not include the allocation of the excess amounts remaining in the
Unallocated Stock Fund subsequent to a sale of stock from such fund in
accordance with a transaction described in Section 8.1 of the Plan.
The $30,000 limitations referred to shall, for each limitation year
ending after 1988, be automatically adjusted to the new dollar
limitations determined by the Commissioner of Internal Revenue for the
calendar year beginning in that limitation year.

5.1-4 Notwithstanding the foregoing, if no more than
one-third of the Employer contributions to the Plan for a year which
are deductible under Section 404(a)(9) of the Code are allocated to
Highly Paid Employees (within the meaning of Section 414(q) of the
Internal Revenue Code), the limitations imposed herein shall not apply
to:

(i) forfeitures of Employer securities (within the meaning
of Section 409 of the Code) under the Plan if such securities were
acquired with the proceeds of a loan described in Section 404(a)(9)(A)
of the Code), or

(ii) Employer contributions to the Plan which are
deductible under Section 404(a)(9)(B) and charged against a
Participant's Account.

5.1-5 If the Employer contributes amounts, on behalf of
Employees covered by this Plan, to other "defined contribution plans"
as defined in Section 3(34) of ERISA, the limitation on annual
additions provided in this Section shall be applied to annual
additions in the aggregate to this Plan and to such other plans.
Reduction of annual additions, where required, shall be accomplished
first by reductions under such other plan pursuant to the directions
of the named Fiduciary for administration of such other plans or under
priorities, if any, established under the terms of such

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<PAGE> 16
other plans and then by allocating any remaining excess for this Plan
in the manner and priority set out above with respect to this Plan.

5.1-6 A limitation year shall mean each 12 consecutive month
period beginning each January 1.

5.2 COORDINATED LIMITATION WITH OTHER PLANS. Aside from the
limitation prescribed by Section 5.1 with respect to the annual addition to a
Participant's Accounts for any single limitation year, if a Participant has
ever participated in one or more defined benefit plans maintained by an
Employer or an affiliate, then the accrued benefit shall be limited so that the
sum of his defined plan fraction and his defined contribution plan fraction
does not exceed one. For this purpose:

5.2-1 A Participant's defined contribution plan fraction with
respect to a Plan Year shall be a fraction, (i) the numerator of which
is the sum of the annual additions to his Accounts through the current
year, and (ii) the denominator of which is the sum of the lesser of
the following amounts -A- and -B- determined for the current
limitation year and each prior limitation year of Service with an
Employer: -A- is 1.25 times the dollar limit in effect for the year
under Section 415(c)(1)(A) of the Code, or 1.0 times such dollar
limitation if the Plan is top-heavy, and -B- is 35 percent of the
Participant's 415 Compensation for such year. Further, if the
Participant participated in any related defined contribution plan in
any years beginning before 1976, any excess of the sum of the actual
annual additions to the Participant's Accounts for those years over
the maximum annual additions which could have been made in accordance
with Section 5.1 shall be ignored, and voluntary contributions by the
Participant during those years shall be taken into account as to each
such year only to the extent that his average annual voluntary
contribution in those years exceeded 10 percent of his average annual
415 Compensation in those years.

5.2-2 A Participant's defined benefit plan fraction with
respect to a limitation year shall be a fraction, (i) the numerator of
which is his projected annual benefit payable at normal retirement
under the Employers' defined benefit plans, and (ii) the denominator
of which is the lesser of (a) 1.25 times $90,000, or 1.0 times such
dollar limitation if the Plan is top-heavy, and (b) 1.4 times the
Participant's average 415 Compensation during his highest-paid three
consecutive limitation years.

5.3 EFFECT OF LIMITATIONS. The Committee shall take whatever
action may be necessary from time to time to assure compliance with the
limitations set forth in Section 5.1 and 5.2. Specifically, the Committee shall
see that each Employer restrict its contributions for any Plan Year to an
amount which, taking into account the amount of available forfeitures, may be
completely allocated to the Participants consistent with those limitations.
Where the limitations would otherwise be exceeded by any Participant, further
allocations to the Participant shall be curtailed to the extent necessary to
satisfy the limitations. Where an excessive amount is contributed on account
of a mistake as to one or more Participants' compensation, or there is an
amount of forfeitures which may not be credited in the Plan Year in which it
becomes available, the amount shall be corrected in accordance with Section
5.1-2 of the Plan.

5.4 LIMITATIONS AS TO CERTAIN PARTICIPANTS. Aside from the
limitations set forth in Section 5.1 and 5.2, if the Plan acquires any Stock in
a transaction as to which a selling shareholder or the estate of a deceased
shareholder is claiming the benefit of Section 1042 of the Code, the Committee
shall see that

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<PAGE> 17
none of such Stock, and no other assets in lieu of such Stock, are allocated to
the Accounts of certain Participants in order to comply with Section 409(n) of
the Code.

This restriction shall apply at all times to a Participant who owns
(taking into account the attribution rules under Section 318(a) of the Code,
without regard to the exception for employee plan trusts in Section
318(a)(2)(B)(i) more than 25 percent of any class of stock of a corporation
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(l)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other
Participant shall be subject to the restriction only as to allocations which
occur at a time when he owns more than 25 percent of any Related Class.

Further, this restriction shall apply to the selling shareholder
claiming the benefit of Section 1042 and any other Participant who is related
to such a shareholder within the meaning of Section 267(b) of the Code, during
the period beginning on the date of sale and ending on the later of (1) the
date that is ten years after the date of sale, or (2) the date of the Plan
allocation attributable to the final payment of acquisition indebtedness
incurred in connection with the sale.

This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under
the Plan for the benefit of all such descendants do not exceed five percent of
the Stock acquired from the shareholder.

SECTION 6. TRUST FUND AND ITS INVESTMENT.

6.1 CREATION OF TRUST FUND. All amounts received under the Plan
from Employers and investments shall be held as the Trust Fund pursuant to the
terms of this Plan and of the Trust Agreement between the Association and the
Trustee. The benefits described in this Plan shall be payable only from the
assets of the Trust Fund, and none of the Association, any other Employer, its
board of directors or trustees, its stockholders, its officers, its employees,
the Committee, and the Trustee shall be liable for payment of any benefit under
this Plan except from the Trust Fund.

6.2 STOCK FUND AND INVESTMENT FUND. The Trust Fund held by the
Trustee shall be divided into the Stock Fund, consisting entirely of Stock, and
the Investment Fund, consisting of all assets of the Trust other than Stock.
The Trustee shall have no investment responsibility for the Stock Fund, but
shall accept any Employer contributions made in the form of Stock, and shall
acquire, sell, exchange, distribute, and otherwise deal with and dispose of
Stock in accordance with the instructions of the Committee. The Trustee shall
have full responsibility for the investment of the Investment Fund, except to
the extent such responsibility may be delegated from time to time to one or
more investment managers pursuant to Section 2.2 of the Trust Agreement, or to
the extent the Committee directs the Trustee to purchase Stock with the assets
in the Investment Fund.

6.3 ACQUISITION OF STOCK. From time to time the Committee may, in
its sole discretion, direct the Trustee to acquire Stock from the issuing
Employer or from shareholders, including shareholders who are or have been
Employees, Participants, or fiduciaries with respect to the Plan. The Trustee
shall pay for such Stock no more than its fair market value, which shall be
determined conclusively by the Committee pursuant to Section 12.4. The
Committee may direct the Trustee to finance the acquisition of

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<PAGE> 18
Stock by incurring or assuming indebtedness to the seller or another party
which indebtedness shall be called a "Stock Obligation". The term "Stock
Obligation" shall refer to a loan made to the Plan by a disqualified person
within the meaning of Section 4975(e)(2) of the Code, or a loan to the Plan
which is guaranteed by a disqualified person. A Stock Obligation includes a
direct loan of cash, a purchase-money transaction, and an assumption of an
obligation of a tax-qualified employee stock ownership plan under Section
4975(e)(7) of the Code ("ESOP"). For these purposes, the term "guarantee"
shall include an unsecured guarantee and the use of assets of a disqualified
person as collateral for a loan, even though the use of assets may not be a
guarantee under applicable state law. An amendment of a Stock Obligation in
order to qualify as an "exempt loan" is not a refinancing of the Stock
Obligation or the making of another Stock Obligation. The term "exempt loan"
refers to a loan that satisfies the provisions of this paragraph. A
"non-exempt loan" fails to satisfy this paragraph. Any Stock Obligation shall
be subject to the following conditions and limitations:

6.3-1 A Stock Obligation shall be for a specific term, shall
not be payable on demand except in the event of default, and shall
bear a reasonable rate of interest.

6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the
Stock Obligation, or the Stock previously pledged in connection with a
prior Stock Obligation which is being repaid with the proceeds of the
current Stock Obligation. No other assets of the Plan and Trust may
be used as collateral for a Stock Obligation, and no creditor under a
Stock Obligation shall have any right or recourse to any Plan and
Trust assets other than Stock remaining subject to a collateral
pledge.

6.3-3 Any pledge of Stock to secure a Stock Obligation must
provide for the release of pledged Stock in connection with payments
on the Stock obligations in the ratio prescribed in Section 4.2.

6.3-4 Repayments of principal and interest on any Stock
Obligation shall be made by the Trustee only from Employer cash
contributions designated for such payments, from earnings on such
contributions, and from cash dividends received on Stock, in the last
case, however, subject to the further requirements of Section 7.2.

6.3-5 In the event of default of a Stock Obligation, the
value of Plan assets transferred in satisfaction of the Stock
Obligation must not exceed the amount of the default. If the lender
is a disqualified person within the meaning of Section 4975 of the
Code, a Stock Obligation must provide for a transfer of Plan assets
upon default only upon and to the extent of the failure of the Plan to
meet the payment schedule of said Stock Obligation. For purposes of
this paragraph, the making of a guarantee does not make a person a
lender.

6.4 PARTICIPANTS' OPTION TO DIVERSIFY. The Committee shall
provide for a procedure under which each Participant may, during the qualified
election period, elect to "diversify" a portion of the Employer Stock allocated
to his Account, as provided in Section 401(a)(28)(B) of the Code. An election
to diversity must be made on the prescribed form and filed with the Committee
within the period specified herein. For each of the first five (5) Plan years
in the qualified election period, the Participant may elect to diversify an
amount which does not exceed 25% of the number of shares allocated to his
Account since the inception of the Plan, less all shares with respect to which
an election under this Section has already been made. For the last year of the
qualified election period, the Participant may elect to have up to 50

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<PAGE> 19
percent of the value of his Account committed to other investments, less all
shares with respect to which an election under this Section has already been
made. The term "qualified election period" shall mean the six (6) Plan Year
period beginning with the first Plan Year in which a Participant has both
attained age 55 and completed 10 years of participation in the Plan. A
Participant's election to diversify his Account may be made within each year of
the qualified election period and shall continue for the 90-day period
immediately following the last day of each year in the qualified election
period. Once a Participant makes such election, the Plan must complete
diversification in accordance with such election within 90 days after the end
of the period during which the election could be made for the Plan Year. In
the discretion of the Committee, the Plan may satisfy the diversification
requirement by any of the following methods:

6.4-1 The Plan may distribute all or part of the amount
subject to the diversification election.

6.4-2 The Plan may offer the Participant at least three
other distinct investment options, if available under the Plan. The
other investment options shall satisfy the requirements of Regulations
under Section 404(c) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").

6.4-3 The Plan may transfer the portion of the
Participant's Account subject to the diversification election to
another qualified defined contribution plan of the Employer that
offers at least three investment options satisfying the requirements
of the Regulations under Section 404(c) of ERISA.

SECTION 7. VOTING RIGHTS AND DIVIDENDS ON STOCK.

7.1 VOTING AND TENDERING OF STOCK. The Trustee generally shall
vote all shares of Stock held under the Plan in accordance with the written
instructions of the Committee. However, if any Employer has registration-type
class of securities within the meaning of Section 409(e)(4) of the Code, or if
a matter submitted to the holders of the Stock involves a merger,
consolidation, recapitalization, reclassification, liquidation, dissolution, or
sale of substantially all assets of an entity, then (i) the shares of Stock
which have been allocated to Participants' Accounts shall be voted by the
Trustee in accordance with the Participants' written instructions, and (ii) the
Trustee shall vote any unallocated Stock and allocated Stock for which it has
received no voting instructions in the same proportions as it votes the
allocated Stock for which it has received instructions from Participants;
provided, however, that if an exempt loan, as defined in Section 4975(d) of the
Code, is outstanding and the Plan is in default on such exempt loan, as default
is defined in the loan documents, then to the extent that such loan documents
require the lender to exercise voting rights with respect to the unallocated
shares, the loan documents will prevail. In the event no shares of Stock have
been allocated to Participants' Accounts at the time Stock is to be voted and
any exempt loan which may be outstanding is not in default, each Participant
shall be deemed to have one share of Stock allocated to his or her Account for
the sole purpose of providing the Trustee with voting instructions.

Notwithstanding any provision hereunder to the contrary, all
unallocated shares of Stock must be voted by the Trustee in a manner determined
by the Trustee to be for the exclusive benefit of the Participants and
Beneficiaries. Whenever such voting rights are to be exercised, the Employers
shall provide the Trustee, in a timely manner, with the same notices and other
materials as are provided to other holders of the Stock, which the Trustee
shall distribute to the Participants. The Participants shall be provided with
adequate opportunity to deliver their instructions to the Trustee regarding the
voting of Stock

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<PAGE> 20
allocated to their Accounts. The instructions of the Participants' with
respect to the voting of allocated shares hereunder shall be confidential.

7.1-1 In the event of a tender offer, Stock shall be tendered
by the Trustee in the same manner as set forth above with respect to
the voting of Stock. Notwithstanding any provision hereunder to the
contrary, Stock must be tendered by the Trustee in a manner determined
by the Trustee to be for the exclusive benefit of the Participants and
Beneficiaries.

7.2 DIVIDENDS ON STOCK. Dividends on Stock which are received by
the Trustee in the form of additional Stock shall be retained in the Stock
Fund, and shall be allocated among the Participant's Accounts and the
Unallocated Stock Fund in accordance with their holdings of the Stock on which
the dividends have been paid. Dividends on Stock credited to Participants'
Accounts which are received by the Trustee in the form of cash shall, at the
direction of the Employer paying the dividends, either (i) be credited to the
Accounts in accordance with Section 8.3 and invested as part of the Investment
Fund, (ii) be distributed immediately to the Participants in proportion with
the Participants' Stock Fund Account balance (iii) be distributed to the
Participants within 90 days of the close of the Plan Year in which paid in
proportion with the Participants' Stock Fund Account balance or (iv) be used to
make payments on the Stock Obligation. If dividends on Stock allocated to a
Participant's Account are used to repay the Stock Obligation, Stock with a fair
market value equal to the dividends so used must be allocated to such
Participant's Account in lieu of the dividends. Dividends on Stock held in the
Unallocated Stock Fund which are received by the Trustee in the form of cash
shall be allocated to Participants' Investment Fund Accounts (pro rata based on
the Participant's Account balance in relation to all Participants' Account
balances) and shall be applied as soon as practicable to payments of principal
and interest under the Stock Obligation incurred with the purchase of the
Stock.

SECTION 8. ADJUSTMENTS TO ACCOUNTS.

8.1 ADJUSTMENTS FOR TRANSACTIONS. An Employer contribution
pursuant to Section 4.1 shall be credited to the Participants' Accounts as of
the last day of the Plan Year for which it is contributed, in accordance with
Section 4.1. Stock released from the Unallocated Stock Fund upon the Trust's
repayment of a Stock Obligation pursuant to Section 4.2 shall be credited to
the Participants' Accounts as of the last day of the Plan Year in which the
repayment occurred, pro rata based on the cash applied from such Participant's
Account relative to the cash applied from all Participants' Accounts. Any
excess amounts remaining from the use of proceeds of a sale of Stock from the
Unallocated Stock Fund to repay a Stock Obligation shall be allocated as
earnings of the Plan as of the last day of the Plan Year in which the repayment
occurred among the Participants' Accounts in proportion to the opening balance
in each Account. Any benefit which is paid to a Participant or Beneficiary
pursuant to Section 10 shall be charged to the Participant's Account as of the
first day of the Valuation Period in which it is paid. Any forfeiture or
restoral shall be charged or credited to the Participant's Account as of the
first day of the Valuation Period in which the forfeiture or restoral occurs
pursuant to Section 9.6.

8.2 VALUATION OF INVESTMENT FUND. As of each Valuation Date, the
Trustee shall prepare a balance sheet of the Investment Fund, recording each
asset (including any contribution receivable from an Employer) and liability at
its fair market value. Any liability with respect to short positions or
options and any item of accrued income or expense and unrealized appreciation
or depreciation shall be included; provided, however, that such an item may be
estimated or excluded if it is not readily ascertainable unless estimating or
excluding it would result in a material distortion. The Committee shall then
determine the net gain or loss of the Investment Fund since the preceding
Valuation Date, which shall mean the entire income of the Investment Fund,
including realized and unrealized capital gains and losses, net of any expenses
to be charged to the general Investment Fund and excluding any contributions by
the Employer.

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The determination of gain or loss shall be consistent with the balance sheets
of the Investment Fund for the current and preceding Valuation Dates.

8.3 ADJUSTMENTS FOR INVESTMENT EXPERIENCE. Any net gain or loss
of the Investment Fund during a Valuation Period, as determined pursuant to
Section 8.2, shall be allocated as of the last day of the Valuation Period
among the Participants' Accounts in proportion to the opening balance in each
Account, as adjusted for benefit payments and forfeitures during the Valuation
Period, without regard to whatever Stock may be credited to an Account. Any
cash dividends received on Stock credited to Participant's Accounts shall be
allocated as of the last day of the Valuation Period among the Participants'
Accounts based on the opening balance in each Participant's Stock Fund Account.

SECTION 9. VESTING OF PARTICIPANTS' INTERESTS.

9.1 DEFERRED VESTING IN ACCOUNTS. A Participant's vested interest
in his Account shall be based on his Vesting Years in accordance with the
following Table, subject to the balance of this Section 9:

<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
</TABLE>

9.2 COMPUTATION OF VESTING YEARS. For purposes of this Plan, a
"Vesting Year" means generally a Plan Year in which an Employee has at least
1,000 Hours of Service, beginning with the first Plan Year in which the
Employee has completed an Hour of Service with the Employer, and including
Service with other Employers as provided in the definition of "Service".
Notwithstanding the above, an Employee who was employed with Sound Federal
Savings and Loan Association, a federal mutual savings association (the "Mutual
Association") which is the predecessor to the Association, shall receive credit
for vesting purposes for each calendar year of continuous employment with the
Mutual Association in which such Employee completed 1,000 Hours of Service, not
to exceed 2 years of credit for vesting purpose (such years shall also be
referred to as "Vesting Years"). However, a Participant's Vesting Years shall
be computed subject to the following conditions and qualifications:

9.2-1 A Participant's Vesting Years shall not include any
Service prior to the date on which an Employee attains age 18.

9.2-2 A Participant's vested interest in his Account
accumulated before five (5) consecutive Breaks in Service shall be
determined without regard to any Service after such five consecutive
Breaks in Service. Further, if a Participant has five (5) consecutive
Breaks in Service before his interest in his Account has become vested
to some extent, pre-Break years of Service shall not be required to be
taken into account for purposes of determining his post-Break vested
percentage.

9.2-3 In the case of a Participant who has 5 or more
consecutive 1-year Breaks in Service, the Participant's pre-Break
Service will count in vesting of the Employer-derived post-break
accrued benefit only if either:

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<PAGE> 22
(i) such Participant has any nonforfeitable interest in
the accrued benefit attributable to Employer
contributions at the time of separation from Service,
or

(ii) upon returning to Service the number of consecutive
1-year Breaks in Service is less than the number of
years of Service.

9.2-4 Unless otherwise specifically excluded, a
Participant's Vesting Years shall include any period of active
military duty to the extent required by the Military Selective Service
Act of 1967 (38 U.S.C. Section 2021).

9.2-5 If any amendment changes the vesting schedule,
including an automatic change to or from a top-heavy vesting schedule,
any Participant with three (3) or more Vesting Years may, by filing a
written request with the Employer, elect to have his vested percentage
computed under the vesting schedule in effect prior to the amendment.
The election period must begin not later than the later of sixty (60)
days after the amendment is adopted, the amendment becomes effective,
or the Participant is issued written notice of the amendment by the
Employer or the Committee.

9.3 FULL VESTING UPON CERTAIN EVENTS.

9.3-1 Notwithstanding Section 9.1, a Participant's interest in his
Account shall fully vest on the Participant's Normal Retirement Date. The
Participant's interest shall also fully vest in the event that his Service is
terminated by Early Retirement, Disability or by death.

9.3-2 The Participant's interest in his Account shall also fully
vest in the event of a "Change in Control" of the Association, or the Company.
For these purposes, "Change in Control" shall mean an event of a nature that;
(i) would be required to be reported in response to Item 1a of the current
report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act'); or (ii)
results in a Change in Control of the Association or the Company within the
meaning of the Bank Holding Company Act of 1956, as amended, and applicable
rules and regulations promulgated thereunder as in effect at the time of the
Change in Control (collectively, the BHCA"); or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (a) any
"Person' (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Association or the
Company representing 25% or more of the Association's or the Company's
outstanding securities except for any securities of the Association purchased
by the Company in connection with the conversion of the Association to the
stock form and any securities purchased by the Association's employee stock
ownership plan and trust; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided, however, that this sub-section (b) shall not
apply if the Incumbent Board is replaced by the appointment by a Federal
banking agency of a conservator or receiver for the Association and, provided
further that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least two-thirds of the directors
comprising the Incumbent Board or whose nomination for election by the
Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
as though he were a member of the Incumbent Board; or (c) a reorganization,
merger, consolidation, sale of all or substantially all the assets of the
Association or the Company, or similar transaction in which the Association or
Company is not the surviving institution occurs.

9.4 FULL VESTING UPON PLAN TERMINATION. Notwithstanding Section
9.1, a Participant's interest in his Account shall fully vest upon termination
of this Plan or upon the permanent and complete

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<PAGE> 23
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each affected Participant shall fully vest with
respect to that part of the Plan which is terminated.

9.5 FORFEITURE, REPAYMENT, AND RESTORAL. If a Participant's
Service terminates before his interest in his Account is fully vested, that
portion which has not vested shall be forfeited if he either (i) receives a
distribution of his entire vested interest pursuant to Section 10.1, or (ii)
incurs five (5) consecutive one year Breaks in Service. If a Participant's
Service terminates prior to having any portion of his Account become vested,
such Participant shall be deemed to have received a distribution of his vested
interest as of the Valuation Date next following his termination of Service.

If a Participant who has received his entire vested interest returns
to Service before he has five (5) consecutive Breaks in Service, he may repay
to the Trustee an amount equal to the distribution. The Participant may repay
such amount at any time within five years after he has returned to Service.
The amount shall be credited to his Account at the time it is repaid; an
additional amount equal to that portion of his Account which was previously
forfeited shall be restored to his Account at the same time from other
Employees' forfeitures and, if such forfeitures are insufficient, from a
special contribution by his Employer for that year. A Participant who was
deemed to have received a distribution of his vested interest in the Plan shall
have his Account restored as of the first day on which he performs an Hour of
Service after his return.

9.6 ACCOUNTING FOR FORFEITURES. If a portion of a Participant's
Account is forfeited, Stock allocated to said Participant's Account shall be
forfeited only after other assets are forfeited. If interests in more than one
class of Stock have been allocated to a Participant's Account, the Participant
must be treated as forfeiting the same proportion of each class of Stock. A
forfeiture shall be charged to the Participant's Account as of the first day of
the first Valuation Period in which the forfeiture becomes certain pursuant to
Section 9.5. Except as otherwise provided in that Section, a forfeiture shall
be added to the contributions of the terminated Participant's Employer which
are to be credited to other Participants pursuant to Section 4.1 as of the last
day of the Plan Year in which the forfeiture becomes certain.

9.7 VESTING AND NONFORFEITABILITY. A Participant's interest in
his Account which has become vested shall be nonforfeitable for any reason.

SECTION 10. PAYMENT OF BENEFITS.

10.1 BENEFITS FOR PARTICIPANTS. For a Participant whose Service
ends for any reason, distribution will be made to or for the benefit of the
Participant or, in the case of the Participant's death, his Beneficiary, by
either, or a combination of the following methods:

10.1.1 By payment in a lump sum, in accordance with Section
10.2; or

10.1.2 By payment in a series of substantially equal annual
installments over a period not to exceed five (5) years,
provided the maximum period over which the distribution of a
Participant's Account may be made shall be extended by 1 year,
up to five (5) additional years, for each $145,000 (or
fraction thereof) by which such Participant's Account balance
exceeds $725,000 (the aforementioned figures are subject to
cost-of-living adjustments prescribed by the Secretary of the
Treasury pursuant to Section 409(o)(2) of the Code).

The Participant shall elect the manner in which his vested
Account balance will be distributed to him. If a Participant so
desires, he may direct how his benefits are to be paid to his
Beneficiary. If a deceased Participant did not file a direction with
the Committee, the Participant's benefits shall be distributed to his
Beneficiary in a lump sum. Notwithstanding any provision to

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the contrary, if the value of a Participant's vested Account balance
at the time of any distribution, does not equal or exceed $5,000, then
such Participant's vested Account shall be distributed in a lump sum
within 60 days after the end of the Plan Year in which employment
terminates. If the value of a Participant's vested Account balance
is, or has ever been, in excess of $5,000, then his benefits shall not
be paid prior to the later of the time he has attained Normal
Retirement or age 62 unless he elects an early payment date in a
written election filed with the Committee. A Participant may modify
such an election at any time, provided any new benefit payment date is
at least 30 days after a modified election is delivered to the
Committee. Failure of a Participant to consent to a distribution
prior to the later of Normal Retirement or age 62 shall be deemed to
be an election to defer commencement of payment of any benefit under
this section.

10.2 TIME FOR DISTRIBUTION.

10.2.1 If the Participant and, if applicable, with the
consent of the Participant's spouse, elects the distribution of the
Participant's Account balance in the Plan, distribution shall commence
as soon as practicable following his termination of Service, but no
later than one year after the close of the Plan Year:

(i) in which the Participant separates from service by
reason of attainment of Normal Retirement Age under the Plan,
Disability, or death; or

(ii) which is the fifth Plan Year following the year in
which the Participant resigns or is dismissed, unless he is
reemployed before such date.

10.2.2 Unless the Participant elects otherwise, the
distribution of the balance of a Participant's Account shall commence not later
than the 60th day after the latest of the close of the Plan Year in which -

(i) the Participant attains the age of 65;

(ii) occurs the tenth anniversary of the year in
which the Participant commenced participation in the Plan; or

(iii) the Participant terminates his Service with
the Employer.

10.2.3 Notwithstanding anything to the contrary, (1) with
respect to a 5-percent owner (as defined in Code Section 416),
distribution of a Participant's Account shall commence (whether or not
he remains in the employ of the Employer) not later than the April 1
of the calendar year next following the calendar year in which the
Participant attains age 70- 1/2, and (2) with respect to all other
Participants, payment of a Participant's benefit will commence not
later than April 1 of the calendar year following the calendar year in
which the Participant attains age 70-1/2, or, if later, the year in
which the Participant retires. A Participant's benefit from that
portion of his Account committed to the Investment Fund shall be
calculated on the basis of the most recent Valuation Date before the
date of payment.

10.2.4 Distribution of a Participant's Account balance after
his death shall comply with the following requirements:

(i) If a Participant dies before his
distributions have commenced, distribution of his Account to
his Beneficiary shall commence not later than one year after
the end of the Plan Year in which the Participant died,
however, if the Participant's Beneficiary is

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<PAGE> 25
his surviving Spouse, distributions may commence on the date
on which the Participant would have attained age 70-1/2. In
either case, distributions shall be completed within five
years after the they commence.

(ii) If the Participant dies after distribution
has commenced pursuant to Section 10.1.2 but before his entire
interest in the Plan has been distributed to him, then the
remaining portion of that interest shall, in accordance with
Section 401(a)(9) of the Code, be distributed at least as
rapidly as under the method of distribution being used under
Section 10.1.2 at the date of his death.

(iii) If a married Participant dies before his
benefit payments begin, then unless he has specifically
elected otherwise the Committee shall cause the balance in his
Account to be paid to his Spouse. No election by a married
Participant of a different Beneficiary shall be valid unless
the election is accompanied by the Spouse's written consent,
which (i) must acknowledge the effect of the election, (ii)
must explicitly provide either that the designated Beneficiary
may not subsequently be changed by the Participant without the
Spouse's further consent, or that it may be changed without
such consent, and (iii) must be witnessed by the Committee,
its representative, or a notary public. (This requirement
shall not apply if the Participant establishes to the
Committee's satisfaction that the Spouse may not be located.)

10.3 MARITAL STATUS. The Committee shall from time to time take
whatever steps it deems appropriate to keep informed of each Participant's
marital status. Each Employer shall provide the Committee with the most
reliable information in the Employer's possession regarding its Participants'
marital status, and the Committee may, in its discretion, require a notarized
affidavit from any Participant as to his marital status. The Committee, the
Plan, the Trustee, and the Employers shall be fully protected and discharged
from any liability to the extent of any benefit payments made as a result of
the Committee's good faith and reasonable reliance upon information obtained
from a Participant and his Employer as to his marital status.

10.4 DELAY IN BENEFIT DETERMINATION. If the Committee is unable to
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days after they can first be
determined, with whatever makeup payments may be appropriate in view of the
delay.

10.5 ACCOUNTING FOR BENEFIT PAYMENTS. Any benefit payment shall be
charged to the Participant's Account as of the first day of the Valuation
Period in which the payment is made.

10.6 OPTIONS TO RECEIVE AND SELL STOCK. Unless ownership of
virtually all Stock is restricted to active Employees and qualified retirement
plans for the benefit of Employees pursuant to the certificates of
incorporation or by-laws of the Employers issuing Stock, a terminated
Participant or the Beneficiary of a deceased Participant may instruct the
Committee to distribute the Participant's entire vested interest in his Account
in the form of Stock. In that event, the Committee shall apply the
Participant's vested interest in the Investment Fund to purchase sufficient
Stock from the Stock Fund or from any owner of Stock to make the required
distribution. In all other cases, the Participant's vested interest in the
Stock Fund shall be distributed in shares of Stock, and his vested interest in
the Investment Fund shall be distributed in cash.

Any Participant who receives Stock pursuant to Section 10.1, and any
person who has received Stock from the Plan or from such a Participant by
reason of the Participant's death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover contribution
described in Section 402(a)(5) of the Code, shall have the right to require the
Employer which issued the Stock to

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<PAGE> 26
purchase the Stock for its current fair market value (hereinafter referred to
as the "put right"). The put right shall be exercisable by written notice to
the Committee during the first 60 days after the Stock is distributed by the
Plan, and, if not exercised in that period, during the first 60 days in the
following Plan Year after the Committee has communicated to the Participant
its determination as to the Stock's current fair market value. However, the
put right shall not apply to the extent that the Stock, at the time the put
right would otherwise be exercisable, may be sold on an established market in
accordance with federal and state securities laws and regulations. Similarly,
the put option shall not apply with respect to the portion of a Participant's
Account which the Employee elected to have reinvested under Code Section
401(a)(28)(B). If the put right is exercised, the Trustee may, if so directed
by the Committee in its sole discretion, assume the Employer's rights and
obligations with respect to purchasing the Stock. Notwithstanding anything
herein to the contrary, in the case of a plan established by a Association (as
defined in Code Section 581), the put option shall not apply if prohibited by a
federal or state law and Participants are entitled to elect their benefits be
distributed in cash.

If a Participant elects to receive his distribution in the form of a
lump sum pursuant to Section 10.1.1 of the Plan, the Employer or the Trustee,
as the case may be, may elect to pay for the Stock in equal periodic
installments, not less frequently than annually, over a period not longer than
five years from the day after the put right is exercised, with adequate
security and interest at a reasonable rate on the unpaid balance, all such
terms to be set forth in a promissory note delivered to the seller with normal
terms as to acceleration upon any uncured default.

If a Participant elects to receive his distribution in the form of an
installment payment pursuant to Section 10.1.2 of the Plan, the Employer or the
Trustee, as the case may be, shall pay for the Stock distributed in the
installment distribution over a period which shall not exceed 30 days after the
exercise of the put right.

Nothing contained herein shall be deemed to obligate any Employer to
register any Stock under any federal or state securities law or to create or
maintain a public market to facilitate the transfer or disposition of any
Stock. The put right described herein may only be exercised by a person
described in the second preceding paragraph, and may not be transferred with
any Stock to any other person. As to all Stock purchased by the Plan in
exchange for any Stock Obligation, the put right shall be nonterminable. The
put right for Stock acquired through a Stock Obligation shall continue with
respect to such Stock after the Stock Obligation is repaid or the Plan ceases
to be an employee stock ownership plan.

10.7 RESTRICTIONS ON DISPOSITION OF STOCK. Except in the case of
Stock which is traded on an established market, a Participant who receives
Stock pursuant to Section 10.1, and any person who has received Stock from the
Plan or from such a Participant by reason of the Participant's death or
incompetency, by reason of divorce or separation from the Participant, or by
reason of a rollover contribution described in Section 402(a)(5) of the Code,
shall, prior to any sale or other transfer of the Stock to any other person,
first offer the Stock to the issuing Employer and to the Plan at the greater of
(i) its current fair market value, or (ii) the purchase price offered in good
faith by an independent third party purchaser. This restriction shall apply to
any transfer, whether voluntary, involuntary, or by operation of law, and
whether for consideration or gratuitous. Either the Employer or the Trustee
may accept the offer within 14 days after it is delivered. Any Stock
distributed by the Plan shall bear a conspicuous legend describing the right of
first refusal under this Section 10.7, as well as any other restrictions upon
the transfer of the Stock imposed by federal and state securities laws and
regulations.

10.8 CONTINUING LOAN PROVISIONS; CREATIONS OF PROTECTIONS AND
RIGHTS. Except as otherwise provided in Sections 10.6 and 10.7 and this
Section, no shares of Employer Stock held or distributed by the Trustee may be
subject to a put, call or other option, or buy-sell arrangement. The
provisions of this

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Section shall continue to by applicable to such Stock even if the Plan ceases
to be an employee stock ownership plan under Section 4975(e)(7) of the Code.

10.9 DIRECT ROLLOVER OF ELIGIBLE DISTRIBUTION. A Participant or
distributee may elect, at the time and in the manner prescribed by the Trustee
or the Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Participant or
distributee in a direct rollover.

10.9-1 An "eligible rollover" is any distribution that does
not include: any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the Participant and the Participant's
Beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Code
Section 401(a)(9); and the portion of any distribution that is not
included in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities).

10.9-2 An "eligible retirement plan" is an individual
retirement account described in Code Section 401(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust described in
Code Section 401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving Spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.

10.9-3 A "direct rollover" is a payment by the Plan to the
eligible retirement plan specified by the distributee.

10.9-4 The term "distributee" shall refer to a deceased
Participant's Spouse or a Participant's former Spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Code Section 414(p).

10.10 WAIVER OF 30 DAY PERIOD AFTER NOTICE OF DISTRIBUTION. If a
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 4.11(a)-11(c) of the Income Tax Regulations is given,
provided that:

(i) the Trustee or Administrative Committee, as
applicable, clearly informs the Participant
that the Participant has a right to a period
of at least 30 days after receiving the
notice to consider the decision of whether or
not to elect a distribution (and, if
applicable, a particular option), and

(ii) the Participant, after receiving the notice,
affirmatively elects a distribution.

SECTION 11. RULES GOVERNING BENEFIT CLAIMS AND REVIEW OF APPEALS.

11.1 CLAIM FOR BENEFITS. Any Participant or Beneficiary who
qualifies for the payment of benefits shall file a claim for his benefits with
the Committee on a form provided by the Committee. The claim, including any
election of an alternative benefit form, shall be filed at least 30 days before
the date on which the benefits are to begin. If a Participant or Beneficiary
fails to file a claim by the day before the date on which benefits become
payable, he shall be presumed to have filed a claim for payment for the
Participant's benefits in the standard form prescribed by Sections 10.1 or 10.2

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<PAGE> 28
11.2 NOTIFICATION BY COMMITTEE. Within 90 days after receiving a
claim for benefits (or within 180 days, if special circumstances require an
extension of time and written notice of the extension is given to the
Participant or Beneficiary within 90 days after receiving the claim for
benefits), the Committee shall notify the Participant or Beneficiary whether
the claim has been approved or denied. If the Committee denies a claim in any
respect, the Committee shall set forth in a written notice to the Participant
or Beneficiary:

(i) each specific reason for the denial;

(ii) specific references to the pertinent Plan provisions
on which the denial is based;

(iii) a description of any additional material or
information which could be submitted by the Participant or Beneficiary
to support his claim, with an explanation of the relevance of such
information; and

(iv) an explanation of the claims review procedures set
forth in Section 11.3.

11.3 CLAIMS REVIEW PROCEDURE. Within 60 days after a Participant
or Beneficiary receives notice from the Committee that his claim for benefits
has been denied in any respect, he may file with the Committee a written notice
of appeal setting forth his reasons for disputing the Committee's
determination. In connection with his appeal the Participant or Beneficiary or
his representative may inspect or purchase copies of pertinent documents and
records to the extent not inconsistent with other Participants' and
Beneficiaries' rights of privacy. Within 60 days after receiving a notice of
appeal from a prior determination (or within 120 days, if special circumstances
require an extension of time and written notice of the extension is given to
the Participant or Beneficiary and his representative within 60 days after
receiving the notice of appeal), the Committee shall furnish to the Participant
or Beneficiary and his representative, if any, a written statement of the
Committee's final decision with respect to his claim, including the reasons for
such decision and the particular Plan provisions upon which it is based.

SECTION 12. THE COMMITTEE AND ITS FUNCTIONS.

12.1 AUTHORITY OF COMMITTEE. The Committee shall be the "plan
administrator" within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are
otherwise specifically (i) allocated to the Association, the Employers, or the
Trustee under the Plan and Trust Agreement, (ii) delegated in writing to other
persons by the Association, the Employers, the Committee, or the Trustee, or
(iii) allocated to other parties by operation of law. The Committee shall have
exclusive responsibility regarding decisions concerning the payment of benefits
under the Plan. The Committee shall have no investment responsibility with
respect to the Investment Fund except to the extent, if any, specifically
provided in the Trust Agreement. In the discharge of its duties, the Committee
may employ accountants, actuaries, legal counsel, and other agents (who also
may be employed by an Employer or the Trustee in the same or some other
capacity) and may pay their reasonable expenses and compensation.

12.2 IDENTITY OF COMMITTEE. The Committee shall consists of three
or more individuals selected by the Association. Any individual, including a
director, trustee, shareholder, officer, or Employee of an Employer, shall be
eligible to serve as a member of the Committee. The Association shall have the
power to remove any individual serving on the Committee at any time without
cause upon 10 days written notice, and any individual may resign from the
Committee at any time upon 10 days written notice to the Association. The
Association shall notify the Trustee of any change in membership of the
Committee.

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<PAGE> 29
12.3 DUTIES OF COMMITTEE. The Committee shall keep whatever
records may be necessary to implement the Plan and shall furnish whatever
reports may be required from time to time by the Association. The Committee
shall furnish to the Trustee whatever information may be necessary to properly
administer the Trust. The Committee shall see to the filing with the
appropriate government agencies of all reports and returns required of the plan
Committee under ERISA and other laws.

Further, the Committee shall have exclusive responsibility and
authority with respect to the Plan's holdings of Stock and shall direct the
Trustee in all respects regarding the purchase, retention, sale, exchange, and
pledge of Stock and the creation and satisfaction of Stock Obligations. The
Committee shall at all times act consistently with the Association's long-term
intention that the Plan, as an employee stock ownership plan, be invested
primarily in Stock. Subject to the direction of the Board as to the
application of Employer contributions to Stock Obligations, and subject to the
provisions of Sections 6.4 and 10.6 as to Participants' rights under certain
circumstances to have their Accounts invested in Stock or in assets other than
Stock, the Committee shall determine in its sole discretion the extent to which
assets of the Trust shall be used to repay Stock Obligations, to purchase
Stock, or to invest in other assets to be selected by the Trustee or an
investment manager. No provision of the Plan relating to the allocation or
vesting of any interests in the Stock Fund or the Investment Fund shall
restrict the Committee from changing any holdings of the Trust, whether the
changes involve an increase or a decrease in the Stock or other assets
credited to Participants' Accounts. In determining the proper extent of the
Trust's investment in Stock, the Committee shall be authorized to employ
investment counsel, legal counsel, appraisers, and other agents to pay their
reasonable expenses and compensation.

12.4 VALUATION OF STOCK. If the valuation of any Stock is not
established by reported trading on a generally recognized public market, the
Committee shall have the exclusive authority and responsibility to determine
its value for all purposes under the Plan. Such value shall be determined as
of each Valuation Date, and on any other date as of which the Plan purchases or
sells such Stock. The Committee shall use generally accepted methods of
valuing stock of similar corporations for purposes of arm's length business and
investment transactions, and in this connection the Committee shall obtain, and
shall be protected in relying upon, the valuation of such Stock as determined
by an independent appraiser experienced in preparing valuations of similar
businesses. For purposes of the preceding sentence, the term "independent
appraiser" means any appraiser meeting requirements similar to the requirements
of the regulations prescribed under Section 170(a)(1) of the Code.

12.5 COMPLIANCE WITH ERISA. The Committee shall perform all acts
necessary to comply with ERISA. Each individual member or employee of the
Committee shall discharge his duties in good faith and in accordance with the
applicable requirements of ERISA.

12.6 ACTION BY COMMITTEE. All actions of the Committee shall be
governed by the affirmative vote of a number of members which is a majority of
the total number of members currently appointed, including vacancies. The
members of the Committee may meet informally and may take any action without
meeting as a group.

12.7 EXECUTION OF DOCUMENTS. Any instrument executed by the
Committee shall be signed by any member or employee of the Committee.

12.8 ADOPTION OF RULES. The Committee shall adopt such rules and
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.

12.9 RESPONSIBILITIES TO PARTICIPANTS. The Committee shall
determine which Employees qualify to enter the Plan. The Committee shall
furnish to each eligible Employee whatever summary plan

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descriptions, summary annual reports, and other notices and information may be
required under ERISA. The Committee also shall determine when a Participant or
his Beneficiary qualifies for the payment of benefits under the Plan. The
Committee shall furnish to each such Participant or Beneficiary whatever
information is required under ERISA (or is otherwise appropriate) to enable the
Participant or Beneficiary to make whatever elections may be available pursuant
to Sections 6 and 10, and the Committee shall provide for the payment of
benefits in the proper form and amount from the assets of the Trust Fund. The
Committee may decide in its sole discretion to permit modifications of
elections and to defer or accelerate benefits to the extent consistent with
applicable law and the best interests of the individuals concerned.

12.10 ALTERNATIVE PAYEES IN EVENT OF INCAPACITY. If the Committee
finds at any time that an individual qualifying for benefits under this Plan is
a minor or is incompetent, the Committee may direct the benefits to be paid, in
the case of a minor, to his parents, his legal guardian, or a custodian for him
under the Uniform Gifts to Minors Act, or, in the case of an incompetent, to
his spouse, or his legal guardian, the payments to be used for the individual's
benefit. The Committee and the Trustee shall not be obligated to inquire as to
the actual use of the funds by the person receiving them under this Section
12.10, and any such payment shall completely discharge the obligations of the
Plan, the Trustee, the Committee, and the Employers to the extent of the
payment.

12.11 INDEMNIFICATION BY EMPLOYERS. Except as separately agreed in
writing, the Committee, and any member or employee of the Committee, shall be
indemnified and held harmless by the Employer, jointly and severally, to the
fullest extent permitted by law against any and all costs, damages, expenses,
and liabilities reasonably incurred by or imposed upon it or him in connection
with any claim made against it or him or in which it or he may be involved by
reason of its or his being, or having been, the Committee, or a member or
employee of the Committee, to the extent such amounts are not paid by
insurance.

12.12 NONPARTICIPATION BY INTERESTED MEMBER. Any member of the
Committee who also is a Participant in the Plan shall take no part in any
determination specifically relating to his own participation or benefits,
unless his abstention would leave the Committee incapable of acting on the
matter.

SECTION 13. ADOPTION, AMENDMENT, OR TERMINATION OF THE PLAN.

13.1 ADOPTION OF PLAN BY OTHER EMPLOYERS. With the consent of the
Association, any entity may become a participating Employer under the Plan by
(i) taking such action as shall be necessary to adopt the Plan, (ii) becoming a
party to the Trust Agreement establishing the Trust Fund, and (iii) executing
and delivering such instruments and taking such other action as may be
necessary or desirable to put the Plan into effect with respect to the entity's
Employees.

13.2 ADOPTION OF PLAN BY SUCCESSOR. In the event that any Employer
shall be reorganized by way of merger, consolidation, transfer of assets or
otherwise, so that an entity other than an Employer shall succeed to all or
substantially all of the Employer's business, the successor entity may be
substituted for the Employer under the Plan by adopting the Plan and becoming a
party to the Trust Agreement. Contributions by the Employer shall be
automatically suspended from the effective date of any such reorganization
until the date upon which the substitution of the successor entity for the
Employer under the Plan becomes effective. If, within 90 days following the
effective date of any such reorganization, the successor entity shall not have
elected to become a party to the Plan, or if the Employer shall adopt a plan of
complete liquidation other than in connection with a reorganization, the Plan
shall be automatically terminated with respect to Employees of the Employer as
of the close of business on the 90th day following the effective date of the
reorganization, or as of the close of business on the date of adoption of a
plan of complete liquidation, as the case may be.

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<PAGE> 31
13.3 PLAN ADOPTION SUBJECT TO QUALIFICATION. Notwithstanding any
other provision of the Plan, the adoption of the Plan and the execution of the
Trust Agreement are conditioned upon their being determined initially by the
Internal Revenue Service to meet the qualification requirements of Section
401(a) of the Code, so that the Employers may deduct currently for federal
income tax purposes their contributions to the Trust and so that the
Participants may exclude the contributions from their gross income and
recognize income only when they receive benefits. In the event that this Plan
is held by the Internal Revenue Service not to qualify initially under Section
401(a), the Plan may be amended retroactively to the earliest date permitted by
U.S. Treasury Regulations in order to secure qualification under Section
401(a). If this Plan is held by the Internal Revenue Service not to qualify
initially under Section 401(a) either as originally adopted or as amended, each
Employer's contributions to the Trust under this Plan (including any earnings
thereon) shall be returned to it and this Plan shall be terminated. In the
event that this Plan is amended after its initial qualification and the Plan as
amended is held by the Internal Revenue Service not to qualify under Section
401(a), the amendment may be modified retroactively to the earliest date
permitted by U.S. Treasury Regulations in order to secure approval of the
amendment under Section 401(a).

13.4 RIGHT TO AMEND OR TERMINATE. The Association intends to
continue this Plan as a permanent program. However, each participating
Employer separately reserves the right to suspend, supersede, or terminate the
Plan at any time and for any reason, as it applies to that Employer's
Employees, and the Association reserves the right to amend, suspend, supersede,
merge, consolidate, or terminate the Plan at any time and for any reason, as it
applies to the Employees of each Employer. No amendment, suspension,
supersession, merger, consolidation, or termination of the Plan shall (i)
reduce any Participant's or Beneficiary's proportionate interest in the Trust
Fund, (ii) reduce or restrict, either directly or indirectly, the benefit
provided any Participant prior to the amendment, or (iii) divert any portion of
the Trust Fund to purposes other than the exclusive benefit of the Participants
and their Beneficiaries prior to the satisfaction of all liabilities under the
Plan. Moreover, there shall not be any transfer of assets to a successor plan
or merger or consolidation with another plan unless, in the event of the
termination of the successor plan or the surviving plan immediately following
such transfer, merger, or consolidation, each participant or beneficiary would
be entitled to a benefit equal to or greater than the benefit he would have
been entitled to if the plan in which he was previously a participant or
beneficiary had terminated immediately prior to such transfer, merger, or
consolidation. Following a termination of this Plan by the Association, the
Trustee shall continue to administer the Trust and pay benefits in accordance
with the Plan as amended from time to time and the Committee's instructions.

SECTION 14. MISCELLANEOUS PROVISIONS.

14.1 PLAN CREATES NO EMPLOYMENT RIGHTS. Nothing in this Plan shall
be interpreted as giving any Employee the right to be retained as an Employee
by an Employer, or as limiting or affecting the rights of an Employer to
control its Employees or to terminate the Service of any Employee at any time
and for any reason, subject to any applicable employment or collective
bargaining agreements.

14.2 NONASSIGNABILITY OF BENEFITS. No assignment, pledge, or other
anticipation of benefits from the Plan will be permitted or recognized by the
Employer, the Committee, or the Trustee. Moreover, benefits from the Plan
shall not be subject to attachment, garnishment, or other legal process for
debts or liabilities of any Participant or Beneficiary, to the extent permitted
by law. This prohibition on assignment or alienation shall apply to any
judgment, decree, or order (including approval of a property settlement
agreement) which relates to the provision of child support, alimony, or
property rights to a present or former spouse, child or other dependent of a
Participant pursuant to a state domestic relations or community property law,
unless the judgment, decree, or order is determined by the Committee to be a
qualified domestic relations order within the meaning of Section 414(p) of the
Code, as more fully set forth in Section 14.2 hereof.

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<PAGE> 32
14.3 LIMIT OF EMPLOYER LIABILITY. The liability of the Employer
with respect to Participants under this Plan shall be limited to making
contributions to the Trust from time to time, in accordance with Section 4.

14.4 TREATMENT OF EXPENSES. All expenses incurred by the Committee
and the Trustee in connection with administering this Plan and Trust Fund shall
be paid by the Trustee from the Trust Fund to the extent the expenses have not
been paid or assumed by the Employer or by the Trustee.

14.5 NUMBER AND GENDER. Any use of the singular shall be
interpreted to include the plural, and the plural the singular. Any use of the
masculine, feminine, or neuter shall be interpreted to include the masculine,
feminine, or neuter, as the context shall require.

14.6 NONDIVERSION OF ASSETS. Except as provided in Sections 5.3
and 13.3, under no circumstances shall any portion of the Trust Fund be
diverted to or used for any purpose other than the exclusive benefit of the
Participants and their Beneficiaries prior to the satisfaction of all
liabilities under the Plan.

14.7 SEPARABILITY OF PROVISIONS. If any provision of this Plan is
held to be invalid or unenforceable, the other provisions of the Plan shall not
be affected but shall be applied as if the invalid or unenforceable provision
had not been included in the Plan.

14.8 SERVICE OF PROCESS. The agent for the service of process upon
the Plan shall be the president of the Association, or such other person as may
be designated from time to time by the Association.

14.9 GOVERNING STATE LAW. This Plan shall be interpreted in
accordance with the laws of the State of New York to the extent those laws are
applicable under the provisions of ERISA.

14.10 EMPLOYER CONTRIBUTIONS CONDITIONED ON DEDUCTIBILITY. Employer
Contributions to the Plan are conditioned on deductibility under Code Section
404. In the event that the Internal Revenue Service shall determine that all
or any portion of an Employer Contribution is not deductible under that
Section, the nondeductible portion shall be returned to the Employer within one
year of the disallowance of the deduction.

14.11 UNCLAIMED ACCOUNTS. Neither the Employer nor the Trustees
shall be under any obligation to search for, or ascertain the whereabouts of,
any Participant or Beneficiary. The Employer or the Trustees, by certified or
registered mail addressed to his last known address of record with the
Employer, shall notify any Participant or Beneficiary that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
Section. If the Participant or Beneficiary fails to claim his benefits or make
his whereabouts known in writing to the Employer or the Trustees within seven
(7) calendar years after the date of notification, the benefits of the
Participant or Beneficiary under the Plan will be disposed of as follows:

(a) If the whereabouts of the Participant is unknown but
the whereabouts of the Participant's Beneficiary is known to the
Trustees, distribution will be made to the Beneficiary.

(b) If the whereabouts of the Participant and his
Beneficiary are unknown to the Trustees, the Plan will forfeit the
benefit, provided that the benefit is subject to a claim for
reinstatement if the Participant or Beneficiary make a claim for the
forfeited benefit.

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<PAGE> 33
Any payment made pursuant to the power herein conferred upon the
Trustees shall operate as a complete discharge of all obligations of the
Trustees, to the extent of the distributions so made.

14.12 QUALIFIED DOMESTIC RELATIONS ORDER. Section 14.2 shall not
apply to a "qualified domestic relations order" defined in Code Section 414(p),
and such other domestic relations orders permitted to be so treated under the
provisions of the Retirement Equity Act of 1984. Further, to the extent
provided under a "qualified domestic relations order", a former Spouse of a
Participant shall be treated as the Spouse or surviving Spouse for all purposes
under the Plan.

In the case of any domestic relations order received by the Plan:

(a) The Employer or the Plan Committee shall promptly
notify the Participant and any other alternate payee of the receipt of
such order and the Plan's procedures for determining the qualified
status of domestic relations orders, and

(b) Within a reasonable period after receipt of such
order, the Employer or the Plan Committee shall determine whether such
order is a qualified domestic relations order and notify the
Participant and each alternate payee of such determination. The
Employer or the Plan Committee shall establish reasonable procedures
to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders.

During any period in which the issue of whether a domestic relations
order is a qualified domestic relations order is being determined (by the
Employer or Plan Committee, by a court of competent jurisdiction, or
otherwise), the Employer or the Plan Committee shall segregate in a separate
account in the Plan or in an escrow account the amounts which would have been
payable to the alternate payee during such period if the order had been
determined to be a qualified domestic relations order. If within eighteen (18)
months the order (or modification thereof) is determined to be a qualified
domestic relations order, the Employer or the Plan Committee shall pay the
segregated amounts (plus any interest thereon) to the person or persons
entitled thereto. If within eighteen (18) months it is determined that the
order is not a qualified domestic relations order, or the issue as to whether
such order is a qualified domestic relations order is not resolved, then the
Employer or the Plan Committee shall pay the segregated amounts (plus any
interest thereon) to the person or persons who would have been entitled to such
amounts if there had been no order. Any determination that an order is a
qualified domestic relations order which is made after the close of the
eighteen (18) month period shall be applied prospectively only. The term
"alternate payee" means any Spouse, former Spouse, child or other dependent of
a Participant who is recognized by a domestic relations order as having a right
to receive all, or a portion of, the benefit payable under a Plan with respect
to such Participant.

SECTION 15. TOP-HEAVY PROVISIONS.

15.1 TOP-HEAVY PLAN. For any Plan Year beginning after December
31, 1983, this Plan is top-heavy if any of the following conditions exist:

(a) If the top-heavy ratio for this Plan exceeds sixty
percent (60%) and this Plan is not part of any required aggregation group or
permissive aggregation group;

(b) If this Plan is a part of a required aggregation group
(but is not part of a permissive aggregation group) and the aggregate top-heavy
ratio for the group of Plans exceeds sixty percent (60%); or

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<PAGE> 34
(c) If this Plan is a part of a required aggregation group
and part of a permissive aggregation group and the aggregate top-heavy ratio
for the permissive aggregation group exceeds sixty percent (60%).

15.2 SUPER TOP-HEAVY PLAN For any Plan Year beginning after
December 31, 1983, this Plan will be a super top-heavy Plan if any of the
following conditions exist:

(a) If the top-heavy ratio for this Plan exceeds ninety
percent (90%) and this Plan is not part of any required aggregation group or
permissive aggregation group.

(b) If this Plan is a part of a required aggregation group
(but is not part of a permissive aggregation group) and the aggregate top-heavy
ratio for the group of Plans exceeds ninety percent (90%), or

(c) If this Plan is a part of a required aggregation group
and part of a permissive aggregation group and the aggregate top-heavy ratio
for the permissive aggregation group exceeds ninety percent (90%).

15.3 DEFINITIONS.

In making this determination, the Committee shall use the following definitions
and principles:

15.3-1 The "Determination Date", with respect to the first
Plan Year of any plan, means the last day of that Plan Year, and with
respect to each subsequent Plan Year, means the last day of the
preceding Plan Year. If any other plan has a Determination Date which
differs from this Plan's Determination Date, the top-heaviness of this
Plan shall be determined on the basis of the other plan's
Determination Date falling within the same calendar years as this
Plan's Determination Date.

15.3-2 A "Key Employee", with respect to a Plan Year, means
an Employee who at any time during the five years ending on the
top-heavy Determination Date for the Plan Year has received
compensation from an Employer and has been (i) an officer of the
Employer having 415 Compensation greater than 50 percent of the limit
then in effect under Section 415(b)(1)(A) of the Code, (ii) one of the
10 Employees owning the largest interests in the Employer having 415
Compensation greater than the limit then in effect under Section
415(c)(1)(A), (iii) an owner of more than five percent of the
outstanding equity interest or the outstanding voting interest in any
Employer, or (iv) an owner of more than one percent of the outstanding
equity interest or the outstanding voting interest in an Employer
whose annual compensation exceeds $150,000. For purposes of
determining whether an Employee is a Key Employee, annual compensation
means compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employee pursuant to a salary
reduction agreement which are excludable from the Employee's gross
income under Section 125, Section 402(e)(3), Section 402(H)(1)(B) or
Section 403(b) of the Code. The Beneficiary of a Key Employee shall
also be considered a Key Employee.

15.3-3 A "Non-key Employee" means an Employee who at any time
during the five years ending on the top-heavy Determination Date for
the Plan Year has received compensation from an Employer and who has
never been a Key Employee, and the Beneficiary of any such Employee.

15.3-4 A "required aggregation group" includes (a) each
qualified Plan of the Employer in which at least one Key Employee
participates in the Plan Year containing the Determination Date and
any of the four (4) preceding Plan Years, and (b) any other qualified
Plan of the

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<PAGE> 35
Employer which enables a Plan described in (a) to meet the
requirements of Code Sections 401(a)(4) and 410. For purposes of the
preceding sentence, a qualified Plan of the Employer includes a
terminated Plan maintained by the Employer within the five (5) year
period ending on the Determination Date. In the case of a required
aggregation group, each Plan in the group will be considered a
top-heavy Plan if the required aggregation group is a top-heavy group.
No Plan in the required aggregation group will be considered a
top-heavy Plan if the required aggregation group is not a top-heavy
group. All Employers aggregated under Code Sections 414(b), (c) or
(m) or (o) (but only after the Code Section 414(o) regulations become
effective) are considered a single Employer.

15.3-5 A "permissive aggregation group" includes the required
aggregation group of Plans plus any other qualified Plan(s) of the
Employer that are not required to be aggregated but which, when
considered as a group with the required aggregation group, satisfy the
requirements of Code Sections 401(a)(4) and 410 and are comparable to
the Plans in the required aggregation group. No Plan in the
permissive aggregation group will be considered a top-heavy Plan if
the permissive aggregation group is not a top-heavy group. Only a
Plan that is part of the required aggregation group will be considered
a top-heavy Plan if the permissive aggregation group is top-heavy.

15.4 TOP-HEAVY RULES OF APPLICATION.

For purposes of determining the value of Account balances and
the present value of accrued benefits the following provisions shall apply:

15.4-1 The value of Account balances and the present value of
accrued benefits will be determined as of the most recent Valuation
Date that falls within or ends with the twelve (12) month period
ending on the Determination Date.

15.4-2 For purposes of testing whether this Plan is
top-heavy, the present value of an individual's accrued benefits and
an individual's Account balances is counted only once each year.

15.4-3 The Account balances and accrued benefits of a
Participant who is not presently a Key Employee but who was a Key
Employee in a Plan Year beginning on or after January 1, 1984 will be
disregarded.

15.4-4 For years beginning after December 31, 1984, Employer
contributions attributable to a salary reduction or similar
arrangement will be taken into account.

15.4-5 When aggregating Plans, the value of Account balances
and accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar year.

15.4-6 The present value of the accrued benefits or the
amount of the Account balances of an Employee shall be increased by
the aggregate distributions made to such Employee from a Plan of the
Employer. No distribution, however, made from the Plan to an
individual (other than the Beneficiary of a deceased Employee who was
an Employee within the five (5) year period ending on the
Determination Date) who has not been an Employee at any time during
the five (5) year period ending on the Determination Date shall be
taken into account in determining whether the Plan is top-heavy.
Also, any amounts recontributed by an Employee upon becoming a
Participant in the Plan shall no longer be counted as a distribution
under this paragraph.

15.4-7 The present value of the accrued benefits or the
amount of the Account balances of an Employee shall be increased by
the aggregate distributions made to such Employee from a

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<PAGE> 36
terminated Plan of the Employer, provided that such Plan (if not
terminated) would have been required to be included in the aggregation
group.

15.4-8 Accrued benefits and Account balances of an
individual shall not be taken into account for purposes of determining
the top-heavy ratios if the individual has performed no services for
the Employer during the five (5) year period ending on the applicable
Determination Date. Compensation for purposes of this subparagraph
shall not include any payments made to an individual by the Employer
pursuant to a qualified or non-qualified deferred compensation plan.

15.4-9 The present value of the accrued benefits or the
amount of the Account balances of any Employee participating in this
Plan shall not include any rollover contributions or other transfers
voluntarily initiated by the Employee except as described below. If
this Plan transfers or rolls over funds to another Plan in a
transaction voluntarily initiated by the Employee after December 31,
1983, then this Plan shall count the distribution for purposes of
determining Account balances or the present value of accrued benefits.
A transfer incident to a merger or consolidation of two or more Plans
of the Employer (including Plans of related Employers treated as a
single Employer under Code Section 414), or a transfer or rollover
between Plans of the Employer, shall not be considered as voluntarily
initiated by the Employee.

15.5 TOP-HEAVY RATIO.

If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer has never
maintained any defined benefit plans which have covered or could cover a
Participant in this Plan, the top-heavy ratio is a fraction, the numerator of
which is the sum of the Account balances of all Key Employees as of the
Determination Date, and the denominator of which is the sum of the Account
balances of all Employees as of the Determination Date. Both the numerator and
denominator of the top-heavy ratio shall be increased to reflect any
contribution which is due but unpaid as of the Determination Date.

If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer maintains or
has maintained one (1) or more defined benefit plans which have covered or
could cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of Account balances under the defined
contribution plans for all Key Employees and the present value of accrued
benefits under the defined benefit plans for all Key Employees, and the
denominator of which is the sum of the Account balances under the defined
contribution plans for all Employees and the present value of accrued benefits
under the defined benefit plans for all Employees.

For these purposes, the accrued benefit of a Participant other than a
Key Employee in a defined benefit plan shall be determined under (a) the
method, if any, that uniformly applies for accrual purposes under all defined
benefit plans maintained by the Employer, or (b) if there is no such method, as
if such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Section 411(b)(1)(C).

15.6 MINIMUM CONTRIBUTIONS. For any Top-Heavy Year, each Employer
shall make a special contribution on behalf of each Participant to the extent
that the total allocations to his Account pursuant to Section 4 is less than
the lesser of:

(i) three percent of his 415 Compensation for that year, or

(ii) the highest ratio of such allocation to 415
Compensation received by any Key Employee for that year. For purposes
of the special contribution of this Section 15.2, a Key

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<PAGE> 37
Employee's 415 Compensation shall include amounts the Key Employee
elected to defer under a qualified 401(k) arrangement. Such a special
contribution shall be made on behalf of each Participant who is
employed by an Employer on the last day of the Plan Year, regardless
of the number of his Hours of Service, and shall be allocated to his
Account.

For any Plan Year when (1) the Plan is top-heavy and (2) a Non-key
Employee is a Participant in both this Plan and a defined benefit plan included
in the plan aggregation group which is top heavy, the sum of the Employer
contributions and forfeitures allocated to the Account of each such Non-key
Employee shall be equal to at least five percent (5%) of such Non-key
Employee's 415 Compensation for that year.

15.7 MINIMUM VESTING. For any Plan Year in which this Plan is
Top-Heavy, a Participant's vested interest in his Account shall be based on the
following "top-heavy table":

<TABLE>
<CAPTION>
Vesting Percentage of
Years Interest Vested
------- ---------------
<S> <C>
Fewer than 2 years 0%
2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>

15.8 TOP-HEAVY PROVISIONS CONTROL IN TOP-HEAVY PLAN. In the event this
Plan becomes top-heavy and a conflict arises between the top-heavy provisions
herein set forth and the remaining provisions set forth in this Plan, the
top-heavy provisions shall control.

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<PAGE> 1
EXHIBIT 10.2

FINANCIAL INSTITUTION EXECUTIVE'S AGREEMENT

AGREEMENT

AGREEMENT made this 31st day of December, 1997, by and between SOUND FEDERAL
SAVINGS AND LOAN ASSOCIATION, which has its principal office at 300 Mamaroneck
Avenue, Mamaroneck, New York (hereinafter referred to as the "Bank") and RICHARD
P. McSTRAVICK of 19 Perna Lane, Riverside, Connecticut (hereinafter referred to
as the "Employee").

WITNESSETH:

WHEREAS, the Employee is President and Chief Executive Officer of the Bank and
has developed an intimate and thorough knowledge of the Bank's business methods
and operations; and

WHEREAS, the retention of the Employee's services for and on behalf of the
Bank is of material importance to the preservation and enhancement of the value
of the Bank's business.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, the Bank and the Employee agree as follows:

Section 1. EMPLOYMENT TERM. The Bank employs the Employee as President and
Chief Executive Officer and the Employee accepts this employment and agrees to
render services to the Bank on the terms and conditions set forth in this
Agreement. The initial term of employment shall commence on January 1, 1998 and
shall terminate on December 31, 2000, unless further extended or sooner
terminated in accordance with this Agreement. Employment shall be subject to
renewal for additional three (3) year terms by action of the Board of Directors
(the "Board") of the Bank and by agreement of the Employee at any time after the
twenty-fourth month of the then existing term, as said Board shall in its sole
and exclusive judgment, determine. References to this Agreement's term shall
mean the initial term and any successive terms.

Section 2. DUTIES. The Employee shall perform executive services for the Bank
as may be consistent with the Employee's title, along with those other duties
that may be assigned from time to time by the Bank's Board of Directors. During
this Agreement's term, the Employee's full business time and best efforts shall
be devoted to the affairs and business of the Bank, as is customarily required
for the position of President and Chief Executive Officer. The services of the
Employee shall be rendered principally in Mamaroneck, New York but the Employee
shall do any traveling and render services at such other present or future
offices on behalf of the Bank as may be reasonably required.

<PAGE> 2

Section 3. RESTRICTED ACTIVITIES. The Employee agrees that during employment,
except with the express consent of the Bank's Board of Directors, the Employee
will not, directly or indirectly, engage or participate in, become a director
of, or render advisory or other services for, or in connection with, or become
interested in, or make any financial investment in any firm, corporation,
business entity or business enterprise competitive with any business of the
Bank; provided, however, that the Employee shall not be precluded or prohibited
from owning passive investments, including investments in the securities of
other financial institutions, so long as ownership does not require the Employee
to devote substantial time to management or control of the other business or
activities in which the Employee has invested.

Section 4. REMEDIES. The Employee agrees and acknowledges that by virtue of
this employment, the Employee will obtain and maintain an intimate knowledge of
the Bank's activities and affairs, including trade secrets and other
confidential matters. As a result, and also because of the special, unique and
extraordinary services that the Employee is capable of performing for the Bank
or one of its competitors, the Employee recognizes that the services to be
rendered are of a character giving them a peculiar value, the loss of which
cannot be adequately or reasonably compensated for by damages. The Employee
agrees that if the Employee fails to render to the Bank the services required,
the Bank shall be entitled to immediate injunctive or other equitable relief to
restrain the Employee, in addition to any other remedies to which the Bank may
be entitled under law.

Section 5. COMPENSATION. The Bank will compensate and pay the Employee for the
Employee's services during this Agreement's term a minimum base salary of One
Hundred Thirty Thousand (130,000.00) Dollars for the year ending December 31,
1998. Subsequent annual salary in amounts determined by the Bank's Board of
Directors from year to year during the original term or during any renewal term
hereof, shall be memorialized by a duly executed Addendum to be appended hereto.

Section 6. VACATION. The Employee shall be entitled to a vacation of four (4)
weeks per calendar year, arranged to coordinate with the Employee's duties. If
for any reason the Employee's full entitlement is not taken in any calendar
year, the unused portion thereof shall be lost or deemed waived. The Employee
shall also be entitled to observe holidays on which the Bank is closed.

Section 7. BENEFITS. The Employee shall be entitled to participate in any Bank
Plan relating to pension, profit sharing, or other retirement benefits, along
with any medical, dental, and life insurance coverage or reimbursement plans
that the Bank may adopt for its employees. The Employee shall be permitted to
participate in the Bank's medical, dental, and life insurance coverage and
reimbursement plans to the extent that such plans exist and as constituted from
time to time until the Employee's death; provided, however, that if the
employment of the Employee is terminated prior to the attainment of age 70, he
shall be entitled to participate in such plans to the extent provided therein
for retired employees.

2
<PAGE> 3

Section 8. DISABILITY

(a) If the Employee shall become disabled or incapacitated to the extent that
the Employee is unable to perform the duties of President and Chief Executive
Officer, the Employee shall continue to receive the following percentages of
compensation, exclusive of any benefits which may be in effect for Bank
employees under this Agreement's Section 7 for the following periods of the
Employee's disability: 100% for the first six (6) months, and 60% thereafter for
this Agreement's remaining term. Upon returning to active duties, the Employee's
full compensation shall be reinstated on a "go forward" basis. Should the
Employee return to active employment on other than a full-time basis, then the
Employee's compensation for the remainder of the then existing term of
employment, as set forth in Section 5, shall be reduced on such terms as the
Bank's Board of Directors shall determine.

(b) There shall be deducted from the amounts paid to the Employee under this
Section during any period of disability any amounts actually paid to the
Employee pursuant to any disability insurance, workers' compensation or other
similar program that the Bank has instituted or may institute on behalf of its
employees for the purpose of compensating the Employee for a disability,
including those payable under disability insurance policies covering the
Employee issued by Commercial Union Insurance Company or any successor issuer(s)
or policies, but the Bank shall continue the program of reimbursement and
payment of premiums as previously conducted.

(c) For purposes of this Agreement, the Employee shall be deemed disabled or
incapacitated if the Employee, due to physical or mental illness, shall have
been absent from duties with the Bank on a full-time basis for thirty (30) days
provided, that, if the Employee shall not agree with a determination to
terminate the Employee because of disability or incapacity, the question of the
Employee's ability shall be submitted to an impartial and reputable physician
selected by the parties and such physician's determination regarding disability
or incapacity shall be final and binding.

Section 9. STOCK OPTIONS. During this Agreement's term, the Employee will be
entitled to participate in and receive the benefits of any stock option, profit
sharing, or other plans, benefits, and privileges given to employees and
executives of the Bank or its subsidiaries and affiliates that may come into
existence to the extent commensurate with the Employee's then duties and
responsibilities, as fixed by the Bank's Board of Directors or any Committee of
the Board or of the Bank selected for this purpose; and, to the extent the
Employee is otherwise eligible and qualifies, to so participate in and receive
these benefits or privileges. The Bank shall not make any changes in these
plans, benefits or privileges that would adversely affect the Employee's rights
or benefits unless the change occurs pursuant to a program applicable to all
Bank executive officers and does not result in a proportionately greater adverse
change in the rights of or benefits to the Employee as compared with any other
Bank executive officer. Nothing paid to the Employee under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Employee pursuant to Section 5.

3
<PAGE> 4

Section 10. EXPENSES. The Bank shall reimburse the Employee or otherwise
provide for or pay for all reasonable expenses incurred by the Employee in
furtherance of or in connection with the Bank's business, including, but not by
way of limitation, automobile and traveling expenses and all reasonable
entertainment expenses whether incurred at the Employee's residence, while
traveling, or otherwise, subject to reasonable limitations as may be established
by the Bank's Board of Directors, provided these expenses are deductible by the
Bank for federal income taxation purposes. If these expenses are paid in the
first instance by the Employee, the Bank will reimburse the Employee.

Section 11. TERMINATION.

(a) (1) The Bank's Board of Directors may terminate the Employee's employment
at any time, but any termination by the Bank's Board of Directors other than
termination for cause, shall not prejudice the Employee's right to compensation
or other benefits under the Agreement. The Employee shall have no right to
receive compensation or other benefits for any period after termination for
cause. Termination for cause shall include termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement.

(2) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(3) and (g)(l) the Bank's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may in its discretion (i) pay
the Employee all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.

(3) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(4) or (g)(l), all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

(4) If the Bank is in default (as defined in section 3(x)(1) of the
Federal Deposit Insurance Act), all obligations under this Agreement shall
terminate as of the date of default, but this paragraph (b)(4) shall not affect
any vested rights of the contracting parties.

(5) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank:

4
<PAGE> 5

(i) by the Director or his or her designee, at the time the Federal
Deposit Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in section 13(c) of the Federal Deposit Insurance Act; or

(ii) by the Director or his or her designee, at the time the Director or
his or her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in an
unsafe or unsound condition.

Any rights of the parties hereto that have already vested, however, shall not be
affected by such action.

(b) In the event employment is terminated for just cause pursuant to Section
11(a), the Employee shall have no right to compensation or other benefits for
any period after the termination date. If the Employee is terminated by the Bank
other than for just cause pursuant to Section 11(a) the Employee's right to
compensation and other benefits shall be as set forth in Section 11(1). If
employment is terminated for just cause, the Employee shall have the right, at
the Employee's sole option, to appear at the next scheduled regular or special
meeting of the Bank's Board of Directors at which a quorum of the Board is
present so that the Board may hear argument from the Employee or counsel or
both and reconsider the termination. The Board of Directors shall deliver to the
Employee its reconsidered determination in writing within twenty (20) days
after the meeting. This procedure shall not prejudice the rights of either party
under Section 20.

(c) The Employee shall have the right, upon prior written Notice of Termination
of not less than thirty (30) days satisfying the requirements of Section 11(k),
to terminate employment, but in this event, the Employee shall have no right
after the termination date to compensation or other benefits as provided in this
Agreement, unless the termination is for good reason, as defined, pursuant to
Section 11(i). If the Employee provides a Notice of Termination for good reason,
as defined, the termination date shall be the date on which a Notice of
Termination was given.

(d) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1) the Bank's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank may in its discretion (i) pay
the Employee all or part of the compensation withheld while its contractual
obligations were suspended and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.

5
<PAGE> 6

(e) All obligations under this Agreement may be terminated: (i) by the FDIC or
successor or other regulatory agency at the time such agency enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained In Section 406(f) of the National Housing Act; and (ii) by the OTS or
successor or other regulatory agency at the time that such agency' approves a
supervisory merger to resolve problems related to the Bank's operations or when
the Bank is determined by the OTS or other agency to be in an unsafe or unsound
condition, but the Employee's rights to compensation earned as of that date
shall not be affected.

(f) If the Bank is in default, as defined to mean an adjudication or other
official determination by a court of competent jurisdiction or other public
authority pursuant to which a conservator, receiver, or other legal custodian is
appointed for the Bank for liquidation purposes, all obligations under this
Agreement shall terminate as of the date of default, but the Employee's rights
to compensation earned as of the termination date shall not be affected.

(g) In the event that the Employee is terminated in a manner that violates the
provisions of Section 11(a), as determined by arbitration in accordance with
Section 20, the Employee shall be entitled to reimbursement for all reasonable
costs, including attorney's fees, in challenging the termination. This
reimbursement shall be in addition to all rights to which the Employee is
otherwise entitled under this Agreement. Notwithstanding the above, the Employee
shall be entitled to indemnification from the Bank consistent with the
indemnification permitted by the OTS Rules and Regulations for Federal
Associations, codified at 12 C.F.R. Sec. 545.121, and to the full extent
contemplated by the Bank's Bylaws. In addition, if the Employee serves as a
director, officer, or employee of any affiliate of the Bank, the Employee shall
be entitled to indemnification and exculpation from liability to the full extent
permitted by applicable law, and the Bank agrees to cause all necessary
provisions to be included in, or changes made to, the Articles of Incorporation
or Bylaws of these affiliates required to accomplish this.

(h) The Employee may terminate employment for good reason. For purposes of this
Agreement, "good reason" shall mean: (i) a failure by the Bank to comply with
any material provision of this Agreement, which failure has not been cured
within ten (10) days after a notice of noncompliance has been given by the
Employee to the Bank; (ii) subsequent to a change in control of the Bank and
without the Employee's express written consent, the assignment to the Employee
of any duties inconsistent with the Employee's positions, duties,
responsibilities, and status with the Bank immediately prior to a change in
control of the Bank; a change in the Employee's reporting responsibilities,
titles, or offices as in effect immediately prior to a change in control of the
Bank; any removal of the Employee from, or any failure to reelect the Employee
to any of these positions, except in connection with an employment termination
for just cause, disability, death, retirement, or pursuant to Sections 11(a) or
11(e); a reduction by the Bank in the Employee's annual salary as in effect
immediately prior to a change in control or as the same may be increased from
time to time; or the failure of the Bank to continue in effect any bonus,
benefit, or

6
<PAGE> 7

compensation plan, life insurance plan, health and accident plan. or disability
plan in which the Employee is participating at the time of a change in control
of the Bank, or the taking of any action by the Bank that would adversely affect
the Employee's participation in or materially reduce the Employee's benefits
under any of these plans; or (iii) any purported termination of the Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 11(k).

(i) Any termination of the Employee's employment by the Bank or by the Employee
shall be communicated by written Notice of Termination to the other party only
after any applicable grace period's expiration that may be set forth in this
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a dated notice which shall (i) indicate the specific termination provision in
the Agreement relied upon; (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for the Employee's employment
termination under the provision so indicated; (iii) specify a termination date
which shall be not less than fifteen (15) days nor more than thirty (30) days
after a Notice of Termination is given, except in the case of the Bank's
termination of the Employee's employment for just cause pursuant to Section
11(a), for which the Notice of Termination must specify that the termination is
effective immediately; and (iv) be given in the manner specified in Section 14.

(j) If the Employee shall terminate employment for good reason pursuant to
Section 11(i) or if the Bank terminates the Employee other than for just cause,
then in lieu of any further salary payments to the Employee for periods
subsequent to the termination date, the Bank shall pay as severance to the
Employee an amount equal to: (i) three (3) times the Employee's average annual
compensation (computed on the basis of the most recent five (5) taxable years)
paid to the Employee and includable in the Employee's gross income for federal
income tax purposes on the date on which the termination occurs, this payment to
be made in a lump sum on or before the thirtieth (30) day following the
termination date; provided, however, that any payments made to the Employee
pursuant to this Agreement or otherwise, are subject to and conditioned upon
compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder. If for any reason the basis for termination of this Agreement or
payment of amounts under this Section is disputed by either party to this
Agreement or any other person or agency, then pending resolution of any
dispute, within three (3) months after the due date of the payment, the Bank
shall deliver the entire amount calculated in accordance with this Section to an
independent trustee to hold in an interest bearing account in trust for the
benefit of the Employee and the Bank, whichever may be ultimately entitled to
the same. The trustee shall be a bank or savings institution other than the
Bank, with deposits of at least $250,000,000, unrelated to any parties in the
dispute, and disinterested in any transaction arising out of or engendering the
dispute. If the parties are unable to agree upon a trustee within this time
period, then either party may seek immediate relief from a court of competent
jurisdiction without the necessity of first resorting to arbitration under
Section 20. In addition, the Bank agrees that the Employee would have no
adequate remedy at law for breach of these obligations, and the Employee shall
be entitled to immediate injunctive and other

7
<PAGE> 8

appropriate equitable relief to enforce the same without the necessity of first
resorting to arbitration under Section 20.

(k) If the Employee shall terminate employment for good reason as defined in
Section 11(i) or if the Employee is terminated by the Bank for other than just
cause pursuant to Section 11(i), then in lieu of any further salary payments to
the Employee for periods subsequent to the termination date, the Bank shall pay
as severance to the Employee an amount equal to the product of (i) the
Employee's current annual base salary in effect as of the termination date,
multiplied by (ii) the number of years, including partial years, remaining in
the employment term, the payment to be made in substantially equal semimonthly
installments on the fifteenth and last days of each month, or if these days are
non business days, the immediately preceding business days, commencing with the
month in which the termination date occurs and continuing for the number of
consecutive semimonthly payment dates including the first date aforesaid,
equal to the product obtained by multiplying the number of years, including
partial years, applicable under (ii) by 24.

(l) The Employee shall not be required to mitigate the amount of any payment
provided for in Section 11(i) by seeking other employment or otherwise. No
other employment or compensation from other sources or employers shall affect or
reduce the amounts or obligations of the Bank to make payments or provide the
benefits or arrangements to the Employee under this Agreement.

(m) Notwithstanding any provision in this Agreement, in the event of
termination by the employee for "good reason" or by the Bank other than for
just cause, all then existing medical, dental, life insurance, and other
applicable benefit plans shall continue in force for the Employee's benefit at
the Bank's sole cost and expense until the employee attains the age of 70
years, provided, however, that if the Employee shall subsequently receive
equivalent medical or dental coverage from a new employer, the Bank shall no
longer be obligated to continue to provide such coverage.

Section 12. OTHER BENEFITS. Notwithstanding anything to the contrary, the
payment or obligation to pay any monies, or granting of any rights or privileges
to the Employee as provided in this Agreement shall not be in lieu or derogation
of the rights and privileges that the Employee now has under any plan or benefit
presently outstanding.

Section 13. AGREEMENT CHANGES. This Agreement may not be modified, changed,
amended, or altered except in writing, signed by the Employee or by the
Employee's duly authorized representative, and by a duly authorized Bank officer
or Chairman of the Bank's Board of Directors.

8
<PAGE> 9

shall be effective when deposited in the mail in the manner specified in this
Section. Either party by a notice in writing may change or designate the place
for receipt of all notices.

Section 15. WAIVER OF RIGHTS. No course of conduct between the Bank and the
Employee and no delay or omission of the Bank or the Employee to exercise any
right or power given under this Agreement shall: (i) impair the subsequent
exercise of any right or power; or (ii) be construed to be a waiver of any
default or any acquiescence in or consent to the curing of any default while any
other default shall continue to exist, or be construed to be a waiver of a
continuing default or of any other right or power that shall have arisen; and
every power and remedy granted by law and by this Agreement to any party may be
exercised from time to time, and as often as may be deemed expedient. All of the
rights and powers shall be cumulative to the fullest extent permitted by law.

Section 16. PRIOR AGREEMENTS. This Agreement supersedes any and all prior
Employment Agreements written or verbal, between the parties all of which are
canceled.

Section 17. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Employee, and, to the extent applicable, the Employee's heirs,
assigns, executors, and personal representatives, and upon the Bank, its
successors, and assigns, including, without limitation, any person,
partnership, or corporation that may acquire all or substantially all of the
Bank's assets and business, or with or into which the Bank may be consolidated
or merged. and this provision shall apply, in the event of any subsequent
merger, consolidation, or transfer unless a merger or consolidation or
subsequent merger or consolidation is a transaction of the type that would
result in termination under sections 11(f) and 11(g).

Section 18. ASSIGNMENT. This Agreement is personal to each of the parties and
neither may assign or delegate any of its rights or obligations under this
Agreement without the prior written consent of the other party.

Section 19. APPLICABLE LAW. This Agreement shall be governed in all respects
and be interpreted by and under the laws of the State of New York, except to the
extent that the law may be preempted by applicable federal law, including
regulations, opinions, or orders duly issued by the OTS or FDIC or successor or
other regulatory agency ("Federal Law"), in which event this Agreement shall be
governed and be interpreted by and under federal law.

Section 20. ARBITRATION. Except as otherwise expressly provided elsewhere in
this Agreement, in the event that any dispute should arise between the parties
as to the meaning, effect, performance, enforcement, or other issue in
connection with this Agreement, which dispute cannot be resolved by the parties,
except the question of Employee's disability under Section 9(c), the dispute
shall be decided by final and binding arbitration of a panel of three
arbitrators who shall be present or former executives of Federal savings
institutions located in the United States. Proceedings in arbitration and its
conduct shall be governed by the rules of the American Arbitration Association
("AAA")

9
<PAGE> 10

applicable to commercial arbitrations (the "Rules") except as modified by this
Section. The Employee shall appoint one arbitrator, the Bank shall appoint one
arbitrator, and the third shall be appointed by the two arbitrators appointed by
the parties. The third arbitrator shall be impartial and shall serve as chairman
of the panel. The parties shall appoint their arbitrators within thirty (30)
days after the demand for arbitration is served, failing which the AAA promptly
shall appoint a defaulting party's arbitrator, and the two arbitrators shall
select the third arbitrator within fifteen (15) days after their appointment, or
if they cannot agree or fail to so appoint, then the AAA promptly shall appoint
the third arbitrator. The arbitrators shall render their decision in writing
within thirty (30) days after the close of evidence or other termination of the
proceedings by the panel, and the decision of a majority of the arbitrators
shall be final and binding upon the parties, nonappealable, except in accordance
with the Rules and enforceable in accordance with the Uniform Arbitration Act in
force in the State of New York or any applicable successor legislation. Any
hearings in the arbitration shall be held in the Village of Mamaroneck, New York
unless the parties shall agree upon a different venue, and shall be private and
not open to the public. Each party shall bear the fees and expenses of its
arbitrator, counsel, and witnesses, and the fees and expenses of the third
arbitrator shall be shared equally by the parties. The costs of the
arbitration, including the fees of AAA, shall be borne as directed in the
decision of the panel.

Section 21. SEPARABILITY. If for any reason, any section or portion of this
Agreement shall be held by a court to be invalid or unenforceable, it is agreed
that this shall not affect any other section or portion of this Agreement.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first above written.

ATTEST: SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION

Witness [SIG] By: [SIG]
------------------------------
Chairman

Witness [SIG] By: [SIG]
------------------------------
Secretary

[SIG]
---------------------------------
Witness [SIG] Employee

10
<PAGE> 11

SOUND FEDERAL SAVINGS
AND LOAN ASSOCIATION

with

RICHARD P. McSTRAVICK

EXECUTIVE'S AGREEMENT

GIOFFRE & GIOFFRE
PROFESSIONAL CORPORATION
COUNSELLORS AT LAW
2900 WESTCHESTER AVENUE
SUITE 206
PURCHASE, NEW YORK 10577

<PAGE> 12
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

WHEREAS, the SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION ("Bank") entered
into an Employment Agreement ("Agreement") with RICHARD P. MCSTRAVICK
("Executive") on December 31, 1997; and

WHEREAS, in connection with the reorganization of the Bank into the two
tier mutual holding company structure ("Reorganization"), the parties thereto
wish to amend said Agreement in several respects.

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:

1. The first paragraph of said Agreement is amended by adding the following
sentence to the end thereof:

"Any reference herein to "Company" shall mean Sound Federal Bancorp, a
federal stock corporation, or any successor thereto."

2. The last two sentences in "Section 1. EMPLOYMENT TERM." shall be
deleted and the following substituted therefor:

"Commencing on the first anniversary date of this Agreement, and
continuing at each anniversary date thereafter, the Agreement shall renew for an
additional year such that the remaining term shall be three (3) years unless
written notice is provided to Executive at least ten (10) days and not more than
sixty (60) days prior to any such anniversary date, that his employment shall
cease at the end of thirty-six (36) months following such anniversary date.
Prior to each notice period for non-renewal, the disinterested members of the
Board of Directors ("Board") of the Bank will conduct a comprehensive
performance evaluation and review of the Executive for purposes of determining
whether to extend the Agreement, and the results thereof shall be included in
the minutes of the Board's meeting. The "disinterested" members of the Board of
Directors shall be all directors other than the director who is the "Executive"
under this Agreement."

3. Sub-section (j) of "Section 11. TERMINATION" shall be amended by
replacing the reference to "Section 11(i)" with a reference to "Section 11(h)"
in the first line thereof.

4. Sub-section (k) shall be deleted and shall be replaced with the
following:

"(k) For these purposes, a Change in Control of the Bank or the Company
shall mean a change in control of a nature that: (i) would be required to be
reported in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank or the Company within the meaning of the Home Owners' Loan
Act and the Rules and Regulations promulgated by the Office of Thrift
Supervision (or its predecessor agency), as in effect

<PAGE> 13

on the date hereof; or (iii) without limitation such a Change in Control shall
be deemed to have occurred at such time as (a) any "Person" (as the term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or the Company representing 25% or more of
the Bank's or the Company's outstanding securities except for any securities of
the Bank purchased by the Company in connection with the conversion of the Bank
to the stock form and any securities purchased by the Bank's employee stock
ownership plan and trust; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided, however, that this sub-section (b) shall not apply
if the Incumbent Board is replaced by the appointment by a Federal banking
agency of a conservator or receiver for the Bank and, provided further that any
person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Bank or the Company; or (d) a
proxy statement soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company or Bank or
similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to such plan or
transaction are exchanged for or converted into cash or property or securities
not issued by the Bank or the Company shall be distributed and the requisite
number of proxies approving such plan of reorganization, merger or consolidation
of the Company or Bank are received and voted in favor of such transactions; or
(e) a tender offer is made for 25% or more of the outstanding securities of the
Bank or Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Bank or Company have tendered or offered to
sell their shares pursuant to such tender offer and such tendered shares have
been accepted by the tender offeror."

5. New Section 22 entitled "SOURCE OF PAYMENTS" shall be added to the
Agreement and shall read as follows:

"Section 22. SOURCE OF PAYMENTS. All payments provided in this Agreement
shall be timely paid in cash or check from the general funds of the Bank. The
Company, however, guarantees payment and provisions of all amounts and benefits
due hereunder to Executive and, if such amounts and benefits due from the Bank
are not timely paid or provided by the Bank, such amounts and benefits shall be
paid or provided by the Company."

6. In all other respects, the Agreement shall remains in full force and
effect.

2
<PAGE> 14

WHEREAS, the parties hereto have caused this First Amendment to be
executed on the _____ day of ____________, 1998.

ATTEST: SOUND FEDERAL SAVINGS AND LOAN
ASSOCIATION

By:
- ------------------ ------------------------------
Secretary

ATTEST:
SOUND FEDERAL BANCORP

By:
- ------------------ ------------------------------
Secretary

WITNESS: EXECUTIVE:

By:
- ------------------ ------------------------------
Richard P. McStravick

<PAGE> 1
EXHIBIT 10.3
FINANCIAL INSTITUTION EXECUTIVE'S AGREEMENT

AGREEMENT

AGREEMENT made this 31st day of December, 1997, by and between SOUND FEDERAL
SAVINGS AND LOAN ASSOCIATION, which has its principal office at 300 Mamaroneck
Avenue, Mamaroneck, New York (hereinafter referred to as the "Bank") and WILLIAM
H. MOREL of 1416 Harrison Avenue, Mamaroneck, New York (hereinafter
referred to as the "Employee").

WITNESSETH:

WHEREAS, the Employee is Senior Vice President and Mortgage Officer of the
Bank and has developed an intimate and thorough knowledge of the Bank's
business methods and operations; and

WHEREAS, the retention of the Employee's services for and on behalf of the
Bank is of material importance to the preservation and enhancement of the
value of the Bank's business.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, the Bank and the Employee agree as follows:

Section 1. EMPLOYMENT TERM. The Bank employs the Employee as Senior Vice
President and Mortgage Officer and the Employee accepts this employment and
agrees to render services to the Bank on the terms and conditions set forth in
this Agreement. The initial term of employment shall commence on January 1, 1998
and shall terminate on December 31, 2000, unless further extended or sooner
terminated in accordance with this Agreement. Employment shall be subject to
renewal for additional three (3) year terms by action of the Board of Directors
(the "Board") of the Bank and by agreement of the Employee at any time after
the twenty-fourth month of the then existing term, as said Board shall in its
sole and exclusive judgment, determine. References to this Agreement's term
shall mean the initial term and any successive terms.

Section 2. DUTIES. The employee shall perform executive services for the
Bank as may be consistent with the Employee's title, along with those other
duties that may be assigned from time to time by the Bank's Board of Directors.
During this Agreement's term, the Employee's full business time and best efforts
shall be devoted to the affairs and business of the Bank, as is customarily
required for the position of Senior Vice President and Mortgage Officer. The
services of the Employee shall be rendered principally in Mamaroneck, New York
but the Employee shall do any traveling and render services at such other
present or future offices on behalf of the Bank as may be reasonably required.

<PAGE> 2

Section 3. RESTRICTED ACTIVITIES. The Employee agrees that during
employment, except with the express consent of the Bank's Board of Directors,
the Employee will not, directly or indirectly, engage or participate in, become
a director of, or render advisory or other services for, or in connection with,
or become interested in, or make any financial investment in any firm,
corporation, business entity or business enterprise competitive with any
business of the Bank; provided, however, that the Employee shall not be
precluded or prohibited from owning passive investments, including investments
in the securities of other financial institutions, so long as ownership does not
require the Employee to devote substantial time to management or control of the
other business or activities in which the Employee has invested.

Section 5. COMPENSATION. The Bank will compensate and pay the Employee for
the Employee's services during this Agreement's term a minimum base salary of
Ninety-Five Thousand ($95,000.00) Dollars for the year ending December 31, 1998.
Subsequent annual salary in amounts determined by the Bank's Board of Directors
from year to year during the original term or during any renewal term hereof,
shall be memorialized by a duly executed Addendum to be appended hereto.

Section 6. VACATION. The Employee shall be entitled to a vacation of five
(5) weeks per calendar year, arranged to coordinate with the Employee's duties.
If for any reason the Employee's full entitlement is not taken in any calendar
year, the unused portion thereof shall be lost or deemed waived. The Employee
shall also be entitled to observe holidays on which the Bank is closed.

Section 7. BENEFITS. The Employee shall be entitled to participate in any
Bank Plan relating to pension, profit sharing, or other retirement benefits,
along with any medical, dental, and life insurance coverage or reimbursement
plans that the Bank may adopt for its employees. The Employee shall be permitted
to participate in the Bank's medical, dental, and life insurance coverage and
reimbursement plans to the extent that such plans exist and as constituted from
time to time until the Employee's death; provided, however, that if the
employment of the Employee is terminated prior to the attainment of age 70, he
shall be entitled to participate in such plans to the extent provided therein
for retired employees.

<PAGE> 3

Section 8. DISABILITY

(a) If the Employee shall become disabled or incapacitated to the extent
that the Employee is unable to perform the duties of Senior Vice President and
Mortgage Officer, the Employee shall continue to receive the following
percentages of compensation, exclusive of any benefits which may be in effect
for Bank employees under this Agreement's Section 7 for the following periods of
the Employee's disability: 100% for the first six (6) months, and 60% thereafter
for this Agreement's remaining term. Upon returning to active duties, the
employee's full compensation shall be reinstated on a "go forward" basis. Should
the Employee return to active employment on other than a full-time basis, then
the Employee's compensation for the remainder of the then existing term of
employment, as set forth in Section 5, shall be reduced on such terms as the
Bank's Board of Directors shall determine.

(b) There shall be deducted from the amounts paid to the Employee under this
Section during any period of disability any amounts actually paid to the
Employee pursuant to any disability insurance, workers' compensation or other
similar program that the Bank has instituted or may institute on behalf of its
employees for the purpose of compensating the Employee for a disability,
including those payable under disability insurance policies covering the
Employee issued by Commercial Union Insurance Company or any successor
issuer(s) or policies, but the Bank shall continue the program of reimbursement
and payment of premiums as previously conducted.

Section 9. STOCK OPTIONS. During this Agreement's term, the Employee will be
entitled to participate in and receive the benefits of any stock option, profit
sharing, or other plans, benefits, and privileges given to employees and
executives of the Bank or its subsidiaries and affiliates that may come into
existence to the extent commensurate with the Employee's then duties and
responsibilities, as fixed by the Bank's Board of Directors, or any Committee of
the Board or of the Bank selected for this purpose; and, to the extent the
Employee is otherwise eligible and qualities, to so participate in and receive
these benefits or privileges. The Bank shall not make any changes in these
plans, benefits or privileges that would adversely affect the Employee's rights
or benefits unless the change occurs pursuant to a program applicable to all
Bank executive officers and does not result in a proportionately greater adverse
change in the rights of or benefits to the Employee as compared with any other
Bank executive officer. Nothing paid to the Employee under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Employee pursuant to Section 5.

<PAGE> 4

Section 11. TERMINATION

(a) The Bank's Board of Directors shall have the right at any time, upon prior
written Notice of Termination to terminate the Employee's employment, including
termination for just cause, but any termination other than for just cause shall
not prejudice the Employee's right to compensation or other benefits under this
Agreement. The provisions of the Regulations of the OTS codified at 12 C.F.R.
Section 563.39(b), subsections (d), (3), (4) and (5), as the same may be amended
or replaced from time to time, are incorporated into this Agreement, and in the
event of any conflict with the Agreement's provisions, shall govern the rights
and obligations of the Bank and the Employee as long as they shall remain in
force and effect.

(b) In the event employment is terminated for just cause pursuant to Section
11(a), the Employee shall have no right to compensation or other benefits for
any period after the termination date. If the Employee is terminated by the Bank
other than for just cause pursuant to Section 11(a) the Employee's right to
compensation and other benefits shall be as set forth in Section 11(l). If
employment is terminated for just cause, the Employee shall have the right, at
the Employee's sole option, to appear at the next scheduled regular or special
meeting of the Bank's Board of Directors at which a quorum of the Board is
present so that the Board may hear argument from the Employee or counsel or both
and reconsider the termination. The Board of Directors shall deliver to the
Employee its reconsidered determination in writing within twenty (20) days after
the meeting. This procedure shall not prejudice the rights of either party under
Section 20.

(d) If the Employee is suspended and or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1) the Bank's obligations

<PAGE> 5

under this Agreement shall be suspended as of the date of service unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Employee all or part of the compensation
withheld while its contractual obligations were suspended and (ii) reinstate (in
whole or in part) any of its obligations which were suspended.

(e) All obligations under this Agreement may be terminated: (i) by the FDIC or
successor or other regulatory agency at the time such agency enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained In Section 406(f) of the National Housing Act; and (ii) by the OTS or
successor or other regulatory agency at the time the such agency approves a
supervisory merger to resolve problems related to the Bank's operations or when
the Bank is determined by the OTS or other agency to be in an unsafe or unsound
condition, but the Employee's rights to compensation earned as of that date
shall not be affected.

<PAGE> 6

the Employee from, or any failure to reelect the Employee to any of these
positions, except in connection with an employment termination for just cause,
disability, death, retirement, or pursuant to Sections 11(a) or 11(e); a
reduction by the Bank in the Employee's annual salary as in effect immediately
prior to a change in control or as the same may be increased from time to time;
or the failure of the Bank to continue in effect any bonus, benefit, or
compensation plan, life insurance plan, health and accident plan, or disability
plan in which the Employee is participating at the time of a change in control
of the Bank, or the taking of any action by the Bank that would adversely affect
the Employee's participation in or materially reduce the Employee's benefits
under any of these plans; or (iii) any purported termination of the Employee's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 11(k).

(i) Any termination of the Employee's employment by the Bank or by the Employee
shall be communicated by written Notice of Termination to the other party only
after any applicable grace period's expiration that may be set forth in this
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a dated notice which shall (i) indicate the specific termination provision in
the Agreement relied upon; (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for the Employee's employment
termination under the provision so indicated; (iii) specify a termination date
which shall be not less than fifteen (15) days nor more than thirty (30) days
after a Notice of Termination is given, except in the case of the Bank's
termination of the Employee's employment for just cause pursuant to Section
11(a), for which the Notice of Termination may specify a termination date as of
the date the Notice of Termination is given; and (iv) be given in the manner
specified in Section 14.

(j) If the Employee shall terminate employment for good reason pursuant to
Section 11(i) or the Bank terminates the Employee other than for just cause
after a change in control of the Bank as defined in Section 11(a), then in lieu
of any further salary payments to the Employee for periods subsequent to the
termination date, the Bank shall pay as severance to the Employee an amount
equal to: (i) three (3) times the Employee's average annual compensation
(computed on the basis of the most recent five (5) taxable years) paid to the
Employee and includable in the Employee's gross income for federal income tax
purposes on the date on which the termination occurs, this payment to be made in
a lump sum on or before the thirtieth (30) day following the termination date;
provided, however, that any payments made to the Employee pursuant to this
Agreement or otherwise, are subject to and conditioned upon compliance with 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder. If for any
reason the basis for termination of this Agreement or payment of amounts under
this section is disputed by either party to this Agreement or any other person
or agency, then pending resolution of any dispute, within three (3) months after
the due date of the payment, the Bank shall deliver the entire amount calculated
in accordance with this section to an independent trustee to hold in an interest
bearing account in trust for the benefit of the Employee and the Bank, whichever
may be ultimately entitled to the same. The trustee shall be a bank or savings
institution other than the Bank, with deposits of at least $250,000,000,
unrelated to any parties in the dispute, and disinterested in any transaction
arising out of or engendering the dispute. If

<PAGE> 7

the parties are unable to agree upon a trustee within this time period, then
either party may seek immediate relief from a court of competent jurisdiction
without the necessity of first resorting to arbitration under Section 20. In
addition, the Bank agrees that the Employee would have no adequate remedy at law
for breach of these obligations, and the Employee shall be entitled to immediate
injunctive and other appropriate equitable relief to enforce the same without
the necessity of first resorting to arbitration under Section 20.

(k) If the Employee shall terminate employment for good reason as defined in
Section 11(i) or if the Employee is terminated by the Bank for other than just
cause pursuant to Section 11(i), then in lieu of any further salary payments to
the Employee for periods subsequent to the termination date, the Bank shall pay
as severance to the Employee an amount equal to the product of (i) the
Employee's current annual base salary in effect as of the termination date,
multiplied by (ii) the number of years, including partial years, remaining in
the employment term, the payment to be made in substantially equal semimonthly
installments on the fifteenth and last days of each month, or if these days are
non business day's, the immediately preceding business day, commencing with the
month in which the termination date occurs and continuing for the number of
consecutive semimonthly payments dates, including the first date aforesaid,
equal to the product obtained by multiplying the number of years, including
partial years, applicable under (ii) by 24.

(l) The Employee shall not be required to mitigate the amount of any payment
provided for in Section 11(I) by seeking other employment or otherwise. No other
employment or compensation from other sources or employers shall affect or
reduce the amounts or obligations of the Bank to make payments or provide the
benefits or arrangements to the Employee under this Agreement.

(m) Notwithstanding any provision in this Agreement, in the event of
termination by the Employee for "good reason" or by the Bank other than for
just cause, all then existing medical, dental, life insurance, and other
applicable benefit plans shall continue in force for the Employee's benefit at
the Bank's sole cost and expense until the employee attains the age of 70
years, provided, however, that if the Employee shall subsequently receive
equivalent medical or dental coverage from a new employer, the Bank shall no
longer be obligated to continue to provide such coverage.

Section 12. OTHER BENEFITS. Notwithstanding anything to the contrary, the
payment or obligation to pay any monies, or granting of any rights or privileges
to the Employee as provided in this Agreement shall not be in lieu or
derogation of the rights and privileges that the Employee now has under any plan
or benefit presently outstanding.

<PAGE> 8

Section 14. NOTICES. All notices given or required to be given shall be in
writing, sent by United States first-class certified or registered mail, return
receipt requested postage prepaid, to the Employee or to the Employee's spouse
or estate upon the Employee's death at the Employee's last-known address, and to
the Bank at its principal office. All notices shall be effective when deposited
in the mail in the manner specified in this Section. Either party by a notice
in writing may change or designate the place for receipt of all notices.

Section 15. WAIVER OF RIGHTS. No course of conduct between the Bank and the
Employee and no delay or omission of the Bank or the Employee to exercise any
right or power given under this Agreement shall: (i) impair the subsequent
exercise of any right or power; or (ii) be construed to be a waiver of any
default or any acquiescence in or consent to the curing of any default while
any other default shall continue to exist, or be construed to be a waiver of a
continuing default or of any other right or power that shall have arisen; and
every power and remedy granted by law and by this Agreement to any party may be
exercised from time to time, and as often as may be deemed expedient. All of the
rights and powers shall be cumulative to the fullest extent permitted by law.

Section 16. PRIOR AGREEMENTS. This Agreement supersedes any and all prior
Employment Agreements written or verbal, between the parties all of which are
canceled.

Section 17. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Employee, and, to the extent applicable, the Employee's heirs,
assigns, executors, and personal representatives, and upon the Bank, its
successors, and assigns, including, without limitation, any person, partnership,
or corporation that may acquire all or substantially all of the Bank's assets
and business, or with or into which the Bank may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger, consolidation,
or transfer unless a merger or consolidation or subsequent merger or
consolidation is a transaction of the type that would result in termination
under sections 11(f) and 11(g).

Section 18. ASSIGNMENT. This Agreement is personal to each of the parties
and neither party may assign or delegate any of its rights or obligations under
this Agreement without the prior written consent of the other party.

Section 19. APPLICABLE LAW. This Agreement shall be governed in all
respects and be interpreted by and under the laws of the State of New York,
except to the extent that the law may be preempted by applicable federal law,
including regulations, opinions, or orders duly issued by the OTS or FDIC or
successor or other regulatory agency ("Federal Law"), in which event this
Agreement shall be governed and be interpreted by and under federal law.

<PAGE> 9

Employee's disability under Section 9(c), the dispute shall be decided by final
and binding arbitration of a panel of three arbitrators who shall be present or
former executives of Federal savings institutions located in the United States.
Proceedings in arbitration and its conduct shall be governed by the rules of the
American Arbitration Association ("AAA") applicable to commercial arbitrations
(the "Rules") except as modified by this Section. The Employee shall appoint one
arbitrator, the Bank shall appoint one arbitrator, and the third shall be
appointed by the two arbitrators appointed by the parties. The third arbitrator
shall be impartial and shall serve as chairman of the panel. The parties shall
appoint their arbitrators within thirty (30) days after the demand for
arbitration is served, failing which the AAA promptly shall appoint a
defaulting party's arbitrator, and the two arbitrators shall select the third
arbitrator within fifteen (15) days after their appointment, or if they cannot
agree or fail to so appoint, then the AAA promptly shall appoint the third
arbitrator. The arbitrators shall render their decision in writing within thirty
(30) days after the close of evidence or other termination of the proceedings by
the panel, and the decision of a majority of the arbitrators shall be final and
binding upon the parties, nonappealable, except in accordance with the Rules and
enforceable in accordance with the Uniform Arbitration Act in force in the State
of New York or any applicable successor legislation. Any hearings in the
arbitration shall be held in the Village of Mamaroneck, New York unless the
parties shall agree upon a different venue, and shall be private and not open to
the public. Each party shall bear the fees and expenses of its arbitrator,
counsel, and witnesses, and the fees and expenses of the third arbitrator shall
be shared equally by the parties. The costs of the arbitration, including the
fees of AAA, shall be borne as directed in the decision of the panel.

Section 21. SEPARABILITY. If for any reason, any Section or portion of this
Agreement shall be held by a court to be invalid or unenforceable, it is agreed
that this shall not affect any other Section or portion of this Agreement.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.

ATTEST: SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION

Witness [SIG] By: [SIG]
--------------------------------------------
Chairman

Witness [SIG] By: [SIG]
--------------------------------------------
President

Witness [SIG] By: [SIG]
--------------------------------------------
Employee

<PAGE> 10

================================================================================
SOUND FEDERAL SAVINGS
AND LOAN ASSOCIATION

with

WILLIAM H. MOREL
================================================================================

EXECUTIVE'S AGREEMENT

================================================================================

GIOFFRE & GIOFFRE

PROFESSIONAL CORPORATION

COUNSELLORS AT LAW

2900 WESTCHESTER AVENUE

SUITE 206

PURCHASE, NEW YORK 10577

<PAGE> 11

================================================================================
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

WHEREAS, the SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION ("Bank")
entered into an Employment Agreement ("Agreement") with WILLIAM H. MOREL
("Executive") on December 31, 1997; and

WHEREAS, in connection with the reorganization of the Bank into the two
tier mutual holding company structure ("Reorganization"), the parties thereto
wish to amend said Agreement in several respects.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. The first paragraph of said Agreement is amended by adding the following
sentence to the end thereof.

"Any reference herein to "Company" shall mean Sound Federal Bancorp, a
federal stock corporation, or any successor thereto."

2. The last two sentences in "Section 1. EMPLOYMENT TERM." shall be deleted
and the following substituted therefor:

3. Sub-Section (j) of "Section 11. TERMINATION" shall be amended by replacing
the reference to "Section 11(i)" with a reference to "Section 11(h)" in the
first line thereof. In addition, the language "after a change in control of the
Bank" shall be removed from the second and third line thereof.

4. Sub-Section (k) shall be deleted and shall be replaced with the following:

<PAGE> 12

Bank or the Company within the meaning of the Home Owners' Loan Act and the
Rules and Regulations promulgated by the Office of Thrift Supervision (or its
predecessor agency), as in effect on the date hereof; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "Person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Company representing 25% or more of the Bank's or the Company's outstanding
securities except for any securities of the Bank purchased by the Company in
connection with the conversion of the Bank to the stock form and any securities
purchased by the Bank's employee stock ownership plan and trust; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof,
provided, however, that this sub-section (b) shall not apply if the Incumbent
Board is replaced by the appointment by a Federal banking agency of a
conservator or receiver for the Bank and, provided further that any person
becoming a director subsequent to the date hereof whose election was approved
by a vote of at least two-thirds of the directors comprising the Incumbent
Board or whose nomination for election by the Company's stockholders was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a
member of the Incumbent Board; or (c) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company; or (d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of
the Company or Bank or similar transaction with one or more corporations as a
result of which the outstanding shares of the class of securities then subject
to such plan or transaction are exchanged for or converted into cash or
property or securities not issued by the Bank or the Company shall be
distributed and the requisite number of proxies approving such plan of
reorganization, merger or consolidation of the Company or Bank are received and
voted in favor of such transactions; or (e) a tender offer is made for 25% or
more of the outstanding securities of the Bank or Company and shareholders
owning beneficially or of record 25% or more of the outstanding securities of
the Bank or Company have tendered or offered to sell their shares pursuant to
such tender offer and such tendered shares have been accepted by the tender
offeror."

5. New Section 22 entitled "SOURCE OF PAYMENTS" shall be added to the Agreement
and shall read as follows:

6. In all other respects, the Agreement shall remains in full force and
effect.

<PAGE> 13

WHEREAS, the parties hereto have caused this First Amendment to be
executed on the____ day of _______________, 1998.

ATTEST: SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

By:
- --------------------- ----------------------------------------------
Secretary

ATTEST: SOUND FEDERAL BANCORP

By:
- --------------------- ----------------------------------------------
Secretary

WITNESS: EXECUTIVE:

By:
- --------------------- ----------------------------------------------
William H. Morel

<PAGE> 1
EXHIBIT 10.4

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
RESTATED DIRECTORS DEFERRED FEE PLAN

Initial Effective Date December 31, 1979
Restated __________, 1998

<PAGE> 2

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
RESTATED DIRECTOR DEFERRED FEE PLAN

ARTICLE 1

PURPOSE

The purpose of this Restated Director Deferred Fee Plan (the "Plan") is to
provide current tax planning opportunities as well as supplemental funds for
retirement or death for eligible directors of Sound Federal Savings and Loan
Association (the "Association"). This Plan was initially adopted by resolution
of the Board of Directors of the Association on December 31, 1979. The Plan was
restated, effective ___________, 1998.

ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following terms may have the meanings
indicated, unless the context clearly indicates otherwise:

2.1 Account. "Account" means the Account as maintained by the
Association in accordance with Article IV with respect to any deferral of
Compensation pursuant to this Plan. A Director's Account shall be utilized
solely as a device for the determination and measurement of the amounts to be
paid to the Director pursuant to the Plan. A Director's Account shall not
constitute or be treated as a trust fund of any kind.

2.2 Association. "Association" means Sound Federal Savings and Loan
Association, a federally chartered savings association, or any successor to the
business thereof, and any affiliated or subsidiary corporations designated by
the Board.

2.3 Beneficiary. "Beneficiary" means the person or persons (and their
heirs) designated as Beneficiary in the Directors Beneficiary Designation
(attached as Exhibit B) to whom the deceased Director's benefits are payable. If
no Beneficiary is so designated, then the Director's Spouse, if living, will be
deemed the Beneficiary. If the Director's Spouse is not living, then the
children of the Director will be deemed the Beneficiaries and will take on a per
stirpes basis. If there are no children, then the Estate of the Director will be
deemed the Beneficiary.

2.4 Board. "Board" means the Board of Directors of the Association.

2.5 Change in Control. "Change of Control" shall mean a change in
control of a nature that: (i) would be required to be reported in response to
Item 1(a) of the current report on Form

<PAGE> 3

8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a
Change in Control of the Association or the Company within the meaning of the
Home Owners Loan Act, as amended ("HOLA"), and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control; or
(iii) without limitation such a Change in Control shall be deemed to have
occurred at such time as (a) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of Company's outstanding securities except for any securities purchased by the
Association's employee stock ownership plan or trust; or (b) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided, however, that this
sub-section (b) shall not apply if the Incumbent Board is replaced by the
appointment by a Federal banking agency of a conservator or receiver for the
Bank provided further, that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Association or the Company or similar transaction in which the
Association or Company is not the surviving institution occurs; or (d) a proxy
statement soliciting proxies from stockholders of the Company, by someone other
than the current management of the Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Company or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the Plan are to be exchanged
for or converted into cash or property or securities not issued by the Company;
or (e) a tender offer is made for 25% or more of the voting securities of the
Company and the shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Company have tendered or offered to sell
their shares pursuant to such tender offer and such tendered shares have been
accepted by the tender offeror.

2.6 Committee. "Committee" means the Committee appointed to administer
the Plan pursuant to Article VII.

2.7 Company. "Company" shall mean Sound Federal Bancorp, the mid-tier
holding company of the Association.

2.8 Compensation. "Compensation" means any Board or Committee fees or
retainer to which the Director becomes entitled during the Deferral Period.

2.9 Deferral Agreement. "Deferral Agreement" means the agreement filed
by a Director which acknowledges assent to the terms of the Plan and in which
the Director elects to defer the receipt of Compensation during a Deferral
Period. The Deferral Agreement must be filed with the Committee prior to the
beginning of the Deferral Period. A new Deferral

2
<PAGE> 4

Agreement or Notice of Adjustment of Deferral may be submitted by the Director
for each Deferral Commitment. If the Director fails to submit a new Deferral
Agreement or Notice of Adjustment of Deferral prior to the beginning of a
Deferral Period, deferrals for such period shall be made in accordance with the
last submitted Deferral Agreement.

2.10 Deferral Commitment. "Deferral Commitment" means an election to
defer Compensation made by a Director pursuant to Article III and for which a
separate Deferral Agreement has been submitted by the Director to the Committee.

2.11 Deferral Period. "Deferral Period" means the period over which a
Director has elected to defer a portion of his Compensation. Each calendar year
shall be a separate Deferral Period.

2.12 Determination Date. "Determination Date" means the last day of each
calendar month.

2.13 Director. "Director" means a member of the Board.

2.14 Disability. "Disability" means the permanent and total inability by
reason of mental or physical infirmity, or both, of a Director to perform the
work customarily assigned to him. Additionally, a medical doctor selected or
approved by the Board must advise the Committee that it is either not possible
to determine when such Disability will terminate or that it appears probable
that such Disability will be permanent during the remainder of such Director's
lifetime. In no event shall a Disability be deemed to occur or to continue after
a Director's Normal Retirement Date.

2.15 Investment Options. "Investment Options" means the investment
options designated by the Committee from which each Director may express a
preference, as described in Article IV, for the constructive investment of his
Account. Investment Options may include, for example, (i) equity markets
(including the stock of the Company or its successors), (ii) money market
securities (i.e., Treasury bills or other obligations of the United States
government or any state government or municipality, certificates of deposit),
(iii) top-grade corporate bonds, (iv) fixed income funds, or (v) assets which
can be liquidated within sixty (60) days with no loss of principal. Investment
Options are subject to change from time to time as the Committee, in its
discretion, deems necessary or appropriate. Investment Options shall be used as
earning indices as described in Section 4.4. No provision of the Plan shall be
construed as giving any Director an interest in any of these investment Options
nor shall any provision require that the Company make any investment in any
option.

2.16 Notice of Adjustment of Deferral. "Notice of Adjustment of
Deferral" means the Notice which the Director may submit for Deferral Periods
following the initial Deferral Period in which the initial Deferral Agreement is
submitted. The Notice of Adjustment of Deferral shall set forth the Director's
elections with respect to deferrals for said period.

3
<PAGE> 5

2.17 Plan Benefit. "Plan Benefit" means the benefit payable to a
Director as calculated in Article V.

2.18 Spouse. "Spouse" means the individual to whom the Director is
legally married at the time of the Director's death provided, however, that the
term "Spouse" shall not refer to an individual to whom the Director is legally
married to at the time of death if the Director and such individual have entered
into a formal separation agreement (provided that such separation agreement does
not provide otherwise or state that such individual is entitled to a portion of
the benefit hereunder) or initiated divorce proceedings.

2.19 Trustee. "Trustee" means the Trustee, if any, of any grantor trust
which may be established by the Association to accumulate assets for the purpose
of funding the benefits promised under this Plan.

ARTICLE III

PARTICIPATION AND DEFERRAL COMMITMENTS

3.1 Eligibility and Participation.

(a) Eligibility. Eligibility to participate in the Plan shall be
limited to members of the Board.

(b) Participation. A Director may elect to participate in the
Plan with respect to any Deferral Period by submitting, as to the initial
Deferral Period, a Deferral Agreement (as set forth at Exhibit A) or, as
to subsequent Deferral Periods, a Notice of Adjustment of Deferral (as set
forth at Exhibit C). Said Deferral Agreement or Notice of Adjustment of
Deferral shall be submitted to the Committee by December 15 of the
calendar year immediately preceding the Deferral Period. If a previously
eligible Director fails to submit a new Deferral Agreement or Notice of
Adjustment of Deferral for a Deferral Period, the Committee shall treat
the previously submitted Deferral Agreement or Notice of Adjustment of
Deferral as still in effect. In the event that a Director first becomes
eligible to participate during a calendar year, a Deferral Agreement must
be submitted to the Committee no later than thirty (30) days following
notification of the Director of eligibility to participate, and such
Deferral Agreement shall be effective only with regard to Compensation
earned or payable following the submission of the Deferral Agreement to
the Committee.

3.2 Form of Deferral. Except as provided in Section 3.1(b) above, a
Director may elect in the Deferral Agreement to defer any portion of his
Compensation for the calendar year following the calendar year in which the
Deferral Agreement is submitted.

4
<PAGE> 6

3.3 Modification of Deferral Commitment. A Deferral Commitment made
with respect to a Deferral Period shall be irrevocable except that the Committee
may permit a Director to reduce the amount to be deferred, or waive the
remainder of the Deferral Commitment upon a finding that the Director has
suffered a severe financial hardship, as set forth in Section 5.4 and except as
provided in Section 5.7.

ARTICLE IV

DEFERRED COMPENSATION ACCOUNTS

4.1 Accounts. For record keeping purposes only, an Account shall be
maintained for each Director. Separate subaccounts shall be maintained to the
extent necessary to properly reflect the Director's total vested Account
balance.

4.2 Elective Deferred Compensation. The amount of Compensation that a
Director elects to defer shall be withheld from each payment of Compensation and
credited to the Director's Account as the nondeferred portion of the
Compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation which is required by state,
federal or local law shall be withheld from the Director's nondeferred
Compensation to the maximum extent possible with any excess being withheld from
the Director's Account.

4.3 Determination of Accounts. Each Director's Account as of each
Determination Date will consist of the balance of the Director's Account as of
the immediately preceding Determination Date, increased by Compensation deferred
pursuant to a Deferral Commitment and earnings, and decreased by distributions
and losses, since that Determination Date.

4.4 Determination of Earnings. Subject to such limitations as may from
time to time be required by law or imposed by the Committee, and subject to such
operating rules and procedures as may be imposed from time to time by the
Committee, each Director may express to the Committee a preference as to how the
Director's Account should be constructively invested among the Investment
Options.

(a) Any initial or subsequent expression of investment preference
shall be in writing, on a form provided by and filed with the
Committee, and shall be subject to such rules and procedures as the
Committee may promulgate from time to time, including rules as to
when an expression of investment preference will be effective.

(b) If the Committee chooses to honor a Director's investment
preferences, (i) all contributions and credits and other amounts
added to a Director's Account shall be constructively invested in
accordance with the then effective designation of investment
preference and (i) as of the effective date of any new investment

5
<PAGE> 7

preference, all or a portion of the Director's Account at that date
shall be constructively reallocated among the designated Investment
Options according to the directions specified in the investment
preferences unless and until a subsequent investment preference
shall be filed and become effective. Unless otherwise announced by
the Committee, investment preferences may be changed no more than
four times per calendar year and must be received by the Committee
no less than ten (10) days before the effective date of the change.

(c) If the Committee receives an initial or revised investment
preference which it deems to be incomplete, unclear or improper,
the Director's investment preference then in effect shall remain in
effect (or, in the case of a deficiency in an initial investment
preference) until the next Determination Date, unless the Committee
provides for, and permits the application of, corrective action
prior to that time. The Committee shall announce to the Director a
default Investment Option, selected by the Director's investment
preference for any portion of his Account from which he fails to
file an investment preference.

(d) All investment preferences shall be advisory only and shall not
bind the Company or the Committee. The Company shall not be
obligated to invest any funds in connection with this Plan. If,
however, the Company chooses to invest funds to provide for its
liabilities under this Plan, the Committee shall have complete
discretion as to investment.

(e) Each Director's Account will be credited with earnings or
losses as if the Account were actually invested in accordance with
the Director's expression of investment preference, as follows. As
of each Determination Date, the net earnings or losses of each
Investment Option since the preceding Determination Date shall be
allocated among all Accounts in accordance with the preferences
indicated by each Director as though the Accounts had been invested
in the Investment Option in accordances with each Director's
indicated preference. For purposes of this allocation, the Account
of each Director will consist of the balance of the Account as of
the preceding Determination Date, adjusted (i) by adding to the
balance any elective deferred Compensation made since the preceding
Determination Date and (ii) by subtracting from such balance all
distributions made to the Director or to a Beneficiary. Each
Account shall be further adjusted to reflect any changes in
investment preferences which have become effective since the last
Determination Date.

(f) If it is determined that the constructive value of an Account
as of any date on which distributions are to be made differs
materially from the constructive value of the Account on the prior
Determination Date upon which the distribution is to be based, the
Committee, in its discretion, shall have the right to designate any
date in the interim as a Determination Date for the purpose of
constructively revaluing

6
<PAGE> 8

the Account so that the Account from which the distribution is
being made will, prior to the distribution, reflect its share of
such material difference in value. Similarly, the Committee may
adopt a policy of providing for regular interim valuations without
regard to the materiality of changes in the value of the Accounts.

4.5 Vesting of Accounts. A Director shall be one hundred percent (100%)
vested at all times in the amount of Compensation elected to be deferred under
this Plan and earnings thereon.

4.6 Statement of Accounts. The Committee shall submit to each Director
during the month of January, a statement setting forth the balance to the credit
of the Account maintained for a Director as of the immediately preceding
December.

ARTICLE V

PLAN BENEFITS

5.1 Plan Benefit. If a Director terminates service for reasons other
than death, the Association shall pay a Plan Benefit equal to the Director's
vested Account, as determined in accordance with Article IV.

5.2 Death Benefit. Upon the death of a Director, the Association shall
pay to the Director's Beneficiary an amount determined as follows:

(a) If the Director dies after termination of service with the
Association, the remaining unpaid balance of the Director's vested Account
shall be paid in the same form that payments were being made prior to the
Director's death.

(b) If the Director dies prior to termination of service with
the Association, the amount payable shall be the Director's Account
balance. Payments shall be made in accordance with Section 5.5.

5.3 Accelerated Distribution. Notwithstanding any other provision of
the Plan, at any time after a Change in Control, upon written request to the
Committee and with the consent of the Committee, a Director shall be entitled to
receive a lump sum distribution of the Director's vested Account balance. The
Committee shall make a determination on distribution within thirty (30) days of
receipt of the written request from the Director. The amount payable under this
Section shall be paid in a lump sum within thirty (30) days following consent to
such payment by the Board which shall be the fair market value of the Account
balance on the date of distribution.

5.4 Hardship Distributions. Upon a finding that a Director has suffered
a severe financial hardship, the Committee may, in its sole discretion, make
distributions from the

7
<PAGE> 9

Director's Account prior to the time specified for payment of benefits under the
Plan. Such hardship distributions may be made on account of an immediate and
heavy financial need of the Director for medical and/or educational expenses or
purchase of a principal residence or to prevent the foreclosure of a principal
residence. The amount of such distribution shall be limited to the amount
reasonably necessary to meet the Director's requirements during the financial
hardship.

5.5 Form of Benefit Payment.

(a) All Plan Benefits other than Hardship Distributions shall be
paid in the form selected by the Director at the time of the Deferral
Commitment.

(b) If for any Deferral Commitment a Director fails to elect a form
of benefit payment, the form shall be the form of payment elected on the
most recent past Deferral Commitment.

(c) A Director's Account may be distributed in cash, or in the
event the Company has established a grantor trust and such trust holds
investments that include Investment Options selected by the Director for
the constructive investment of his Account, the Committee may, in its sole
discretion, direct the Trustee to distribute assets in kind from the trust
in satisfaction of all or part of the Company's obligation to make
distributions to the Director.

5.6 Commencement of Payments. Payments under the Plan shall commence
and shall be paid in accordance with the Director's elections under the
Directors Deferral Agreement and Notice of Adjustment of Deferral.

5.7 Modification of Deferral Period. In the event a Director desires to
modify his Deferral Period with respect to amounts accrued in his Account, the
Director may do so, provided that any such modification is made no later than
twenty-four (24) months prior to the date of the commencement of payments under
both (i) the Directors present Deferral Agreement and/or Notice of Adjustment of
Deferral, and (ii) the Directors Deferral Agreement as modified.

5.8 Determination of Annual Installments. Benefits payable in annual
installments hereunder shall be determined as follows. The first annual
installment shall equal one-fifth of the Director's Account. The second annual
installment shall equal one-fourth of the Director's Account, as increased
during the year by interest and/or earnings on said Account. The third annual
installment shall equal one-third of the Director's Account, the fourth annual
installment shall equal one-half of the Director's Account and the final
installment shall equal the balance of the Director's Account. Each succeeding
installment shall be paid on the anniversary date of the immediate preceding
installment.

ARTICLE VI

8
<PAGE> 10

BENEFICIARY DESIGNATION

6.1 Beneficiary Designation. If the Director should die before
receiving said Plan Benefits payable hereunder, the Bank shall pay the
Director's Account to the Director's Beneficiary, commencing within thirty (30)
days oaf the Director's death and payable over the period designated in the
Directors Deferral Agreement and/or Notice of Adjustment of Deferral.

6.2 Effect of Payment. The payment to the deemed Beneficiary shall
completely discharge Association's obligations under this Plan.

ARTICLE VII

ADMINISTRATION

7.1 Committee; Duties. This Plan shall be administered by the
Committee, which shall be appointed by the Board. The Committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and
all questions, including interpretations of this Plan, as may arise in
connection with the Plan. A majority vote of the Committee members shall control
any decision.

7.2 Agents. The Committee may, from time to time, employ other agents
and delegate to them such administrative duties as it sees fit, and may from
time to time consult with counsel who may be counsel to the Association.

7.3 Binding Effect of Decisions. The decision or action of the
Committee in respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules of
regulations promulgated hereunder shall be final, conclusive and binding upon
all persons having any interest in the Plan.

7.4 Indemnity of Committee. The Association shall indemnify and hold
harmless the members of the Committee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act with respect to
this Plan, except in the case of gross negligence or willful misconduct.

9
<PAGE> 11

ARTICLE VIII

CLAIMS PROCEDURE

8.1 Claim. Any person claiming a benefit, requesting an
interpretation or ruling under the Plan, or requesting information under the
Plan shall present the request in writing to the Committee, which shall respond
in writing within thirty (30) days.

8.2 Denial of Claim. If the claim or request is denied, the written
notice of denial shall state:

(a) The reasons for denial, with specific reference to the
Plan provisions on which the denial is based.

(b) A description of any additional material or
information required and an explanation of why it is necessary.

8.3 Review of Claim. Any person whose claim or request is denied
or who has not received a response within thirty (30) days may request review
by notice given in writing to the Committee. The claim or request shall be
reviewed by the Committee who may, but shall not be required to, grant the
claimant a hearing. On review, the claimant may have representation, examine
pertinent documents, and submit issues and comments in writing.

8.4 Final Decision. The decision on review shall normally be made
within sixty (60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and the time limit
shall be one hundred twenty (120) days. The decision shall be in writing and
shall state the reasons and the relevant Plan provisions.

8.5 Arbitration. If claimants continue to dispute the benefit
denial based upon completed performance of this Plan and the Deferral Agreement
or the meaning and effect of the terms and conditions thereof, then claimants
may submit the dispute to mediation, administered by the American Arbitration
Association ("AAA") (or a mediator selected by the parties) in accordance with
the AAA's Commercial Mediation Rules. If mediation is not successful in
resolving the dispute, it shall be settled by arbitration administered by the
AAA under its Commercial Arbitration Rules, and judgment on the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof.

10
<PAGE> 12
ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

9.1 Amendment. The Board may at any time amend the Plan in whole
or in part, provided, however, that no amendment shall be effective to decrease
or restrict the amount accrued to the date of Amendment in any Account
maintained under the Plan.

9.2 Association's Right to Terminate. The Board may at any time
partially or completely terminate the Plan if, in its judgment, the tax,
accounting, or other effects of the continuance of the Plan, or potential
payments thereunder, would not be in the best interests of the Association.

(a) Partial Termination. The Board may partially
terminate the Plan by instructing the Committee not to accept
any additional Deferral Commitments. In the event of such a
Partial Termination, the Plan shall continue to operate and be
effective with regard to Deferral Commitments entered into
prior to the effective date of such Partial Termination.

(b) Complete Termination. The Board may
completely terminate the Plan by instructing the Committee not
to accept any additional Deferral Commitments, and by
terminating all ongoing Deferral Commitments. In the event of
Complete Termination, the Plan shall cease to operate and the
Association shall pay out to each Director their Account as if
that Director had terminated service as of the effective date
of the Complete Termination. Payments shall be made in equal
annual installments over the period listed below, based on the
Account balance:

<TABLE>
<CAPTION>
Appropriate Account Balance Payout Period
--------------------------- -------------
<S> <C>
Less than $10,000 1 Year
$10,000 but less than $50,000 3 Years
More than $50,000 5 Years
</TABLE>

ARTICLE X

MISCELLANEOUS

10.1 Unfunded Plan. This Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for a select
group of management or highly compensated employees. This Plan is not intended
to create an investment contract, but to provide tax planning opportunities and
retirement benefits to eligible individuals who have elected to

11
<PAGE> 13
participate in the Plan. Eligible individuals are select members of management
who, by virtue of their position with the Association, are uniquely informed as
to the Association's operations and have the ability to materially affect the
Association's profitability and operations.

10.2 Unsecured General Creditor. Directors and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interest
or claims in any property or assets of Association, nor shall they be
Beneficiaries of, or have any rights, claims or interests in any life insurance
policies, annuity contracts or the proceeds therefrom owned or which may be
acquired by Association. Such policies or other assets of Association shall not
be held under any trust for the benefit of Directors, their Beneficiaries,
heirs, successors or assigns, or held in any way as collateral security for the
fulfilling of the obligations of Association under this Plan. Any and all of
Association's assets and policies shall be, and remain, the general, unpledged,
unrestricted assets of Association. Association's obligation under the Plan
shall be that of an unfunded and unsecured promise of Association to pay money
in the future.

10.3 Trust Fund. The Association shall be responsible for the
payment of all benefits provided under the Plan. At its discretion, the
Association may establish one or more trusts, with such trustees as the Board
may approve, for the purpose of providing for the payment of such benefits.
Such trust or trusts may be irrevocable, but the assets thereof shall be
subject to the claims of the Association's creditors. To the extent any
benefits provided under the Plan are actually paid from any such trust, the
Association shall have no further obligation with respect thereto, but to the
extent not so paid, such benefits shall remain the obligation of, and shall be
paid by, the Association.

10.4 Payment to Director, Legal Representative or Beneficiary. Any
payment to any Director or the legal representative, Beneficiary, or to any
guardian or committee appointed for such Director or Beneficiary in accordance
with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims hereunder against the Association, which may require
the Director, legal representative, Beneficiary, guardian or committee, as a
condition precedent to such payment, to execute a receipt and release thereof
in such form as shall be determined by the Association.

10.5 Minimum Regulatory Capital Requirement. Notwithstanding
anything herein to the contrary, to the extent required by applicable law, no
benefits hereunder shall be earned or distributed in any year in which the
Association is not meeting its fully phased-in capital requirements.

10.6 Nonassignability. Neither a Director nor any other person
shall have any right to commute, sell, assign, transfer, hypothecate or convey
in advance of actual receipt the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are, expressly declared to be
unassignable and nontransferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments,

12
<PAGE> 14
alimony or separate maintenance owed by a Director or any other person, nor be
transferable by operation of law in the event of a Director's or any other
person's bankruptcy or insolvency.

10.7 Terms. Whenever any words are used herein in the masculine,
they shall be construed as though they were used in the feminine in all cases
where they would so apply; and whenever any words are used herein in the
singular or in the plural, they shall be construed as though they were used in
the plural or the singular, as the case may be, in all cases where they would
so apply.

10.8 Captions. The captions of the articles, sections and
paragraphs of this Plan are for convenience only and shall not control or
affect the meaning or construction of any of its provisions.

10.9 Governing Law. The provisions of this Plan shall be construed
and interpreted according to the laws of the State of New York.

10.10 Validity. In case any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal and invalid provision had never been inserted
herein.

10.11 Notice. Any notice or filing required or permitted to be given
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to any member of the
Committee, the Plan Administrator, or the Secretary of the Association. Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration
or certification.

10.12 Successors. The provisions of this Plan shall bind and inure
to the benefit of Sound Federal Savings and Loan Association and its successors
and assigns. The term "successors" as used herein shall include any corporate
or other business entity which shall, whether by merger, consolidation,
purchase or otherwise acquire all or substantially all of the business and
assets of Sound Federal Savings and Loan Association, and successors of any
such corporation or other business entity.

13
<PAGE> 15
IN WITNESS WHEREOF, and pursuant to resolution of the Board of
Directors of Sound Federal Savings and Loan Association, such corporation has
caused this instrument to be executed by its duly authorized officers effective
as of the day and year first above written.

SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION

By:
---------------------
President

ATTEST:

By:
---------------------
Secretary

14
<PAGE> 16
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
RESTATED DEFERRED FEE PLAN
DEFERRAL AGREEMENT

I,_________________________, and SOUND FEDERAL SAVINGS AND LOAN
ASSOCIATION hereby agree for good and valuable consideration, the value of
which is hereby acknowledged, that I shall participate in the Restated Director
Deferred Fee Plan ("Plan"), initially effective December 31, 1979 and restated
__________, 1998, as such Plan may now exist or hereafter be amended or
modified, and do further agree to the terms and conditions thereof.

I hereby elect to defer _________ of my Board fees and/or _________ of
my retainer. Such deferrals shall commence on _________, 1998, shall renew
annually unless otherwise changed at least fifteen (15) days prior to January 1
of any year in the Deferral Period. I understand that this election to defer
applies only to Compensation attributable to services not yet performed.

I understand that my election to defer shall continue in accordance
with this Deferral Agreement until such time as I submit a "NOTICE OF
ADJUSTMENT OF DEFERRAL" (Exhibit B, hereto) to the Administrator, at least
fifteen (15) days prior to any January 1st during my Deferral Period. A Notice
of Adjustment of Deferral Amount can be used to adjust the amount of Board fees
and/or retainer to be deferred or to discontinue deferrals altogether.

I hereby elect a DEFERRAL PERIOD of _____ years. Payments hereunder
shall commence in the year ______.

I hereby elect to receive the amount deferred in ___________
installments.

I understand that I am entitled to review or obtain a copy of the
Plan, at any time, and may do so by contacting the Committee.

This Deferral Agreement shall become effective upon execution (below)
by both the Director and a duly authorized officer of the Association.

Dated this ____ day of _______, 1998.

- ---------------------------------- -----------------------------------------
(Director) (Association's duly authorized Officer)

Exhibit A
<PAGE> 17
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
RESTATED DEFERRED FEE PLAN
BENEFICIARY DESIGNATION

The Director, under the terms of the Restated Director Deferred
Compensation Plan executed by Sound Federal Savings and Loan Association,
hereby designates the following Beneficiary to receive any guaranteed payments
or death benefits under such Plan, following his death:

PRIMARY BENEFICIARY:
--------------------------

SECONDARY BENEFICIARY:
--------------------------

This Beneficiary Designation hereby revokes any prior Beneficiary
Designation which may have been in effect.

Such Beneficiary Designation is revocable.

DATE: _________________, 19

- -------------------------------- --------------------------------
(WITNESS) DIRECTOR

- --------------------------------
(WITNESS)

Exhibit B
<PAGE> 18
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
RESTATED DIRECTORS DEFERRED FEE PLAN
NOTICE OF ADJUSTMENT OF DEFERRAL

TO: Sound Federal Savings and Loan Association
Attention: Administrative Committee, Restated Directors Deferred
Fee Plan

I hereby give notice of my election to adjust the amount of my
compensation deferral in accordance with my Deferral Agreement, dated the ____
day of _______, 19__. This notice is submitted thirty (30) days prior to
January 1st, and shall become effective January 1st, as specified below.

Adjust deferral as of: January 1st, 19__

Previous Deferral Amount ______________ per month
New Deferral Amount ______________ per month
(to discontinue deferral, enter $0)

-----------------------------------------
DIRECTOR

-----------------------------------------
DATE

ACKNOWLEDGED
BY:
--------------------------------------

TITLE:
----------------------------------

-----------------------------------------
DATE

Exhibit C

<PAGE> 1

EXHIBIT 10.5
<PAGE> 2

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
DIRECTOR EMERITUS PROGRAM

This document sets forth the terms of the Director Emeritus Program ("Program")
formerly contained in the Bylaws of Sound Federal Savings and Loan Association
("Association"), a federally chartered mutual savings association. In
connection with the reorganization of the Association into the two-tier mutual
holding company structure ("Reorganization") as the wholly-owned stock savings
association subsidiary of Sound Federal Bancorp ("Company"), the Association
has caused the Program to be set forth in this separate plan document. Sound
Federal Bancorp is a signatory to this Program solely for the purpose of
guaranteeing payment hereunder.

1. ELIGIBILITY. A Director shall be eligible for status as a Director
Emeritus upon the attainment by such Director of the age of seventy
years, provided that such Director shall first have completed fifteen
(15) years of service as a Director; except that in any case in which
the term of office of such Director who shall have served in such
capacity for at least five (5) years shall be terminated by the
merger, consolidation, takeover or dissolution of the Charter of the
Association, such Director regardless of age, shall forthwith attain
Director Emeritus status.

2. COMPENSATION OF DIRECTOR EMERITUS. A Director Emeritus shall be
entitled to compensation, without the obligation of attendance at
meetings of the Board of Directors, in the same manner and amount as
was being paid to such Director at the time of attainment of such
status.

3. TERM OF PAYMENT OF COMPENSATION. Compensation, as set forth in
Paragraph 2 above, shall be paid to the Director Emeritus for a period
not to exceed fifteen years, or until such Director Emeritus shall
attain age 85 or until the death of such Director Emeritus, whichever
occurs first.

4. SOURCE OF PAYMENTS. All payments provided in this Program shall be
timely paid in cash or check from the general funds of the
Association. The Company, however, guarantees payment and provisions
of all amounts and benefits due hereunder to a Director Emeritus and,
if such amounts and benefits due from the Association are not timely
paid or provided by the Association, such amounts and benefits shall
be paid or provided by the Company.

WHEREAS, the Association and Company have caused this Program to be
executed on the ____ day of ________, 1998.

ATTEST: SOUND FEDERAL SAVINGS AND LOAN
ASSOCIATION

- --------------- By:
Secretary ------------------------------

ATTEST: SOUND FEDERAL BANCORP

- --------------- By:
Secretary --------------------------------

<PAGE> 1
EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following is a list of the subsidiaries of Sound Federal Bancorp
following the Reorganization:

<TABLE>
<CAPTION>
Name State of Incorporation
---- ----------------------
<S> <C>
Sound Federal Savings and Loan Association Federal
</TABLE>

<PAGE> 1
EXHIBIT 23.2

Consent of Independent Certified Public Accountants

The Board of Directors
Sound Federal Savings and Loan Association:

We consent to the use of our report dated June 5, 1998 included herein relating
to the balance sheets of Sound Federal Savings and Loan Association as of March
31, 1998 and 1997, and the related statements of income, changes in equity, and
cash flows for each of the years in the three-year period ended March 31, 1998.
We further consent to the use of our opinions dated June 19, 1998 included
herein regarding certain income tax consequences of the proposed reorganization
and offering and of the proposed charitable foundation.

We consent to the references to our firm under the headings "THE REORGANIZATION
AND OFFERING - Tax Effects of the Reorganization", "SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION STATEMENTS OF INCOME", "LEGAL AND TAX MATTERS", and "EXPERTS"
in the prospectus.

/s/ KPMG PEAT MARWICK LLP

Stamford, Connecticut
June 19, 1998

<PAGE> 1
EXHIBIT 23.3

[FINPRO LETTERHEAD]
26 Church Street - P.O. Box 323
Liberty Corner, NJ 07938
(908) 604-9336 - (908) 604-5951 (FAX)
finpro @ cybernex.net - www.finpronj.com

June 19, 1998

Board of Directors
Sound Federal Savings & Loan Association
300 Mamaroneck Avenue
Mamaroneck, New York 10543-0160

Dear Board Members:

We hereby consent to the use of our firm's name, FinPro, Inc. ("FinPro") in the
Form S-1 Registration Statement, and amendments thereto, of Sound Federal
Bancorp so filed with the Securities and Exchange Commission, the combined
Notice of Mutual Holding Company Reorganization and Application for Approval of
a Minority Stock Issuance by a Subsidiary of a Mutual Holding Company on "Form
MHC-1/MHC-2" filed by Sound Federal Savings & Loan Association, and any
amendments thereto, and the Conversion Valuation Appraisal Report ("Report")
regarding the valuation of the Association provided by FinPro, and our opinion
regarding subscription rights filed as exhibits to the form S-1 and the forms
MHC-1/MHC-2. We also consent to the use of our firm's name and the inclusion
of, summary of and references to our Report and Opinion in the Prospectus
included in the form S-1 and the forms MHC-l/MHC-2, and any amendments thereto.

Very Truly Yours,

/s/ DONALD J. MUSSO

Donald J. Musso

Liberty Corner, New Jersey
June 19, 1998

<ARTICLE> 9
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,711
<INT-BEARING-DEPOSITS> 11,483
<FED-FUNDS-SOLD> 36,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,994
<INVESTMENTS-CARRYING> 64,898
<INVESTMENTS-MARKET> 65,091
<LOANS> 129,542
<ALLOWANCE> (984)
<TOTAL-ASSETS> 254,749
<DEPOSITS> 219,913
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,935
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 31,901
<TOTAL-LIABILITIES-AND-EQUITY> 254,749
<INTEREST-LOAN> 10,456
<INTEREST-INVEST> 4,341
<INTEREST-OTHER> 2,821
<INTEREST-TOTAL> 17,618
<INTEREST-DEPOSIT> 8,700
<INTEREST-EXPENSE> 8,743
<INTEREST-INCOME-NET> 8,875
<LOAN-LOSSES> 155
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,956
<INCOME-PRETAX> 4,950
<INCOME-PRE-EXTRAORDINARY> 4,950
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,885
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.69
<LOANS-NON> 1,958
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 845
<CHARGE-OFFS> 16
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 984
<ALLOWANCE-DOMESTIC> 984
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>

<PAGE> 1
Exhibit 99.1
[FINPRO LETTERHEAD]
Sound Federal Savings and Loan Association
Proposal to provide Appraisal and Business Plan Services

SECTION 1: SERVICES TO BE RENDERED

APPRAISAL

As part of the Conversion and Stock Offering services, the following major tasks
will be included:

- - conduct financial due diligence, including on-site interviews of senior
management and reviews of financial and other records;

- - gather an understanding of the Bank's financial condition,
profitability, risk characteristics, operations and external factors
that might influence or impact the Bank;

- - prepare a written detailed valuation report of the Bank and the
Company, including any appraisal updates required by regulatory
agencies other than any updates required as a result of financial
information in the prospectus going "stale", that is consistent with
applicable regulatory guidelines and standard valuation practices;

- - prepare and deliver an opinion, in form and substance acceptable to
legal and tax counsel of the Bank, to the effect that the subscription
rights granted to eligible account holders, the applicable stock
benefit plans and others in connection with the mutual holding company
reorganization and minority stock offering, have no value.

The valuation report will:

- - include an in-depth analysis of the operating results and financial
condition of the Bank;

- - assess the interest rate risk, credit risk and liquidity risk;

- - describe the business strategies of the Bank and the Company, the
market area, competition and potential for the future;

- - include a detailed peer analysis of publicly traded savings
institutions for use in determining appropriate valuation adjustments
based upon multiple factors;

- - include a midpoint pro forma valuation along with a range of value
around the midpoint value;

- - comply, in form and substance to all applicable requirements of
regulatory authorities for purposes of its use to establish the
estimated pro forma market value of the common stock of the Company
following the Conversion and Stock Offering.
<PAGE> 2
Sound Federal Savings and Loan
May 5, 1998 Page: 2

The valuation report may be periodically updated throughout the Conversion
process and will be updated at the time of the closing of the Stock Offering.

FinPro will perform such other services as are necessary or required in
connection with the regulatory review of the appraisal and will respond to the
regulatory comments, if any, regarding the valuation appraisal and any
subsequent updates.

BUSINESS PLAN

In connection with the preparation of the business plan and any other strategy
planning services, the following major tasks will be included:

- - compile a historical trend analysis utilizing the past five year ends
of Regulatory Reports;

- - perform detailed peer analysis;

- - assess competitive situation;

- - analyze the Bank markets and customers from a demographic standpoint;

- - conduct branch market tour and identify competitive positioning,
branching opportunities and market threats;

- - assess the regulatory, social, political and economic environment;

- - document the internal situation assessment;

- - analyze the current ALM position;

- - analyze the CRA position;

- - identify and document strengths and weaknesses;

- - document the Bank's mission statement;

- - document the objectives and goals;

- - document strategies;

- - meet with the Regional Office of the Office of Thrift Supervision to
review the business plan prior to filing mutual holding company
applications;

- - compile five year projections of performance;

- - prepare assessment of strategic alternatives;

- - conduct one or two planning retreats with the Board and Management to
review strategies;

- - map the Bank's general ledger to FinPro's planning model and to the
Regulatory Reports;

- - assess the Bank from a capital markets perspective including comparison
to national, regional, state and similar size organizations;

- - prepare a written business plan in form and substance satisfactory to
all applicable regulatory authorities for purposes of submission and
dissemination in connection with the application to form a mutual
holding company, including a mid-tier stock holding company and related
proxy, offering prospectus and other documents concerning the mutual
holding company formation and minority stock offering.

-Confidential-
<PAGE> 3
Sound Federal Savings and Loan
May 5, 1998 Page: 3

NO OTHER APPRAISAL/PLANNING FIRM PROVIDES THE QUANTITY AND QUALITY OF THE
PLANNING SERVICES FINPRO PROVIDES AS PART OF IT STANDARD PROPOSALS. WE URGE YOU
TO TALK TO OUR CLIENTS ABOUT THE EXTRA ADVANTAGE THAT FINPRO HAS AFFORDED THEM.

SECTION 2: INFORMATION REQUIREMENTS OF THE BANK

To accomplish the tasks set forth in Section 1 of this proposal, the following
information and work effort is expected of the Bank:

- - provide FinPro with all financial and other information, whether or not
publicly available, necessary to familiarize FinPro with the business
and operations of the Bank;

- - allow FinPro the opportunity, from time to time, to discuss the
operations of the Bank with Bank personnel;

- - promptly advise FinPro of any material or contemplated material
transactions which may have an effect on the day-to-day operations of
the Bank;

- - provide FinPro with all support schedules required to compile
Regulatory, Board and Management reports;

- - provide FinPro with offering circular, prospectus and all other
materials relevant to the appraisal function for the Conversion;

- - have system download capability;

- - promptly review all work products of FinPro and provide necessary
sign-offs on each work product so that FinPro can move on to the next
phase;

- - provide FinPro with office space to perform its daily tasks. The office
space requirements consists of a table with at least two chairs along
with access to electrical outlets for FinPro's computers.

SECTION 3: PROJECT DELIVERABLES
The following is a list of deliverables that will result from FinPro's effort:

1. Pro Forma Market Valuation of the Company and the Bank

2. Mapping of the Bank's general ledger to FinPro's five year cash flow
projection model

3. Business Plan

SECTION 4: TERM OF THE AGREEMENT AND STAFFING

It is anticipated that it will take approximately six weeks of elapsed time to
complete the tasks outlined in this proposal. During this time, FinPro will be
on-site at the Bank's facilities on a regular basis, during normal business
hours.

FinPro will assign Donald J. Musso and Kenneth G. Emerson to this engagement.
Although some back office analytics may be performed by other FinPro staff,
Donald Musso will be the firm's point man on this engagement and will be active
in all aspects of this engagement.

-Confidential-
<PAGE> 4
Sound Federal Savings and Loan
May 5, 1998 Page: 4

SECTION 5: FEES AND EXPENSES

FinPro's fees for providing the services outlined in this proposal will be:

- $16,000 for the appraisal.

- $9,000 for the business plan component.

This fee is payable according to the following schedule:

- prior to starting, a retainer of $4,000; plus

- upon the submission of the business plan to the regulators, a
non-refundable fee of $5,000; plus

- upon submission of the appraisal to the regulators, a
non-refundable fee of $9,000; plus

- upon completion of the Stock Offering, a non-refundable fee
equal to the remainder, unless only the plan is selected in
which case the remainder would be due upon regulatory approval
of the business plan.

In addition to any fees that may be payable to FinPro hereunder, the Bank hereby
agrees to reimburse FinPro for all of FinPro's travel and other out-of-pocket
expenses incurred in connection with FinPro's engagement provided that any
individual expenses in excess of $750 shall require the prior approval of the
Bank. Such out-of-pocket expenses will consist of travel to and from the Bank's
facilities from FinPro's offices, normal delivery charges such as Federal
Express, and costs associated with the actual Plan and Valuation documents such
as copying. The out-of-pocket expenses will not include expenses such as food or
lodging as FinPro is local. It is FinPro policy to provide you with an itemized
accounting of the out-of-pocket expenditures so that you can control them.

In the event that the Bank shall, for any reason, discontinue the proposed
Conversion prior to delivery of the completed documents set forth above, the
Bank agrees to compensate FinPro according to FinPro's standard billing rates
for consulting services based on accumulated time and expenses, not to exceed
the respective fee caps noted above. FinPro's standard hourly rates are as
follows:

<TABLE>
<S> <C>
- Managing Director Level $250

- Staff Consultant Level $125
</TABLE>

-Confidential-
<PAGE> 5
Sound Federal Savings and Loan
May 5, 1998 Page: 5

If during the course of the proposed transaction, unforeseen events occur so as
to materially change the nature or the work content of the services described in
this contract, the terms of said contract shall be subject to renegotiation by
the Bank and FinPro. Such unforeseen events shall include, but not be limited
to, major changes in the conversion regulations, appraisal guidelines or
processing procedures as they relate to conversion appraisals, major changes in
management or procedures, operating policies or philosophies, excessive delays
or suspension of processing of conversion applications by the regulators, and
stale financial numbers such that completion of the conversion transaction
requires the preparation by FinPro of a new or updated appraisal.

FinPro agrees to execute a suitable confidentiality agreement with the Bank. The
Bank acknowledges that all opinions, valuations and advice (written or oral)
given by FinPro to the Bank in connection with FinPro's engagement are intended
solely for the benefit and use of the Bank (and it's directors, management, and
attorneys) in connection with the matters contemplated hereby, and the Bank
agrees that no such opinion, valuation, or advice shall be used for any other
purpose, except with respect to the opinion and valuation which may be used for
the proper corporate purposes of the client, or reproduced, or disseminated,
quoted or referred to at any time, in any manner or for any purpose, nor shall
any public references to FinPro be made by the Bank (or such persons), without
the prior written consent of FinPro, which consent shall not be unreasonably
withheld.

SECTION 6: REPRESENTATIONS AND WARRANTIES

FinPro, the Bank and the Company agree to the following:

1.) The Bank agrees to make available or to supply to FinPro the
information set forth in Section 2 of this Agreement.

2.) The Bank hereby represents and warrants to FinPro that any information
provided to FinPro does not and will not, to the best of the Bank's knowledge,
at the times it is provided to FinPro, contain any untrue statement of a
material fact or fail to state a material fact necessary to make the statements
therein not false or misleading in light of the circumstances under which they
were made.

3.) (a) The Bank agrees that it will indemnify and hold harmless
FinPro, its directors, officers, agents and employees of FinPro (collectively
referred to in this Section 6 as "FinPro") or its successors who act for or on
behalf of FinPro in connection with the services called for under this agreement
( hereinafter referred to as the "Agreement"), from and against any and all
losses, claims, damages and liabilities (including, but not limited to, all
losses and expenses in connection with claims under the federal securities law)
arising out of or in any way related to the services provided by FinPro under
this Agreement, except to the extent arising out of or attributable to the
negligence or willful misconduct of FinPro, its directors, officers, agents or
employees.

-Confidential-
<PAGE> 6
Sound Federal Savings and Loan
May 5, 1998 Page: 6

(b) FinPro shall give written notice to the Bank of such claim for
indemnification or facts within thirty days of the assertion of any claim or
discovery of material facts upon which FinPro intends to base a claim for
indemnification hereunder. In the event the Bank elects, within seven days of
the receipt of the original notice thereof, to contest such claim by written
notice to FinPro, FinPro will be entitled to be paid any amounts payable by the
Bank hereunder, together with interest on such costs from the date incurred at
the rate of eight percent per annum within five days after a final determination
is made either in writing by the Bank or by a final judgment of a court of
competent jurisdiction that indemnification hereunder should be made. If the
Bank does not elect to challenge the claim for indemnification, FinPro shall be
paid promptly and in any event within thirty days after receipt by the Bank of
the notice of the claim.

(c) The Bank shall pay for or reimburse the reasonable expenses,
including attorneys' fees, incurred by FinPro in connection with the contest of
any claim subject to indemnification hereunder in advance of the final
determination of any proceeding within thirty days of the receipt of such
request if FinPro furnishes the Bank:

1. a written statement of FinPro's good faith belief
that it is entitled to indemnification hereunder; and

2. a written undertaking by FinPro to repay the advance
if it is ultimately determined in a final
adjudication of such proceeding that FinPro is not
entitled to such indemnification.

(d) In the event that the Bank elects to contest the claim, (i)
FinPro will cooperate in Good Faith with the contest, (ii) FinPro will provide
the Bank with an irrevocable power-of-attorney permitting the Bank to pursue the
claim in the name of FinPro, and (iii) FinPro will be prohibited from settling
or compromising the claim without written consent of the Bank.

(e) In the event the Bank does not pay any indemnified loss or
make advance reimbursements of expenses in accordance with the terms of this
Agreement, FinPro shall have all remedies available at law or in equity to
enforce such obligation.

This Agreement constitutes the entire understanding of the Bank and FinPro
concerning the subject matter addressed herein, and shall be governed and
construed in accordance with the laws of the State of New York. This Agreement
may not be modified, supplemented or amended except by written agreement
executed by both parties.

The Bank and FinPro are not affiliated, and neither the Bank nor FinPro has an
economic interest in, or is held in common with, the other and has not derived a
significant portion of its gross revenues, receipts or net income for any period
from transactions with the other.

-Confidential-
<PAGE> 7
Sound Federal Savings and Loan
May 5, 1998 Page: 7

Please confirm that the foregoing is in accordance with your understanding and
agreement with FinPro by signing and returning to FinPro the duplicate of the
letter enclosed herewith.

Sincerely:
FinPro, Inc.
By:

/s/ Donald J. Musso /s/ Richard McStravick
- ------------------------------ ------------------------------
Donald J. Musso Richard McStravick
President President and CEO

5/18/98 5/18/98
- ------------------------------ ------------------------------
Date Date

-Confidential-

<PAGE> 1
Exhibit 99.2

SOUND FEDERAL BANCORP

CONVERSION

VALUATION

APPRAISAL

DATE ISSUED: JUNE 12, 1998
DATE OF MARKET PRICES: JUNE 8, 1998
<PAGE> 2
Table of Contents
Sound Federal Bancorp
Mamaroneck, New York

INTRODUCTION 1

1. OVERVIEW AND FINANCIAL ANALYSIS 3

GENERAL OVERVIEW 3
HISTORY 4
STRATEGIC DIRECTION 5
BUSINESS STRATEGY 7
BALANCE SHEET TRENDS 8
LOAN PORTFOLIO 11
SECURITIES 14
INVESTMENTS AND MORTGAGE-BACKED SECURITIES 15
ASSET QUALITY 16
FUNDING COMPOSITION 18
ASSET/LIABILITY MANAGEMENT 20
NET WORTH AND CAPITAL 21
INCOME AND EXPENSE TRENDS 22
SUBSIDIARIES 26
LEGAL PROCEEDINGS 26

2. MARKET AREA ANALYSIS 27

MARKET AREA DEMOGRAPHICS 27
MARKET AREA DEPOSIT CHARACTERISTICS 29
FEDERAL RESERVE BANK - NATIONAL SUMMARY 31
FEDERAL RESERVE DISTRICT 2 - NEW YORK 37

3. COMPARISONS WITH PUBLICLY TRADED THRIFTS 40

INTRODUCTION 40
SELECTION SCREENS 41
SELECTION CRITERIA 42
COMPARABLE GROUP PROFILES 44

4. MARKET VALUE DETERMINATION 49

INTRODUCTION 49
BALANCE SHEET STRENGTH 50
ASSET QUALITY 53
<PAGE> 3
EARNINGS QUALITY, PREDICTABILITY AND GROWTH 54
MARKET AREA 58
MANAGEMENT 59
DIVIDENDS 60
LIQUIDITY OF THE ISSUE 62
SUBSCRIPTION INTEREST 63
RECENT REGULATORY MATTERS 64
MARKET FOR SEASONED THRIFT STOCKS 65
MARKET FOR MHC STOCKS 69
ACQUISITION MARKET 71
ADJUSTMENTS TO VALUE 77
VALUATION APPROACH 78
VALUATION CONCLUSION 82
<PAGE> 4
List of Exhibits
Sound Federal Bancorp
Mamaroneck, New York
EXHIBIT

1 Profile of FinPro, Inc.

2 Consolidated Statements of Financial Condition

3 Consolidated Statements of Income

4 Consolidated Statements of Changes in Net Worth

5 Consolidated Statements of Cash Flows

6 Selected Data on All Public Thrifts

7 Industry Multiples

8 MHC Conversions

9 Recent Standard Conversions

10 Full Appraisal Pro forma March 31, 1998 - 12 Months Data

11 Full Appraisal With Foundation Pro forma March 31, 1998 - 12 Months Data

12 Appraisal MHC With Foundation Pro forma March 31, 1998 - 12 Months Data
<PAGE> 5
Conversion Valuation Appraisal Report Page: 1 - 1

INTRODUCTION

This report represents FinPro, Inc.'s ("FinPro") independent appraisal of the
estimated pro-forma market value of the common stock ( the "Common Stock") of
Sound Federal Savings & Loan Association ( the "Bank") in connection with the
Plan of Mutual Holding Company Reorganization and Stock Issuance ("Plan") of the
Bank. Pursuant to the Plan, the Bank (i) will establish a mid tier company,
Sound Federal Bancorp (the "Bancorp") and a mutual holding company, Sound
Federal, MHC (the "Mutual Holding Company"); (ii) will exchange its mutual
savings bank charter for a stock savings bank charter; (iii) will issue 100% of
its common stock to the Bancorp; and (iv) the Bancorp will issue 45% to the
public and 4.44% of the shares issued to the public to a newly formed charitable
foundation.

It is our understanding that the Bank will offer its stock in a subscription and
community offering to the Bank's Eligible Account Holders, to the Bank's ESOP,
to Supplemental Eligible Account Holders of the Bank, to Other Participants, to
the board members, officers and employees of the Bank, and to the community.

This appraisal has been prepared in accordance with Regulation 563b.7 and with
the "Guidelines for Appraisal Reports for the Valuation of Savings and Loan
Associations Converting from Mutual to Stock Form of Organization" of the Office
of Thrift Supervision ("OTS") which have been adopted in practice by the Federal
Deposit Insurance Corporation ("FDIC"), including the most recent revisions as
of October 21, 1994, and applicable regulatory interpretations thereof. Pursuant
to the Reorganization, the Bank is filing with the Office of Thrift Supervision
("OTS") a Notice of Mutual Holding Company Reorganization and an Application for
approval of a Minority Stock Issuance by a Savings Association Subsidiary of a
Mutual Holding Company on Forms MHC-1 and MHC-2 ("Form MHC-1/MHC-2").

In the course of preparing our report, we reviewed the audited financial
statements of the Bank's operations for the twelve month periods ending March
31, 1998, and March 31, 1997 and the Bank's operations and financials for the
prior three years. We have conducted due diligence analysis of the Bank and the
Company (hereinafter, collectively referred to as "the Bank") and held due
diligence related discussions with the Bank's management and board, KPMG Peat
Marwick, LLP, (the Bank's independent audit firm), Luse, Lehman, Gorman,
Pomerenk, & Schick (the Bank's special counsel), and Sandler O'Neill & Partners,
L.P. (the Bank's financial and marketing advisor). The valuation parameters set
forth in the appraisal were predicated on these discussions but all conclusions
related to the valuation were reached and made independent of such discussions.
<PAGE> 6
Conversion Valuation Appraisal Report Page: 1 - 2

Where appropriate, we considered information based upon other publicly available
sources, which we believe to be reliable; however, we cannot guarantee the
accuracy or completeness of such information. We visited the Bank's primary
market area and reviewed the market area economic condition. We also reviewed
the competitive environment in which the Bank operates and its relative
strengths and weaknesses. We compared the Bank's performance with selected
publicly traded thrift institutions. We reviewed conditions in the securities
markets in general and in the market for savings institutions in particular. Our
analysis included a review of the estimated effects of the Reorganization on the
Bank, operation and expected financial performance as they related to the Bank's
estimated pro-forma value.

In preparing our valuation, we relied upon and assumed the accuracy and
completeness of financial and other information provided to us by the Bank and
its independent accountants. We did not independently verify the financial
statements and other information provided by the Bank and its independent
accountants, nor did we independently value any of the Bank's assets or
liabilities. This estimated valuation considers the Bank only as a going concern
and should not be considered as an indication of its liquidation value.

OUR VALUATION IS NOT INTENDED, AND MUST NOT BE CONSTRUED, TO BE A RECOMMENDATION
OF ANY KIND AS THE ADVISABILITY OF PURCHASING SHARES OF COMMON STOCK IN THE
REORGANIZATION. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON
ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO
CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS WHO PURCHASE
SHARES OF COMMON STOCK IN THE REORGANIZATION WILL THEREAFTER BE ABLE TO SELL
SUCH SHARES AT PRICES RELATED TO THE FOREGOING VALUATION OF THE PRO-FORMA MARKET
VALUE THEREOF. FINPRO IS NOT A SELLER OF SECURITIES WITHIN THE MEANING OF ANY
FEDERAL OR STATE SECURITIES LAWS AND ANY REPORT PREPARED BY FINPRO SHALL NOT BE
USED AS AN OFFER OR SOLICITATION WITH RESPECT TO THE PURCHASE OR SALE OF ANY
SECURITIES.

The estimated valuation herein will be updated as appropriate. These updates
will consider, among other factors, any developments or changes in the Bank's
financial condition, operating performance, management policies and procedures,
and current conditions in the securities market for thrift institution common
stock. Should any such developments or changes, in our opinion, be material to
the estimated pro-forma market value of the Bank, appropriate adjustments to the
estimated pro-forma market value will be made. The reasons for any such
adjustments will be explained at that time.
<PAGE> 7
Conversion Valuation Appraisal Report Page: 1 - 3

1. OVERVIEW AND FINANCIAL ANALYSIS

GENERAL OVERVIEW

The Bank after the Reorganization, will be a federally chartered stock holding
company, the wholly owned subsidiary of Sound Federal Bancorp, who in turn, is
majority owned by Sound Federal MHC and minority owned by the public. As of
March 31, 1998, the Bank had $254.7 million in total assets, $219.9 million in
deposits, $128.6 million in net loans and $31.9 million in equity.

The following table shows the Bank's branch network as of March 31, 1998.

FIGURE 1 - CURRENT BRANCH LIST

BRANCH OFFICE TOWN

WESTCHESTER COUNTY

30 Mamaroneck Avenue Mamaroneck

189 Halstead Avenue Harrison

115 Ridge Street Rye Brook
<PAGE> 8
Conversion Valuation Appraisal Report Page: 1 - 4

HISTORY

1891 Mamaroneck Co-operative Savings and Loan Association was incorporated
January 2.

1895 The Association moved to 111 Mamaroneck Avenue.

1910 The Association moved to 54 West Boston Post Road.

1926 The Association moved to 60 West Boston Post Road.

1930 The Association moved to 236 Mamaroneck Avenue.

1935 Mamaroneck Co-operative Savings and Loan Association was converted to a
Federal Association under the name Mamaroneck Federal Savings and Loan
Association.

1939 The Association moved to its new headquarters located at 142 Mamaroneck
Avenue.

1952 The Association took title to 300 Mamaroneck Avenue which was razed for
the construction of a new building.

1954 A grand opening was held on November 20, establishing the Associations
current headquarters.

1961 The Association opened its second branch on April 1 at the corner of
Oakland Avenue and Halstead Avenue in Harrison, New York.

1970 A special meeting of members was held to amend section 3 of the Bank's
Charter, converting the Association from a share institution to a
deposit institution.

1972 The grand opening for the Bank's Rye Ridge branch, 115 South Ridge
Street was held on December 9th.

1978 At a special meeting, held on October 13th, the members approved a
change in the name of the Association to Sound Federal Savings and Loan
Association.

1979 A parcel of land adjacent to 300 Mamaroneck Avenue was purchased for
the construction of a drive-up window which opened on January 12, 1980.
<PAGE> 9
Conversion Valuation Appraisal Report Page: 1 - 5

STRATEGIC DIRECTION

The Bank has historically operated as a traditional thrift, taking consumer
deposits and making mortgage loans. The portfolio of loans is supplemented,
however, with a mix of short and long duration investment securities.

It is anticipated that the Bank will form an Employee Stock Ownership Plan
("ESOP") which will purchase 8% of the minority shares as part of the Initial
Public Offering and a Management Recognition and Retention Plan ("MRP") which
will purchase 4% of the minority shares approximately six months after the
conversion in the aftermarket. In addition, at the midpoint of the valuation
range, 276,818 stock options will be authorized as part of the conversion. No
option plans or restricted stock plans will be implemented for at least six
months after the Conversion and Reorganization.

The Board of Directors of the Bank believes that the decision to convert to a
mutual holding company is in the best interests of all parties associated with
the bank. The resultant entity will:

- be financially stronger, primarily as a result of additional
capital;

- be better positioned to compete in the markets the Bank
serves;

- facilitate possible acquisition opportunities and possible
diversification;

- provide access to capital markets;

- allow for a wider array of products and services; and,

- provide financial capacity to buy or build critical mass in
new geographic markets or in the markets it currently serves.

The Reorganization also provides the Bank, Bancorp and MHC the corporate
flexibility to raise additional capital and further diversify into bank related
activities when such opportunities or needs arise. The Bank can utilize its new
structure to:
<PAGE> 10
Conversion Valuation Appraisal Report Page: 1 - 6

- form new subsidiaries; and

- purchase branches, acquire or merge with other banks, thrifts
or financial services related company.

Although there are no current arrangements, understandings or agreements
regarding any such opportunities, the Bancorp and MHC will be in a position
after the conversion (subject to regulatory limitations and the financial
condition of Bancorp and MHC) to take advantage of any such opportunity that may
arise.
<PAGE> 11
Conversion Valuation Appraisal Report Page: 1 - 7

BUSINESS STRATEGY

The Bank's current strategic plan is to maintain profitability and its
well-capitalized position to take advantage of future expansion or growth
opportunities, while managing growth, maintaining asset quality, controlling
expenses and managing its exposure to credit and interest rate risk. Management
seeks to accomplish these goals by:

(1) Emphasizing its retail banking services through its network of branch
offices, which includes the origination of one-to-four family mortgage
loans, as well as commercial real estate, home equity, multi-family,
construction and development and consumer loans, in the communities it
serves as market conditions permit; and

(2) Expanding its current branch franchise as opportunities present
themselves; and

(3) Enhancing earnings and offsetting the effects of the extreme
competition for real estate loans in the Bank's market area through the
purchase of U.S. Government agency, and treasury securities and MBS's,
which provide a source of liquidity, low credit risk and low
administrative cost as well as helping to manage interest rate risk;
and continuing to monitor interest rate risk.

(4) Additionally, management will seek to increase loan originations.

Competition, however has remained intense in the Bank's market area, which has
resulted in the Bank's total securities portfolio representing a greater
percentage of total assets than its loan portfolio in each of the last five
years. Management believes that continuing to seek lending opportunities, as
well as investing in wholesale investments, enables the Bank to effectively
control its interest rate risk while at the same time enabling it to maintain a
balance of high quality, diversified investments, provide for collateral for
short and long term borrowings and lessen exposure to credit risk.
<PAGE> 12
Conversion Valuation Appraisal Report Page: 1 - 8

BALANCE SHEET TRENDS

Since March 31, 1994, the Bank's balance sheet has grown from $204.3 million to
$254.7 million. This represents growth of 24.70% since March 31, 1994. Retained
earnings has increased $10.3 million from $21.6 million at March 31, 1994 to
$31.9 million at March 31, 1998.

FIGURE 2 - ASSET AND RETAINED EARNINGS CHART

<TABLE>
<CAPTION>
Assets Retained Earnings
------------ -----------------
$ in thousands $ in millions
<S> <C> <C>

Mar. 94 $204,283 $21.6
Mar. 95 214,225
Mar. 96 230,026
Mar. 97 242,983
Mar. 98 254,749 $31.9

</TABLE>

Source: Offering Prospectus
<PAGE> 13
Conversion Valuation Appraisal Report Page: 1 - 9

FIGURE 3 - AVERAGE YIELDS AND COSTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------------------
AT MARCH 31, 1998 1998 1997 1996
-----------------------------------------------------------------------------------------------------

AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loan $128,558 8.20% $124,646 $10,456 8.39% $118,986 $ 9,987 8.39% $111,022 $ 9,468 8.53%
Mortgage-backed securities 53,421 6.91% 53,475 3,515 6.57% 50,930 3,244 6.37% 43,440 2,819 6.49%
Other securities 14,471 6.21% 13,789 826 5.99% 12,956 768 5.93% 14,280 717 5.02%
Federal funds sold 36,400 5.45% 34,292 1,929 5.63% 33,523 1,793 5.35% 31,685 1,870 5.90%
Certificates of deposit 11,483 6.16% 12,002 738 6.15% 11,765 700 5.95% 11,317 699 6.18%
Other interest-earning assets 3,515 6.04% 2,512 154 6.13% 2,360 145 6.14% 2,623 159 6.06%
-------- -------- ------- -------- ------- -------- -------
Total interest-earning
assets 247,848 7.28% 240,716 $17,618 7.32% 230,520 $16,637 7.22% 214,367 $15,732 7.34%
======= ======= =======
Noninterest earning assets 6,901 7,100 6,606 6,459
-------- -------- -------- --------
Total assets $254,749 $247,816 $237,126 $220,826
======== ======== ======== ========

Interest-bearing liabilities:
Passbook and club accounts $ 61,347 2.54% $ 62,197 $ 1,573 2.53% $ 64,537 $ 1,640 2.54% $ 67,537 $ 1,903 2.82%
Money market accounts 17,676 3.05% 18,556 510 2.75% 17,845 525 2.94% 16,446 516 3.14%
Demand and NOW deposits 21,261 2.04% 20,269 452 2.23% 19,454 393 2.02% 17,615 358 2.03%
Certificates accounts 119,629 5.60% 114,015 6,165 5.41% 104,991 5,318 5.07% 91,557 5,032 5.50%
Other interest-bearing
liabilities 2,451 2.22% 1,870 43 2.30% 1,771 41 2.32% 1,651 39 2.36%
-------- -------- ------- -------- ------- -------- -------
Total interest-bearing
deposits 222,364 4.18% 216,907 $ 8,743 4.03% 208,598 $ 7,917 3.80% 194,806 $ 7,848 4.03%
======= ======= =======
Non-interest-bearing
liabilities 484 448 508 395
-------- -------- -------- --------
Total liabilities 222,848 217,355 209,106 195,201
Equity 31,901 30,461 28,020 25,625
-------- -------- -------- --------
Total liabilities and
equity $254,749 $247,816 $237,126 $220,826
======== ======== ======== ========
Net interest income $ 8,875 $ 8,720 $ 7,884
======= ======= =======
Net interest rate spread 3.10% 3.29% 3.42% 3.31%
Net earning assets $ 25,484 $ 23,830 $21,943 $ 19,582
======== ======== ======== ========
Net interest margin 3.69% 3.78% 3.68%
Average interest-earning
assets to average interest-
bearing liabilities 111.46% 110.99% 110.51% 110.04%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Source: Offering Prospectus
<PAGE> 14
Conversion Valuation Appraisal Report Page: 1 - 10

The following tables set forth certain information concerning the financial
position of the Bank along with selected ratios at the dates indicated.

FIGURE 4 - KEY BALANCE SHEET DATA

<TABLE>
<CAPTION>
At March 31,
-------------------------------------
1998 1997 1996
-------------------------------------
($ in thousands)
-------------------------------------
<S> <C> <C> <C>
SELECTED FINANCIAL CONDITION AND DATA:
Total Amount of:
Total Assets $254,749 $242,983 $230,026
Loans receivable, net 128,558 121,617 113,532
Mortgage-backed securities
Held to maturity 53,421 52,901 48,307
Held for investment -- -- --
Other securities
Held to maturity 11,477 10,452 11,184
Held for investment -- -- --
Available for sale 2,994 1,995 1,994
Deposits 219,913 211,223 200,611
Equity 31,901 29,017 26,726
</TABLE>

Source: Offering Prospectus

FIGURE 5 - KEY RATIOS

<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED MARCH 31,
-------------------------------------
KEY OPERATING RATIOS 1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
SELECTED FINANCIAL RATIOS & OTHER DATA:
Performance Ratios:
Return on assets (ratio of net income
to average total assets) 1.16% 0.97% 1.09%
Return on equity (ratio of net income
to average equity) 9.47% 8.17% 9.35%
Average interest rate spread 3.29% 3.42% 3.31%
Net interest margin 3.69% 3.78% 3.68%
Efficiency ratio 43.66% 44.65% 47.76%
Noninterest expenses to average total
assets 1.60% 2.22% 1.75%
Average interest-earning assets to
average interest bearing liabilities 110.98% 110.51% 110.54%

ASSET QUALITY RATIOS:
Nonperforming assets to total assets 0.82% 0.98% 1.37%
Allowance for loan losses to
nonperforming loans 50.26% 37.32% 23.48%
Allowance for loan losses to total
loans 0.75% 0.68% 0.62%

CAPITAL RATIOS:
Equity to total assets at end of period 12.52% 11.94% 11.62%
Average equity to average assets 12.29% 11.82% 11.60%

OTHER DATA:
Number of full-service offices 3 3 3
</TABLE>

Source: Offering Prospectus
<PAGE> 15
Conversion Valuation Appraisal Report Page: 1 - 11

LOAN PORTFOLIO

The Bank's loan portfolio is very one dimensional, primarily composed of
one-to-four family residential loans, with 93.5% of total loans falling into
this category.

FIGURE 6 - LOAN MIX AS OF MARCH 31, 1998

[PIE CHART]

Source: Offering Prospectus
<PAGE> 16
Conversion Valuation Appraisal Report Page: 1 - 12

The Bank increased its lending portfolio by $23.9 million, from $104.7 million
at March 31, 1994, to $128.6 million at March 31, 1998. The Bank's net loan to
asset ratio was 50.46% at March 31, 1998 and has remained at about that level
since March 1994.

FIGURE 7 - NET LOANS RECEIVABLE CHART

Net Loans
$ in thousands
Mar-94 $104,707
Mar-95 $108,684
Mar-96 $113,532
Mar-97 $121,617
Mar-98 $128,556

Source: Offering Prospectus
<PAGE> 17
Conversion Valuation Appraisal Report Page: 1 - 13

The Bank's loan portfolio is primarily composed of one-to-four family
residential loans. However, the Bank does offer commercial, construction, and
consumer loans, although in aggregate these loans comprise only a small portion
of the loan mix. Construction loans have decreased to $1.8 million at March 31,
1998 from $5.5 million at March 31, 1997.

FIGURE 8 - LOAN MIX
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------------- ----------------- ----------------- ----------------- -----------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
$ IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REAL ESTATE LOANS:
One to four family $121,865 93.5% $113,082 91.4% $105,996 90.8% $103,821 90.8% $ 99,393 94.4%
Multi-family 892 0.7% 348 0.3% 373 0.3% 395 0.4% 680 0.6%
Commercial 3,811 2.9% 3,416 2.7% 3,469 3.0% 3,188 2.9% 3,088 2.9%
Construction 1,800 1.4% 5,539 4.5% 5.193 4.5% 1,451 1.3% 365 0.4%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total Mortgage Loans 128,368 98.5% 122,385 98.9% 115,031 98.6% 108,855 98.7% 103,526 98.3%

CONSUMER LOANS:
Automobile 1,011 0.8% 1,028 0.8% 968 0.8% 647 0.6% 185 0.2%
Other 1,016 0.7% 426 0.3% 665 0.6% 737 0.7% 1,625 1.5%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total Consumer Loans 2,027 1.5% 1,454 1.1% 1,633 1.4% 1,384 1.3% 1,810 1.7%
Total Loans receivable $130,395 100.0% $123,839 100.0% $116,664 100.0% $110,239 100.0% $105,336 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
Less:
Construction loans in process 573 1,049 2,023 500 112
Allowance for loan losses 984 845 725 652 568
Deferred loan origination fees 280 328 384 503 529
-------- -------- -------- -------- --------
Total loans, net $128,558 $121,617 $113,532 $108,584 $104,127
</TABLE>

Source: Offering Prospectus
<PAGE> 18
Conversion Valuation Appraisal Report Page: 1 - 14

SECURITIES

The Bank's security portfolio has grown from $48.3 million at March 31, 1994, to
$67.9 million at March 31, 1998. The portfolio is primarily composed of
mortgage-backed securities.

FIGURE 9 - SECURITIES CHART

<TABLE>
<CAPTION>
Mar-94 Mar-95 Mar-96 Mar-97 Mar-98
<S> <C> <C> <C> <C> <C>
Mortgage-Backed Securities $36,332 $40,046 $48,307 $52,901 $53,421
Investment Securities $12,013 $14,991 $13,178 $12,447 $14,477
------- ------- ------- ------- -------
Total $48,345 $55,037 $61,485 $65,348 $67,898
======= ======= ======= ======= =======
</TABLE>

Source: Offering Prospectus
<PAGE> 19
Conversion Valuation Appraisal Report Page: 1 - 15

INVESTMENTS AND MORTGAGE-BACKED SECURITIES

The investment and mortgage-backed securities portfolio is comprised primarily
of GNMA adjustable securities. Of the investments, only a modest portfolio of
mutual fund investments is available for sale, however, the Bank has a high
level of liquidity with $36.4 million in federal funds sold and $11.5 million in
certificates of deposit.

FIGURE 10 - INVESTMENT MIX

<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------------------------------------------------
Amortized Amortized Amortized
Cost Fair Value Cost Fair Value Cost Fair Value
--------------------------------------------------------------------------------------
Dollars in Thousands
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
Adjustable rate:
GNMA $45,260 $45,411 $44,811 $44,741 $39,725 $39,239
Fannie Mae 6,935 6,940 6,438 6,424 6,534 6,552
Fixed rate:
GNMA 1,129 1,211 1,518 1,593 1,873 1,978
Freddie Mac 97 99 134 134 175 177
------- ------- ------- ------- ------- -------
Total mortgage-backed securities $53,421 $53,661 $52,901 $52,892 $48,307 $47,946
======= ======= ======= ======= ======= =======

Securities held to maturity:
US Government securities $ 4,012 $ 4,030 $ 6,004 $ 5,993 $ 6,003 $ 6,005
Federal agency obligations 7,465 7,400 4,448 4,407 5,181 5,170
Securities available for sale:
Mutual fund investments 3,000 2,994 2,000 1,995 2,000 1,994
------- ------- ------- ------- ------- -------
Total other securities $14,477 $14,424 $12,452 $12,395 $13,184 $13,169
======= ======= ======= ======= ======= =======

Average remaining life of other securities 7.2 years 2.8 years 3.8 years

Other interest-earning assets:
Federal funds sold $36,400 $35,200 $34,800
Certificates of deposit 11,483 11,986 11,594
FHLB stock 1,745 1,607 1,513
------- ------- -------
Total $49,628 $48,793 $47,907
======= ======= =======
</TABLE>

Source: Offering Prospectus
<PAGE> 20
Conversion Valuation Appraisal Report Page: 1 - 16

ASSET QUALITY

The Bank has a moderate level of non-performing assets. As a percentage of
assets, total non-performing assets have decreased from 0.87% at March 31, 1994,
to 0.82% at March 31, 1998. Non-performing assets peaked at $3.143 million at
March 31, 1996. At March 31, 1998 non-performing assets have declined to $2.087
million, a decrease of 33.60%.

FIGURE 11 - NON-PERFORMING ASSETS CHART

[BAR CHART]

Source: Offering Prospectus

FIGURE 12 - NON-PERFORMING LOANS

- -------------------------------------------------------------------------------
At March 31, 1998
($ in thousands)
- -------------------------------------------------------------------------------
<S> <C>

Non-performing loans $1,958
Real estate owned, net 129
- -------------------------------------------------------------------------------
Total non-performing assets $2,087

Non-performing loans as a percentage of total loans 1.50%
Non-performing assets as a percentage of total assets 0.82%
- -------------------------------------------------------------------------------
</TABLE>

Source: Offering Prospectus
<PAGE> 21
Conversion Valuation Appraisal Report Page: 1 - 17

The Bank has grown its allowance for loan and lease losses from $568 thousand at
March 31, 1994 to $984 thousand at March 31, 1998. As a percentage of loans,
ALLL increased from 0.54% at March 31, 1994 to 0.75% at March 31, 1998. The ALLL
to non-performing loans ratio was 50.26% as of March 31, 1998.

FIGURE 13 - ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES CHART

<TABLE>
<CAPTION>
$ in thousands
----------------------------------------------------
<S> <C>
March 1994 $568
March 1995 $652
March 1996 $725
March 1997 $845
March 1998 $984
-----------------------------------------------------
</TABLE>

Source: Offering Prospectus
<PAGE> 22
Conversion Valuation Appraisal Report Page: 1 - 18

FUNDING COMPOSITION

The Bank's average deposit mix is presented below. The Bank's deposit mix has
shifted away from non time deposits (core deposits) and towards time deposits
(certificates of deposit). The weighted average rate on deposits has increased
since March 31, 1996, rising from 3.94% to 4.20% at March 31, 1998.

FIGURE 14 - DEPOSIT MIX

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
March 31,
-----------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Amount Percent Rate Amount Percent Rate Amount Percent Rate
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>'

Transaction accounts
& savings deposits:
Passbook & club
accounts $ 61,347 27.9% 2.54% $ 63,579 30.1% 2.54% $67,637 33.7% 2.54%
Money market accounts 17,676 8.0% 3.05% 17,497 8.3% 3.10% 16,561 8.3% 3.10%
NOW accounts 21,261 9.7% 2.04% 19,885 9.4 2.04 19,320 9.6% 2.04%
--------- ------- -------
Total $100,284 45.6% 2.52% 100,961 47.8 2.54 103,518 51.6% 2.54%
--------- ------- -------
Certificates of
deposits maturing:
Within one year 108,902 49.5% 5.60% 101,169 47.9% 5.39% 82,431 41.1% 5.44%
After one year but
within three years 9,613 4.4% 5.72% 7,597 3.6% 5.72% 12,160 6.1% 5.44%
After three years 1,114 0.5% 4.49% 1,496 0.7% 4.53% 2,502 1.2% 5.05%
--------- -------- --------
Total 119,629 54.4% 5.60% 110,262 52.2% 5.40% 97,093 48.4% 5.43%
--------- -------- --------
Total Deposits $219,913 100.0% 4.20% $211.223 100.0% 4.03% $200,611 100.0% 3.94%
========= ======== ========

- -------------------------------------------------------------------------------------------------------------
</TABLE>

Source: Offering Prospectus
<PAGE> 23
Conversion Valuation Appraisal Report Page: 1 - 19

Deposits have increased $39.9 million from $180.0 million at March 31, 1994 to
$219.9 million at March 31, 1998, or growth of 22.19%. The Bank has had no
borrowings over the five year period.

FIGURE 15 - DEPOSIT AND BORROWING TREND CHART

$ IN THOUSANDS
Mar-94 $179,980
Mar-95 $186,951
Mar-96 $200,611
Mar-97 $211,223
Mar-98 $219,913

Source: Offering Prospectus
<PAGE> 24
Conversion Valuation Appraisal Report Page: 1 - 20

ASSET/LIABILITY MANAGEMENT

The Bank manages its interest rate risk through normal balance sheet activities
and does not utilize any hedging techniques. The following chart illustrates the
Bank's net portfolio value at March 31, 1998, as calculated by the OTS. As
Figure 16 demonstrates, at all rate shocks the Bank's NPV is above the minimum
required level of capital.

FIGURE 16 - NET PORTFOLIO VALUE

[LINE CHART]

Source: OTS at March 31, 1998
<PAGE> 25
Conversion Valuation Appraisal Report Page: 1 - 21

NET WORTH AND CAPITAL

At March 31, 1998, the Bank had capital in excess of the minimum requirements
for all three measures.

FIGURE 17 - CAPITAL ANALYSIS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ACTUAL MINIMUM REQUIREMENT EXCESS CAPITAL
- ----------------------------------------------------------------------------------------------------
REGULATORY CAPITAL POSITION AMOUNT AMOUNT AMOUNT
AT MARCH 31, 1998 (000'S) RATIO (000'S) RATIO (000'S) RATIO
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL CAPITAL $32,885 34.90% $7,527 8.00% $25,358 26.90%
(to risk-weighted assets)

CORE (TIER 1) CAPITAL 31,901 12.50% 7,642 3.00% $24,259 9.50%
(to adjusted total assets)

TANGIBLE CAPITAL 31,901 12.50% 3,821 1.50% $28,080 11.00%
(to adjusted total assets)
</TABLE>

Source: Offering Prospectus
<PAGE> 26
Conversion Valuation Appraisal Report Page: 1 - 22

INCOME AND EXPENSE TRENDS

Annual net income has been relatively flat since March 31, 1994. The year ended
March 31, 1997 net income was skewed downward by the one-time SAIF assessment,
which was $1.2 million on a pre-tax basis. On an after-tax basis, the adjustment
would have been approximately $768 thousand. Therefore, the Bank's adjusted year
ended March 31, 1997 net income would have been $3.0 million as opposed to the
$2.290 million unadjusted net income for the same period.

FIGURE 18 - NET INCOME CHART

$ IN THOUSANDS
Mar-94 $2,845
Mar-95 $2,742
Mar-96 $2,397
Mar-97 $2,290
Mar-98 $2,885

Source: Offering Prospectus
<PAGE> 27
Conversion Valuation Appraisal Report Page: 1 - 23

Both spread and margin have held flat over the past two years.

FIGURE 19 - SPREAD AND MARGIN CHART

[LINE CHART]

Source: Offering Prospectus
<PAGE> 28
Conversion Valuation Appraisal Report Page: 1 - 24

A summary of the Bank's income statement is presented below. The net income for
the year ended March 31, 1997, on an adjusted basis for the one-time SAIF
assessment, net of tax would have been $3.0 million as opposed to the $2.290
million shown for the year ended March 31, 1997.

FIGURE 20 - INCOME STATEMENT TRENDS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------
($ in thousands)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest and dividend income $17,618 $16,637 $15,732 $14,033 $13,429
Interest expense 8,736 7,917 7,848 5,594 5,278
------- ------- ------- ------- -------
Net interest income 8,882 8,720 7,884 8,439 8,151
Provision for loan losses 155 146 98 82 82
------- ------- ------- ------- -------
Net interest income after provision for loan losses 8,727 8,574 7,786 8,357 8,069
Noninterest income 186 301 208 201 236
Noninterest expense (excluding special assessment) 3,963 4,028 3,865 3,526 3,311
SAIF special assessment -- 1,232 -- -- --
------- ------- ------- ------- -------
Income before income tax expense 4,950 3,615 4,129 5,032 4,994
Income tax expense 2,065 1,325 1,732 2,290 2,149
------- ------- ------- ------- -------
Net income (loss) $ 2,885 $ 2,290 $ 2,397 $ 2,742 $ 2,845
======= ======= ======= ======= =======
</TABLE>

Source: Offering Prospectus
<PAGE> 29
Conversion Valuation Appraisal Report Page: 1 - 25

The ROAA and ROAE increased for the period ended March 31, 1998 as compared to
the unadjusted ROAA and ROAE for the period ended March 31, 1997. The March 31,
1997 adjusted ROAA and ROAE would have been 1.28% and 10.81%, respectively.

FIGURE 21 - PROFITABILITY TREND CHART

[LINE CHART]

Source: Offering Prospectus
<PAGE> 30
Conversion Valuation Appraisal Report Page: 1 - 26

SUBSIDIARIES

The Bank does not have any subsidiary corporations.

LEGAL PROCEEDINGS

Although the Bank is involved, from time to time, in various legal proceedings
in the normal course of business, there are no material legal proceedings to
which the Bank presently is a party or to which any of its property is subject.
<PAGE> 31
Conversion Valuation Appraisal Report Page: 1 - 27

2. MARKET AREA ANALYSIS

MARKET AREA DEMOGRAPHICS

The following tables summarize demographic data for the Bank's markets. The
markets were defined as natural markets based on the MCD in which the branch is
located.

FIGURE 22 - POPULATION DEMOGRAPHICS

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
MAMARONECK HARRISON RYE BROOK NY TOTAL
- -----------------------------------------------------------------------------------------------
POPULATION CHARACTERISTICS
<S> <C> <C> <C> <C>
LAND AREA (miles) 7.95 8.55 10.50 49,015.19

POPULATION
1980 CENSUS 33,414 21,566 37,992 17,558,070
1990 CENSUS 32,076 21,290 39,083 17,990,456
1997 ESTIMATE 32,745 21,804 39,167 18,227,782
2002 PROJECTION 33,279 22,210 39,350 18,366,428
GROWTH 1980 TO 1990 -4.01% -1.28% 2.87% 2.46%
PROJECTED GROWTH 1990 TO 2002 3.75% 4.32% 0.68% 2.09%
POPULATION DENSITY 1997 (persons / sq mile) 4,117.9 2,550.0 3,729.0 371.9

POPULATION BY URBAN VS. RURAL 32,048 21,294 39,059 17,990,455
URBAN 100.00% 100.00% 100.00% 84.29%
RURAL 0.00% 0.00% 0.00% 15.71%

POPULATION BY SEX - 1997 EST 32,745 21,804 39,167 18,227,782
MALE 47.61% 47.09% 48.15% 48.03%
FEMALE 52.39% 52.91% 51.85% 51.97%

MARITAL STATUS 26,234 17,497 32,248 14,416,508
SINGLE 25.57% 25.29% 30.47% 32.13%
MARRIED 59.27% 60.45% 53.00% 49.87%
SEPERATED/DIVORCED 9.87% 9.18% 10.55% 9.91%
WIDOWED 5.29% 5.08% 5.98% 8.10%

POPULATION BY RACE - 1997 EST 32,745 21,804 39,167 18,227,782
WHITE 81.02% 85.13% 62.24% 66.43%
BLACK 4.31% 1.19% 7.83% 15.00%
INDIAN 0.09% 0.05% 0.04% 0.28%
ASIAN 4.90% 8.36% 3.38% 4.61%
OTHER 0.07% 0.06% 0.14% 0.15%
HISPANIC 9.61% 5.21% 26.36% 13.53%

POPULATION BY AGE - 1997 EST 32,745 21,804 39,167 18,227,782
UNDER 5 YEARS 6.12% 5.94% 6.63% 6.89%
5 TO 14 YEARS 12.53% 12.22% 12.37% 13.24%
15 TO 24 YEARS 10.42% 10.00% 10.28% 12.56%
25 TO 34 YEARS 13.48% 13.88% 17.42% 15.97%
35 TO 44 YEARS 15.98% 15.12% 15.75% 16.04%
45 TO 54 YEARS 15.06% 15.23% 12.65% 12.65%
55 TO 64 YEARS 10.85% 11.31% 9.49% 8.80%
65 + YEARS 15.55% 16.29% 15.42% 13.86%
MEDIAN AGE 40.4 42.3 40.0 35.8
MEDIAN AGE OF HOUSEHOLDER 51.4 53.2 51.7 47.9

POPULATION 25+ BY EDUCATION LEVEL 22,408 15,181 27,139 11,818,569
ELEMENTARY 5.90% 5.46% 11.84% 10.16%
SOME HIGH SCHOOL 6.52% 7.80% 13.23% 15.03%
HIGH SCHOOL GRADUATE 21.36% 23.16% 25.59% 29.49%
SOME COLLEGE 13.61% 15.24% 13.86% 15.66%
ASSOCIATES DEGREE ONLY 5.73% 5.16% 5.72% 6.52%
BACHELORS DEGREE ONLY 23.43% 24.30% 17.25% 13.21%
GRADUATE DEGREE 23.45% 18.88% 12.51% 9.92%

POPULATION ENROLLED IN SCHOOL 7,670 4,842 9,097 4,656,218
PRE-PRIMARY - PUBLIC 4.29% 4.74% 3.99% 3.92%
PRE-PRIMARY - PRIVATE 6.12% 6.04% 4.91% 2.98%
ELEM/HIGH - PUBLIC 51.83% 50.98% 49.09% 53.00%
ELEM/HIGH - PRIVATE 8.69% 11.38% 12.26% 9.19%
COLLEGE - PUBLIC 12.11% 11.84% 14.28% 19.06%
COLLEGE - PRIVATE 16.95% 15.01% 15.47% 11.85%
</TABLE>

Source: Claritas
<PAGE> 32
Conversion Valuation Appraisal Report Page: 1 - 28

FIGURE 23 - HOUSEHOLD CHARACTERISTICS
<TABLE>
<CAPTION>

MAMARONECK HARRISON RYE BROOK NY TOTAL
---------- -------- --------- --------
<S> <C> <C> <C> <C>
HOUSEHOLD CHARACTERISTICS
HOUSEHOLDS
1980 CENSUS 11,866 7,283 13,879 6,340,422
1990 CENSUS 11,971 7,776 14,275 6,639,322
1997 ESTIMATE 12,327 8,032 14,426 6,767,371
2002 PROJECTION 12,585 8,220 14,555 6,841,315
GROWTH 1980 TO 1990 0.89% 6.76% 2.85% 4.71%
PROJECTED GROWTH 1990 TO 2002 5.13% 5.72% 1.96% 3.04%

HOUSEHOLD SIZE
AVG PERSONS PER HH 1980 2.82 2.96 2.74 2.77
AVG PERSONS PER HH 1990 2.68 2.74 2.74 2.71
AVG PERSONS PER HH 1997 EST 2.66 2.71 2.71 2.69
AVG PERSONS PER HH 2002 PROJ 2.64 2.70 2.70 2.68
CHANGE 1980 TO 19987 -0.16 -0.25 -0.02 -0.08

POPULATION BY HOUSEHOLD TYPE 12,327 8.032 14,426 6,767,371
FAMILY HOUSEHOLDS 72.53% 74.35% 69.04% 66.87%
NON-FAMILY HOUSEHOLDS 24.40% 22.21% 26.78% 24.92%
GROUP QUARTERS 3.07% 3.44% 4.18% 8.21%

HOUSEHOLDS BY TYPE 11,971 7,776 14,275 6,639,322
SINGLE MALE 7.82% 6.83% 8.64% 10.67%
SINGLE FEMALE 14.88% 13.90% 16.21% 16.54%
MARRIED COUPLE 61.92% 64.94% 54.01% 49.94%
OTHER FAMILY - MALE HEAD 3.14% 2.43% 4.43% 3.83%
OTHER FAMILY - FEMALE HEAD 8.56% 8.06% 11.57% 13.85%
NON FAMILY - MALE HEAD 1.88% 1.97% 2.94% 2.99%
NON FAMILY - FEMALE HEAD 1.80% 1.87% 2.18% 2.18%
HOUSEHOLDS WITH CHILDREN 11,953 7,712 14,227 6,634,434
MARRIED COUPLE FAMILY 61.75% 65.30% 56.48% 51.12%
OTHER FAMILY - MALE HEAD 4.08% 2.47% 3.91% 3.52%
OTHER FAMILY - FEMALE HEAD 7.99% 7.85% 10.74% 13.62%
NON FAMILY 26.18% 24.39% 28.87% 31.74%

HOUSEHOLDS BY INCOME 1997 EST 12,327 8,032 14,426 6,767,371
UNDER $5,000 1.24% 1.89% 2.30% 4.27%
$5,000 TO $10,000 3.48% 3.51% 5.89% 7.97%
$10,000 TO $15,000 3.51% 3.08% 5.21% 7.12%
$15,000 TO $25,000 6.76% 5.84% 10.00% 12.33%
$25,000 TO $35,000 8.98% 7.44% 10.31% 12.42%
$35,000 TO $50,000 11.08% 11.45% 14.71% 16.31%
$50,000 TO $75,000 18.39% 19.96% 19.48% 19.59%
$75,000 TO $100,000 15.06% 13.66% 12.37% 9.62%
$100,000 OR MORE 31.50% 33.17% 19.72% 10.37%
MEDIAN HOUSEHOLD INCOME - 1997 EST $83,272 $108,596 $97,248 $40,238
MEDIAN FAMILY INCOME - 1997 EST $99,654 $129,480 $117,325 $48,583
PER CAPITA INCOME - 1997 EST $51,511 $66,273 $60,462 $21,036

PUBLIC ASSISTANCE INCOME 11,963 7,712 14,227 6,634,434
WITH PUBLIC ASSISTANCE INCOME 3.82% 2.45% 4.67% 9.08%
NO PUBLIC ASSISTANCE INCOME 96.18% 97.55% 95.33% 90.92%

RETIREMENT INCOME 11,953 7,712 14,227 6,634,434
WITH RETIREMENT INCOME 14.38% 17.02% 17.25% 17.54%
NO RETIREMENT INCOME 89.60% 85.50% 87.65% 92.44%

HOUSEHOLDS BY NUMBER OF VEHICLES 11,967 7,850 14,093 6,639,322
NO VEHICLES 8.85% 7.50% 15.08% 30.03%
1 VEHICLE 35.34% 30.15% 34.42% 32.43%
2 VEHICLES 39.45% 40.97% 36.10% 26.47%
3+ VEHICLES 16.36% 21.38% 14.40% 11.07%
ESTIMATED TOTAL VEHICLES 20,189 14,178 22,487 8,165,440
</TABLE>

Source: Claritas
<PAGE> 33
Conversion Valuation Appraisal Report Page: 1 - 29

The markets that the Bank serves are projected to grow in population through
2002. The markets, due to their proximity to New York City, have a high
population density. Households are also projected to grow through 2002. The
demographics portray a high median household income level for the Bank's markets
and a low level of public assistance.

MARKET AREA DEPOSIT
CHARACTERISTICS

The following tables summarize deposits for the Bank's markets. The markets were
defined as the zip codes in which each branch is located.

Two of the three markets the Bank serves have experienced deposit growth over
the past four years. During that same time period, the Bank, in each of its
markets, has had a deposit growth rate in excess of the market's. Interestingly,
the Bank is third or fourth in market share in each market, while competing with
large banks or thrifts.

FIGURE 24 - MAMARONECK BRANCH DEPOSITS

MAMARONECK: Market Share by Institution Type
<TABLE>
<CAPTION>
TOTAL MKT SHARE % GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $451,064 100.00% $55,318 13.98% $ 64,438 7 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
Commercial Banks $227,720 50.49% $41,409 22.23% $ 45,544 5 70.7%
Savings Banks $136,289 30.22% $ 1,568 1.16% $136,289 1 211.5%
Thrifts $ 87,055 19.30% $12,341 16.52% $ 87,055 1 135.1%
Credit Unions $ 0 0.0% $ 0 0.00% $ 0 0 0.0%
</TABLE>

MAMARONECK: Market Share by Institution

<TABLE>
<CAPTION>
TOTAL MKT SHARE % GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $451,064 $100.00% $55,318 13.96% $ 64,438 7 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
Marine Midland Bk $ 26,020 5.77% $ 4,202 19.26% $ 26,020 1 40.4%
Bank of New York $108,217 23.99% $17,895 19.81% $ 54,109 2 84.0%
Sound FS&LA $ 87,055 19.30% $12,341 16.52% $ 87,055 1 135.1%
Citibank NA $ 80,901 17.94% $20,919 34.88% $ 80,901 1 125.5%
Dime Savings Bank of New York $136,289 30.22% $ 1,568 1.16% $136,289 1 211.5%
First Union NB $ 12,582 2.79% $(1,607) -11.33% $ 12,582 1 29.5%
</TABLE>

Source: FDIC data, FinPro calculations.
<PAGE> 34
Conversion Valuation Appraisal Report Page: 1 - 30

FIGURE 25 - HARRISON BRANCH DEPOSITS

HARRISON: Market Share by Institution Type

<TABLE>
<CAPTION>
TOTAL MKT SHARE $ GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $417,833 100.00% $18,707 4.69% $ 59,690 7 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
Commercial Banks $235,940 56.47% $ (857) -0.36% $ 58,985 4 98.8%
Savings Banks $125,324 29.99% $12,260 10.84% $125,324 1 210.0%
Thrifts $ 54,252 12.98% $ 7,359 15.69% $ 54,252 1 90.9%
Credit Unions $ 2,317 0.55% $ (55) -2.32% $ 2,317 1 3.9%
</TABLE>

HARRISON: Market Share by Institution

<TABLE>
<CAPTION>
TOTAL MKT SHARE $ GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $417,833 100.00% $18,707 4.69% $ 59,690 7 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
CHASE MANHATTAN BK NA $ 61,617 14.75% $(2,355) -3.68% $ 61,617 1 103.2%
BANK OF NEW YORK $ 98,539 23.58% $ 361 0.37% $ 49,270 2 82.5%
SOUND FS&LA $ 54,252 12.98% $ 7,359 15.69% $ 54,252 1 90.9%
HARRISON TEACHERS FCU $ 2,317 0.55% $ (55) -2.32% $ 2,317 1 3.9%
CITIBANK NA $ 75,784 18.14% $ 1,137 1.52% $ 75,784 1 127.0%
DIME SAVINGS BANK OF NEW YORK $125,324 29.99% $12,260 10.84% $125,324 1 210.0%
</TABLE>

Source: FDIC data, FinPro calculations.

FIGURE 26 - RYE BROOK BRANCH DEPOSITS

RYE BROOK: Market Share by Institution Type

<TABLE>
<CAPTION>
TOTAL MKT SHARE % GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $462,360 100.00% $(127,238) -21.58% $ 51,373 9 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
Commercial Banks $386,594 83.61% $(153,261) -28.39% $ 55,228 7 107.5%
Savings Banks $ 0 0.00% $ 0 0.00% $ 0 0 0.0%
Thifts $ 73,391 15.87% $ 27,001 58.20% $ 73,391 1 142.9%
Credit Unions $ 2,375 0.51% $ (978) -29.17% $ 2,375 1 4.6%
</TABLE>

RYE BROOK: Market Share by Institution

<TABLE>
<CAPTION>
TOTAL MKT SHARE % GROWTH % GROWTH AVG BRANCH EFFICIENCY
INSTITUTION 1997 1997 1993 - 1997 1993 - 1997 1997 COUNT RATIO
- ----------- ----- --------- ----------- ----------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total $462,360 100.00% $(127,238) -21.58% $ 51,373 9 100.0%
-------- --------- ----------- ----------- ---------- ----- ----------
CHASE MANHATTAN BK NA $ 0 0.00% $ (19,202) -100.00% $ 0 0 0.0%
BANK OF NEW YORK $176,957 38.27% $ 2,546 1.46% $ 58,986 3 114.8%
SOUND SF&LA $ 73,391 15.87% $ 27,001 58.20% $ 73,391 1 142.9%
TRIPLE A FCU $ 2,375 0.51% $ (978) -29.17% $ 2,375 1 4.6%
FLEET BK NA $ 28,767 6.22% $ (19,942) -40.94% $ 28,767 1 56.0%
HUDSON VALLEY BK $ 35,611 7.70% $ 35,611 0.00% $ 35,611 1 69.3%
FIRST UNION NB $145,259 31.42% $(152,274) -51.18% $ 72,630 2 141.4%
</TABLE>

Source: FDIC data, FinPro calculations.
<PAGE> 35
Conversion Valuation Appraisal Report Page: 1 - 31

FEDERAL RESERVE BANK - NATIONAL SUMMARY

All district economies continue to show overall strength, but a few have noted
some recent moderation in their rates of growth. Retail sales are generally up
in most districts, exceeding retailers' expectations in many of them. Auto
sales, however, are generally down, although demand for pickup trucks and sport
utility vehicles remains high. Industrial activity is on the rise in most parts
of the country, with orders and production up. Most districts, though, are
experiencing a decline in exports to Asia. Continuing the theme of recent
reports, the demand for labor remains strong, with nearly all districts
reporting shortages of workers at the entry level and in certain skilled
categories. Widespread labor market tightness appears to have increased the
degree of wage pressures compared with recent reports. Pressures on product
prices remain eerily calm, as domestic competition, productivity gains and the
Asian situation help to constrain production costs. Residential housing markets,
buoyed by low interest rates and mild weather in many districts, are
unseasonably hardy. Commercial real estate markets are healthy across districts.
Loan demand, especially for residential mortgages, remains strong in most
districts. Agricultural conditions are mixed, with some districts reporting that
an abundance of precipitation has harmed crop prospects and delayed field
preparation activities.
<PAGE> 36
Conversion Valuation Appraisal Report Page: 1 - 32

CONSUMER SPENDING

Most districts report that January and February sales are up from one year ago.
The Boston, Chicago, Cleveland, Dallas, New York and Richmond districts report
that sales have generally exceeded retailers' expectations; in the Atlanta and
St. Louis districts, sales have generally met expectations. Almost all districts
report that unseasonably mild winter weather has helped boost sales of items in
many categories, especially home improvement products, furniture and building
materials. Sales of winter clothes, however, have suffered in most parts of the
country. The New York district notes that contacts experiencing weak retail
sales have usually cited mild weather as a cause. The Atlanta, Chicago,
Cleveland, New York and Richmond districts report strong sales of spring
clothes, particularly for women; the Boston and San Francisco districts note
that apparel sales are down. The San Francisco district adds that department
store sales in Southern California are also down. Most districts report that
retailers' inventories are at desired levels, although some contacts in the
Kansas City and St. Louis districts report that inventories are too high. Auto
sales in most districts are down from one year ago. While sales of pickup
trucks, sport utility vehicles and minivans remain strong, sales of passenger
cars are either flat or down. The Richmond district reports, though, that sales
of new and used vehicles have exceeded expectations. The Dallas district notes
that vehicle sales surged in January, before slowing somewhat in February.
Almost all districts report that vehicle inventories are too high, although
contacts in the Kansas City district are satisfied with their stocks. Contacts
in most districts expect some strengthening in sales this spring.
<PAGE> 37
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MANUFACTURING

Almost all districts report steady or increasing growth in industrial activity,
although the Dallas district notes a slight weakening in growth. The Chicago
district reports that activity is robust, with nearly every sector operating
near capacity, while Kansas City district contacts report that current
operations are at moderately high levels of capacity utilization and expanding.
The Cleveland district notes that, although production is up at most surveyed
firms, the number reporting a slowing in production has risen. The Richmond
district describes a resurgence of activity, with sharp rebounds in orders and
shipments. The Chicago, Cleveland, Minneapolis, New York, Philadelphia, St.
Louis and San Francisco districts also report hikes in new orders, while the
Kansas City district has seen a mild decline. Makers of building materials and
related products generally report continued brisk or rebounding sales due to
strength in construction markets. The Dallas district, however, notes that sales
of construction materials are down because of a wetter than usual February.
Aircraft and heavy truck parts, primary and fabricated metals, and steel
production are reportedly strong in the Boston, Chicago, Cleveland, Minneapolis,
St. Louis and San Francisco districts. Demand for business services,
particularly real estate services, and telecommunications services is up in the
Richmond and San Francisco districts. Contacts in the Dallas district, though,
report that sales of telecommunications equipment are essentially flat.

The apparel industry is in decline in almost all districts. Plant closings,
falling sales and declining orders are common, reflecting both increased import
penetration and a weakening of export demand. Just about every district reports
that exports of many goods to Asia are dropping. The Richmond district, however,
notes that activity in the district, except in the textiles industry, has not
been affected by the Asian situation. The Boston district adds that the strong
dollar has been hurting exports to all parts of the world, not just to Asia.

LABOR MARKETS

The tone of this report is largely unchanged from that of recent reports: Taut
labor markets continue to hamper business activity in a variety of ways. In
general, the apparent imbalance between the demand and available supply of
workers remains the dominant theme, with the majority of district reports
suggesting that the supply of entry-level and skilled workers -- most often in
technology-related fields, but also in construction and certain skilled craft
positions -- appears to be insufficient to meet existing production schedules.
In the St Louis district, for instance, contacts note that UPS is concerned it
will not be able to find enough workers to staff a major expansion.
<PAGE> 38
Conversion Valuation Appraisal Report Page: 1 - 34

Firms have used a variety of methods to ameliorate these shortages. For example,
in the Boston and Cleveland districts, firms are hiring temporary workers and
outsourcing production more often, while in the Atlanta, Chicago and Kansas City
districts, firms are resorting to worker training programs and various incentive
or award programs.

WAGES AND PRICES

With labor markets stretched to the limit in many areas, there have been reports
of rather large wage increases -- although this is by no means consistent across
all districts. In the Boston district, vigorous demand at temporary employment
agencies has produced wage increases of up to 15 percent; wage increases in the
retail sector are running 4 to 6 percent higher than the previous year, while
wage increases in manufacturing are running at 3 to 5 percent. Wage gains appear
to be more measured elsewhere in the country. The Cleveland district reports
wage gains of 3 percent, while the Minneapolis and San Francisco districts
report wage increases of anywhere from 0 to 4 percent. The Atlanta and Richmond
districts report somewhat faster wage growth in the retail sector, but note that
overall wage gains are modest to subdued, which is similar to the Chicago and
Kansas City district reports.

Price pressures appear to be less pressing than wage pressures, according to
most district reports. Manufacturing raw materials costs have reportedly
increased little, if at all, in the Boston, Chicago, Cleveland, New York and
Philadelphia districts. At the same time, nonmanufacturing firms in the New York
district, as well as manufacturing firms in the Kansas City and St. Louis
districts, note higher input prices. In addition, a few districts continue to
report that competitive pressures and productivity gains have worked to offset
higher materials prices and to limit product price increases. Although a few
firms in the Chicago district have attempted to raise their selling prices,
these efforts have not been entirely successful.

The evolving Asian situation has had some depressing effect on prices, according
to most district reports. The Dallas district reports that Asian currency
movements against the U.S. dollar have caused widespread declines in the prices
of commodities, computer components and petrochemical products. In the Atlanta
district, some import prices have fallen, although not among importers with
fixed contracts. Meanwhile, retailers in the New York district report that no
significant price declines in consumer goods have occurred.
<PAGE> 39
Conversion Valuation Appraisal Report Page: 1 - 35

CONSTRUCTION AND REAL ESTATE

Every district reports strong residential housing market conditions. New home
construction is described as unseasonably brisk in several districts, including
Boston, Chicago, Cleveland, New York and St. Louis. Mild winter weather, high
consumer confidence and low interest rates are credited with much of this
strength. However, in several districts, such as Atlanta, Dallas, and Richmond,
otherwise robust activity is being hampered by wet weather. Sales of new and
existing homes are reportedly strong in most districts, and modest price
appreciation is noted by many districts.

Commercial real estate markets are uniformly described as strong by reporting
districts. Contacts in a number of districts are reporting declining vacancy
rates, rising rental rates and increasing speculative construction. The
commercial real estate market has "picked up dramatically" in the Richmond
district, with "floods of tenants looking for space." Nonresidential
construction and prices are up in California, while the Dallas district reports
a sharp increase in land prices. Contacts in several other districts, however,
see signs of an impending slowdown and are worried about the pace of speculative
building.

BANKING AND FINANCE

Most districts report moderate to vigorous demand for bank loans. Contacts in
the Chicago, Cleveland, Dallas, Minneapolis, Philadelphia and San Francisco
districts indicate that loan competition, especially on the commercial side, is
stiff, although there are concerns in some districts that this competition could
compromise credit standards. Mortgage lending, especially refinancings, is
reportedly strong in the Atlanta, Chicago, Cleveland, Dallas, Kansas City, New
York, Philadelphia, Richmond and St. Louis districts. Contacts in the Atlanta
and Chicago districts report robust consumer loan demand, while contacts in the
Cleveland, Dallas, Philadelphia and St. Louis districts note some softening. A
reduction in consumer loan delinquencies is reported in the Chicago and New York
districts. The Chicago district notes that credit card repayments are up and
personal bankruptcies are declining.
<PAGE> 40
Conversion Valuation Appraisal Report Page: 1 - 36

AGRICULTURE AND NATURAL RESOURCES

Agricultural conditions vary widely across districts. The deluge of rain that
hit California has damaged crops. Near-record precipitation has reportedly
worsened the condition of the winter wheat crop in the Richmond district rather
significantly. In the Kansas City district, however, the winter wheat crop
appears to be in good shape. Although rains have delayed field activities in the
Dallas and Minneapolis districts, overall conditions are reportedly good in
those areas. Contacts in the Richmond district are worried that a late frost may
harm the apple and peach crops. The Chicago district reports that corn exports
have weakened markedly -- not solely because of Asia -- although the soybean
export picture is somewhat brighter. In the St. Louis district, cotton exports
to Asia, while still expected to wane, are not declining as much as many had
expected since sales to other markets, such as Mexico, have picked up. The San
Francisco district reports a similar situation for beef and pork exports. Lower
cattle and hog prices are hurting the profit margins of producers in the
Chicago, Minneapolis and Kansas City districts.

The unseasonably warm winter weather has affected the energy extraction
industries to varying degrees. The Dallas and Minneapolis districts report
increased activity, while energy output increases have begun to decline in the
Kansas City district. Solid demand for steel continues to bolster iron ore
output in the Minneapolis district.
<PAGE> 41
Conversion Valuation Appraisal Report Page: 1 - 37

FEDERAL RESERVE DISTRICT 2 -
NEW YORK

The Second District's economy continued to grow briskly in the first two months
of 1998. Retailers report that sales were above plan in February, while both
selling prices and merchandise costs held steady. The housing market retained
momentum in early 1998, following a strong fourth quarter. Commercial rents
across most of the metropolitan area have risen rapidly in recent months, as
office vacancy rates continued to fall. Regional purchasing managers report a
pickup in activity, reduced price pressures for manufacturing inputs, but an
acceleration in some labor costs. Finally, local banks report a pickup in loan
demand, and a continued modest decline in consumer delinquency rates.

CONSUMER SPENDING

Retailers report that sales were generally on plan in January but above plan in
February. Same-store sales for the two months, compared to a year earlier,
varied widely -- from no gain to a 10 percent increase. In general, those
retailers with weak sales attributed the softness to unusually mild winter
weather. Those with strong February sales noted that virtually all categories
performed well, especially furnishings, appliances and women's apparel. Most
retailers report that inventories are in good shape. Overall, it appears that
discounters continue to fare slightly better than traditional department stores.

Retail selling prices and merchandise costs were said to be mostly flat, and no
increases in wage pressures were reported. Most contacts expect only a modest
reduction in merchandise costs as a result of the Asian currency crisis, though
one major retailer anticipates "significant savings." All expect to pass along
any cost savings to customers in the form of price reductions; these lower-cost
products may start to show up on the shelves as early as July, but mostly after
Labor Day.
<PAGE> 42
Conversion Valuation Appraisal Report Page: 1 - 38

CONSTRUCTION AND REAL ESTATE

The region's housing market continued to strengthen in early 1998. New Jersey
homebuilders report that new home sales were brisk in February -- especially at
the high end of the market, where nearly all of the buyers are in the securities
industry, as opposed to the usual broad mix of high-level executives. Aside from
large Wall Street bonuses, strong market conditions in early 1998 are attributed
to mild winter weather, low but rising mortgage rates, and increased consumer
confidence. One contact notes that with the supply overhang from the early 1990s
now mostly gone, a tight market for single-family homes is "finally" spilling
over into the new home market. Home remodeling also remains brisk.

New York State realtors report that existing-home sales were steady in January,
running 4-5 percent ahead of a year ago. Prices retreated a bit from lofty
December levels, but were still ahead of a year ago by about 4 percent. In
general, upstate New York has registered increased volume and steady prices,
while downstate has had the reverse. Following a fourth-quarter surge, prices of
prime Manhattan co-ops and condos held steady at exceptionally high levels in
January, according to a major broker. The average price per room continues to
run more than 20 percent higher than a year ago.

Office markets across the New York City area continued to tighten in late 1997
and early 1998. Midtown Manhattan's office availability rate (space coming
available in the next six months) edged down from 9.1 percent at year end to 8.9
percent at the end of January; similarly, Downtown's rate slipped from 15.5 to
15.2 percent. Midtown rents continued to rise rapidly in January, running 8
percent above year-ago levels; Downtown rents have risen a more moderate 4
percent.

Markets also continued to tighten in the rest of the NYC area, where figures are
tallied quarterly. Long Island's vacancy rate tumbled nearly 3 percentage points
during the fourth quarter, ending 1997 at an all-time low of 10.6 percent.
Vacancy rates fell by roughly a full point in northern New Jersey, Westchester,
and Fairfield. In the final quarter of 1997, office rents continued to rise at
their trend pace of 6 percent in New Jersey but surged at a double-digit rate in
Long Island, Westchester, and Fairfield.
<PAGE> 43
Conversion Valuation Appraisal Report Page: 1 - 39

OTHER BUSINESS ACTIVITY

Regional purchasing managers report a pickup in activity in February. Buffalo
purchasing managers report that production activity grew at a slower pace in
February than January, while commodity prices were steady. However, new orders
rose sharply in February, as did hiring activity. New York purchasing managers
report that manufacturing activity rebounded sharply in February, while
non-manufacturing experienced a more moderate pickup. Prices paid by
manufacturers dipped in February but non-manufacturing costs rose sharply, led
mainly by labor costs -- specifically, computer consultants, temps and
construction services.

Separately, contacts in various sectors note tight labor market conditions,
especially for computer experts, as well as for office support with modest
technical abilities. One contact at a leading NYC-area employment agency
remarked that the region's labor market has never been hotter," adding that
increased flexibility and efficiency in the labor market are helping to keep a
lid on wage inflation.

In New York City, tourism remained fairly robust during the usually slow month
of January -- hotel occupancy rates (seasonally adjusted) held steady at close
to 85 percent, while room rates eased slightly. The local industry expects to
get a slight boost from a 23 percent hike in travel stipends for Federal
employees traveling to NYC effective January 1. In western New York, Buffalo
convention bookings set a new record in 1997 and look to be even stronger this
year, while Niagara Falls reports a sharp increase in conventions booked for
1998 versus 1997.

FINANCIAL DEVELOPMENTS

Bankers at small to medium-sized banks in the District report stronger demand
for loans during the past two months. Demand for residential mortgages
strengthened most notably, with 75 percent of bankers reporting increased
demand. Refinancing activity for all types of loans increased. Willingness to
lend increased slightly, while credit standards remained stable across all loan
categories. Deposit rates fell moderately, while lending rates fell sharply
across all categories. Delinquency rates declined for consumer loans, but
remained stable for mortgages and commercial and industrial loans.

Source: Federal Reserve Bank
<PAGE> 44
Conversion Valuation Appraisal Report Page: 1 - 40

3. COMPARISONS WITH PUBLICLY TRADED THRIFTS

INTRODUCTION

This chapter presents an analysis of the Bank's operations against a Comparable
Group of publicly traded savings institutions. The Comparable Group ("Comparable
Group") was selected from a universe of 394 public thrifts as of June 8, 1998.
The Comparable Group was selected based upon similarity of characteristics to
the Bank. The Comparable Group multiples provide the basis for the fair market
valuation of the Bank. Factors that influence the Bank's value such as balance
sheet structure and size, profitability, income and expense trends, capital
levels, credit risk, interest rate risk and recent operating results can be
measured against the Comparable Group. The Comparable Group current market
pricing, coupled with the appropriate adjustments for differences between the
Bank and the Comparable Group, will then be utilized as the basis for the
pro-forma valuation of the Bank to-be-issued common stock.
<PAGE> 45
Conversion Valuation Appraisal Report Page: 1 - 41

SELECTION SCREENS

When selecting the Comparables, it was determined that the balance sheet size of
the institution was of equal importance to geography.

THE SELECTION SCREENS UTILIZED TO IDENTIFY POSSIBLE COMPARABLES FROM THE LIST OF
394 PUBLIC THRIFTS AT JUNE 8, 1998 INCLUDED:

1. The IPO date had to be before January 1, 1997, eliminating any new
conversions.

2. The conversion type had to be a full standard conversion.

3. The thrift had to be located in New York, Connecticut, New Jersey or
Pennsylvania.

4. The total asset size had to be less than or equal to $400 million.

5. The total asset size had to be greater than or equal to $250 million.

6. The institution had to be listed on AMEX, NASDAQ or the NYSE to ensure
trading liquidity.

7. The institution could not be an announced acquisition target.

This resulted in 13 institutions. The list of comparable institutions is as
follows:

FIGURE 27 - COMPARABLE GROUP

<TABLE>
<CAPTION>
CORPORATE
----------------------------------------------------------------------------------
DEPOSIT
NUMBER INSURANCE
OF AGENCY CONVERSION
TICKER SHORT NAME EXCHANGE CITY STATE OFFICES IPO DATE (BIF/SAIF) TYPE
- ------ ------------------------------------ -------- ------------- ----- ------- -------- ---------- ----------
COMPARABLE THRIFT DATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CATB Catskill Financial Corp. NASDAQ Catskill NY 5 04/18/96 BIF Regular
CVAL Chester Valley Bancorp Inc. NASDAQ Downington PA 7 03/27/87 SAIF Regular
FBER 1st Bergen Bancorp NASDAQ Wood-Ridge NJ 4 04/01/96 SAIF Regular
FIBC Financial Bancorp Inc. NASDAQ Long Island City NJ 5 08/17/94 SAIF Regular
FKFS First Keystone Financial NASDAQ Media PA 6 01/26/95 SAIF Regular
HARL Harleysville Savings Bank NASDAQ Harleysville PA 4 08/04/87 SAIF Regular
LFBI Little Falls Bancorp Inc. NASDAQ Little Falls NJ 6 01/05/96 SAIF Regular
NMSB NewMil Bancorp Inc. NASDAQ New Milford CT 15 02/01/86 BIF Regular
PBCI Pamrapo Bancorp Inc. NASDAQ Bayonne NJ 10 11/14/89 SAIF Regular
PHFC Pittsburgh Home Financial Corp. NASDAQ Pittsburgh PA 8 04/01/96 SAIF Regular
SKAN Skaneateles Bancorp Inc. NASDAQ Skaneateles NY 9 06/02/86 BIF Regular
WVFC WVS Financial Corp. NASDAQ Pittsburgh PA 6 11/29/93 SAIF Regular
YFCB Yonkers Financial Corp. NASDAQ Yonkers NY 5 04/18/96 SAIF Regular
</TABLE>

<PAGE> 46
Conversion Valuation Appraisal Report Page: 1 - 42

SELECTION CRITERIA

Excluded from the Comparable Group were institutions that were pending mergers
or acquisitions. Institutions that completed their conversions within the last
year were also excluded as the earnings of newly converted institutions do not
reflect a full years benefit from the reinvestment of proceeds, and thus the
price/earnings multiples and return on equity measures for these institutions
tend to be skewed upward and downward respectively.

In an ideal world, all of the Comparable Group would contain the exact
characteristics of the Bank. The goal of the selection criteria process is to
find those institutions that most closely match those of the Bank. None of the
Comparables selected will be exact clones of the Bank.
<PAGE> 47
Conversion Valuation Appraisal Report Page: 1 - 43

The members of the Comparable Group were selected based upon the following
criteria:

1. ASSET SIZE The Comparable Group should have a similar asset size to the Bank.
Large institutions are not appropriate for the peer group due to a more
extensive branch network, greater financial strength, more access to diverse
markets and more capacity in terms of infrastructure. The Comparable Group
ranged in size from $257.6 million to $385.2 million in total assets with a
median of $343.9 million. The Bank's asset size was $254.7 million as of March
31, 1998 and will be $277.5 million on a pro forma basis at the midpoint of the
valuation range.

2. PROFITABILITY The Comparable Group have a median ROAA of 0.95% and a median
ROAE of 9.28% for the most recent quarter available. The Comparable Group
profitability measures had a dispersion about the mean for the ROAA measure
ranging from a low of 0.58% to a high of 1.34% while the ROAE measure ranged
from a low of 4.85% to a high of 15.28%. The Bank had an ROAA of 1.16% and ROAE
of 9.47% for the year ended March 31, 1998.

3. CAPITAL LEVEL The median equity to assets ratio for the Comparable Group was
9.04% with a high of 23.42% and a low of 6.67%. At March 31, 1998, the Bank had
an equity to assets ratio of 12.52%. On a pro forma basis, at the midpoint the
Bank would have an equity to assets ratio of 19.68%.

4. BALANCE SHEET MIX At March 31, 1998, the Bank had a net loan to asset ratio
of 50.46%. The median loan to asset ratio for the Comparables was 55.02%,
ranging from a low of 41.77% to a high of 83.33%. On the liability side, the
Bank's deposit to asset ratio was 86.33% at March 31, 1998 while the Comparable
median was 70.86%, ranging from 43.13% to 84.76%. Additionally, the Bank had no
borrowings at March 31, 1998 and the Comparable borrowings to assets ratio
median was 15.82% with a range of 3.63% to 44.42%.

5. OPERATING STRATEGY An institution's operating characteristics are important
because they determine future performance. They also affect expected rates of
return and investor's general perception of the quality, risk and attractiveness
of a given company. Specific operating characteristics include profitability,
balance sheet growth, asset quality, capitalization, and non-financial factors
such as management strategies and lines of business.

6. DATE OF CONVERSION Recent conversions, those completed after January 1, 1997,
were excluded since the earnings of a newly converted institution do not reflect
a full year's benefits of reinvestment of conversion proceeds. Additionally, new
issues tend to trade at a discount to the market averages.
<PAGE> 48
Conversion Valuation Appraisal Report Page: 1 - 44

COMPARABLE GROUP PROFILES

- CATSKILL FINANCIAL CORP. CATB is a BIF insured institution
that operates 5 branches in the Catskill, New York region and
has $295.9 million in assets. Catskill had the highest ROAA,
1.34%, but the second lowest ROAE, 5.37%. CATB's low ROAE is
due to a high equity to assets ratio, 23.42%. Catskill has the
third lowest loans-to-deposits ratio, 62.58% and the second
lowest borrowings to assets ratio, 6.06%. CATB was selected to
the Group based on asset size, low loans to assets ratio, and
geographic proximity.

- CHESTER VALLEY BANCORP CVAL is a SAIF insured institution that
has $343.7 million in assets, and operates 7 branches in and
around Downingtown, Pennsylvania. CVAL had the highest
reserves to non-performing loans ratio, 390.28% and no
intangibles. CVAL was selected to the Group based on its lack
of intangibles and its strong profitability.

- 1ST BERGEN BANCORP FBER is a SAIF insured institution that has
$316.1 million in assets, and operates 4 branches in northern
New Jersey. FBER had the lowest loans to deposits ratio,
58.96%, and loans to assets, 41.22% the second lowest yield on
assets, 7.13%, and the second lowest level of noninterest
income, 0.11%. FBER was selected to the Group based on asset
size, geographic proximity, low loans to assets ratio, and
number of branches.

- FINANCIAL BANCORP INC. FIBC is a SAIF insured thrift that
operates 5 offices, is headquartered in Long Island City, New
York and has $310.4 million in assets. FIBC has the highest
nonperforming assets to assets ratio, 2.19%. It was selected
as a comparable based on its asset size, low loans to assets
ratio, and profitability.

- FIRST KEYSTONE FINANCIAL FKFS is a SAIF insured institution
with 6 offices in the Media, Pennsylvania area and assets of
$385.2 million, the largest of the Group. FKFS had the lowest
equity to assets ratio, 6.67%. FKFS was selected as a
comparable based on its asset size, low loans to assets ratio
and asset quality.

- HARLEYSVILLE SAVINGS BANK. HARL is a SAIF insured institution
with 4 offices and is located in Harleysville, Pennsylvania.
HARL has the highest interest expense to average assets,
4.74%, and return on equity, 15.28%. HARL has the lowest
equity to asset, 6.67%, and efficiency, 44.82%, ratios. HARL
was selected to the Group based on its profitability.
<PAGE> 49
Conversion Valuation Appraisal Report Page: 1 - 45

- LITTLE FALLS BANCORP INC. LFBI is a SAIF insured institution
that operates 6 branches in northern New Jersey and has $355.4
million in assets. LFBI had the highest level of intangible
assets, 7.63%, and the lowest ROAA, 0.58%, ROAE, 4.83%,
margin, 2.67%, and noninterest income, 0.07%. Little Falls was
selected the Group based on its balance sheet mix.

- NEWMIL BANCORP INC. NMSB is a BIF insured thrift that operates
15 offices in the New Milford, Connecticut area and has $370.3
million in assets. NMSB has the highest reserve to loan ratio,
2.87%, and no intangibles. It was included as a comparable
based on its asset mix and profitability.

- PAMRAPO BANCORP INC. PBCI is a SAIF insured institution that
operates 10 offices and is located in Bayonne, New Jersey. The
institution has assets of $381.4 million. Pamrapo has the
highest net interest margin, 4.70%, and the highest level of
nonperforming loans to loans ratio, 2.32%. PBCI has the lowest
borrowings to assets, 3.63%, growth rate, 3.83%, and interest
expense to assets ratio, 3.25%. PBCI was selected as a
comparable based on its balance sheet mix, capital levels and
profitability.

- PITTSBURGH HOME FINANCIAL CORP. PHFC is a SAIF insured thrift
that operates 8 offices in the Pittsburgh, Pennsylvania area
and has $338.3 million in assets. PHFC has the highest loans
to deposits ratio, 139.04%, and borrowing to assets ratio,
44.42%. PHFC had the fastest asset growth rate 42.75%. PHFC
had the lowest reserves to nonperforming loans ratio, 39.89%,
and deposits to assets ratio, 43.13%. Pittsburgh Home was
selected to the Group based on its asset size, low loan to
asset ratio, asset quality, and modest profitability.

- SKANEATLES BANCORP, INC. SKAN is a BIF insured institution
with 9 offices in New York State and is the smallest
comparable with $257.6 million in assets. SKAN has the highest
loan to assets, 83.33%, deposits to assets, 84.76%,
nonperforming assets to equity, 28.87%, interest income to
assets, 7.73%, noninterest income to assets, 0.74%,
noninterest expense to assets, 3.49%, and efficiency, 73.06%,
ratios. SKAN has the lowest risk based capital ratio, 11.35%.
Skaneatles was selected as a comparable based on its asset
size, capital level and profitability.

- WVS FINANCIAL CORP. WVS is a SAIF insured institution with 6
offices in and around Pittsburgh, Pennsylvania and $297.8
million in assets. WVFC has no intangibles and the lowest
deposit growth rate, (1.78%). WVS Financial was selected as a
comparable based on its asset size, balance sheet mix, capital
levels and profitability.
<PAGE> 50
Conversion Valuation Appraisal Report Page: 1 - 46

- YONKERS FINANCIAL CORP. YFCB is a SAIF insured institution
with 5 offices in the Yonkers, New York area and $343.9
million in assets. YFCB has the highest loan and deposit
growth rates, 75.92% and 15.56%, respectively. WVS Financial
was selected as a comparable based on its low loan to asset
ratio, capital levels and profitability.
<PAGE> 51
Conversion Valuation Appraisal Report Page: 1 - 47

All data presented in figure 28 is from SNL Securities utilizing the most recent
quarter for balance sheet and income statement related items. All data for the
Bank is from the prospectus or the audited financials.

FIGURE 28 - KEY FINANCIAL INDICATORS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
THE BANK AT COMPARABLE GROUP
MARCH 31, 1998 QUARTER MEDIAN
(MOST RECENT
QUARTER)
- ------------------------------------------------------------------------------
<S> <C> <C>
BALANCE SHEET DATA
Gross Loans to Deposits 58.91% 76.00%
Total Net Loans to Assets 50.46% 55.02%
Deposits to Assets 86.33% 70.86%
Borrowed Funds to Assets 0.00% 15.82%

BALANCE SHEET GROWTH
Asset Growth Rate 4.84% 15.29%
Loan Growth Rate 5.71% 6.99%
Deposit Growth Rate 4.11% 6.32%

CAPITAL
Equity to Assets 12.52% 9.04%
Tangible Equity to Assets 12.52% 9.00%
Intangible Assets to Equity 0.00% 0.00%
Regulatory Core Capital to Assets 12.52% 9.45%
Equity + Reserves to Assets 12.91% 10.26%
Total Capital to Risk Adjusted Assets 34.81% 20.73%
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
Conversion Valuation Appraisal Report Page: 1 - 48

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
THE BANK AT COMPARABLE GROUP
MARCH 31, 1998 QUARTER MEDIAN
(MOST RECENT
QUARTER)
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSET QUALITY
Non-Performing Loans to Loans 1.50% 0.83%
Reserves to Non-Performing Loans 50.26% 111.92%
Non-Performing Assets to Assets 0.82% 0.47%
Non-Performing Assets to Equity 6.54% 5.29%
Reserves to Loans 0.75% 1.11%
Reserves to Non-Performing Assets
+ 90 Days Del. 50.26% 82.87%

PROFITABILITY
Return on Average Assets 1.16% 0.95%
Return on Average Equity 9.47% 9.28%

INCOME STATEMENT
Net Interest Margin 3.69% 3.64%
Interest Income to Average Assets 7.11% 7.41%
Interest Expense to Average Assets 3.53% 3.92%
Net Interest Income to Average Assets 3.58% 3.59%
Noninterest Income to Average Assets 0.08% 0.25%
Noninterest Expense to Average Assets 1.60% 2.08%
Efficiency Ratio 43.70% 58.68%
Overhead Ratio 42.52% 55.70%
- -------------------------------------------------------------------------
</TABLE>

Source: The Bank Offering Prospectus, FinPro calculations and SNL Securities

Note: All of the Bank data is for the twelve months ended March 31, 1998.

Note: All of the Comparable data is as of the most recent quarter.

<PAGE> 53
Conversion Valuation Appraisal Report Page: 1 - 49

4. MARKET VALUE DETERMINATION

INTRODUCTION

The estimated pro forma market value of the Bank, along with certain adjustments
to its value relative to market values for the Comparable Group are delineated
in this section. The adjustments delineated in this section are made from
potential investors' viewpoints. A potential investor includes depositors
holding subscription rights and unrelated parties who may purchase stock in the
community offering and who are assumed to be aware of all relevant and necessary
facts as they pertain to the value of the Bank relative to other publicly traded
thrift institutions and relative to alternative investment opportunities.

There are numerous criteria on which the market value adjustments are based, but
the major ones utilized for purposes of this report include:

- Balance Sheet Strength

- Asset Quality

- Earnings Quality, Predictability and Growth

- Market Area

- Management

- Dividends

- Liquidity of the Issue

- Subscription Interest

- Recent Regulatory Matters

- Market for Seasoned Thrift Stocks

- Market for MHC Stocks

- Acquisition Market

After identifying the adjustments that should be made to market value, the
pro-forma market value for the Bank is computed and adjusted. The estimated
pro-forma market value for the Bank is then compared with the market valuation
ratios of the Comparable Group, recently converted public thrifts, MHC's, New
York State public thrifts and the aggregate ratios for all public thrifts.
<PAGE> 54
Conversion Valuation Appraisal Report Page: 1 - 50

BALANCE SHEET STRENGTH

The balance sheet strength of an institution is an important market value
determinant, as the investment community considers such factors as bank
liquidity, capitalization, asset composition, funding mix, intangible levels and
interest rate risk in assessing the attractiveness of investing in the common
stock of a thrift. The following tables summarize the key financial elements of
the Bank measured against the Comparable Group.

FIGURE 29 - KEY BALANCE SHEET DATA

<TABLE>
<CAPTION>
KEY FINANCIAL DATA AS OF THE MOST RECENT QUARTER
---------------------------------------------------------
TOTAL LOANS/ LOANS/ DEPOSITS/ BORROWINGS/
ASSETS DEPOSITS ASSETS ASSETS ASSETS
TICKER SHORT NAME ($000) (%) (%) (%) (%)
- --------------------------------------------- ----------------------------------------------------------
COMPARABLE THRIFT DATE
<S> <C> <C> <C> <C> <C> <C>
CATB Catskill Financial Corp. 295,932 62.58 43.10 68.87 6.06
CVAL Chester Valley Bancorp Inc. 343,865 96.14 77.82 80.95 9.12
FBER 1st Bergen Bancorp 316,071 58.96 41.77 70.86 16.56
FIBC Financial Bancorp Inc. 310,368 76.00 55.98 73.66 15.82
FKFS First Keystone Financial 385,152 83.46 51.47 61.67 26.02
HARL Harleysville Savings Bank 367,596 89.54 68.66 76.68 15.67
LFBI Little Falls Bancorp Inc. 355,443 64.00 42.10 65.79 23.60
NMSB NewMil Bancorp Inc. 370,276 60.21 47.05 78.14 12.02
PBCI Pamrapo Bancorp Inc. 381,444 70.60 57.21 81.04 3.63
PHFC Pittsburgh Home Financial Corp. 338,312 139.04 59.98 43.13 44.42
SKAN Skaneateles Bancorp Inc. 257,605 98.31 83.33 84.76 7.10
WVFC WVS Financial Corp. 297,814 99.28 55.02 55.42 31.55
YFCB Yonkers Financial Corp. 343,861 70.75 47.04 66.49 20.10
- --------------------------------------------- ----------------------------------------------------------
Average 335,672 82.22 56.19 69.80 17.82
Median 343,861 76.00 55.02 70.86 15.82
Maximum 385,152 139.04 83.33 84.76 44.42
Minimum 257,605 58.96 41.77 43.13 3.63

SOUND FEDERAL SAVINGS & LOAN
ASSOCIATION 254,749 58.91 50.46 86.33 0.00

VARIANCE TO THE COMPARABLE MEDIAN (89,112) (17.09) (4.56) 15.47 (15.82)
</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations

Liquidity - The liquidity of the Bank and the Comparable Group appear
similar and were sufficient to meet all regulatory guidelines.

Asset Composition - The Bank's net loans to assets ratio of 50.46% is
below the median for the Comparable Group of 55.02%. This indicates
that the Bank has a heavier reliance on wholesale investments for
assets, which will increase after the offering, as the Bank will need
to leverage the additional capital.
<PAGE> 55
Conversion Valuation Appraisal Report Page: 1 - 51

Funding Mix - The Bank is funded through deposits, 86.33% of assets,
and retained earnings, 12.52% of assets. The Comparable Group has a
greater reliance on borrowings than the Bank with a median deposit to
asset ratio of 70.86%, a borrowing to assets ratio of 15.82%. The
Bank's lack of borrowings leaves room for additional funding in the
future.

FIGURE 30 - BALANCE SHEET GROWTH DATA

<TABLE> BALANCE SHEET GROWTH OF THE MRQ
<CAPTION> --------------------------------
ASSET LOAN DEPOSIT
GROWTH GROWTH GROWTH
RATE RATE RATE
TICKER SHORT NAME (%) (%) (%)
- --------------------------------------------- --------------------------------
COMPARABLE THRIFT DATA
<S> <C> <C> <C> <C>
CATB Catskill Financial Corp. 8.03 2.16 3.38
CVAL Chester Valley Bancorp Inc. 12.67 8.29 14.88
FBER 1st Bergen Bancorp 25.28 5.70 7.29
FIBC Financial Bancorp Inc. 15.29 17.01 10.88
FKFS First Keystone Financial 22.41 8.74 6.32
HARL Harleysville Savings Bank 10.54 5.29 5.20
LFBI Little Falls Bancorp Inc. 17.16 21.51 2.77
NMSB NewMil Bancorp Inc. 16.80 3.10 7.59
PBCI Pamrapo Bancorp Inc. 3.83 4.91 2.73
PHFC Pittsburgh Home Financial Corp 42.75 26.35 5.98
SKAN Skaneateles Bancorp Inc. 6.70 3.44 7.22
WVFC WVS Financial Corp. 6.40 6.99 (1.78)
YFCB Yonkers Financial Corp. 20.91 75.92 15.56
- --------------------------------------------- --------------------------------
Average 16.06 14.57 6.77
Median 15.29 6.99 6.32
Maximum 42.75 75.92 15.56
Minimum 3.83 2.16 (1.78)

SOUND FEDERAL SAVINGS & LOAN ASSOCIATION 4.84 5.71 4.11

VARIANCE TO THE COMPARABLE MEDIAN (10.45) (1.28) (2.21)
</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations

Figure 30 illustrates that the Bank has experienced modest deposit growth for
the year ended March 31, 1998. The Comparable Group has higher growth rates.
<PAGE> 56
Conversion Valuation Appraisal Report Page: 1 - 52

FIGURE 31 - CAPITAL DATA
<TABLE>
CAPITAL AS OF THE MOST RECENT QUARTER
<CAPTION> ----------------------------------------------------------------------------
TANGIBLE INTANGIBLE REGULATORY EQUITY + TOTAL CAPITAL/
EQUITY/ EQUITY/ ASSETS/ CORE CAP/ RESERVES/ RISK ADJUSTED
ASSETS TANG ASSETS EQUITY ASSETS ASSETS ASSETS
TICKER SHORT NAME (%) (%) (%) (%) (%)
- -------------------------------------------------- ----------------------------------------------------------------------------
COMPARABLE THRIFT DATA
<S> <C> <C> <C> <C> <C> <C> <C>
CATB Catskill Financial Corp. 23.42 23.42 0.00 20.88 24.07 60.42
CVAL Chester Valley Bancorp Inc. 8.67 8.67 0.00 8.36 9.61 14.63
FBER 1st Bergen Bancorp 11.69 11.69 0.00 10.10 12.68 25.66
FIBC Financial Bancorp Inc. 9.04 9.00 0.42 6.83 9.56 17.60
FKFS First Keystone Financial 6.67 6.67 0.00 8.50 7.13 20.75
HARL Harleysville Savings Bank 6.67 6.67 0.00 6.67 7.21 14.48
LFBI Little Falls Bancorp Inc. 10.20 9.50 7.63 7.67 10.54 16.77
NMSB NewMil Bancorp Inc. 8.91 8.91 0.00 9.45 10.26 20.73
PBCI Pamrapo Bancorp Inc. 12.82 12.76 0.56 11.85 13.46 25.28
PHFC Pittsburgh Home financial Corp 7.43 7.35 1.14 19.17 7.90 18.21
SKAN Skaneateles Bancorp Inc. 6.98 6.81 2.53 6.78 7.98 11.35
WVFC WVS Financial Corp. 10.99 10.99 0.00 11.14 11.62 23.48
YFCB Yonkers Financial Corp. 13.18 13.18 0.00 11.40 13.55 28.24
- -------------------------------------------------- ---------------------------------------------------------------------------
Average 10.51 10.43 0.94 10.68 11.20 22.89
Median 9.04 9.00 0.00 9.45 10.26 20.73
Maximum 23.42 23.42 7.63 20.88 24.07 60.42
Minimum 6.67 6.67 0.00 12.52 7.13 11.35

SOUND FEDERAL SAVINGS & LOAN ASSOCIATION 12.52 12.52 0.00 12.52 12.91 34.81

VARIANCE TO THE COMPARABLE MEDIAN 3.48 3.52 0.00 3.07 2.65 14.08
</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations

Capitalization - The Comparable Group's median equity to assets ratio
of 9.04% is below the Bank's ratio of 12.52%.

Intangible Levels - One of the most important factors influencing
market values is the level of intangibles that an institution carries
on its books. The Comparable Group has a limited level of intangibles
with an average of 0.94% of equity. Five of the thirteen Comparables
have intangibles. Thrifts trade more on tangible book than on book
basis. The Bank had no intangible assets.

Interest Rate Risk - The Bank has a modest level of interest rate risk,
evidenced by a net portfolio value that falls below the level of
tangible equity at the +300 and +400 basis point rate shocks but
remains above the required 4% capital level under all rate shocks.

The Bank has increased its reliance on the wholesale market for assets and, in
the short term, the additional capital will increase this reliance. The Bank's
market value should be adjusted downward in comparison to the Comparable Group
for this measure, as the Bank has a low loan to asset ratio and a high equity to
assets ratio.
<PAGE> 57
Conversion Valuation Appraisal Report Page: 1 - 53

ASSET QUALITY

The asset quality of an institution is an important determinant of market value.
The investment community considers levels of nonperforming loans, REO and levels
of ALLL in assessing the attractiveness of investing in the common stock of an
institution.

FIGURE 32 - ASSET QUALITY TABLE
<TABLE>
<CAPTION>
Asset Quality of The Most Recent Quarter
---------------------------------------------------------------------------------
NPLs Reserves/ NPAs/ NPAs/ Reserve/ Reserves/
Loans NPLs Assets Equity Loans NPAs + 90
Ticker Short Name (%) (%) (%) (%) (%) (%)
- ------ ------------------------------ ----- -------- ------ ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Thrift Data
CATB Catskill Financial Corp. 0.50 296.88 0.29 1.26 1.49 219.08
CVAL Chester Valley Bancorp Inc. 0.31 390.28 0.24 2.80 1.21 390.28
FBER 1st Bergen Bancorp 2.19 108.32 0.95 8.15 2.38 104.08
FIBC Financial Bancorp Inc. 1.56 59.59 2.19 24.27 0.93 23.74
FKFS First Keystone Financial 1.54 57.73 1.34 20.06 0.89 34.27
HARL Harleysville Savings Bank 0.00 NM 0.00 0.02 0.79 NM
LFBI Little Falls Bancorp Inc. 0.64 126.60 0.43 4.25 0.81 78.51
NMSB NewMil Bancorp Inc. 0.83 345.17 0.47 5.29 2.87 215.34
PBCI Pamrapo Bancorp Inc. 2.32 47.68 1.70 13.27 1.11 32.66
PHFC Pittsburgh Home Financial Corp. 1.97 39.89 1.37 18.41 0.79 34.44
SKAN Skaneateles Bancorp Inc. 2.00 60.25 2.01 28.87 1.21 49.89
WVFC WVS Financial Corp. 0.37 310.17 0.20 1.83 1.14 310.17
YFCB Yonkers Financial Corp. 0.67 115.52 0.41 3.14 0.77 87.23
- ------ ----------------------------- ----- --------- ---- ----- ---- ------
Average 1.15 163.17 0.89 10.12 1.26 131.64
Median 0.83 111.92 0.47 5.29 1.11 82.87
Maximum 2.32 390.28 2.19 28.87 2.87 390.28
Minimum 0.00 39.89 0.00 0.02 0.77 23.74

SOUND FEDERAL SAVINGS &
LOAN ASSOCIATION 1.50 50.26 0.82 6.54 0.75 50.26

VARIANCE TO THE COMPARABLE
MEDIAN 0.67 (61.66) 0.35 1.25 (0.36) (32.61)
</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations

The Bank has a higher level of non-performing loans ("NPL") to total loans at
1.50% when compared to the Comparable Group at 0.83%. Additionally, the Bank's
reserves to loans ratio of 0.75% is lower than the Comparable median of 1.11%.
The Bank's asset quality and reserve levels appear less attractive when compared
to the Comparable Group, as such, a downward adjustment is warranted.
<PAGE> 58
Conversion Valuation Appraisal Report Page: 1 - 54

EARNINGS QUALITY, PREDICTABILITY AND GROWTH

The earnings quality, predictability and growth are critical components in the
establishment of market values for thrifts. Thrift earnings are primarily a
function of:

- net interest income

- loan loss provision

- non-interest income

- non-interest expense

The quality and predictability of earnings is dependent on both internal and
external factors. Some internal factors include the mix of the balance sheet,
the interest rate sensitivity of the balance sheet, the asset quality, and the
infrastructure in place to deliver the assets and liabilities to the public.
External factors include the competitive market for both assets and liabilities,
the global interest rate scenario, local economic factors and regulatory issues.

Each of these factors can influence the earnings of an institution, and each of
these factors is volatile. Investors prefer stability and consistency. As such,
solid, consistent earnings are preferred to high but risky earnings. Investors
also prefer earnings to be diversified and not entirely dependent on interest
income.
<PAGE> 59
Conversion Valuation Appraisal Report Page: 1 - 55

FIGURE 33 - NET INCOME TREND

IN THOUSANDS
------------
Mar-94 $2,845
Mar-95 $2,742
Mar-96 $2,397
Mar-97 $2,290
Mar-98 $2,885

Sources: Offering Circular
<PAGE> 60
Conversion Valuation Appraisal Report Page 1 - 56

For the year ended March 31, 1998, the Bank's ROAA and ROAE were 1.16% and
9.47%, respectively. The Comparable median ROAA and ROAE were 0.95% and 9.28%,
respectively.

FIGURE 34 - PROFITABILITY DATA

<TABLE>
<CAPTION>
PROFITABILITY AS OF THE
MOST RECENT QUARTER
------------------------
RETURN ON RETURN ON
TICKER SHORT NAME AVG ASSETS AVG EQUITY
(%) (%)
- ------------------------------------------ ------------------------
COMPARABLE THRIFT DATA
<S> <C> <C> <C>
CATB Catskill Financial Corp. 1.34 5.37
CVAL Chester Valley Bancorp Inc. 1.03 11.92
FBER 1st Bergen Bancorp 0.75 5.41
FIBC Financial Bancorp Inc. 0.95 10.27
FKFS First Keystone Financial 0.78 11.30
HARL Harleysville Savings Bank 1.01 15.28
LFBI Little Falls Bancorp Inc. 0.58 4.85
NMSB NewMil Bancorp Inc. 0.86 8.68
PBCI Pamrapo Bancorp Inc. 1.32 10.23
PHFC Pittsburgh Home Financial Corp 0.78 8.06
SKAN Skaneateles Bancorp Inc. 0.64 9.28
WVFC WVS Financial Corp. 1.27 11.12
YFCB Yonkers Financial Corp. 0.98 6.94
- ------------------------------------------ -------------------------
Average 0.95 9.13
Median 0.95 9.28
Maximum 1.34 15.28
Minimum 0.58 4.85

SOUND FEDERAL SAVINGS &
LOAN ASSOCIATION 1.16 9.47

VARIANCE TO THE COMPARABLE MEDIAN 0.21 0.19
</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations
<PAGE> 61
Conversion Valuation Appraisal Report Page 1 - 57

FIGURE 35 - INCOME STATEMENT DATA

<TABLE>
<CAPTION>
INCOME STATEMENT AS OF THE MOST RECENT QUARTER
-----------------------------------------------------------------------------------------------
NET INTEREST INTEREST NET INTEREST NONINTEREST NONINTEREST
INTEREST INCOME/ EXPENSE/ INCOME/ INCOME/ EXPENSE/ EFFICIENCY OVERHEAD
MARGIN AVG ASSETS AVG ASSETS AVG ASSETS AVG ASSETS AVG ASSETS RATIO RATIO
TICKER SHORT NAME (%) (%) (%) (%) (%) (%) (%) (%)
- ----------------------------- -----------------------------------------------------------------------------------------------
COMPARABLE THRIFT DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CATB Catskill Financial Corp. 4.07 7.26 3.28 3.98 0.14 1.90 46.75 44.84
CVAL Chester Valley Bancorp Inc. 3.83 7.73 3.99 3.74 0.40 2.61 63.10 59.17
FBER 1st Bergen Bancorp 3.32 7.13 3.92 3.21 0.11 2.08 62.41 61.13
FIBC Financial Bancorp Inc. 3.64 7.23 3.78 3.45 0.25 1.88 50.82 47.22
FKFS First Keystone Financial 3.32 7.34 4.12 3.22 0.29 2.30 65.56 62.49
HARL Harleysville Savings Bank 2.73 7.41 4.74 2.67 0.12 1.24 44.82 42.39
LFBI Little Falls Bancorp Inc. 2.67 6.78 4.20 2.58 0.07 1.70 60.97 59.93
NMSB NewMil Bancorp Inc. 3.86 7.30 3.56 3.74 0.45 2.61 65.61 61.50
PBCI Pamrapo Bancorp Inc. 4.70 7.69 3.25 4.44 0.37 2.71 54.61 50.86
PHFC Pittsburgh Home Financial
Corp 2.82 7.46 4.74 2.72 0.20 1.73 58.68 55.70
SKAN Skaneateles Bancorp Inc. 4.16 7.73 3.80 3.93 0.74 3.49 73.06 67.99
WVFC WVS Financial Corp. 3.63 7.63 4.05 3.59 0.13 1.70 45.84 43.91
YFCB Yonkers Financial Corp. 3.79 7.47 3.76 3.71 0.29 2.26 56.19 52.76
- -----------------------------------------------------------------------------------------------------------------------------------
Average 3.58 7.40 3.94 3.46 0.27 2.17 57.57 54.61
Median 3.64 7.41 3.92 3.59 0.25 2.08 58.68 55.70
Maximum 4.70 7.73 4.74 4.44 0.74 3.49 73.06 67.99
Minimum 2.67 6.78 3.25 2.58 0.07 1.24 44.82 42.39

SOUND FEDERAL SAVINGS &
LOAN ASSOCIATION 3.69 7.11 3.53 3.58 0.08 1.60 43.70 42.52

VARIANCE TO THE COMPARABLE
MEDIAN 0.05 (0.30) (0.39) (0.01) (0.17) (0.48) (14.98) (13.18)

</TABLE>

Sources: SNL and Audited Financial Data, FinPro Computations

Compared to the Comparable Group, the Bank's lower yield on assets is offset by
a lower cost of funds. Noninterest income is lower, but more than offset by a
lower level of noninterest expense, resulting in a 4 basis point advantage on a
pre-tax net income basis.

Currently, investors are focusing on earnings sustainability as the interest
rate volatility has caused wide variation in income levels. With the intense
competition for both assets and deposits, banks can not easily replace lost
spread and margin with balance sheet growth.

The Bank's historical earnings have been relatively stable. The noninterest
expense advantage will narrow with the extra cost of reporting and legal fees
after the conversion, all other things being equal. Taken collectively, the
income of the Bank can be measured by the efficiency ratio, where the Bank has
an advantage of 15.02% as compared to the Comparable median. Based on the Bank's
historical earnings performance, an upward adjustment is warranted to the market
value for earnings.
<PAGE> 62
Conversion Valuation Appraisal Report Page 1 - 58

MARKET AREA

The market area that an institution serves has a significant impact on value, as
future success is interrelated with the economic, demographic and competitive
aspects of the market. Specifics on the Bank's market were delineated in Section
2 - Market Area Analysis. The following are discussions with respect to the
various data sets utilized for the market analysis

DEMOGRAPHIC DATA - the households within the Bank's markets are
projected to grow 3.93% from 1990 to 2002, indicating a stable market,
but with limited opportunity for customer growth through demographic
expansion. The median household income for all three markets, however,
is greater than twice the state average. The markets are populated with
educated people, ranging from 30-47% with a bachelors degree or better,
compared to the state average of 23%. These factors are indicative of
upscale markets with sophisticated customers.

COMPETITIVE DATA - the Bank has an average branch size of $71.5
million, compared to the average for its markets of $57.9 million,
indicating a successful branch franchise. Additionally, the bank has an
overall branch efficiency ratio of 123.64% with a 16.13% market share
of $1.3 billion in deposits and a branch share of 13.04% of 23
competitive branch facilities.

A slight upward adjustment is warranted for this factor due to the upscale
markets and the Bank's successful franchise.

<PAGE> 63
Conversion Valuation Appraisal Report Page 1 - 59

MANAGEMENT

The Bank has developed a good management team with considerable banking
experience. The Bank's organizational chart is reasonable for an institution of
its size and complexity, however, the Reorganization will require the addition
of senior management and lending positions. The Board is active and oversees and
advises on all key strategic and policy decisions and holds the management to
high performance standards.

Due to the unknowns of the staff expansion, a slight downward adjustment appears
to be warranted for this factor.
<PAGE> 64
Conversion Valuation Appraisal Report Page 1 - 60

DIVIDENDS

Historically, banks have not established dividend policies immediately at or
after conversion to stock ownership. Rather, newly converted institutions, in
general, have preferred to establish an earnings track record, fully invest the
conversion proceeds, and allow for seasoning of the stock before establishing a
dividend policy. In the late 1980's and early 1990's however, there has been a
tendency toward initiating dividend policies concurrent with the conversion as a
means of increasing the attractiveness of the issue and to utilize the proceeds.

The last few years have seen yet another shift away from dividend policies
concurrent with conversion. Recent issues have been fully or over subscribing
without the need for the additional enticement of dividends. After the
conversion is another issue, however. Recent pressures on ROE and on internal
rate of returns to investors has prompted the industry toward cash dividends.
This trend is exacerbated by the lack of growth. Typically, when institutions
are in a growth mode, they issue stock dividends or do not declare a dividend.
When growth is stunted, these institutions shift toward reducing equity levels
and thus utilize cash dividends as a tool in this regard.
<PAGE> 65
Conversion Valuation Appraisal Report Page 1 - 61

FIGURE 36 - DIVIDENDS DATA

<TABLE>
<CAPTION>
DIVIDENDS
-----------------------
CURRENT LTM DIVIDEND
DIVIDEND PAYOUT
YIELD RATIO
TICKER SHORT NAME ($) (%)
- -----------------------------------------------------------------------
COMPARABLE THRIFT DATA
<S> <C> <C> <C>
CATB Catskill Financial Corp. 1.816 34.09
CVAL Chester Valley Bancorp Inc. 1.380 31.55
FBER 1ST Bergen Bancorp 1.046 22.50
FIBC Financial Bancorp Inc. 1.818 25.60
FKFS First Keystone Financial 1.067 10.42
HARL Harleysville Savings Bank 1.359 20.69
LFBI Little Falls Bancorp Inc. 1.026 19.48
NMSB NewMil Bancorp Inc. 2.349 41.18
PBCI Pamrapo Bancorp Inc. 3.947 59.54
PHFC Pittsburgh Home Financial Corp. 1.362 230.25
SKAN Skaneateles Bancorp Inc. 1.600 25.01
WVFC WVS Financial Corp. 3.243 247.62
YFCB Yonkers Financial Corp. 1.445 22.22
- --------------------------------------------------------------------
Average 1.80 60.78
Median 1.45 25.60
Maximum 3.95 247.62
Minimum 1.03 10.42

SOUND FEDERAL BANCORP NA NA

VARIANCE TO THE COMPARABLE MEDIAN NA NA
</TABLE>

All of the Comparable institutions had declared dividends. The median dividend
payout ratio for the Comparable Group was 25.60%, ranging from a high of 247.62%
to a low of 10.42%. The Bank will have the capital levels to afford to pay
dividends and, therefore, no adjustment is indicated for this factor.

<PAGE> 66
Conversion Valuation Appraisal Report Page 1 - 62

LIQUIDITY OF THE ISSUE

The Comparable Group is by definition composed only of companies that trade in
the public markets with all of the Comparables trading on NASDAQ. Typically, the
number of shares outstanding and the market capitalization provides an
indication of how much liquidity there will be in a given stock. The actual
liquidity can be measured by volume traded over a given period of time.

FIGURE 37 - MARKET CAPITALIZATION DATA

<TABLE>
<CAPTION>
MARKET CAPITALIZATION
------------------------------------------------------------------------------------
MRQ MRQ LTM LTM MRQ PUBLICLY MRQ TANGIBLE
MARKET PRICE PRICE PRICE REPORTED PUBLICLY REP
VALUE PER SHARE HIGH LOW BOOK VALUE BOOK VALUE
TICKER SHORT NAME ($) ($) ($) ($) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Thrift Data

CATB Catskill Financial Corp. 78.62 17.750 19.125 13.938 15.54 15.54
CVAL Chester Valley Bancorp Inc. 69.77 35.125 37.000 15.714 13.64 13.64
FBER 1st Bergen Bancorp 52.20 19.750 20.750 12.875 13.54 13.54
FIBC Financial Bancorp Inc. 46.93 25.000 27.000 14.875 16.43 16.36
FKFS First Keystone Financial 45.25 18.250 19.000 10.625 10.65 10.65
HARL Harleysville Savings Bank 54.13 31.000 31.125 20.250 14.66 14.66
LFBI Little Falls Bancorp Inc. 48.31 20.000 20.500 12.750 14.63 13.51
NMSB NewMil Bancorp Inc. 52.31 13.750 14.500 8.875 8.59 8.59
PBCI Pamrapo Bancorp Inc. 80.67 28.750 28.750 18.500 17.20 17.10
PHFC Pittsburgh Home Financial Corp. 34.71 18.625 20.813 14.000 12.76 12.61
SKAN Skaneateles Bancorp Inc. 25.20 19.563 22.250 12.250 12.48 12.16
WVFC WVS Financial Corp. 66.91 19.032 19.500 11.750 9.05 9.05
YFCB Yonkers Financial Corp. 58.43 19.750 22.000 14.375 15.03 15.03
- ----------------------------------------------------------------------------------------------------------------------------
Average 54.88 22.03 23.25 13.91 13.40 13.26
Median 52.31 19.75 20.81 13.94 13.64 13.54
Maximum 80.67 35.13 37.00 20.25 17.20 17.10
Minimum 25.20 13.75 14.50 8.88 8.59 8.59

SOUND FEDERAL BANCORP 25.60 10.00 NA NA 9.27 9.27

VARIANCE TO THE
COMPARABLE MEDIAN (26.71) (9.75) NA NA (4.37) (4.27)
</TABLE>

Note: Sound Federal figures based on the midpoint of the estimated value range.

The market capitalization values of the Comparable Group range from a low of
$25.2 million to a high of $80.7 million with a median market capitalization of
$52.3 million. The Bank expects to have $26.5 million of market capital at the
midpoint on a pro forma basis.

Since the size of the offering is small, it is unlikely that an active and
liquid trading market will be maintained. It is anticipated the Bank will be
traded on NASDAQ. Based on a low level of market capitalization, a slight
downward adjustment for this factor appears warranted.
<PAGE> 67
Conversion Valuation Appraisal Report Page 1 - 63

SUBSCRIPTION INTEREST

The outcome of subscription offerings has been, historically, difficult to
predict. Since 1992, however, the conversions have experienced robust
subscription interest with the exception of late 1994 when the pricing multiples
were high. During late 1994, many subscriptions had the need to resolicit due to
lack of professional investor demand. During 1995, the investor demand returned
and the subscription interest increased, primarily the result of lower market
multiples. The vast majority of recent conversions have oversubscribed and gone
off at the maximum or super-maximum.

Of more importance is the general strength of the aftermarket. Thrift stock
prices, including MHC's continue to climb (see Figure 38).

Recently, on a national level, there were deals which significantly
oversubscribed, resulting in a few re-solicitations and an upward adjustment to
the valuations.

As such, an upward adjustment for subscription interest is warranted at this
time.

<PAGE> 68
Conversion Valuation Appraisal Report Page 1 - 64

RECENT REGULATORY MATTERS

As a result of large after-market price increases of conversions during 1993 and
early 1994, the regulatory agencies have issued guidelines on appraisals for
conversions. The regulators publicly indicated that only modest immediate
after-market price increases are appropriate for converting institutions. The
guidelines issued November 22, 1994, indicate that the reasonableness and
adequacy of an appraisal will be partially judged by the immediate price
movement of the conversion stock in the after-market, using a very short time
frame of the second day of trading following closing. The guidelines further
discuss that the average price appreciation for all IPO's has been between 10%
and 15%, which was deemed to be too high.

At around the same time period, IPO pricing was elevated on a book basis and
IPO's in late 1994 did not experience much appreciation. In fact, numerous IPO's
actually depreciated. 1995 brought back lower premiums to book but they have
been rising throughout 1996 to approximately the same levels as late 1994. The
trend has continued in 1997 and 1998 with IPO's popping over 40% on average, for
the first day of trading.

The recent interest in thrift IPO's has caused large oversubscriptions, which in
turn have caused large price appreciation's in the aftermarket. Recently,
regulators have been indicating the need for increased pricing of new issues in
the attempt to lessen the aftermarket appreciation. Also, regulators have been
concerned with capital redistributions from thrifts which have converted within
the past three years. Regulatory agencies are publicly indicating that they will
enforce the limits of stock buy backs to: 0% in the first year, 5% in the second
year and 5% in the third year.

This threat to newly converted institutions, of not being able to use all of the
capital markets tools available, will hurt the stocks attractiveness, as it will
put them at a significant competitive disadvantage to the rest of the industry.

As such, a downward adjustment for this measure is warranted based on the
uncertainty surrounding the regulatory environment.
<PAGE> 69
Conversion Valuation Appraisal Report Page 1 - 65

MARKET FOR SEASONED THRIFT STOCKS

Data for all public thrifts as of June 8, 1998 is provided in Exhibit 7. A
common measure utilized as a proxy for the performance of the thrift industry is
the SNL thrift index graphically shown below and tabularly shown on the
following page:

FIGURE 38 - SNL THRIFT INDEX CHART

[LINE CHART]
Source: SNL Securities
<PAGE> 70
Conversion Valuation Appraisal Report Page: 1 - 66

FIGURE 39 - HISTORICAL SNL INDEX

- ------------------------------------------------------------------------------
SNL THRIFT INDEX MONTHLY PERFORMANCE
January 2, 1992 to June 8, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SNL % Change % Change % Change % Change % Change % Change % Change
Thrift Since Since Since Since Since Since Since
Date Index 1/2/92 1/4/93 1/3/94 12/30/94 12/29/95 12/31/96 12/31/97
- ----------- ------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-92 143.9 -- -- -- -- -- -- --
Jul-92 175.1 21.7% -- -- -- -- -- --
Jan-93 201.1 39.7% -- -- -- -- -- --
Jul-93 220.5 53.2% 9.6% -- -- -- -- --
Jan-94 252.5 75.5% 25.6% -- -- -- -- --
Jul-94 273.8 90.3% 36.2% 8.4% -- -- -- --
Jan-95 256.1 78.0% 27.3% 1.4% -- -- -- --
Jul-95 328.2 128.1% 63.2% 30.0% 28.2% -- -- --
Jan-96 370.7 157.6% 84.3% 46.8% 44.7% -- -- --
Jul-96 389.9 171.0% 93.9% 54.4% 52.2% 5.2% -- --
Jan-97 520.1 261.4% 158.6% 106.0% 103.1% 40.3% -- --
Jul-97 684.5 375.7% 240.4% 171.1% 167.3% 84.7% 31.6% --
Jan-98 768.3 433.9% 282.0% 204.3% 217.1% 104.1% 58.9% -5.6%
June 8, 1998 897.2 523.5% 346.1% 255.3% 270.3% 138.3% 85.5% 10.2%
</TABLE>

Source: SNL Securities

FIGURE 40 - EQUITY INDICES

[INSERT LINE CHART]
<PAGE> 71
Conversion Valuation Appraisal Report Page: 1 - 67

INDEX COMPARISONS
-----------------------------------------------------
SNL S&P DJIA
-----------------------------------------------------
<S> <C> <C> <C>
6/30/94 269.9 444.3 3,625.0
12/30/94 244.7 459.3 3,834.4
6/30/95 313.5 544.8 4,556.1
12/29/95 376.5 615.9 5,117.1
6/28/96 387.2 670.6 5,654.6
12/31/96 483.6 740.7 6,448.3
6/30/97 624.5 885.2 7,672.8
12/30/97 814.1 970.4 7,903.0
6/8/98 897.2 1,115.7 9,069.6
-----------------------------------------------------
</TABLE>

As the Figures 38 and 39 illustrate, the performance of the SNL index has been
robust through 1992, 1993, 1994 and 1995. The dip in the index, occurring in
late 1994, was the product of the interest rate rise during that period along
with the overall uneasiness in the stock market in general. The rate scenario
covering the same period as the SNL index can be seen in the following chart.

FIGURE 41 - HISTORICAL RATES

[INSERT LINE CHART]

Source: Prudential Bache Securities

As the graph demonstrates, the rate rise in late 1994 correlates closely to the
fall in thrift prices. The drop in rates in 1995 was one of the primary drivers
of the rapid rise in the SNL index. During 1996, rates increased slightly and
then remained stable, fueling the rise in the conversion prices. 1997 has seen a
continuation of this trend, with the median IPO pricing at 71.1%, 71.4%, 72.5%,
and 76.6% of book value for the first, second, third, and fourth quarters of
1997, respectively, and 78.4% and 76.0% in the first and second quarters of
1998.
<PAGE> 72
Conversion Valuation Appraisal Report Page 1 - 68

As Figures 40 and 41 show, in 1997, the flat interest rate environment has
contributed to the appreciation in the SNL index. In addition, the market
continues to demonstrate evidence of acquisition speculation. For the first two
months of 1998, the thrift market appreciation continued, as illustrated in
Figure 38.

A slight downward adjustment for this measure is warranted, as the institution
will trade at a discount to the market until the newly raised capital is
adequately invested.
<PAGE> 73
Conversion Valuation Appraisal Report Page 1 - 69

MARKET FOR MHC STOCKS

As the Bank is undergoing an MHC reorganization, it should be compared to other
publicly traded institutions which have undergone a similar process, of which
there are currently 31 institutions. The trading multiples for the MHC's are
different from the fully converted institutions for a variety of reasons. As the
trading shares for an MHC are less than 50% of the total shares, there is a
reduced amount of liquidity, though, for the MHC's with a two tier structure,
the ability of the institution to repurchase its stock increases its liquidity.
The regulators have recently changed their policy regarding the grandfathering
of waived dividends, changing the appraisal method for second steps, effectively
reducing the exchange ratios for some second step conversions. Conversely, there
are assumed trading premiums built into MHC stock prices for the possibility of
a second step offering. Additionally, due to the majority control of the MHC,
there is a lack of acquisition speculation in the stock price.

The average trading multiples for all MHC's are misrepresentative due to
thinly-traded issues and institutions that have announced their second steps. In
order to refine the averages, only those institutions traded on NASDAQ or the
AMSE have been used, resulting in a list of 21 institutions. Their multiples are
shown in the table below.

FIGURE 42 - MHC TRADING MULTIPLES

Current Price in Relation to
-------------------------------------------------------------------
Current Current Price/ Tangible
Stock Market LTM LTM Core Price/ Book Book
Price Value Earnings EPS EPS Core Value Value Assets
Ticker Short Name ($) (SM) (x) (x) (x) (x) (%) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

MUTUAL HOLDING COMPANIES
ALLB Alliance Bank (MHC) 34.00 111.27 53.13 54.84 54.84 53.13 380.74 380.74 40.79
BRKL Brookline Bancorp (MHC) 16.31 474.63 NA NA NA NA 174.84 174.84 58.07
CMSV Community Savings Bnkshrs(MHC)34.50 175.95 35.94 33.50 36.32 35.94 208.84 208.84 23.13
EBI Equality Bancorp Inc. 13.38 33.25 NA NA NA NA 129.73 129.73 14.50
FFFL Fidelity Bankshares Inc. (MHC)29.63 201.51 23.89 27.43 31.85 29.63 227.71 234.75 15.26
FFSX First Fed SB of Siouxland(MHC)36.50 103.58 33.80 31.74 31.47 29.44 251.55 317.67 18.13
GBNK Gaston Federal Bancorp(MHC) 16.00 71.94 NA NA NA NA NA NA NA
HARS Harris Financial Inc.(MHC) 24.06 817.13 35.39 43.75 66.84 60.16 444.79 495.12 36.14
JXSB Jacksonville Savings Bk(MHC) 21.50 41.02 41.35 42.16 65.15 107.50 232.94 232.94 24.18
LFED Leeds Federal Bankshares(MHC) 19.75 102.35 29.04 29.92 29.92 29.04 207.46 207.46 34.23
NBCP Niagara Bancorp Inc.(MHC) 14.63 435.19 NA NA NA NA NA NA NA
NWSB Northwest Bancorp Inc.(MHC) 15.88 743.55 33.07 36.08 36.92 36.08 348.90 390.05 30.86
PBCT People's Bank(MHC) 38.75 2,483.21 23.63 24.84 45.59 38.75 294.01 343.22 27.14
PBHC Pathfinder Bancorp Inc.(MHC) 21.63 61.23 38.62 34.88 45.05 60.07 258.98 305.87 31.21
PHSB Peoples Home Savings Bk(MHC) 20.13 55.55 31.45 NA NA 38.70 194.82 194.82 24.86
PLSK Pulaski Savings Bank (MHC) 17.88 37.68 31.92 NA NA 31.92 171.22 171.22 19.75
PULB Pulaski Bank, Svgs Bank(MHC) 45.25 95.29 47.14 47.63 56.56 59.54 386.42 386.42 51.89
SBFL SB of the Finger Lakes (MHC) 19.63 70.06 70.09 75.48 89.20 81.77 321.72 321.72 27.93
SKBO First Carnegie Deposit(MHC) 19.50 44.85 81.25 NA NA 121.88 181.56 181.56 31.22
WAYN Wayne Savings Bancshares(MHC) 28.00 69.55 46.67 37.33 40.58 50.00 284.55 284.55 26.77
WCFB Webster City Federal SB (MHC) 18.88 39.86 29.49 29.49 29.49 29.49 176.73 176.73 42.44

MHC Average 298.51 40.35 39.22 47.13 52.53 256.71 270.43 30.45
MHC Median 95.29 35.39 35.48 42.82 38.75 232.94 234.75 27.93

</TABLE>

Source: SNL Securities
<PAGE> 74
Conversion Valuation Appraisal Report Page 1 - 70

Another factor making MHC comparisons to the Bank misrepresentative on a pricing
basis is the varying levels of minority ownership. As a means of adjusting for
this factor, market multiples are derived assuming that the MHC's are fully
converted through the issuance of the majority shares at current market prices
using standard second step assumptions. The median Price to LTM EPS and Price to
Book Value multiples, for the same list of 21 institutions on a fully converted
basis as calculated by SNL Securities as of April 30, 1998, are 22.3x and
116.4%, respectively.

The following table compares the MHC fully converted pricing multiples to those
of all fully converted thrifts.

FIGURE 43 - MHC ADJUSTED TRADING MULTIPLE COMPARISON

Pricing as of 4/30/98
-----------------------
Price to Price to
LTM EPS Book
-------- --------
<S> <C> <C>
Median Trading Value for all Thrifts 20.8 160.7
Median Trading Value for MHC's 22.3 116.4
------- -------
MHC (Discount)/Premium 7.21% -27.57%
</TABLE>

Source: SNL Securities

MHC's are presently trading at a 7.21% premium on an earnings basis and a 27.57%
discount on a book basis, indicating that, using the fully converted
methodology, the MHC's appear to be comparably valued to fully converted thrifts
on an earnings basis but not on a book basis.

As the fully converted MHC multiples indicate a relationship exists to fully
converted institutions, a comparison of the appraisal to the pool of MHC's
appears to be appropriate. Due to the ownership, liquidity, dividend,
acquisition and second step factors delineated in the first paragraph of this
section, and to the discount on a book basis for the fully converted MHC
multiples, a slight downward adjustment is, however, warranted for the market
for MHC stocks.
<PAGE> 75
Conversion Valuation Appraisal Report Page 1 - 71

ACQUISITION MARKET

FIGURE 44 - DEALS FOR LAST THIRTEEN QUARTERS

1995-2 1995-3 1995-4 1996-1 1996-2 1996-3 1996-4 1997-1 1997-2 1997-3 1997-4 1998-1 1998-2*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bank 85 92 80 79 87 91 82 66 79 102 94 85 72
Thrift 35 27 22 22 29 21 19 25 32 17 37 26 20
</TABLE>

Source: SNL Securities

<PAGE> 76
Conversion Valuation Appraisal Report Page 1 - 72

From 1994 through June 8, 1998, thrift deal prices remained high. Nationally,
all pricing multiples are up in 1998. Regionally, price to earnings, price to
assets and price to deposits are up, while price to book and price to tangible
are down. Deals between $50 million and $100 million, were priced at a higher
price to earnings, price to asset and price to deposits multiples.

FIGURE 45 - CURRENT THRIFT ACQUISITION MULTIPLES, PRICE TO BOOK

[LINE CHART]
<PAGE> 77
Conversion Valuation Appraisal Report Page 1 - 73

FIGURE 46 - CURRENT THRIFT ACQUISITION MULTIPLES, PRICE TO TANGIBLE BOOK

[LINE CHART]

FIGURE 47 - THRIFT ACQUISITION MULTIPLES, PRICE TO EARNINGS

[LINE CHART]
<PAGE> 78
Conversion Valuation Appraisal Report Page 1 - 74

FIGURE 48 - CURRENT THRIFT ACQUISITION MULTIPLES, PRICE TO ASSETS

[LINE CHART]

FIGURE 49 - CURRENT THRIFT ACQUISITION MULTIPLES, PRICE TO DEPOSITS

[LINE CHART]
<PAGE> 79
Conversion Valuation Appraisal Report Page 1 - 75

FIGURE 50 - DEAL MULTIPLES
<TABLE>
<CAPTION>
MEDIAN PRICE TO LTM EARNINGS 1995 1996 1997 1998 YTD
<S> <C> <C> <C> <C>
Thrifts - Nationwide 18.4 17.6 24.6 26.6
Thrifts - Mid-Atlantic 17.9 17.0 21.7 27.2
Thrifts - Deal Value $50-$100 Million 19.6 17.5 22.5 31.0

AVERAGE PRICE TO BOOK
Thrifts - Nationwide 144.7 149.5 185.2 215.8
Thrifts - Mid-Atlantic 156.5 156.9 212.5 206.2
Thrifts - Deal Value $50-$100 Million 157.9 162.2 209.9 206.9

AVERAGE PRICE TO TANGIBLE BOOK
Thrifts - Nationwide 150.0 153.6 191.9 219.7
Thrifts - Mid-Atlantic 157.6 159.4 228.7 206.6
Thrifts - Deal Value $50-$100 Million 158.7 166.2 212.4 211.6

AVERAGE PRICE TO ASSETS
Thrifts - Nationwide 14.8 15.0 18.4 21.2
Thrifts - Mid-Atlantic 15.3 17.7 16.5 23.2
Thrifts - Deal Value $50-$100 Million 19.6 15.3 18.2 26.2

AVERAGE PRICE TO DEPOSITS
Thrifts - Nationwide 19.2 19.9 24.9 29.1
Thrifts - Mid-Atlantic 20.3 24.5 26.1 32.0
Thrifts - Deal Value $50-$100 Million 24.7 20.2 24.2 36.0
</TABLE>

Currently, there are five thrift acquisitions pending in New York. HUBCO Inc. is
in the process of acquiring MSB Bancorp. MSB was priced at 165% of book and
32.2X LTM earnings. AFSALA Bancorp is being acquired by Ambanc for 145% of book
and 22.6X LTM earnings. Astoria Financial is acquiring Long Island Bancorp for
299% and 32.1X earnings. Tappan Zee Financial is being acquired by USB for 151%
of book and 30.6X LTM earnings. TR Financial Corp. has announced its agreement
to be acquired by Roslyn Bancorp at 27.2x earnings and 403.1% of book, however,
after the announcement, Roslyn's stock price dropped below the walk away level.
The markets reaction to Roslyn's deal may be a signal that the acquisition
multiples are reaching their high.
<PAGE> 80
Conversion Valuation Appraisal Report Page 1 -76

The following table illustrates the acquisition premiums nationwide as compared
to the trading multiples for all public thrifts and the Comparable Group.

FIGURE 51 - ACQUISITION TABLE

<TABLE>
<CAPTION>
PRICE TO PRICE TO PRICE TO PRICE TO
BOOK TANGIBLE BOOK EARNINGS ASSETS
(%) (%) (X) (%)
<S> <C> <C> <C> <C>

Announced National Merger Multiples
1998 YTD as of 6/8/98 215.8 219.7 26.6 21.2

All Public Thrift Median Trading Multiples
as of 6/8/98 154.1 157.4 19.9 18.7

Comparable Median Trading Multiples
as of 6/8/98 158.6 158.6 17.6 15.1

Acquisition Premium Over All Public Thrifts 40.04% 39.58% 33.67% 13.37%

Acquisition Premium Over Comparables 36.07% 38.52% 51.14% 40.40%

</TABLE>

Source: SNL Securities

When compared to the all public thrift trading multiples, the "take-out" premium
appears to be 30% to 40%. The "take-out" premium over the Comparables is
slightly higher at 35% to 50%.

As the Bank is undertaking a mutual holding company structure and only selling a
minority of its shares to the public, acquisition speculation is not relevant
and a downward adjustment is warranted for this measure.
<PAGE> 81
Conversion Valuation Appraisal Report Page 1 - 77

ADJUSTMENTS TO VALUE

Overall, FinPro believes that the Bank pro-forma market value should be
discounted relative to the Comparable Group, reflecting the following
adjustments.

Key Valuation Parameters Valuation Adjustment
- --------------------------------------------------------------------------------

Balance Sheet Strength Downward

Asset Quality Downward

Earnings Quality, Predictability and Growth Upward

Market Area Slight Upward

Management Slight Downward

Dividends No Adjustment

Liquidity of the Issue Slight Downward

Subscription Interest Upward

Recent Regulatory Matters Downward

Market for Seasoned Thrift Stocks Slight Downward

Market for MHC Stocks Slight Downward

Acquisition Market Downward

As a result of all the factors discussed, a full offering discount of
approximately 20% on an earnings multiple basis and a 50% discount on a price to
book basis appears to be reasonable.
<PAGE> 82
Conversion Valuation Appraisal Report Page 1 - 78

VALUATION APPROACH

In applying the accepted valuation methodology promulgated by the regulators,
i.e., the pro-forma market value approach, four key pricing multiples were
considered. The four multiples include:

Price to earnings ("P/E")

Price to tangible book value ("P/TB")

Price to book value ("P/B")

Price to assets ("P/A")

All of the approaches were calculated on a pro-forma basis including the effects
of the conversion proceeds. All of the assumptions utilized are presented in
Exhibit 10, 11, and 12.

To ascertain the pro-forma estimated market value of the Bank, the market
multiples for the Comparable Group, all publicly traded thrifts and the recent
(1995 to date) MHC reorganizations were assessed.

Since thrift earnings in general have had a high degree of volatility over the
past decade, the P/B approach had gained in importance and was utilized
frequently as the benchmark for market value. It is interesting to note that the
P/B approach is more of a benchmark than a reliable valuation technique. A
better approach is the P/TB approach. In general, investors tend to price
financial institutions on a tangible book basis, because it incorporates the P/B
approach adjusted for intangibles. Most recently, the P/E approach has regained
favor among investors.

The evidence of the movement towards the P/E Multiple can be seen in the
acquisition, trading and IPO markets. The P/LTM EPS multiple for the completed
mergers is 26.6x, for all public thrifts the trading P/LTM is 19.93x and for
recent IPO's it is 17.4x.

As such, in estimating the market value for the Bank, the most emphasis was
placed on the P/E approach. The P/B and P/TB were given much less weight and the
P/A ratio was not given much weight at all.

In terms of the market multiples, most weight was given to the Comparable Group.
Less weight was ascribed to all public thrifts and all New York thrifts. The
multiples for the Comparable Group, all publicly traded thrifts, and New York
publicly traded thrifts are shown in Exhibit 8.
<PAGE> 83
Conversion Valuation Appraisal Report Page 1 - 79

Based upon the premiums and discounts defined in the section above, the Bank
pricing at the midpoint on a fully converted basis is estimated to be
$58,900,000. Based upon a range below and above the midpoint value, the relative
values are $50,065,000 at the minimum and $67,735,000 at the maximum
respectively. At the supermaximum of the range the offering value would be
$77,895,250.

At the various levels of the estimated value range, and utilizing a 45% minority
offering (established by the Sound Board of Directors) would result in the
following offering data:

FIGURE 52 - VALUE RANGE OFFERING DATA
<TABLE>
<CAPTION>
Total Price per Total
Conclusion Shares Share Value
<S> <C> <C> <C>
Appraised Value - $50,065,000 at 45% 2,252,925 $10 $22,529,250
Appraised Value - $58,900,000 at 45% 2,650,500 $10 $26,505,000
Appraised Value - $67,735,000 at 45% 3,048,075 $10 $30,480,750
Appraised Value - $77,895,250 at 45% 3,505,286 $10 $35,052,860

</TABLE>
Source: FinPro Inc. Pro forma Model

FIGURE 53 - VALUE RANGE OFFERING DATA

Bank Comparables State National
----------------------------------------------------------------------------
Mean Median Mean Median Mean Median
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$50,065,000 14.49
Price-Earnings Ratio P/E $58,900,000 16.67 18.57 17.62 24.33 21.80 23.33 19.93
$67,735,000 18.87
$77,895,250 21.28

$50,065,000 98.04%
Price-to-Book Ratio P/B $58,900,000 107.87% 163.17% 158.61% 176.33% 154.75% 171.31% 154.11%
$67,735,000 116.69%
$77,895,250 125.47%

$50,065,000 98.04%
Price-to-Tangible Book Ratio P/TB $58,900,000 107.87% 164.56% 158.61% 194.22% 156.33% 178.18% 157.39%
$67,735,000 116.69%
$77,895,250 125.47%

$50,065,000 18.28%
Price-to-Assets Ratio P/A $58,900,000 21.23% 16.41% 15.12% 21.60% 19.02% 20.51% 18.69%
$67,735,000 24.11%
$77,895,250 27.34%

</TABLE>
<PAGE> 84
Conversion Valuation Appraisal Report Page 1 - 80

This equates to the following multiple comparisons:

FIGURE 54 - COMPARABLE PRICING MULTIPLES TO THE BANK'S PRO FORMA MIDPOINT (FULL
CONVERSION)
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Price Relative to
-------------------------------------------------------------------
Earnings Core Earnings Book Tangible Book Assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Bank (at midpoint) Full Conversion 14.08 14.08 72.67% 72.67% 20.00%
- -------------------------------------------------------------------------------------------------------------
Comparable Group Average 17.62 16.56 158.61% 158.67% 15.12%
- -------------------------------------------------------------------------------------------------------------
(Discount) Premium -20.09% -14.98% -54.18% -54.18% 32.28%
- -------------------------------------------------------------------------------------------------------------
</TABLE>

Source: FinPro Calculations

FIGURE 55 - COMPARABLE PRICING MULTIPLES TO THE BANK'S PRO FORMA SUPERMAXIMUM
(FULL CONVERSION)

<TABLE>
<CAPTION>
-------------------------------------------------------------------
Price Relative to
-------------------------------------------------------------------
Earnings Core Earnings Book Tangible Book Assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Bank (at midpoint) Full Conversion 17.24 17.24 79.94% 79.94% 25.05%
- -------------------------------------------------------------------------------------------------------------
Comparable Group Average 17.62 16.56 158.61% 158.67% 15.12%
- -------------------------------------------------------------------------------------------------------------
(Discount) Premium -2.16% 4.11% -49.60% -49.60% 65.67%
- -------------------------------------------------------------------------------------------------------------
</TABLE>

Source: FinPro Calculations

As the figure 54 demonstrates, the Bank is priced at a discount of 14.98% on a
core earnings basis. A discount of 54.18% is applied to the Bank relative to the
Comparable Group on a price to book basis. When comparing the Bank's EVR at the
supermaximum to the Comparable Group, the Bank is priced at a 4.11% premium on a
core earnings basis and at a 49.60% discount on a book basis.

Figures 56 and 57 compare the Bank's MHC ratios at the midpoint and supermaximum
to all MHC trading multiples. This comparison is skewed by the percentage
minority ownership of each MHC institution, but shows an approximate 55%
discount on both an earnings and book basis at the midpoint and 45% discount at
the supermaximum.

FIGURE 56 - MHC PRICING MULTIPLES TO THE BANK'S PRO FORMA MIDPOINT (MHC)

<TABLE>
<CAPTION>
-------------------------------------------------------------------
Price Relative to
-------------------------------------------------------------------
Earnings Core Earnings Book Tangible Book Assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Bank (at midpoint) MHC 16.67 16.67 107.87% 107.87% 21.23%
- -------------------------------------------------------------------------------------------------------------
Unadjusted MHC Trading Median 35.48 38.75 232.94% 234.75% 27.93%
- -------------------------------------------------------------------------------------------------------------
(Discount) Premium -53.02% -56.98% -53.69% -54.05% -23.99%
- -------------------------------------------------------------------------------------------------------------
</TABLE>

Source: FinPro Calculations

FIGURE 57 - MHC PRICING MULTIPLES TO THE BANK'S PRO FORMA SUPERMAXIMUM (MHC)

<TABLE>
<CAPTION>
-------------------------------------------------------------------
Price Relative to
-------------------------------------------------------------------
Earnings Core Earnings Book Tangible Book Assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Bank (at the supermax) MHC 21.28 21.28 125.47% 125.47% 27.34%
- -------------------------------------------------------------------------------------------------------------
Unadjusted MHC Trading Median 35.48 38.75 232.94% 234.75% 27.93%
- -------------------------------------------------------------------------------------------------------------
(Discount) Premium -40.02% -45.08% -46.14% -46.55% -2.11%
- -------------------------------------------------------------------------------------------------------------
</TABLE>

Source: FinPro Calculations
<PAGE> 85
Conversion Valuation Appraisal Report Page 1 - 81

Figures 58 and 59 provide a comparison of the Bank's multiples on a fully
converted basis to MHC trading multiples on a fully converted basis, with
discounts of approximately 37% and 25% for the midpoint and supermaximum,
respectively.

FIGURE 58 - ADJUSTED MHC PRICING MULTIPLES TO THE BANK'S PRO MIDPOINT
(MHC)

<TABLE>
<CAPTION>
Price Relative to
------------------------
Earnings Book
-------- ----
<S> <C> <C>
The Bank (at the midpoint) Full Conversion 14.08 72.67%
MHC Full Conversion Median Trading (4/30/98) 22.30 116.40%
(Discount) Premium (36.86)% (37.57)%
</TABLE>

Source: FinPro Calculations

FIGURE 59 - ADJUSTED MHC PRICING MULTIPLES TO THE BANK'S PRO
SUPERMAXIMUM (MHC)

Price Relative to
------------------------
Earnings Book
-------- ----
<S> <C> <C>
The Bank (at the supermax) Full Conversion 17.24 79.94%
MHC Full Conversion Median Trading (4/30/98) 22.30 116.40%
(Discount) Premium (22.69)% (31.32)%
</TABLE>

Source: FinPro Calculations
<PAGE> 86
Conversion Valuation Appraisal Report Page 1 - 82

VALUATION CONCLUSION

It is, therefore, our opinion that as of June 12, 1998, the estimated pro-forma
market value of the Bank in a full offering was $58,900,000 at the midpoint of a
range with a minimum of $50,065,000 to a maximum of $67,735,000 at 15% below and
15% above the midpoint of the range respectively. Assuming an adjusted maximum
value of 15% above the maximum value, the adjusted maximum value or supermaximum
value in a full offering is $77,895,250. The stock will be issued at $10.00 per
share.

Using the pro forma market values for a full offering shown above, the amount of
stock publicly offered as part of the MHC reorganization issuing 45% will equal
2,252,925 shares, 2,650,500 shares, 3,048,075 shares and 3,505,286 shares at the
minimum, midpoint, maximum and supermaximum, respectively. The resulting gross
proceeds of the public offering will equal:

<TABLE>
<CAPTION>
Total Price per Total
Conclusion Shares Share Value
<S> <C> <C> <C>
Appraised Value - $50,065,000 at 45% 2,252,925 $10 $22,529,250
Appraised Value - $58,900,000 at 45% 2,650,500 $10 $26,505,000
Appraised Value - $67,735,000 at 45% 3,048,075 $10 $30,480,750
Appraised Value - $77,895,250 at 45% 3,505,286 $10 $35,052,860
</TABLE>

Pro-forma comparisons of the Bank's value range with the Comparable Group, all
public thrifts, and New York public thrifts are shown in Exhibits 10 through 12.

<PAGE> 1
EXHIBIT 99.3

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400

-----------------------------

NOTICE OF SPECIAL MEETING OF MEMBERS

-----------------------------

Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Sound Federal Savings and Loan Association (the "Association") will
be held at the main office of the Association, located at 300 Mamaroneck Avenue,
Mamaroneck, New York 10543, on ____________________, 1998 at _____ p.m., local
time. The purpose of this Special Meeting is to consider and vote upon:

1. A Plan of Reorganization from Mutual Savings Association to Mutual
Holding Company and Stock Issuance Plan providing for the
reorganization of the Association into the mutual holding company
structure. As part of the Plan the Association will convert to a
federally chartered stock savings association, which will be
wholly-owned by Sound Federal Bancorp (the "Company") a to be formed
federal corporation. Pursuant to the Plan, the Company will (i) issue
53% of its to-be-outstanding shares of common stock to Sound Federal,
MHC, a federal mutual holding company to be formed pursuant to the
Plan, (ii) offer for sale to certain depositors and borrowers 45% of
its to-be-, outstanding shares of common stock, and (iii) subject to
the receipt of member approval, contribute 2% of its to-be-outstanding
shares of Common Stock to the Sound Federal Savings and Loan
Association Charitable Foundation (the "Charitable Foundation");

2. The establishment of a tax exempt foundation, which will be a Delaware
chartered non-stock corporation dedicated to the promotion of
charitable purposes within the Association's market area; and

such other business as may properly come before this Special Meeting or any
adjournment thereof. Management is not aware of any such other business.

The members who shall be entitled to notice of and to vote at the
Special Meeting and any adjournment thereof are depositors at the close of
business on August ___, 1998. In the event there are insufficient votes for
approval of the Plan at the time of the Special Meeting, the Special Meeting may
be adjourned from time to time in order to permit further solicitation of
proxies.

BY ORDER OF THE BOARD OF DIRECTORS

Richard P. McStravick
President and Chief Executive Officer

Mamaroneck, New York
August ___, 1998

- --------------------------------------------------------------------------------
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE PLAN AND THE ESTABLISHMENT
OF THE CHARITABLE FOUNDATION BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
YOUR VOTE IS VERY IMPORTANT
- --------------------------------------------------------------------------------
<PAGE> 2
SUMMARY OF PROPOSED REORGANIZATION

This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.

Under its present mutual form of organization, the Association has no
stockholders. Its deposit account holders and certain of its borrowers are
members of the Association and have voting rights in that capacity. In the
unlikely event of liquidation, the Association's deposit account holders would
have the sole right to receive any assets of the Association remaining after
payment of its liabilities (including the claims of all deposit account holders
to the withdrawal value of their deposits). Under the Plan of Reorganization to
be voted on at the Special Meeting, the Association would reorganize into the
mutual holding company structure. In the Reorganization, the Association would
be converted into a federally chartered savings association organized in stock
form and all of the Association's common stock would be issued concurrently to
the Company. The Company will issue 53% of its to-be outstanding shares of
Common Stock to the Mutual Holding Company and offer and sell 45% of its to-be
outstanding shares of Common Stock in a subscription offering (1) to depositors
with an account balance of $50 or more as of March 31, 1997 ("Eligible Account
Holders"), (2) to tax-qualified employee plans of the Association
("Tax-Qualified Employee Plans"), (3) to depositors of the Association with an
account balance of $50 or more as of June 30, 1998 ("Supplemental Eligible
Account Holders"), and (4) to depositors of the Association as of __________,
1998 other than Eligible Account Holders or Supplemental Eligible Account
Holders, and borrowers as of __________, 1998 ("Other Members"). Subject to the
receipt of stockholder approval of Proposal II, the Company will contribute 2%
of its to-be outstanding shares of Common Stock to the Charitable Foundation.
The shares of Common Stock that are not owned by the Mutual Holding Company are
referred to as the Minority Ownership Interest. Notwithstanding the foregoing,
to the extent there is an increase in the maximum of the Estimated Valuation
Range, which will result in an increase in the maximum of the Offering Range (as
defined in the Prospectus), Tax-Qualified Employee Plans shall be given a first
priority to purchase shares sold above the maximum of the Offering Range. It is
anticipated that the Association's Employee Stock Ownership Plan (the "ESOP")
will purchase shares of Common Stock equal to 8% of the Minority Ownership
Interest.

At any time following commencement of the Subscription Offering, to the
extent sufficient shares of Common Stock are not sold to the persons in the
foregoing categories, the Company may offer Common Stock in the Community
Offering to members of the general public to whom a Prospectus has been
delivered, with first preference to natural persons residing in Westchester
County, New York. All depositors who have membership and liquidation rights with
respect to the Association immediately prior to the completion of the
Reorganization will continue to have such rights solely with respect to the
Mutual Holding Company as long as they maintain deposit accounts in the
Association after the completion of the Reorganization.

THE REORGANIZATION WILL NOT AFFECT THE BALANCE, INTEREST RATE OR
FEDERAL INSURANCE PROTECTION OF ANY SAVINGS DEPOSIT, AND NO PERSON WILL BE
OBLIGATED TO PURCHASE ANY STOCK IN THE OFFERING.

Business Purposes Net Offering proceeds are expected to increase the
for the Reorganization capital of the Association, which will support the
and Offering expansion of its financial services to the public.
The conversion to stock form and the use of a holding
company structure are also expected to enhance its
ability to expand through possible mergers and
acquisitions (although no such transactions are
contemplated at this time) and to diversify into
other financial services and will facilitate the
future access of the Company and the Association to
the capital markets.

Subscription and As part of the Reorganization, Common Stock is being
Community Offering offered for sale in the Subscription Offering, in the
priorities summarized below, to the Association's (1)
Eligible Account Holders, (2) Tax-Qualified Employee
Plans, including the ESOP, (3) Supplemental Eligible
Account Holders and (4) Other Members. In addition,
should a Community Offering be conducted, members of
the general public may purchase Common Stock to the
extent shares are available after satisfaction of
subscriptions in the Subscription Offering, with a
preference first to natural persons residing in
Westchester County, New York.
<PAGE> 3
Subscription Rights Each Eligible Account Holder has been given
of Eligible Account non-transferable rights to subscribe for an amount of
Holders shares equal to the greater of (i) $150,000 of the
Common Stock sold in the Offering; or (ii) 15 times
the product (rounded down to the whole next number)
obtained by multiplying the total number of shares to
be issued by a fraction of which the numerator is the
amount of qualifying deposits of such subscriber and
the denominator is the total qualifying deposits of
all account holders in this category on the
qualifying date.

Subscription Rights The Association's Tax-Qualified Employee Plans have
of Tax-Qualified been given non-transferable rights to subscribe for
Employee Plans up to 10% of the Minority Ownership Interest after
satisfaction of subscriptions of Eligible Account
Holders. Notwithstanding the foregoing, to the extent
there is an increase in the maximum of the Estimated
Valuation Range that results in an increase in the
maximum of the Offering Range (as defined in the
Prospectus), Tax-Qualified Employee Plans shall be
given a first priority to purchase shares sold above
the maximum of the Offering Range. It is anticipated
that the ESOP will purchase shares of Common Stock
equal to 8% of the Minority Ownership Interest.

Subscription Rights After satisfaction of subscriptions of Eligible
of Supplemental Account Holders and Tax-Qualified Employee Plans,
Eligible Account each Supplemental Eligible Account Holder (other than
Holders directors and officers of the Association and their
associates) has been given non-transferable rights to
subscribe for an amount of shares equal to the
greater of (i) $150,000 of the Common Stock sold in
the Offering; or (ii) 15 times the product (rounded
down to the whole next number) obtained by
multiplying the total number of shares to be issued
by a fraction of which the numerator is the amount of
qualifying deposits of such subscriber and the
denominator is the total qualifying deposits of all
account holders in this category on the qualifying
date. The subscription rights of each Supplemental
Eligible Account Holder shall be reduced to the
extent of such person's subscription rights as an
Eligible Account Holder.

Subscription Rights Each Other Member has been given non-transferable
of Other Members rights to subscribe for an amount of shares equal to
$150,000 of the Common Stock sold in the Offering;
after satisfaction of the subscriptions of the
Association's Eligible Account Holders, Tax-Qualified
Employee Plans and Supplemental Eligible Account
Holders.

Purchase No person or entity, together with associates, and
Limitations persons acting in concert, may purchase more than
$300,000 of the Common Stock offered in the Offering.
The Boards of Directors of the Company and the
Association may, in their sole discretion, increase
the maximum purchase limitation to up to 9.99% of the
shares sold, provided that orders for shares
exceeding 5% shall not exceed, in the aggregate, 10%
of the shares offered in the Subscription Offering.
Should the Association increase the maximum purchase
limitation above 5% of the Common Stock offered,
persons who previously subscribed for the maximum
number of shares will be given the opportunity to
subscribe for additional shares. The aggregate
purchases of directors and executive officers and
their associates may not exceed 30% of the total
number of shares offered in the Offering. These
purchase limitations do not apply to the
Association's Tax-Qualified Employee Plans.

Expiration Date of All subscriptions for Common Stock must be received
Subscription and by _____ _.m., local time on _______, 1998.
Community Offerings

How to Subscribe For information on how to subscribe for Common Stock
for Shares being offered in the Offering, please read the
Prospectus and the Stock Order Form and instructions
accompanying this Proxy Statement. Subscriptions will
not become effective until the Plan of Reorganization
has been approved by the Association's members and
all of the Common Stock offered in the Offering

2
<PAGE> 4
has been subscribed for or sold in the Offering or
through such other means as may be approved by the
OTS.

Price of Common All sales of Common Stock in the Offering will be
Stock made at $10.00 per share. See "The Reorganization and
Offering--Procedure for Purchasing Shares" in the
Prospectus.

Tax Consequences The Association has received an opinion from its
special counsel, Luse Lehman Gorman Pomerenk &
Schick, P.C., stating that the Reorganization is a
nontaxable reorganization under Section 368(a)(1)(F)
of the Internal Revenue Code of 1986, as amended (the
"Code"). The Association also has received an opinion
from KPMG Peat Marwick LLP stating that the Offering
will not be a taxable transaction for New York income
tax purposes.

Required Vote Approval of the Plan of Reorganization will require
the affirmative vote of a majority of all votes
eligible to be cast at the Special Meeting.

RECOMMENDATION OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS OF THE ASSOCIATION RECOMMENDS THAT YOU VOTE TO
APPROVE THE PLAN OF REORGANIZATION.

The Association is currently organized in mutual rather than stock
form, meaning that it has no stockholders and no authority under its federal
mutual charter to issue capital stock. The Association's Board of Directors has
adopted the Plan of Reorganization providing for the Reorganization. The sale of
Common Stock of the Company, which will be formed to become the holding company
of the Association, will substantially increase the Association's net worth. The
Company will exchange a portion of the net proceeds from the sale of the Common
Stock for the common stock of the Association to be issued upon Reorganization.
The Company expects to retain the balance of the net proceeds (up to 50%), as
its initial capitalization and the Company intends to lend funds to the Employee
Stock Ownership Plan, a tax-qualified employee stock benefit plan of the
Association, to fund its purchase of Common Stock. This increased capital will
support the expansion of the Association's financial services to the public. The
Board of Directors of the Association also believes that the conversion to stock
form and the use of a holding company structure will enhance the Association's
ability to expand through possible mergers and acquisitions (although no such
transactions are contemplated at this time) and will facilitate its future
access to the capital markets.

The Board of Directors of the Association believes that the
Reorganization will further benefit the Association by enabling it to attract
and retain key personnel through prudent use of stock-related incentive
compensation and benefit plans. See "Management of the Association--Benefit
Plans" in the accompanying Prospectus.

Voting in favor of the Plan of Reorganization will not obligate any
person to purchase Common Stock.

THE OTS HAS APPROVED THE PLAN OF REORGANIZATION SUBJECT TO THE APPROVAL
OF THE ASSOCIATION'S MEMBERS AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS.
HOWEVER, SUCH APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF
THE PLAN OF REORGANIZATION BY THE OTS.

SUMMARY OF PROPOSED CHARITABLE FOUNDATION

This summary does not purport to be complete and is qualified in its
entirety by the more detailed information contained in the remainder of this
Proxy Statement and the accompanying Prospectus.

As a reflection of the Association's long-standing commitment to the
local community, the Company intends to establish the Charitable Foundation upon
the completion of the Reorganization, subject to member approval. The Charitable
Foundation will be incorporated in the State of Delaware. The Charitable
Foundation will be funded with

3
<PAGE> 5
a contribution consisting of shares of Common Stock equal to 2% of the shares
outstanding at the conclusion of the Reorganization.

STRUCTURAL PURPOSE OF THE CHARITABLE FOUNDATION. The purpose of the
Charitable Foundation is to provide funding to support charitable purposes
within the communities in which the Association operates. The Association has
long emphasized community lending and community development activities and
currently has a satisfactory rating under the Community Reinvestment Act
("CRA"). The Charitable Foundation is being formed as a complement to the
Association's existing community activities, not as a replacement for such
activities. The Charitable Foundation may be able to support community
charitable activities even in periods when the Association or the Company would
not be in a position to do so.

The Charitable Foundation will be a private foundation under the Code.
As a tax-exempt private foundation, the Charitable Foundation will be required
to distribute annually in grants or donations at least 5% of its net investment
assets. The Charitable Foundation will be dedicated to the promotion of
charitable purposes within the communities in which the Association operates,
including, but not limited to, providing grants or donations to support housing
assistance, not-for-profit medical facilities, community groups and other types
of organizations or projects. While the Charitable Foundation is authorized to
engage directly in charitable activities, in order to limit overhead costs, it
is currently anticipated that the Charitable Foundation's primary activity will
consist of making grants to other charitable organizations.

FUNDING OF THE CHARITABLE FOUNDATION. The Charitable Foundation will be
initially funded with shares of Common Stock equal to 2% of the shares
outstanding at the conclusion of the Reorganization. Future contributions to the
Charitable Foundation may be made either in cash or Common Stock. The amount of
such future contributions, if any, will be determined based on, among other
factors, an assessment of the Company's then current financial condition,
operations and prospects and of the need for charitable donations in the
Company's market area. Any such additional contribution swill reduce earnings
and may have a material impact on the Company's earnings for such quarter and
for the year. The Company does not anticipate making any contributions to the
Charitable Foundation that will not be tax deductible.

TAX CONSIDERATIONS. The Company has been advised that an organization
created for the above purposes will qualify as a 501(c)(3) exempt organization
under the Code, and will be classified as a private foundation rather than a
public charity. A private foundation typically receives its support from one
person or one corporation whereas a public charity receives its support from the
public. The Charitable Foundation will submit a request to the IRS to be
recognized as an exempt organization after approval of the Charitable Foundation
by the Association's members at the Special Meeting. So long as the Charitable
Foundation files its application for tax-exempt status within 15 months from the
date of its organization, and provided the IRS approves the application, the
effective date of the Charitable Foundation's status as a Section 501(c)(3)
organization will be the date of its organization.

REGULATORY CONDITIONS IMPOSED ON THE CHARITABLE FOUNDATION.
Establishment of the Charitable Foundation is subject to the following
conditions imposed by the OTS: (i) the Charitable Foundation will be subject to
examination by the OTS, at the Charitable Foundation's own expense; (ii) the
Charitable Foundation must comply with supervisory directives imposed by the
OTS; (iii) the Charitable Foundation will provide annual reports to the OTS
describing grants made and grant recipients; (iv) the Charitable Foundation will
operate in accordance with written policies adopted by the board of directors,
including a conflict of interest policy; (v) unless required by another
condition imposed by the OTS, the Charitable Foundation will not engage in
self-dealing and will comply with all laws necessary to maintain its tax-exempt
status; and (vi) any shares of Common Stock of the Company held by the
Charitable Foundation must be voted in the same ratio as all other shares of the
Company's Common Stock on all proposals considered by stockholders of the
Company.

REQUIRED VOTE. Approval of the Charitable Foundation will require the
affirmative vote of a majority of all votes eligible to be cast at the Special
Meeting.

4
<PAGE> 6
RECOMMENDATION OF THE BOARD OF DIRECTORS

YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE CHARITABLE FOUNDATION.

DIRECTORS AND OFFICERS OF THE ASSOCIATION

Set forth below are the names, ages and present occupations of the
Associations directors and executive officers.

<TABLE>
<CAPTION>
AGE AT
NAME MARCH 31, 1998 POSITION DIRECTOR SINCE CURRENT TERM EXPIRES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bruno J. Gioffre 63 Chairman of the Board 1975 1999

Richard P. McStravick 49 President, Chief 1996 1999
Executive Officer and
Director

Joseph Dinolfo 64 Director 1985 2001

Donald H. Heithaus 63 Director 1978 2000

Robert P. Joyce 69 Director 1980 2001

Joseph A. Lanza 51 Director 1998 2000

Arthur C. Phillips, Jr. 74 Director 1976 2001

James Staudt 45 Director 1987 1999

Stephen P. Milliot 50 Treasurer

William H. Morel 65 Senior Vice President
and Secretary
</TABLE>

The business experience for the past five years for each of the
Association's directors and officers is as follows:

BRUNO J. GIOFFRE is the Chairman of the Board of Directors and has been
so since December 1997. Mr. Gioffre is also general counsel to the Association.
Mr. Gioffre is a principal of the law firm Gioffre & Gioffre and the Senior
Justice for the Town of Rye, New York.

JOSEPH DINOLFO is the President of the Dinolfo Wilson Agency, Inc. and
insurance agency located in Mamaroneck, New York.

DONALD H. HEITHAUS is the President and Chief Executive Officer of the
Happiness Laundry Service, Inc. in Mamaroneck, New York.

ROBERT P. JOYCE is retired. Prior to his retirement, Mr. Joyce was the
President of Joyce Marketing Corporation.

JOSEPH A. LANZA is the Mayor of the Village of Mamaroneck. Mr. Lanza is
the President of Lanza Electric, a private electrical contractor.

JAMES STAUDT is an attorney practicing with the firm of McCullough,
Goldberger & Staudt.

5
<PAGE> 7
ARTHUR C. PHILLIPS, JR. is the Pension and Welfare Funds Manager for
the Industry and Local 338 Pension and Welfare Fund.

STEPHEN P. MILLIOT has been the Treasurer and Chief Financial Officer
since 1996. Prior to that time, Mr. Milliot was the Association's internal
auditor.

WILLIAM H. MOREL is the Association's Senior Vice President, Chief
Lending Officer and Corporate Secretary.

INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING

The Board of Directors of the Association has fixed __________, 1998 as
the voting record date ("Voting Record Date") for the determination of members
entitled to notice of the Special Meeting. All Association depositors are
members of the Association under its current charter. All Association members of
record as of the close of business on the Voting Record Date will be entitled to
vote at the Special Meeting or any adjournment thereof.

Each depositor (including IRA and Keogh account beneficiaries) will be
entitled at the Special Meeting to cast one vote for each $100, or fraction
thereof, of the aggregate withdrawal value of all of such depositor's accounts
in the Association as of the Voting Record Date, up to a maximum of 1,000 votes.
Joint accounts shall be entitled to no more than 1,000 votes, and any owner may
cast all the votes unless notified in writing. In general, accounts held in
different ownership capacities will be treated as separate memberships for
purposes of applying the 1,000 vote limitation. For example, if two persons hold
a $100,000 account in their joint names and each of the persons also holds a
separate account for $100,000 in his own name, each person would be entitled to
1,000 votes for each separate account and they would together be entitled to
cast 1,000 votes on the basis of the joint account. Where no proxies are
received from IRA and Keogh account beneficiaries, after due notification, the
Association, as trustee of these accounts, is entitled to vote these accounts in
favor of the Plan of Conversion and the establishment of the Charitable
Foundation.

Approval of both the Plan of Reorganization and the establishment of
the Charitable Foundation requires the affirmative vote of a majority of the
total outstanding votes of the Association's members eligible to be cast at the
Special Meeting. As of ____________, 1998, the Association had ______ members
who were entitled to cast a total of ______ votes at the Special Meeting.

Association members may vote at the Special Meeting or any adjournment
thereof in person or by proxy. Any member giving a proxy will have the right to
revoke the proxy at any time before it is voted by giving written notice to the
Secretary of the Association, provided that such written notice is received by
the Secretary prior to the Special Meeting or any adjournment thereof, or upon
request if the member is present and chooses to vote in person.

All properly executed proxies received by the Board of Directors of the
Association will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. IF NO INSTRUCTIONS ARE GIVEN, SUCH PROXIES
WILL BE VOTED IN FAVOR OF THE PLAN OF REORGANIZATION AND IN FAVOR OF
ESTABLISHING THE CHARITABLE FOUNDATION. If any other matters are properly
presented at the Special Meeting and may properly be voted on, the proxies
solicited hereby will be voted on such matters in accordance with the best
judgment of the proxy holders named thereon. Management is not aware of any
other business to be presented at the Special Meeting.

If a proxy is not executed and is returned or the member does not vote
in person, the Association is prohibited by OTS regulations from using a
previously executed proxy to vote for the Reorganization and establishing the
Charitable Foundation. AS A RESULT, FAILURE TO VOTE MAY HAVE THE SAME EFFECT AS
A VOTE AGAINST THE PLAN OF REORGANIZATION AND THE ESTABLISHMENT OF THE
CHARITABLE FOUNDATION.

To the extent necessary to permit approval of the Plan of
Reorganization, proxies may be solicited by officers, directors or regular
employees of the Association, in person, by telephone or through other forms of
communication and, if necessary, the Special Meeting may be adjourned to a later
date. Such persons will be reimbursed by the

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Association for their expenses incurred in connection with such solicitation.
The Association will bear all costs of this solicitation. The proxies solicited
hereby will be used only at the Special Meeting and at any adjournment thereof.

PRINCIPAL EFFECTS OF REORGANIZATION

DEPOSITORS. The Reorganization will not change the amount, interest
rate, withdrawal rights or federal insurance protection of deposit accounts, or
affect deposit accounts in any way other than with respect to voting and
liquidation rights as discussed below.

BORROWERS. The rights and obligations of borrowers under their loan
agreements with the Association will remain unchanged by the Reorganization. The
principal amount, interest rate and maturity date of loans will remain as they
were contractually fixed prior to the Reorganization.

VOTING RIGHTS OF MEMBERS. Currently in the Association's mutual form,
members have voting rights and may vote for the election of directors. Following
the Reorganization, members will cease to have voting rights in the Association,
but will have voting rights in the Mutual Holding Company. All voting rights in
the Association will be vested in the Company as the Association's sole
shareholder. Voting rights in the Company will be vested exclusively in its
shareholders, with one vote for each share of Common Stock. The Mutual Holding
Company will at all times own a majority of the Common Stock.

THE ASSOCIATION. Under federal law, the stock savings bank resulting
from the Reorganization will be deemed to be a continuation of the mutual
savings bank rather than a new entity and will continue to have all of the
rights, privileges, properties, assets and liabilities of the Association prior
to the Reorganization. The Reorganization will enable the Association to issue
capital stock, but will not change the general objectives, purposes or types of
business currently conducted by the Association, and no assets of the
Association will be distributed in order to effect the Reorganization, other
than to pay the expenses incident thereto. After the Reorganization, the
Association will remain subject to examination and regulation by the OTS and
will continue to be a member of the Federal Home Loan Bank System. The
Reorganization will not cause any change in the executive officers or directors
of the Association.

TAX CONSEQUENCES. The Association intends to proceed with the
Reorganization on the basis of an opinion from Luse Lehman Gorman Pomerenk &
Schick, P.C., Washington, D.C., as to certain tax matters that are material to
the Reorganization. The opinion is based, among other things, on certain
representations made by the Association. See the section of the Prospectus
entitled "The Reorganization and Offering--Federal and State Tax Consequences of
the Reorganization" which is incorporated herein by reference.

With respect to New York taxation, the Association has received an
opinion from KPMG Peat Marwick LLP to the effect that, assuming the
Reorganization does not result in any federal taxable income, gain or loss to
the Association in its mutual or stock form, the Company, the account holders,
borrowers, officers, directors and employees and Tax-Qualified Employee Plans of
the Association, the Offering should not result in any New York income tax
liability to such entities or persons.

APPROVAL, INTERPRETATION, AMENDMENT AND TERMINATION

Under the Plan of Reorganization, the letter from the OTS giving
approval thereto, and applicable regulations, consummation of the Reorganization
is subject to the satisfaction of the following conditions: (a) approval of the
Plan of Reorganization by members of the Association casting at least a majority
of the votes eligible to be cast at the Special Meeting; (b) sale of all of the
Common Stock to be offered in the Offering; and (c) receipt of favorable rulings
or opinions of counsel as to the federal and New York tax consequences of the
Reorganization.

The Plan of Reorganization may be substantively amended by the Boards
of Directors of the Association and the Company with the concurrence of the OTS.
If the Plan of Reorganization is amended, proxies which have been received prior
to such amendment will not be resolicited unless otherwise required by the OTS.
Also, as required by the federal regulations, the Plan of Reorganization
provides that the transactions contemplated thereby may be

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terminated by the Board of Directors of the Association alone at any time prior
to the Special Meeting and may be terminated by the Board of Directors of the
Association at any time thereafter with the concurrence of the OTS,
notwithstanding approval of the Plan of Reorganization by the members of the
Association at the Special Meeting. All interpretations by the Association and
the Company of the Plan of Reorganization and of the Stock Order Forms and
related materials for the Offering will be final, except as regards or affects
the OTS.

APPROVAL OF THE CHARITABLE FOUNDATION

ESTABLISHMENT OF THE CHARITABLE FOUNDATION

GENERAL. In furtherance of our commitment to the communities that the
Association serves, the Board of Directors has determined to establish the
Charitable Foundation, which will be incorporated under Delaware law as a
non-stock corporation. The Charitable Foundation will be funded with a
contribution of 2% of the shares of Common Stock to be issued and outstanding
following the Reorganization or 117,682 shares of Common Stock at the mid-point
of the Offering. By further enhancing the Association's visibility and
reputation in the communities that it serves, the Board believes that the
Charitable Foundation will enhance the long-term value of the Association's
community banking franchise. The Charitable Foundation will be dedicated
exclusively to charitable purposes within the communities served by the
Association, including community development activities.

PURPOSE OF THE CHARITABLE FOUNDATION. The purpose of the Charitable
Foundation is to provide funding to support charitable and not-for-profit causes
and community development activities. The Charitable Foundation is being formed
as a complement to the Association's existing community activities, not as a
replacement for such services. While the Association intends to continue to
emphasize community lending and community development activities following the
Reorganization, such activities are not the Association's sole corporate
purpose. The Charitable Foundation, conversely, will be completely dedicated to
community activities and the promotion of charitable and not-for-profit causes,
and may be able to support such activities in ways that are not currently
available to the Association. The Charitable Foundation will enhance the
Association's current activities under the CRA. In this regard, the Board of
Directors of the Association believes the establishment of the Charitable
Foundation is consistent with the Association's commitment to community service.
The Board further believes that the funding of the Charitable Foundation with
Common Stock is a means of enabling the communities served by the Association to
share in the growth and success of the Company long after completion of the
Reorganization. The Charitable Foundation will accomplish that goal by providing
for continued ties between the Charitable Foundation and the Association,
thereby forming a partnership with the Association's community. Charitable
foundations have been formed by other financial institutions for this purpose,
among others. The Association, however, does not expect the contribution to the
Charitable Foundation to take the place of the Association's traditional
community lending activities.

STRUCTURE OF THE CHARITABLE FOUNDATION. The Charitable Foundation will
be incorporated under Delaware law as a non-stock corporation. Pursuant to the
Charitable Foundation's Bylaws, the Charitable Foundation's initial board of
directors will be comprised of two members of the Company's and the
Association's Board of Directors and one person who is unaffiliated with the
Association. Other individuals may be selected as board members (there is no
present intention to expand the board of directors of the Charitable
Foundation). A nominating committee of the Charitable Foundation's Board will
nominate individuals eligible for election to the Board of Directors. The
members of the Charitable Foundation, who are comprised of its Board members,
will elect the directors at the annual meeting of the Charitable Foundation from
those nominated by the nominating committee. Only persons serving as directors
of the Charitable Foundation qualify as members of the Charitable Foundation,
with voting authority. Directors will be elected annually. The certificate of
incorporation of the Charitable Foundation provides that the corporation is
organized exclusively for charitable purposes, including community development,
as set forth in Section 501(c)(3) of the Code. The Charitable Foundation's
certificate of incorporation further provides that no part of the net earnings
of the Charitable Foundation will inure to the benefit of, or be distributable
to its directors, officers or members.

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of the Charitable Foundation with respect to grants or donations by the
Charitable Foundation, consistent with the purposes for which the Charitable
Foundation was established. Although no formal policy governing Charitable
Foundation grants exists at this time, the Charitable Foundation's Board of
Directors will adopt such a policy upon establishment of the Charitable
Foundation. As directors of a nonprofit corporation, directors of the Charitable
Foundation will at all times be bound by their fiduciary duty to advance the
Charitable Foundation's charitable goals, to protect the assets of the
Charitable Foundation and to act in a manner consistent with the charitable
purpose for which the Charitable Foundation is established. The Directors of the
Charitable Foundation will also be responsible for directing the activities of
the Charitable Foundation, including the management of the Common Stock of the
Company held by the Charitable Foundation. However, it is expected that as a
condition to receiving OTS approved of the Reorganization, that the Charitable
Foundation will be required to commit to the OTS that all shares of Common Stock
held by the Charitable Foundation will be voted in the same ratio as all other
shares of Common Stock on all proposals considered by stockholders of the
Company; provided, however, that, consistent with such expected condition, the
OTS would waive this voting restriction under certain circumstances if
compliance with the voting restriction would: (i) cause a violation of the law
of the State of Delaware and the OTS determines that federal law would not
preempt the application of the laws of Delaware to the Charitable Foundation;
(ii) cause the Charitable Foundation to lose its tax-exempt status, or cause the
Internal Revenue Service to deny the Charitable Foundation's request for a
determination that it is an exempt organization or otherwise have a material and
adverse tax consequence on the Charitable Foundation; or (iii) cause the
Charitable Foundation to be subject to an excise tax under Section 4941 of the
Code. In order for the OTS to waive such voting restriction, the Company's or
the Charitable Foundation's legal counsel would be required to render an opinion
satisfactory to the OTS that compliance with the voting requirement would have
the effect described in clauses (i), (ii) or (iii) above. Under those
circumstances, the OTS would grant a waiver of the voting restriction upon
submission of such legal opinion(s) by the Company or the Charitable Foundation
that are satisfactory to the OTS. In the event that the OTS were to waive the
voting requirement, the directors would direct the voting of the Common Stock
held by the Charitable Foundation.

The Charitable Foundation's place of business will be located at the
Association's main office and initially the Charitable Foundation is expected to
have no employees but will utilize the members of the staff of the Company. The
Board of Directors of the Charitable Foundation will appoint such officers as
may be necessary to manage the operations of the Charitable Foundation. In this
regard, it is expected that the Association will be required to provide the OTS
with a commitment that, to the extent applicable, the Association will comply
with the affiliate restrictions set forth in Sections 23A and 23B of the Federal
Reserve Act with respect to any transactions between the Association and the
Charitable Foundation.

The Charitable Foundation will receive working capital from any
dividends that may be paid on the Common Stock from loans collateralized by the
Common Stock subject to applicable federal and state laws or from the proceeds
of the sale of any of the Common Stock in the open market from time to time. As
a private Charitable Foundation under Section 501(c)(3) of the Code, the
Charitable Foundation will be required to distribute annually in grants or
donations, a minimum of 5% of the average fair market value of its net
investment assets.

IMPACT ON EARNINGS. The contribution of Common Stock to the Charitable
Foundation will have an adverse impact on the Company's earnings in the year in
which the contribution is made. The Company will recognize the full expense in
the amount of the contribution of common stock to the Charitable Foundation in
the quarter in which the contribution occurs, which is expected to be the
quarter ended December 31, 1998. The contribution expense will be partially
offset by the tax benefit related to the expense. We have been advised that the
contribution to the Charitable Foundation will be tax deductible, subject to an
annual limitation based on 10% of the Company's annual taxable income. The
Association estimates that there will be a net after tax expense of $________.
If the Charitable Foundation had been established at March 31, 1998, the
Association would have reported net income of $________,

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rather than reporting net income of $_____ for the year ended March 31, 1998.
The Association and the Company do not currently anticipate making additional
contributions to the Charitable Foundation within the first five years following
the initial contribution.

TAX CONSIDERATIONS. The Association has been advised that an
organization created and operated for the above charitable purposes would
general qualify as a Section 501(c)(3) exempt organization under the Code, and
further that such an organization would likely be classified as a private
foundation. This opinion presumes that the Charitable Foundation will submit a
timely request to the IRS to be recognized as an exempt organization. As long as
the Charitable Foundation files its application for recognition of tax-exempt
status within 15 months from the date of its organization, and provided the IRS
approves the application, the effective date of the Charitable Foundation's
status as a Section 501(c)(3) organization will be the date of its organization.
The Association's tax advisor, however, has not rendered any advice on the
condition to the contribution to be agreed to by the Charitable Foundation which
requires that all shares of Common Stock of the Company held by the Charitable
Foundation must be voted in the same ratio as all other outstanding shares of
Common Stock on all proposals considered by stockholders of the Company.
Consistent with the expected condition, in the event that the Company or the
Charitable Foundation receives an opinion of its legal counsel that compliance
with this voting restriction would have the effect of causing the Charitable
Foundation to lose its tax-exempt status or otherwise have a material and
adverse tax consequence on the Charitable Foundation, or subject the Charitable
Foundation to an excise tax under Section 4941 of the Code, it is expected that
the OTS would waive such voting restriction upon submission of a legal
opinion(s) by the Company or the Charitable Foundation satisfactory to the OTS.

Under the Code, the Company is generally allowed a deduction for
charitable contributions made to qualifying donees within the taxable year of up
to 10% of its taxable income (with certain modifications) for such year.
Charitable contributions made by the Company in excess of the annual deductible
amount will be deductible over each of the five succeeding taxable years,
subject to certain limitations. The Board of Directors believes that the
Reorganization presents a unique opportunity to establish and fund a Charitable
Foundation given the substantial amount of additional capital being raised in
the Offering. In making such a determination, the Board of Directors considered
the impact on earnings of the contribution of Common Stock to the Charitable
Foundation. Based on such consideration, the Company and the Association believe
that the contribution to the Charitable Foundation in excess of the 10% annual
deduction limitation is justified given the Association's capital position and
its earnings, the substantial additional capital being raised in the Offering
and the potential benefits of the Charitable Foundation to the communities
served by the Association. In this regard, and assuming the sale of the Common
Stock at the midpoint of the Estimated Valuation Range, the Company would have
pro forma stockholders' equity of $54.6 million or 19.68% of pro forma
consolidated assets and the Association's pro forma tangible, core and total
risk-based capital ratios would be 15.65%, 15.65% and 42.72%, respectively. See
"Pro Forma Data--Historical and Pro Forma Regulatory Capital Compliance," and
"Capitalization," in the Prospectus. Thus, the amount of the contribution will
not adversely impact the Association's financial condition and management
believes that the amount of the charitable contribution is reasonable given the
Association's pro forma capital positions. As such, management believes that the
contribution does not raise safety and soundness concerns.

The Association has received an opinion of its tax advisors that the
Company's contribution of its own stock to the Charitable Foundation would not
constitute an act of self-dealing, and that the Company will be entitled to a
deduction in the amount of the fair market value of the stock at the time of the
contribution, subject to the annual deduction limitation described above. The
Company, however, would be able to carry forward any unused portion of the
deduction for five years following the contribution, subject to certain
limitations. The Association's tax advisor, however, has not rendered advice as
to fair market value for purposes of determining the amount of the tax
deduction. If the Charitable Foundation would have been established in the year
ended March 31, 1998, the Company would have received a current tax benefit of
approximately $________ (based on the Association's taxable income for that
period). The Association is permitted under the Code to carry over the excess
contribution over the five-year period following the contribution to the
Charitable Foundation. The Association estimates that all of the contribution
should be deductible over the six-year period. Neither the Company nor the
Association expect to make any further contributions to the Charitable
Foundation within the first five years following the initial contribution. After
that time, the Association and the Company may consider future contributions to
the Charitable Foundation. Any such decisions

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would be based on an assessment of, among other factors, our financial
condition, the interests of stockholders of the Company, and the financial
condition and operations of the Charitable Foundation.

Although the Association has received an opinion that the Company will
be entitled to a deduction for the charitable contribution, there can be no
assurances that the IRS will recognize the Charitable Foundation as a Section
501(c)(3) exempt organization or that a deduction for the charitable
contribution will be allowed. In such event, the tax benefit related to the
contribution to the Charitable Foundation would be expensed without tax benefit,
resulting in a reduction in earnings in the year in which the IRS makes such a
determination.

The Charitable Foundation will be required to make an annual filing
with the IRS within four and one-half months after the close of the Charitable
Foundation's fiscal year to maintain its tax-exempt status. The Charitable
Foundation will be required to publish a notice that the annual information
return will be available for public inspection for a period of 180 days after
the date of such public notice. The information return for a private foundation
must include, among other things, an itemized list of all grants made or
approved, showing the amount of each grant, the recipient, any relationship
between a grant recipient and the Charitable Foundation's managers and a concise
statement of the purpose of each grant.

COMPARISON OF VALUATION AND OTHER FACTORS ASSUMING THE CHARITABLE
FOUNDATION IS NOT ESTABLISHED AS PART OF THE REORGANIZATION. The establishment
of the Charitable Foundation was taken into account by FinPro in determining the
estimated pro forma market value of the Common Stock. The aggregate price of the
shares of Common Stock being offered in the Offering is based upon the
independent appraisal conducted by FinPro of the estimated pro forma market
value of the Common Stock. The pro forma aggregate price of the Common Stock
being offered for sale in the Offering is currently estimated to be between
$22.5 million and $35.1 million, with a midpoint of $26.5 million. The pro forma
price to book ratio and the pro forma price to earnings ratio, at and for the
year ended March 31, 1998, are 107.87% and 16.67x, respectively, at the midpoint
of the Estimated Valuation Range. In the event that the Reorganization did not
include the Charitable Foundation, FinPro has estimated that the estimated pro
forma market value of the Common Stock being offered for sale in the Offering
would be $27.7 million at the midpoint based on a pro forma price to book ratio
and the pro forma price to earnings ratio that of 111.23% and 17.24x,
respectively. The amount of Common Stock being offered for sale in the Offering
at the midpoint of the Estimated Valuation Range is approximately $1.2 million
less than the estimated amount of Common Stock that would be sold in the
Offering without the Charitable Foundation based on the estimate provided by
FinPro. Accordingly, persons who subscribe to purchase Common Stock in the
Offering would receive fewer shares depending on the size of a subscriber's
stock order and the amount of his or her qualifying deposits in the Association
and the overall level of subscriptions. See "Comparison of Valuation and Pro
Forma Information Without Charitable Foundation" in the Prospectus. This
estimate by FinPro was prepared solely for purposes of providing subscribers
with information with which to make an informed decision on the Reorganization
and Offering.

The decrease in the amount of Common Stock being offered for sale as a
result of the contribution of Common Stock to the Charitable Foundation will not
have a significant effect on the Company or the Association's capital position.
The Association's regulatory capital is significantly in excess of its
regulatory capital requirements and will further exceed such requirements
following the Reorganization. The Association's leverage and risk-based capital
ratios at March 31, 1998 were 12.5% and 34.9%, respectively. Assuming the sale
of shares at the midpoint of the Estimated Valuation Range, the Bank's pro forma
leverage and risk-based capital ratios at March 31, 1998 would be 15.65% and
42.72%, respectively. On a consolidated basis, the Company's pro forma
stockholders' equity would be $54.6 million, or approximately 19.68% of pro
forma consolidated assets, assuming the sale of shares at the midpoint of the
Estimated Price Range. Pro forma stockholders' equity per share and pro forma
net income per share would be $_______ and $_______, respectively. If the
Charitable Foundation was not being established in the Reorganization, based on
the FinPro estimate, the Company's pro forma stockholders' equity would be
approximately $55.3 million, or approximately 19.88% of pro forma consolidated
assets at the midpoint of the estimated value, and pro forma stockholder's
equity per share and pro forma net income per share would be higher with the
Charitable Foundation as without the establishment of the Charitable Foundation.
See "Comparison of Valuation and Pro Forma Information Without Charitable
Foundation" in the Prospectus.

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REGULATORY CONDITIONS IMPOSED ON THE CHARITABLE FOUNDATION.
Establishment of the Charitable Foundation is expected to be subject to the
following conditions being agreed to by the Charitable Foundation in writing as
a condition to receiving OTS approval of the Reorganization and Offering: (i)
the Charitable Foundation will be subject to examination by the OTS; (ii) the
Charitable Foundation must comply with supervisory directives imposed by the
OTS; (iii) the Charitable Foundation will operate in accordance with written
policies adopted by its board of directors, including a conflict of interest
policy; (iv) any shares of Common Stock held by the Charitable Foundation must
be voted in the same ratio as all other outstanding shares of Common Stock on
all proposals considered by stockholders of the Company; provided, however,
that, consistent with the condition, the OTS may waive this voting restriction
under certain circumstances if compliance with the voting restriction would: (a)
cause a violation of the law of the State of Delaware and the OTS determines
that federal law would not preempt the application of the laws of Delaware to
the Charitable Foundation; (b) would cause the Charitable Foundation to lose its
tax-exempt status or otherwise have a material and adverse tax consequence on
the Charitable Foundation; or (c) would cause the Charitable Foundation to be
subject to an excise tax under Section 4941 of the Code; and (v) any shares of
Common Stock subsequently purchased by the Charitable Foundation will be
aggregated with any shares repurchased by the Company or the Association for
purposes of calculating the number of shares which may be repurchased during the
three-year period subsequent to the Reorganization. In order for the OTS to
waive such voting restriction, the Company's or the Charitable Foundation's
legal counsel would be required to render an opinion satisfactory to the OTS.
While there is no current intention for the Company or the Charitable Foundation
to seek a waiver from the OTS from such restrictions, there can be no assurances
that a legal opinion addressing these issues could be rendered, or if rendered,
that the OTS would grant an unconditional waiver of the voting restriction. In
no event would the voting restriction survive the sale of shares of the Common
Stock held by the Charitable Foundation.

Various OTS regulations may be deemed to apply to the Charitable
Foundation including regulations regarding (i) transactions with affiliates,
(ii) conflicts of interest, (iii) capital distributions and (iv) repurchases of
capital stock within the three-year period subsequent to a mutual-to-stock
conversion. Because only two of the eight directors of the Company and the
Association are expected to serve as directors of the Charitable Foundation, the
Company and the Association do not believe that the Charitable Foundation should
be deemed an affiliate of the Association. The Company and the Association
anticipate that the Charitable Foundation's affairs will be conducted in a
manner consistent with the OTS' conflict of interest regulations. The
Association has provided information to the OTS demonstrating that the initial
contribution of common stock to the Charitable Foundation would be within the
amount which the Association would be permitted to make as a capital
distribution assuming such contribution is deemed to have been made by the
Association.

POTENTIAL CHALLENGES. To date, there has been limited precedent with
respect to the establishment and funding of a foundation as part of the
reorganization of a mutual savings institution to stock form. In addition,
establishment and funding of the Charitable Foundation will require the OTS to
grant the Association and the Company waivers from its mutual-to-stock
conversion regulations and mutual holding company regulations. As such, the
Charitable Foundation and the OTS's non-objection to the Reorganization may be
subject to potential challenges with respect to, among other things, the
Company's and the Association's ability to establish the Charitable Foundation,
notwithstanding that the Board of Directors have carefully considered the
various factors involved in the establishment of the Charitable Foundation in
reaching its determination to establish the Charitable Foundation as part of the
Reorganization, and/or with respect to the OTS' authority to grant the waivers
necessary to establish the Charitable Foundation. If challenges were to be
instituted seeking management to terminate the establishment of the Charitable
Foundation no assurances could be made that the resolution of such challenges
would not result in a delay in the consummation of the Reorganization or that
any objecting persons would not be ultimately successful in obtaining such
relief.

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Range takes into account the proposed contribution to the Charitable Foundation.
If the pro forma market value of the Company without the Charitable Foundation
is either greater than $67.7 million or less than $50.1 million, or if the OTS
otherwise requires a resolicitation of subscribers, the Association will
establish a new Estimated Valuation Range and resolicit subscribers (i.e.,
subscribers will be permitted to continue their orders, in which case they will
need to affirmatively reconfirm their subscriptions prior to the expiration of
the resolicitation offering or their subscription funds will be promptly
refunded with interest). Any change in the Estimated Valuation Range must be
approved by the OTS. See "--Stock Pricing and Number of Shares to be Issued."
Further, if the Mutual Holding Company were to undertake a Conversion
Transaction, and in connection with such a transaction additional shares of
stock of the Company or its successor were contributed to the Charitable
Foundation, such contribution of additional shares of Common Stock to the
Charitable Foundation would be voted on as a separate matters and would require
the approval of: (i) a majority of the total outstanding vote of the members of
the Mutual Holding Company eligible to be cast; and (ii) a majority vote of the
total outstanding shares of Common Stock held by stockholders other than the
Mutual Holding Company and the Charitable Foundation.

JUDICIAL REVIEW

Section 5(i)(2)(B) of the Home Owners' Loan Act, as amended, 12 U.S.C.
Section 1464(i)(2)(B) and Section 563b.8(u) of the Rules and Regulations
promulgated thereunder (12 C.F.R. Section 563b.8(u)) provide: (i) that persons
aggrieved by a final action of the OTS which approves, with or without
conditions, or disapproves a plan of reorganization, may obtain review of such
final action only by filing a written petition in the United States Court of
Appeals for the circuit in which the principal office or residence of such
person is located, or in the United States Court of Appeals for the District of
Columbia, requesting that the final action of the OTS be modified, terminated or
set aside, and (ii) that such petition must be filed within 30 days after
publication of notice of such final action in the Federal Register, or 30 days
after the date of mailing of the notice and proxy statement for the meeting of
the converting institution's members at which the conversion is to be voted on,
whichever is later. The notice of the Special Meeting of the Bank's members to
vote on the Plan of Reorganization described herein is included at the beginning
of this Proxy Statement. The statute and regulation referred to above should be
consulted for further information.

ADDITIONAL INFORMATION

The information contained in the accompanying Prospectus, including a
more detailed description of the Plan of Reorganization, financial statements of
the Association and a description of the capitalization and business of the
Association and the Company, including the Association's directors and executive
officers and their compensation, the anticipated use of the net proceeds from
the sale of the Common Stock, the establishment of the Charitable Foundation and
a description of the Common Stock, is intended to help you evaluate the
Reorganization and is incorporated herein by this reference.

YOUR VOTE IS VERY IMPORTANT TO US. PLEASE TAKE A MOMENT NOW TO COMPLETE
AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY STILL
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN THOUGH YOU HAVE VOTED YOUR
PROXY. FAILURE TO SUBMIT A PROXY WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
REORGANIZATION AND THE ESTABLISHMENT OF THE CHARITABLE FOUNDATION.

If you have any questions, please call our Stock Conversion Center at
(914) _______.

IMPORTANT: YOU MAY BE ENTITLED TO VOTE IN MORE THAN ONE CAPACITY.
PLEASE SIGN, DATE AND PROMPTLY RETURN EACH PROXY CARD YOU RECEIVE.

-------------------

THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.

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REVOCABLE PROXY

SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ___________, 1998

The undersigned member of Sound Federal Savings and Loan Association
(the "Association"), hereby appoints the full Board of Directors, with full
powers of substitution, as attorneys-in-fact and agents for and in the name of
the undersigned, to vote such votes as the undersigned may be entitled to vote
at the Special Meeting of Members of the Association, to be held at the main
office of the Association, located at ___________________________________ on
_________________, at ______ .m., local time, and at any and all adjournments
thereof. They are authorized to cast all votes to which the undersigned is
entitled as follows:

FOR AGAINST
--- -------

1. A Plan of Reorganization from Mutual Savings / / / /
Association to Mutual Holding Company and
Stock Issuance Plan providing for the
reorganization of the Association into the
mutual holding company structure. As part of
the Plan the Association will convert to a
federally chartered stock savings association,
which will be wholly-owned by Sound Federal
Bancorp (the "Company") a to be formed federal
corporation. Pursuant to the Plan, the Company
will (i) issue 53% of its to-be-outstanding
shares of common stock to Sound Federal, MHC,
a federal mutual holding company to be formed
pursuant to the Plan, (ii) offer for sale to
certain depositors and borrowers 45% of its
to-be-outstanding shares of common stock, and
(iii) subject to the receipt of member
approval, contribute 2% of its
to-be-outstanding shares of Common Stock to
the Sound Federal Savings and Loan Association
Charitable Foundation;

FOR AGAINST
--- -------

2. The establishment of a tax exempt foundation, / / / /
which will be a Delaware chartered non-stock
corporation dedicated to the promotion of
charitable purposes within the Association's
market area; and

3. Such other matters as may properly come before
the Special Meeting.

NOTE: The Board of Directors is not aware of any
other matter that may come before the
Special Meeting of Members.

- --------------------------------------------------------------------------------

THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY A MAJORITY OF THE BOARD OF
DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.

- --------------------------------------------------------------------------------
Votes will be cast in accordance with the Proxy. Should the undersigned
be present and elect to vote at the Special Meeting or at any adjournment
thereof and after notification to the Secretary of the Association at said
Meeting
<PAGE> 16
of the member's decision to terminate this Proxy, then the power of said
attorney-in-fact or agents shall be deemed terminated and of no further force
and effect.

The undersigned acknowledges receipt of a Notice of Special Meeting of
Members and a Proxy Statement dated _____________, 1998, prior to the execution
of this Proxy.

____________________________________
Date

____________________________________
Signature

NOTE: Only one signature is required
in the case of a joint account.

________________________________________________________________________________

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE.

________________________________________________________________________________

<PAGE> 1
EXHIBIT 99.4

[DRAFT 6/18/98]

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

PROPOSED LETTERS/QUESTION & ANSWER BROCHURE

INDEX
-----

1. Dear Member Letter including IRA or Qualified Plan*

2. Dear Member Letter for Non Eligible States*

3. Dear Friend Letter -- Eligible Account Holders who are no longer Members*

4. Dear Potential Investor Letter*

5. Dear Customer Letter -- Used as a Cover Letter for States Requiring
"Agent" Mailing*

6. Proxy Request

7. Proxy and Stock Question and Answer Brochure*

8. Mailing Insert/Lobby Poster

9. Invitation Letter -- Informational Meetings

10. Dear Subscriber/Acknowledgment Letter -- Initial Response to Stock Order
Received

11. Dear Charter Shareholder -- Confirmation Letter

12. Dear Interested Investor -- No Shares Available Letter

13. Welcome Shareholder Letter -- For Initial Certificate Mailing

14. Dear Interested Subscriber Letter -- Subscription Rejection

15. Letter for Sandler O'Neill Mailing to Clients*

* Accompanied by a Prospectus

Note: Items 1 through 8 are produced by the Financial Printer and Items 9
through 15 are produced by the Stock Conversion Center.

<PAGE> 2

[SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION]

Dear Member:

The Board of Directors of Sound Federal Savings and Loan Association has voted
unanimously in favor of a plan to reorganize from a federally-chartered mutual
savings association to a federally-chartered mutual holding company. As part of
this reorganization, the Association will convert to a stock savings association
and will become a wholly-owned subsidiary of Sound Federal Bancorp, a federal
stock corporation, which in turn will be a majority-owned subsidiary of Sound
Federal, MHC, a federal mutual holding company. We are reorganizing so that
Sound Federal will be structured in the stock form of ownership used by a
growing number of savings institutions and to allow our Association to become
stronger.

In addition, as part of the reorganization and in furtherance of our commitment
to our local community, we intend to establish a charitable foundation. The
Foundation will be dedicated to community activities and the promotion of
charitable purposes within the communities served by the Association. We request
that you review the proposal to establish the Foundation which is set forth in
the Proxy Statement.

TO ACCOMPLISH THIS REORGANIZATION, AND THE ESTABLISHMENT OF THE FOUNDATION, YOUR
PARTICIPATION IS EXTREMELY IMPORTANT. On behalf of the Board, I ask that you
help us meet our goal by reading the enclosed Proxy Statement and Prospectus and
then casting your vote in favor of the Plan of Reorganization and for the
establishment of the Foundation, and mailing your signed proxy card immediately
in the _________ postage-paid envelope provided marked "PROXY RETURN". Should
you choose to attend the Special Meeting of Members and wish to vote in person,
you may do so by revoking any previously executed proxy. If you have an IRA or
other Qualified Plan account for which the Association acts as trustee and we do
not receive a proxy from you, the Association intends, as trustee for such
account, to vote for the Plan of Reorganization and the establishment of the
Foundation on your behalf.

If the Plan of Reorganization is approved let me assure you that:

* Deposit accounts will continue to be federally insured to the fullest
extent permitted by law.

* Existing deposit accounts and loans will not undergo any change as a
result of the Conversion.

* Voting for approval will not obligate you to buy any shares of Common
Stock.

As a qualifying account holder, you may also take advantage of your
nontransferable rights to subscribe for shares of Sound Federal Bancorp's Common
Stock on a priority basis, before the stock is offered to the general public.
The enclosed Proxy Statement and Prospectus describe the stock offering and the
operations of Sound Federal Savings and Loan Association. If you wish to
purchase stock, please complete the stock order and certification form and mail
it to Sound Federal Savings and Loan Association in the enclosed ________
postage-paid envelope marked "STOCK ORDER RETURN", or return it to any branch
office of Sound Federal Savings and Loan Association. Your order must be
physically received no later than 12:00 noon New York time on Day, Month X,
199X. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION.

If you wish to use funds in your IRA or Qualified Plan maintained at Sound
Federal to subscribe for Common Stock, please be aware that federal law requires
that such funds first be transferred to a self-directed retirement account with
a trustee other than Sound Federal. The transfer of such funds to a new trustee
takes time, so please make arrangements as soon as possible.

If you have any questions after reading the enclosed material, please call our
Stock Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the
hours of 10:00 a.m. and 4:00 p.m. Please note that the Stock Conversion Center
will be closed from 12:00 noon Day, Month X, through 12:00 noon Day, Month X,
in observance of the Labor Day holiday.

Sincerely,

SIGNATURE
TITLE

#1
<PAGE> 3
[SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION]

Dear Member:

The Board of Directors of Sound Federal Savings and Loan Association has
voted unanimously in favor of a plan to reorganize from a federally-chartered
mutual savings association, to a federally-chartered mutual holding company. As
part of this reorganization, the Association will convert to a stock savings
association and will become a wholly-owned subsidiary of Sound Federal Bancorp,
a federal stock corporation, which in turn will be a majority-owned subsidiary
of Sound Federal, MHC, a federal mutual holding company. We are reorganizing so
that Sound Federal will be structured in the stock form of ownership used by a
growing number of savings institutions and to allow our Association to become
stronger.

In addition, as part of the Reorganization and in furtherance of our
commitment to our local community, we intend to establish a charitable
foundation. The Foundation will be dedicated to community activities and the
promotion of charitable purposes within the communities served by the
Association. We request that you review the proposal to establish the Foundation
which is set forth in the Proxy Statement.

If the Plan of Reorganization is approved let me assure you that:

- Deposit accounts will continue to be federally insured to the
fullest extent permitted by law.

- Existing deposit accounts and loans will not undergo any change as
a result of the Reorganization.

We regret that we are unable to offer you Common Stock in the Subscription
offering, because the laws of your state or jurisdiction require us to register
either (1) the to-be-issued Common Stock of Sound Federal Bancorp, or (2) an
agent of the Association to solicit the sale of such stock, and the number of
eligible subscribers in your state or jurisdiction does not justify the expense
of such registration.

If you have any questions after reading the enclosed material, please call
our Stock Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between
the hours of 10:00 a.m. and 4:00 p.m. Please note that the Stock Conversion
Center will be closed from 12:00 noon Day, Month Date through 12:00 noon Day,
Month Date, in observance of the Labor Day holiday.

Sincerely,

SIGNATURE
TITLE

Dear Friend of Sound Federal Savings and Loan Association:

Sound Federal Savings and Loan Association is in the process of reorganizing
from a federally-chartered mutual savings association, to a federally-chartered
mutual holding company. As part of this reorganization, the Association will
convert to a stock savings association and will become a wholly-owned
subsidiary of Sound Federal Bancorp, a federal stock corporation, which in turn
will be a majority-owned subsidiary of Sound Federal, MHC, a federal mutual
holding company. We are reorganizing so that Sound Federal will be structured
in the stock form of ownership used by a growing number of savings institutions
and to allow our Association to become stronger.

In addition, as part of the reorganization and in furtherance of our commitment
to our local community, we intend to establish a charitable foundation. The
Foundation will be dedicated to community activities and the promotion of
charitable purposes within the communities served by the Association. We
request that you review the description of the Foundation which is set forth in
the Prospectus.

As a former account holder, you may take advantage of your nontransferable
rights to subscribe for shares of Sound Federal Bancorp's Common Stock without
commission or fee on a priority basis, before the stock is offered to the
general public. The enclosed Prospectus describes the stock offering and the
operations of Sound Federal Savings and Loan Association. If you wish to
purchase stock, please complete the stock order and certification form and mail
it to Sound Federal Savings and Loan Association in the enclosed postage-paid
envelope marked "STOCK ORDER RETURN", or return it to any branch office of
Sound Federal Savings and Loan Association. Your order must be physically
received no later than 12:00 noon New York time on DAY, MONTH XX, 199X. Please
read the Prospectus carefully before making an investment decision.

If you have any questions after reading the enclosed material, please call our
Stock Conversion Center at (XXX) XXX-XXXX, Monday through Friday, between the
hours of 10:00 a.m. and 4:00 p.m. Please note that the Stock Conversion Center
will be closed from 12:00 noon Day, Month Date through 12:00 noon Day, Month
Date, in observance of the Labor Day holiday.

Sincerely,

SIGNATURE
TITLE

#3
<PAGE> 5
[SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION]

Dear Potential Investor:

We are pleased to provide you with the enclosed material regarding the
reorganization of Sound Federal Savings and Loan Association from a
federally-chartered mutual savings association, to a federally-chartered mutual
holding company. As part of this reorganization, the Association will convert
to a stock savings association and will become a wholly-owned subsidiary of
Sound Federal Bancorp, a federal stock corporation, which in turn will become a
majority-owned subsidiary of Sound Federal, MHC, a federal mutual holding
company.

This information packet includes the following:

PROSPECTUS: This document provides detailed information about the
Association's operations, the proposed stock offering by Sound Federal
Bancorp, a holding company formed by the Association to become its parent
company upon completion of the reorganization and the establishment of a
charitable foundation as part of the reorganization. Please read it
carefully prior to making an investment decision.

QUESTION AND ANSWER BROCHURE: This answers commonly asked questions about
the stock offering and establishment of the charitable foundation.

STOCK ORDER AND CERTIFICATION FORMS: Use these forms to subscribe for stock
and return them together with your payment in the _______ postage-paid
envelope marked "STOCK ORDER RETURN". The deadline to subscribe for stock
is 12:00 noon, New York time on __________, 199X.

We are pleased to offer you this opportunity to become one of our charter
stockholders. If you have any questions regarding the Reorganization or the
Prospectus, please call our Stock Conversion Center at (XXX) XXX-XXXX, Monday
through Friday, between the hours of 10:00 a.m. and 4:00 p.m. Please note that
the Stock Conversion Center will be closed from 12:00 noon Day, Month Date
through 12:00 noon Day, Month Date, in observance of the Labor Day holiday.

Sincerely,

SIGNATURE
TITLE

#4
<PAGE> 6
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]

Dear Customer of Sound Federal Savings and Loan Association:

At the request of Sound Federal Savings and Loan Association and Sound Federal
Bancorp, a holding company formed by the Association to become its parent
company, we have enclosed material regarding the offering of Common Stock in
connection with the Reorganization of Sound Federal Savings and Loan
Association from a federally-chartered mutual savings association, to a
federally-chartered mutual holding company and the establishment of a
charitable foundation. As part of this reorganization, the Association will
convert to a stock savings association and will become a wholly-owned
subsidiary of Sound Federal Bancorp, a federal stock corporation, which in turn
will become a majority-owned subsidiary of Sound Federal, MHC, a federal mutual
holding company. These materials include a Proxy Statement, a Prospectus and a
stock order and certification form which offer you the opportunity to subscribe
for shares of Common Stock of Sound Federal Bancorp.

We recommend that you study this material carefully. If you decide to subscribe
for shares, you must return the properly completed and signed stock order and
certification form along with full payment for the shares (or appropriate
instructions authorizing withdrawal from a deposit account at the Association)
no later than 12:00 noon, New York time on ____________, 1998 in the _______
accompanying postage-paid envelope marked "STOCK ORDER RETURN". If you have any
questions after reading the enclosed material, please call the Stock Conversion
Center at (XXX) XXX-XXXX, Monday through Friday, between the hours of 10:00
a.m. and 4:00 p.m. and ask for a Sandler O'Neill representative. Please note
that the Stock Conversion Center will be closed from 12:00 noon Day, Month Date
through 12:00 noon Day, Month Date, in observance of the Labor Day holiday.

We have been asked to forward these documents to you in view of certain
requirements of the securities laws of your jurisdiction. We should not be
understood as recommending or soliciting in any way any action by you with
regard to the enclosed materials.

Sincerely,

SANDLER O'NEILL & PARTNERS, L.P.

Enclosure

<PAGE> 7
LOGO: [SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION]

P R O X Y R E Q U E S T

WE NEED YOUR VOTE!

DEAR CUSTOMER:

YOUR VOTE ON OUR PLAN OF REORGANIZATION AND THE ESTABLISHMENT OF THE CHARITABLE
FOUNDATION HAS NOT YET BEEN RECEIVED. YOUR VOTE IS VERY IMPORTANT TO US. PLEASE
VOTE AND MAIL THE ENCLOSED PROXY TODAY.

REMEMBER: VOTING FOR THE PLAN OF REORGANIZATION, AND/OR THE ESTABLISHMENT OF
THE CHARITABLE FOUNDATION, DOES NOT OBLIGATE YOU TO BUY STOCK. YOUR
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PLAN OF
REORGANIZATION, INCLUDING THE ESTABLISHMENT OF THE CHARITABLE
FOUNDATION, AND URGES YOU TO VOTE IN FAVOR OF BOTH PROPOSALS. YOUR
DEPOSIT ACCOUNTS OR LOANS WITH THE ASSOCIATION WILL NOT BE AFFECTED
IN ANY WAY. DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED.

A POSTAGE-PAID ENVELOPE IS ENCLOSED WITH THE PROXY FORM. IF YOU HAVE ANY
QUESTIONS, PLEASE CALL OUR STOCK CONVERSION CENTER AT (XXX) XXX-XXXX.

IF YOU HAVE MORE THAN ONE ACCOUNT YOU MAY RECEIVE MORE THAN ONE PROXY.

PLEASE VOTE TODAY BY RETURNING ALL PROXY FORMS RECEIVED.

SINCERELY,

SOUND FEDERAL SAVINGS AND
LOAN ASSOCIATION
<PAGE> 8
7-1

QUESTIONS AND ANSWERS

ABOUT THE CONVERSION

The Board of Directors of Sound Federal Savings and Loan Association has
unanimously adopted the Plan of Reorganization whereby the Association will
convert from a federally-chartered mutual savings association, to a
federally-chartered mutual holding company. As part of this Reorganization, the
Association will convert to a stock savings association and will become a
wholly-owned subsidiary of Sound Federal Bancorp, a federal stock corporation,
which in turn will be a majority-owned subsidiary of Sound Federal, MHC, a
federal mutual holding company. As part of the reorganization, Sound Federal
Bancorp will be offering its Common Stock for sale pursuant to the terms of the
Plan of Reorganization.

Sound Federal is reorganizing so that it will be structured in the stock form
of ownership used by a growing number of savings institutions and to allow our
Association to become stronger. In addition, as part of the reorganization, the
Association intends to establish a charitable foundation which will be
dedicated to charitable purposes within the communities in which the
Association operates, subject to the approval of members of the Association.

It is necessary for the Association to receive a majority of the outstanding
votes in favor of both the Reorganization and the Foundation, so YOUR VOTE IS
VERY IMPORTANT. Please return your proxy in the enclosed __________ postage-paid
envelope. YOUR BOARD OF DIRECTORS URGES YOU TO VOTE "FOR" THE REORGANIZATION AND
"FOR" THE ESTABLISHMENT OF THE FOUNDATION AND RETURN YOUR PROXY TODAY.

EFFECT ON DEPOSITS AND LOANS

Q. WILL THE REORGANIZATION AFFECT ANY OF MY DEPOSIT ACCOUNTS OR LOANS?

A. No. The Reorganization will have no effect on the balance or terms of any
deposit account or loan. Your deposits will continue to be federally insured
to the fullest extent permissible.

ABOUT VOTING

Q. WHO IS ELIGIBLE TO VOTE ON THE REORGANIZATION AND THE FOUNDATION?

A. Depositors and certain borrowers as of ____________________ 199X (the "Voting
Record Date") who continue to be members of the Association as of the Special
Meeting of Members to be held on __________________ 199X.

Q. AM I REQUIRED TO VOTE?

A. No. Members are not required to vote. However, because the Reorganization
will produce a fundamental change in the Association's corporate structure,
the Board of Directors encourages all members to vote.
<PAGE> 9
7-2

Q. WHY DID I RECEIVE SEVERAL PROXIES?

A. If you have more than one account you may have received more than one proxy
depending upon the ownership structure of your accounts. Please vote and sign
all proxy cards that you received.

Q. HOW DO I VOTE?

A. You may vote by mailing your signed proxy card in the _________ postage-paid
envelope provided. Should you choose to attend the Special Meeting of Members
and decide to change your vote, you may do so by revoking any previously
executed proxy.

Q. DOES MY VOTE FOR REORGANIZATION AND/OR THE FOUNDATION MEAN THAT I MUST BUY
COMMON STOCK IN SOUND FEDERAL BANCORP.

A. No. Voting for the Reorganization does not obligate you to buy shares of
Common Stock of Sound Federal Bancorp.

Q. I HAVE A JOINT SAVINGS ACCOUNT. MUST BOTH PARTIES SIGN THE PROXY CARD?

A. Only one signature is required, but both parties should sign if possible.

Q. WHO MUST SIGN TRUST OR CUSTODIAN ACCOUNTS?

A. The trustee or custodian must sign such accounts, not the beneficiary.

Q. I AM THE EXECUTOR (ADMINISTRATOR) FOR A DECEASED DEPOSITOR. CAN I SIGN THE
PROXY CARD?

A. Yes. Please indicate on the card the capacity in which you are signing the
card.

ABOUT THE FOUNDATION

Q. WHAT IS THE CHARITABLE FOUNDATION AND WHY IS IT BEING ESTABLISHED?

A. In furtherance of our commitment to our local community, the Association's
Plan of Reorganization provides for the establishment of a charitable
foundation. The Foundation will be dedicated to community activities and the
promotion of charitable purposes within the communities served by the
Association.
<PAGE> 10
7-3

Q. HOW WILL THE FOUNDATION BE FUNDED?

A. The Company will fund the Foundation with shares of its Common Stock.
Immediately following the Reorganization a number of shares of authorized
but unissued Common Stock equal to ___% of the Common Stock sold in the
Offerings, or ______, ______ and ______ shares at the minimum, midpoint and
maximum, respectively, of the Estimated Price Range will be contributed to
the Foundation.

Q. WHAT IS THE IMPACT OF THE FOUNDATION ON THE COMPANY'S STOCKHOLDERS' EQUITY
AND EARNINGS?

A. The funding of the Foundation will impact the Company's stockholders'
equity and will have an adverse effect on the Company's earnings in the
period in which the Foundation is funded which is expected to be in the
quarter ended December 31, 1998. The establishment of the Foundation,
however, was considered in the independent appraisal of the aggregate pro
forma market value of the Company's Common Stock. In addition, there are
certain tax effects, regulatory considerations and other matters with
respect to the Foundation. A prospective stockholder should carefully
review "Risk Factors -- Establishment of the Charitable Foundation," "Pro
Forma Data" and "The Reorganization and Offering -- Establishment of the
Charitable Foundation" in the Prospectus.
<PAGE> 11
7-4

ABOUT THE STOCK

Investment in Common Stock involves certain risks. For a discussion of these
risks and other factors, investors are urged to read the accompanying
Prospectus.

Q. WHAT ARE THE PRIORITIES OF PURCHASING THE COMMON STOCK?

A. The Common Stock of Sound Federal Bancorp will be offered in the following
order of priority to the Association's:

* Eligible Account Holders, (depositors with accounts totaling $50 or
more as of March 31, 1997).

* The Employee Plans, including the ESOP.

* Supplemental Eligible Account Holders (depositors with accounts
totaling $50 or more as of June 30, 1998).

* Other Members (depositors as of _____________ XX, 199X)

* Borrowers with loans outstanding as of _________________, which
continue to be outstanding as of _____________ XX, 199X) in a
Subscription Offering.

Upon completion of the Subscription Offering, Common Stock that is not
sold in the Subscription Offering will be offered to certain members of the
general public in a Community Offering and then to the general public in a
Syndicated Community Offering.

Q. WILL ANY ACCOUNT I HOLD WITH THE ASSOCIATION BE CONVERTED INTO STOCK?

A. No. All accounts remain as they were prior to the Reorganization. As an
Eligible Account Holder, Supplemental Eligible Account Holder or Other
Member you receive priority over the general public in exercising your
right to subscribe for shares of Common Stock.

Q. WILL I RECEIVE A DISCOUNT ON THE PRICE OF THE STOCK?

A. No. Reorganization regulations require that the offering price of the
stock be the same for everyone: customers, directors, officers and
employees of the Association, and the general public.

Q. HOW MANY SHARES OF STOCK ARE BEING OFFERED, AND AT WHAT PRICE?

A. Sound Federal Bancorp is offering for sale up to ____________ shares of
Common Stock at a subscription price of $10 per share through the
Prospectus. Under certain circumstances, Sound Federal Bancorp may issue
up to ___________ shares (not including any shares contributed to the
Foundation).
<PAGE> 12
7-5

Q. HOW MUCH STOCK CAN I PURCHASE?

A. The minimum purchase is 25 shares; the maximum purchase by any person in
the Subscription Offering is $150,000 (15,000 shares); in the Community
Offering and Syndicated Community Offering, if either is held, the maximum
purchase by any person, including purchases by associates of such person or
entity, is $150,000 (15,000 shares); and the maximum purchase by any
person, including purchases by Associates of such person or entity in the
Subscription and Community Offerings is 1.0% of the shares offered, or
30,000 shares.

Q. HOW DO I ORDER STOCK?

A. You may subscribe for shares of Common Stock by completing and returning
the stock order form and certification form, together with your payment
either in person to any branch of Sound Federal Savings and Loan
Association or by mail in the _______ postage-paid envelope marked "STOCK
ORDER RETURN" that has been provided. Stock Order Forms may not be
delivered to a walk up or drive through window located at any of the bank's
branch offices.

Q. HOW CAN I PAY FOR MY SHARES OF STOCK?

A. You can pay for the Common Stock by check, cash, money order or withdrawal
from your deposit account at Sound Federal Savings and Loan Association. If
you choose to pay by cash, you must deliver the stock order form and
payment in person to any branch office of Sound Federal Savings and Loan
Association and it will be converted to a bank check or a money order.
PLEASE DO NOT SEND CASH IN THE MAIL.

Q. WHEN IS THE DEADLINE TO SUBSCRIBE FOR STOCK?

A. An executed order form and certification form with the required full
payment must be physically received by 12:00 noon, New York time, on
DAY, MONTH, DATE, 199X.

Q. CAN I SUBSCRIBE FOR SHARES USING FUNDS IN MY SOUND FEDERAL IRA/QUALIFIED
PLAN?

A. Federal regulations do not permit the purchase of Common Stock with your
existing IRA or Qualified Plan at Sound Federal Savings and Loan
Association. To use such funds to subscribe for Common Stock, you need to
establish a "self-directed" trust account with an outside trustee. Please
call our Stock Conversion Center if you require additional information.
TRANSFER OF SUCH FUNDS TAKES TIME, SO PLEASE MAKE ARRANGEMENTS AS SOON AS
POSSIBLE.
<PAGE> 13
7-6

Q. CAN I SUBSCRIBE FOR SHARES AND ADD SOMEONE ELSE WHO IS NOT ON MY ACCOUNT TO
MY STOCK REGISTRATION?

A. No. Federal regulations prohibit the transfer of subscription rights. Adding
the names of other persons who are not owners of your qualifying account(s)
will result in your order becoming null and void.

Q. WILL PAYMENTS FOR STOCK EARN INTEREST UNTIL THE REORGANIZATION CLOSES?

A. Yes. Any payments made by cash, check or money order will earn interest at
the Association's passbook rate from the date of receipt to the completion or
termination of the Reorganization. Withdrawals from a deposit account or a
certificate of deposit at the Association to buy Common Stock may be made
without penalty. Depositors who elect to pay for their Common Stock by
withdrawal will receive interest at the contract rate on the account until
the completion or termination of the Reorganization.

Q. WILL DIVIDENDS BE PAID ON THE STOCK?

A. No dividends are expected to be paid initially. Following the Reorganization,
however, the Board of Directors of Sound Federal Bancorp may consider a
policy of paying cash dividends on the stock.

Q. WILL MY STOCK BE COVERED BY DEPOSIT INSURANCE?

A. No. The Common Stock cannot be insured or guaranteed by the Bank Insurance
Fund or the Savings Association Insurance Fund of the FDIC or any other
government agency nor is it insured or guaranteed by Sound Federal Savings
and Loan Association or Sound Federal Bancorp.

Q. WHERE WILL THE STOCK BE LISTED?

A. Upon completion of the Reorganization, Sound Federal Bancorp expects the
stock to be listed on the Nasdaq National Market under the symbol " ".

Q. CAN I CHANGE MY MIND AFTER I PLACE AN ORDER TO SUBSCRIBE FOR STOCK?

A. No. After receipt, your order may not be modified or withdrawn.
<PAGE> 14
7-7

ADDITIONAL INFORMATION

Q. WHAT IF I HAVE ADDITIONAL QUESTIONS OR REQUIRE MORE INFORMATION?

A. The Association's Proxy Statement and Prospectus describe the Reorganization
and the Foundation in detail. Please read the Proxy Statement and Prospectus
carefully before voting. If you have any questions after reading the enclosed
material you may call our Stock Conversion Center at (XXX) XXX-XXXX, Monday
through Friday, between the hours of 10:00 a.m. and 4:00 p.m. Please note,
the Stock Labor Day holiday, from 12:00 Noon, DAY, MONTH DATE through 12:00
Noon DAY, MONTH DATE. Additional materials may only be obtained from the
Stock Conversion Center.

The shares of Common Stock offered in the Reorganization are not savings
accounts or deposits and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency nor is the Common Stock
insured or guaranteed by Sound Federal Savings and Loan Association or Sound
Federal Bancorp. To ensure that each purchaser receives a Prospectus at least 48
hours prior to the Expiration Date of __________, __, 199X at 12:00 noon, New
York time, in accordance with Rule 15c2-8 of the Securities Exchange Act of
1934, as amended, no Prospectus will be mailed any later than five days prior to
such date or hand delivered any later than two days prior to such date.

This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.
<PAGE> 15
-----------------------------------------------
L O G O
-----------------------------------------------

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION

PLEASE SUPPORT US

VOTE YOUR

PROXY CARD TODAY

-----------------------------------------------------------------------
IF YOU HAVE MORE THAN ONE ACCOUNT, YOU MAY HAVE RECEIVED MORE THAN ONE
PROXY DEPENDING UPON THE OWNERSHIP STRUCTURE OF YOUR ACCOUNTS. PLEASE
VOTE, SIGN AND RETURN ALL PROXY CARDS THAT YOU RECEIVED.
-----------------------------------------------------------------------

#8
<PAGE> 16
[SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION]

_______________, 199X

Mr. John Smith
00-00 00 Drive
City, State 00000

Dear Mr. Smith:

The Board of Directors of Sound Federal Savings and Loan Association has voted
unanimously in favor of a plan to reorganize from a federally-chartered mutual
savings association, to a federally-chartered mutual holding company. As part
of this reorganization, the Association will convert to a stock savings
association and will become a wholly-owned subsidiary of Sound Federal Bancorp,
a federal stock corporation, which in turn will be a majority-owned subsidiary
of Sound Federal, MHC, a federal mutual holding company. We are reorganizing so
that Sound Federal will be structured in the stock form of ownership used by a
growing number of savings institutions and to allow our Association to become
stronger.

You are cordially invited to join members of our senior management team at an
informational meeting to be held on ____________ at 7:30 P.M. to learn more
about the reorganization and the stock offering.

A member of our staff will be calling to confirm your interest in attending the
meeting.

If you would like additional information regarding the meeting or our
Reorganization, please call our Stock Conversion Center number at (XXX)
XXX-XXXX. The Stock Conversion Center is open Monday through Friday from 10:00
a.m. to 4:00 p.m. Please note that the Stock Conversion Center will be closed
from 12:00 noon Day, Month Date through 12:00 noon Day, Month Date, in
observance of the Labor Day holiday.

Sincerely,

SIGNATURE
TITLE

This is not an offer to sell or a solicitation of an offer to buy Common Stock.
The offer is made only by the Prospectus.

(Printed by Stock Conversion Center)

#9
<PAGE> 17
[SOUND FEDERAL BANCORP]

------------------, 199X

Dear Subscriber:

We hereby acknowledge receipt of your order for shares of Common Stock in Sound
Federal Bancorp.

At this time, we cannot confirm the number of shares of Sound Federal Bancorp
Common Stock that will be issued to you. Such allocation will be made in
accordance with the Plan of Reorganization following completion of the stock
offering.

If you have any questions, please call our Stock Conversion Center at
(XXX) XXX-XXXX.

Sincerely,

SOUND FEDERAL BANCORP
Stock Conversion Center

(Printed by Stock Conversion Center)
<PAGE> 18
[SOUND FEDERAL BANCORP]

__________________, 199X

Dear Charter Shareholder:

We appreciate your interest in the stock offering of Sound Federal Bancorp. Due
to the excellent response from our Eligible Account Holders, we are unable to
fill all orders in full. Consequently, in accordance with the provisions of the
Plan of Reorganization, you were allocated ______ shares at a price of $10.00
per share. If your subscription was paid for by check, a refund of any balance
due you with interest will be mailed to you promptly.

The purchase date and closing of the transaction occurred on Month __, 199X.
The Common Stock will be listed on the Nasdaq National Market under the symbol
" " on ____ Month __, 199X. Your stock certificate will be mailed to you
shortly.

We thank you for your interest in Sound Federal Bancorp, and welcome you as a
charter shareholder.

Sincerely,

SOUND FEDERAL BANCORP
Stock Conversion Center

(Printed by Stock Conversion Center)

#11
<PAGE> 19
[SOUND FEDERAL BANCORP]

_______________________, 199X

Dear Interested Investor:

We recently completed our Subscription and Community Offerings. Unfortunately,
due to the excellent response from our Eligible Account Holders, stock was not
available for our Supplemental Eligible Account Holders, Other Members or
community friends. If your subscription was paid for by check, a refund of any
balance due you with interest will be mailed to you promptly.

We appreciate your interest in Sound Federal Bancorp and hope you become an
owner of our stock in the future. The stock will be listed on the Nasdaq
National Market under the symbol " ".

Sincerely,

SOUND FEDERAL BANCORP
Stock Conversion Center

(Printed by Stock Conversion Center)

#12

<PAGE> 20
[SOUND FEDERAL BANCORP]

_____________________, 199X

Welcome Shareholder:

We are pleased to enclose the stock certificate that represents your share of
ownership in Sound Federal Bancorp, the holding company of Sound Federal Savings
and Loan Association and a majority-owned subsidiary of Sound Federal, MHC.

Please examine your stock certificate to be certain that it is properly
registered. If you have any questions about your certificate, you should
contact the Transfer Agent immediately at the following address:

TRANSFER AGENT
Address
Telephone Number

Also, please remember that your certificate is a negotiable security which
should be stored in a secure place, such as a safe deposit box or on deposit
with your stockbroker.

On behalf of the Board of Directors of Sound Federal Bancorp and Sound Federal,
MHC and the employees of Sound Federal Savings and Loan Association, I would
like to thank you for supporting our offering.

Sincerely,

SIGNATURE
TITLE

(Printed by Stock Conversion Center)

#13

<PAGE> 21
[SOUND FEDERAL BANCORP]

------------------, 199X

Dear Interested Subscriber:

We regret to inform you that Sound Federal Savings and Loan Association and
Sound Federal Bancorp, the holding company for Sound Federal Savings and Loan
Association, have decided not to accept your order for shares of Sound Federal
Bancorp Common Stock in our Community Offering. This action is in accordance
with our Plan of Reorganization which gives the Association and the Holding
Company, the absolute right to reject the subscription of any Community Member,
in whole or in part, in the Community Offering.

Enclosed, therefore, is a check representing your subscription and interest
earned thereon.

Sincerely,

SOUND FEDERAL BANCORP
Stock Conversion Center

(Printed by Stock Conversion Center)

#14
<PAGE> 22
[SANDLER O'NEILL & PARTNERS, L.P. LETTERHEAD]

________________, 199X

To Our Friends:

We are enclosing the offering material for Sound Federal Bancorp, a
majority-owned subsidiary of Sound Federal. MHC and the purposed holding
company for Sound Federal Savings and Loan Association, which is now in the
process of converting to stock form.

Sandler O'Neill & Partners, L.P. is managing Sound Federal's Subscription
Offering, which will conclude at 12:00 noon, New York time on ______________,
199X. Sandler O'Neill is also providing conversion agent and proxy solicitation
services for the Association. In the event that all the stock is not subscribed
for in the Subscription Offering, Sandler O'Neill will form and manage a
syndicate of broker/dealers to sell the remaining stock.

Members of the general public, other than residents of __, are eligible to
participate. If you have any questions about this transaction, please do not
hesitate to call or write.

Sincerely,

SANDLER O'NEILL & PARTNERS, L.P.

(Printed by Sandler O'Neill)

#15

<PAGE> 1
LOGO: SOUND FEDERAL SAVINGS
AND LOAN ASSOCIATION
Subscription & Community Offering Stock Order Form

IMPORTANT-PLEASE NOTE: A properly completed original stock order form must be
used to subscribe for Common Stock. Copies of this form are not required to be
accepted. Please read the Stock Ownership Guide and Stock Order Form
Instructions as you complete this form.

Bank Use --------------------

--------------------

-----------------------------
SOUND FEDERAL SAVING AND LOAN
ASSOCIATION
STOCK CONVERSION CENTER
XX Street
City, State Zip Code
(XXX) XXX-XXXX
-----------------------------
EXPIRATION DATE
for Stock Order Forms:
Day, Month XX, 199X
12:00 Noon, New York Time
-----------------------------

- ------------------------------- -----------------------------------------------

(1) NUMBER OF SHARES (2) TOTAL PAYMENT DUE
| | SUBSCRIPTION PRICE | |
| | | |
| | X $ 10.00 = | |
- ------------------------------- -----------------------------------------------

[](3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION
Check here if you are an employee, officer or director of Sound Federal
Savings and Loan Association or a member of such person's immediate family
living in the same household.

(4) METHOD OF PAYMENT/CHECK
Enclosed is a check, bank draft or money order made payable to Sound
Federal Savings and Loan Association in the amount indicated in this box.

Check Amount ---------------

---------------

(5) METHOD OF PAYMENT/WITHDRAWAL
The undersigned authorizes withdrawal from the following account(s) at
Sound Federal Savings and Loan Association. Individual Retirement Accounts
maintained at Sound Federal Savings and Loan Association cannot be used.
There is no penalty for early withdrawal used for this payment.

- ------------------------------- ------------------------------- ---------
Account Number(s) Withdrawal Amount(s) Bank Use
- ------------------------------- ------------------------------- ---------

- ------------------------------- ------------------------------- ---------

- ------------------------------- ------------------------------- ---------
Total Withdrawal Amount
- ------------------------------- ------------------------------- ---------

The minimum number of shares that may be subscribed for is 25 and the maximum
number of shares that may be subscribed for in the Subscription Offering is
15,000 shares. See Instructions.

(6) PURCHASER INFORMATION

a.[] Check here if you are an Eligible Account Holder of Sound Federal with a
deposit account(s) totalling $50.00 or more on March 31, 1997. List
account(s) below.

b.[] Check here if you are a Supplemental Eligible Account Holder with a
deposit account(s) totalling $50.00 or more on June 30, 1998. List
account(s) below.

c.[] Check here if you were a depositor as of ________ X, 199X or a borrower
with a loan(s) outstanding as of _________ X, 199X which continued to be
outstanding as of __________ X, 199X. List account(s) or loan(s) below.

- -------------------------------- ------------------------------- ---------
Account Title (Names on Accounts) Account Number(s) Bank Use
- -------------------------------- ------------------------------- ---------

- -------------------------------- ------------------------------- ---------

- -------------------------------- ------------------------------- ---------
PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN THE LOSS OF PART OR
ALL OF YOUR SUBSCRIPTION RIGHTS. IF ADDITIONAL SPACE IS NEEDED, PLEASE UTILIZE
THE BACK OF THIS STOCK ORDER FORM.

(7) STOCK REGISTRATION/FORM OF STOCK OWNERSHIP

<TABLE>
<S> <C> <C> <C>
[ ] Individual [ ] Joint Tenants [ ] Tenants in Common [ ] [ ] [ ]- [ ] [ ]- [ ] [ ] [ ] [ ]

[ ] Fiduciary (i.e. trust, estate, etc.) [ ] Company/Corp/Partnership [ ] Uniform Transfers to Minors Act

[ ] IRA or other Qualified Plan - Beneficial Owners SS#
</TABLE>

(8) NAME(S) IN WHICH STOCK IS TO BE REGISTERED (PLEASE PRINT CLEARLY) - ADDING
THE NAMES OF OTHER PERSON(S) WHO ARE NOT OWNERS OF YOUR QUALIFYING
ACCOUNT(S) WILL RESULT IN YOUR ORDER BECOMING NULL AND VOID.

- ------------------------------------------- ---------------------------
Name(s) Social Security # or Tax ID

- ------------------------------------------- ---------------------------
Name(s) continued Social Security # or Tax ID

- ------------------------------------------- ---------------------------
Street Address County of Residence

- ------------------------------------------- ---------------------------
City State Zip Code

- ---------------- ------------- ----------

(9) TELEPHONE - Daytime ( ) Evening ( )

- ---------------------------------------------------- ------------------------

[ ] (10) NASD AFFILIATION - Check here if you are a member of the National
Association of Securities Dealers, Inc. ("NASD"), a person associated with
an NASD member, a member of the immediate family of any such person to
whose support such person contributes, directly or indirectly, or the
holder of an account in which an NASD member or person associated with an
NASD member has a beneficial interest. To comply with conditions under
which an exemption from the NASD's Interpretation With Respect to
Free-Riding and Withholding is available, you agree, if you have checked
the NASD Affiliation box, (i) not to sell, transfer or hypothecate the
stock for a period of three months following issuance, and (ii) to report
this subscription in writing to the applicable NASD member within one day
of payment therefor.

[ ] (11) ASSOCIATES - ACTING IN CONCERT Check here, and complete the reverse
side of this form, if you or any associates (as defined on the reverse
side of this form) or persons acting in concert with you have submitted
other orders for shares in the Subscription and/or Community Offerings.

[ ] (12) ACKNOWLEDGMENT - To be effective, this Stock Order Form and
accompanying Certification Form must be properly completed and physically
received by Sound Federal Savings and Loan Association no later than 12:00
Noon, New York time, on Day, Month Date, 199X, unless extended; otherwise
this Stock Order Form and all subscription rights will be void. The
undersigned agrees that after receipt by Sound Federal Savings and Loan
Association, this Stock Order Form may not be modified, withdrawn or
canceled without the Association's consent and if authorization to
withdraw from deposit accounts at the Association has been given as
payment for shares; the amount authorized for withdrawal shall not
otherwise be available for withdrawal by the undersigned. Under penalty of
perjury, I hereby certify that the Social Security or Tax ID Number and
the information provided on this Stock Order Form is true, correct and
complete, that I am not subject to back-up withholding, and that I am
purchasing solely for my own account and that there is no agreement or
understanding regarding the sale or transfer of such shares, or my right
to subscribe for shares herewith. It is understood that this Stock Order
Form will be accepted in accordance with, and subject to, the terms and
conditions of the Plan of Reorganization of the Association described in
the accompanying Prospectus. The undersigned hereby acknowledges receipt
of the Prospectus at least 48 hours prior to delivery of this Stock Order
Form to the Association.

FEDERAL REGULATIONS PROHIBIT ANY PERSON FROM TRANSFERRING, OR ENTERING
INTO ANY AGREEMENT, DIRECTLY OR INDIRECTLY, TO TRANSFER THE LEGAL OR
BENEFICIAL OWNERSHIP OF SUBSCRIPTION RIGHTS OR THE UNDERLYING SECURITIES
TO THE ACCOUNT OF ANOTHER. SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION AND
SOUND FEDERAL BANCORP WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES
IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND
WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE SUCH TRANSFER.

<TABLE>
<S> <C>
Signature Date Signature Date

------------------------------------------- ---------------------------------------
</TABLE>

-------------
BANK USE ONLY
=============

=============

-------------
BANK USE ONLY
=============

THE CERTIFICATION FORM ON THE REVERSE SIDE MUST BE SIGNED

<PAGE> 2
ITEM (6) a, b - (CONTINUED)

- --------------------------------- -------------------------
Account Title (Names on Accounts) Account Number(s)
- --------------------------------- -------------------------

- --------------------------------- -------------------------

- --------------------------------- -------------------------
Account Title (Names on Accounts) Account Number(s)
- --------------------------------- -------------------------

- --------------------------------- -------------------------

ITEM (11) - (CONTINUED)
List below all other orders submitted by you or Associates (as defined) or by
persons acting in concert with you.

- ----------------------------------------- -------------------------
Name(s) listed on other Stock Order Forms Number of Shares
Ordered
- ----------------------------------------- -------------------------

- ----------------------------------------- -------------------------

"Associate" is defined as: (i) any corporation or organization (other than the
Association or a majority-owned subsidiary of the Association) of which such
person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities; (ii) any
trust or other estate in which such person has a substantial beneficial interest
or as to which such person serves as a trustee or in a similar fiduciary
capacity; provided, however, such term shall not include Sound Federal Bancorp's
or Sound Federal Savings and Loan Association's employee benefit plans in which
such person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and (iii) ANY RELATIVE OR SPOUSE OF SUCH PERSON, OR
ANY RELATIVE OF SUCH SPOUSE, WHO EITHER HAS THE SAME HOME AS SUCH PERSON or who
is a director or officer of the Association or the Holding Company or any
subsidiaries thereof. Directors of the Association or the Holding Company are
not treated as associates solely because of their Board memberships.

YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK

CERTIFICATION FORM

I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
AND IS NOT INSURED OR GUARANTEED BY SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION,
THE FEDERAL GOVERNMENT OR BY ANY GOVERNMENT AGENCY. THE ENTIRE AMOUNT OF AN
INVESTOR'S PRINCIPAL IS SUBJECT TO LOSS.

If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I should call the Office of Thrift Supervision,
Regional Director of the Northeast Regional Office at (201) 413-1000.

I further certify that, before purchasing the Common Stock, par value $1.00 per
share, of Sound Federal Bancorp (the "Company"), the proposed holding company
for Sound Federal Bancorp, I received a Prospectus of the Company dated _____,
199X
relating to such offer of Common Stock.

The Prospectus that I received contains disclosure concerning the nature of the
Common Stock being offered by the Company and describes in the "Risk Factor"
section beginning on page____ the risks involved in the investment in this
Common Stock, including but not limited to the:

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

THIS CERTIFICATION MUST BE SIGNED IN ORDER TO PURCHASE STOCK

<TABLE>
<S> <C>
SIGNATURE DATE SIGNATURE DATE

- -------------------------------------- -------------------------------------

NAME (PLEASE PRINT) DATE NAME (PLEASE PRINT) DATE

- -------------------------------------- -------------------------------------
</TABLE>

<PAGE> 3

[LOGO] SOUND FEDERAL BANCORP

STOCK OWNERSHIP GUIDE

INDIVIDUAL

Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights,
such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.

JOINT TENANTS

Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.

TENANTS IN COMMON

Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common.

UNIFORM TRANSFERS TO MINORS ACT ("UTMA")

Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minors Act of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for Custodian
is "CUST", while the Uniform Transfers to Minors Act is "UTMA". Standard U.S.
Postal Service state abbreviations should be used to describe the appropriate
state. For example, stock held by John Doe as custodian for Susan Doe under the
New York Uniform Transfers to Minors Act will be abbreviated John Doe, CUST
Susan Doe UTMA, NY (use minor's social security number).

FIDUCIARIES

Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:

- The name(s) of the fiduciary. If an individual, list the first name,
middle initial and last name. If a corporation, list the full corporate
title (name). If an individual and a corporation, list the
corporation's title before the individual.

- The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.

- A description of the document governing the fiduciary relationship,
such as a trust agreement or court order. Documentation establishing a
fiduciary relationship may be required to register your stock in a
fiduciary capacity.

- The date of the document governing the relationship, except that the
date of a trust created by a will need not be included in the
description.

- The name of the maker, donor or testator and the name of the
beneficiary.

An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee Under Agreement Dated 10-1-87 for Susan Doe.

STOCK ORDER FORM INSTRUCTIONS

ITEMS 1 AND 2-

Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares by the
subscription price of $10.00 per share. The minimum purchase in the Subscription
and Community Offerings is 25 shares. As more fully described in the Plan of
Reorganization and Prospectus, the maximum purchase by each Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member is $XXX,XXX (XX,XXX
shares), and the maximum purchase in the Community Offering by any person,
together with Associates or persons acting in concert, is $XXX,XXX (XX,XXX
shares). However, no person, together with Associates or persons acting in
concert with such person, may purchase in the aggregate more than 1.0% of the
shares offered. Based on the offering of XX,XXX,XXX shares 1.0% amounts to
XXX,XXX shares. Qualifying account holders desiring to purchase shares in the
Community Offering must do so by obtaining from the Stock Conversion Center an
additional Stock Order Form and submitting a completed additional Stock Order
Form which indicates the number of shares to be purchased in the Community
Offering. Sound Federal Savings and Loan Association and Sound Federal Bancorp
have reserved the right to reject the subscription of any order received in the
Community Offering, in whole or in part.

ITEM 3-

Please check this box to indicate whether you are an employee, officer or
director of Sound Federal Savings and Loan Association or a member of such
person's immediate family living in the same household.

ITEM 4-

Payment for shares may be made in cash (only if delivered by you in person to a
branch office of Sound Federal) or by check, bank draft or money order payable
to Sound Federal Savings and Loan Association. Your funds will earn interest at
the Association's passbook rate of interest until the Reorganization is
completed. DO NOT MAIL CASH TO PURCHASE STOCK! Please insert the total payment
amount in this box if your method of payment is by check, bank draft or money
order.

ITEM 5-

If you pay for your stock by a withdrawal from a deposit account at Sound
Federal Savings and Loan Association, insert the account number(s) and the
amount of your withdrawal authorization for each account. The total amount
withdrawn should equal the amount of your stock purchase. There will be no
penalty assessed for early withdrawals from certificate accounts used for stock
purchases. THIS FORM OF PAYMENT MAY NOT BE USED IF YOUR ACCOUNT IS AN INDIVIDUAL
RETIREMENT ACCOUNT OR QUALIFIED PLAN.

ITEM 6-

a. Please check this box if you are an Eligible Account Holder at Sound Federal
Savings and Loan Association with a deposit account(s) totalling $50.00 or
more on ___XX, 199X.

b. Please check this box if you are a Supplemental Eligible Account Holder with
a deposit account(s) totalling $50.00 or more on ______ XX, 199X.

c. Please check this box if you were a depositor as of ______X, 199X or a
borrower with a loan(s) outstanding on _____ X, 199X which continued to be
outstanding on ______XX, 199X.

Please list all names on the account(s) and all account number(s) of accounts
you had at these dates in order to insure proper identificaton of your
purchase rights. PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN
THE LOSS OF PART OR ALL OF YOUR SUBSCRIPTION RIGHTS.

ITEMS 7,8 AND 9-

The stock transfer industry has developed a uniform system of shareholder
registrations that will be used in the issuance of your Sound Federal Bancorp
Common Stock. Please complete items 7, 8 and 9 as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening telephone number(s). We may need to call you if we
cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Stock ownership
must be registered in one of the ways described above under "Stock Ownership
Guide". Adding the names of other persons who are not owners of your qualifying
accounts(s) will result in your order becoming null and void.

ITEM 10-

Please check this box if you are a member of the NASD or if this item otherwise
applies to you.

ITEM 11-

Please check this box if you or any Associate (as defined on the reverse side of
the Stock Order Form) or person acting in concert with you has submitted another
order for shares and complete the reverse side of the Stock Order Form.

ITEM 12-

Please sign and date the Stock Order Form and Certification Form where
indicated. Before you sign, review the Stock Order Form, including the
acknowledgement, and the Certification Form. Normally, one signature is
required. An additional signature is required only when payment is to be made by
withdrawal from a deposit account that requires multiple signatures to withdraw
funds.

You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to any branch of Sound Federal Savings Loan Association. Your
Stock Order Form and Certification Form, properly completed, and payment in full
(or withdrawal authorization) at the subscription price must be physically
received by Sound Federal Savings and Loan Association no later than 12:00 noon,
New York Time, on _______, ________ 199X or it will become void. If you have any
remaining questions, or if you would like assistance in completing your Stock
Order Form and Certification Form, you may call our Stock Conversion Center
Monday through Friday from 10:00 a.m. to 4:00 p.m.

<PAGE> 1
EXHIBIT 99.6

PROSPECTUS SUPPLEMENT

SOUND FEDERAL BANCORP

SOUND FEDERAL SAVINGS AND LOAN ASSOCIATION
401(K) PROFIT SHARING PLAN

This Prospectus Supplement is being provided to participants (the
"Participants") in the Sound Federal Savings and Loan Association 401(k) Savings
Plan in RSI Retirement Trust (the "Plan"). Sound Federal Savings and Loan
Association (the "Association") is reorganizing from the mutual form of
organization to the mutual holding company form of organization, and shares of
Common Stock of Sound Federal Bancorp (the "Company") will be issued to certain
depositors and the public (the "Offering"). As a Participant, you may direct the
trustee of the Plan to purchase Company common stock ("Common Stock") in the
Offering with amounts allocated to your account under the Plan. The Plan would
invest in Common Stock through the Sound Federal Bancorp Stock Fund ("Employer
Stock Fund"). Since the Plan actually purchases the Common Stock, you would
acquire only a "participation interest" in the shares and would not own the
shares directly. This Prospectus Supplement relates to your initial election to
direct that all or a portion of your account be invested in the Employer Stock
Fund in the Offering. Your account will be reinvested in the other funds
available under the Plan in the event that the Offering is oversubscribed and
the total amount allocated to your account cannot be used by the trustee to
purchase Common Stock. You will be entitled to direct the investment of your
account in the Employer Stock Fund after the Offering is completed.

The Prospectus of the Company dated August ___, 1998 (the "Prospectus")
which is attached to this Prospectus Supplement includes detailed information
with respect to the mutual holding company reorganization and related stock
offering, and the financial condition, results of operations and business of the
Association. This Prospectus Supplement, which provides information with respect
to the Plan, should be read only in conjunction with the Prospectus. Defined
terms have the same meaning as is set forth in the Prospectus.

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY EACH PARTICIPANT AS TO AN INVESTMENT IN THE COMMON STOCK, SEE
"RISK FACTORS" BEGINNING ON PAGE __ OF THE PROSPECTUS

THE INTERESTS IN THE PLAN AND THE OFFERING OF THE COMMON STOCK HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
OFFICE OF THRIFT SUPERVISION, THE SECURITIES AND EXCHANGE COMMISSION, ANY OTHER
FEDERAL OR STATE AGENCY, OR ANY STATE SECURITIES BUREAU OR OTHER STATE AGENCY.

NO OFFICE, CORPORATION, COMMISSION, BUREAU OR OTHER AGENCY HAS PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE PARTICIPATION INTERESTS OFFERED HEREBY ARE NOT (1) SAVINGS ACCOUNTS
OR DEPOSITS; (2) FEDERALLY INSURED OR GUARANTEED, OR (3) GUARANTEED BY THE
COMPANY OR THE ASSOCIATION. THE PLAN'S ENTIRE INVESTMENT IN COMMON STOCK IS
SUBJECT TO LOSS.

The date of this Prospectus Supplement is August __, 1998.
<PAGE> 2
TABLE OF CONTENTS

THE OFFERING................................................................ 1

Securities Offered................................................. 1
Election to Purchase Common Stock in the Offering; Priorities...... 1
Value of Participation Interests................................... 2
Method of Director Transfer........................................ 2
Time for Directing Transfer........................................ 2
Irrevocability of Transfer Direction............................... 2
Direction to Purchase Common Stock After the Offering.............. 2
Purchase Price of Common Stock..................................... 3
Nature of a Participant's Interest in Common Stock................. 3
Voting Rights of Common Stock...................................... 3

DESCRIPTION OF THE PLAN..................................................... 4

Introduction....................................................... 4
Eligibility and Participation...................................... 4
Contributions Under the Plan....................................... 5
Limitations on Contributions....................................... 5
Investment of Contributions and Account Balances................... 7
Benefits Under the Plan............................................ 9
Withdrawals and Distributions From the Plan........................ 10
Administration of the Plan ........................................ 11
Reports to Plan Participants....................................... 11
Plan Administrator................................................. 11
Amendment and Termination.......................................... 12
Merger, Consolidation or Transfer.................................. 12
Federal Income Tax Consequences.................................... 12
ERISA and Other Qualifications..................................... 15
SEC Reporting and Short-Swing Profit Liability..................... 15

LEGAL OPINION............................................................... 16

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<PAGE> 3
THE OFFERING

SECURITIES OFFERED

The securities offered hereby are participation interests in the Plan.
Up to 95,000 shares (assuming a purchase price of $10 per share) of Common Stock
may be acquired by the Plan as part of the Offering to be held in the employer
stock fund ("Employer Stock Fund"). The Company is the issuer of the Common
Stock. Only employees of the Association or its subsidiaries may become
Participants in the Plan. The Common Stock to be issued hereby is conditioned on
the consummation of the Reorganization. A Participant's investment in the
Employer Stock Fund in the Offering is subject to the priority set forth in the
Plan of Reorganization. Information with regard to the Plan is contained in this
Prospectus Supplement and information with regard to the Reorganization and the
financial condition, results of operation and business of the Association is
contained in the attached Prospectus. The address of the principal executive
office of the Association is 300 Mamaroneck Avenue, Mamaroneck, NY 10543. The
Association's telephone number is (914) 698-6400.

ELECTION TO PURCHASE COMMON STOCK IN THE OFFERING; PRIORITIES

The Plan permits each Participant to direct the investment of his or
her account balance among seven investment alternatives which include the
Employer Stock Fund. The Trustee of the Plan will purchase Common Stock offered
for sale in connection with the Offering in accordance with each Participant's
directions. IN THE EVENT THE OFFERING IS OVERSUBSCRIBED AND THE TRUSTEE IS
UNABLE TO USE THE FULL AMOUNT ALLOCATED BY A PARTICIPANT TO PURCHASE COMMON
STOCK IN THE OFFERING, THE AMOUNT THAT CANNOT BE INVESTED IN COMMON STOCK SHALL
BE REINVESTED IN THE OTHER INVESTMENT FUNDS OF THE PLAN FROM WHICH THEY WERE
INITIALLY WITHDRAWN. If a Participant fails to direct the investment of his or
her account balance, the Participant's account balance will remain in the other
investment funds of the Plan as previously directed by the Participant. If a
Participant has never made an investment election, the Participant's account
balance will be invested in the Short-Term Investment Fund.

The shares of Common Stock to be sold in the Offering are being offered
in accordance with the following priorities: (i) depositors of the Association
with account balances of $50 or more as of March 31, 1997 ("Eligible Account
Holders"); (ii) tax-qualified employee plans of the Association, including the
Employee Stock Ownership Plan and related trust ("ESOP"); (iii) depositors of
the Association with account balances of $50 or more as of June 30, 1998 who are
not Eligible Account Holders ("Supplemental Eligible Account Holders"); (iv)
borrowers and depositors of the Association as of , 1998 who are not
Eligible Account Holders or Supplemental Eligible Account Holders; (v)
employees, officers and directors of the Association; and (vi) certain members
of the general public, with preference given to natural persons residing in
Westchester County, New York.

To the extent that the Plan or the Participants fall into one of these
categories, the Participants are being permitted to use funds in their Plan
account to subscribe or pay for the Common Stock being acquired. Common Stock so
purchased will be placed in a Participant's Employer Stock Fund

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<PAGE> 4
account within his or her Plan account. Funds not transferred to the Employer
Stock Fund will remain in the other investment funds of the Plan as directed by
the Participant.

VALUE OF PARTICIPATION INTERESTS

The assets of the Plan were valued at approximately $860,000 as of
March 31, 1998. Each Participant was informed of the value of his or her
beneficial interest in the Plan as of March 31, 1998. The $860,000 value
represents the aggregate market value as of March 31, 1998, of all Participants'
accounts and earnings thereon, less previous withdrawals.

METHOD OF DIRECTING TRANSFER

Each Participant shall receive a form which provides for a Participant
to direct that all or a portion of his or her beneficial interest in the Plan
(but not less than 10% of such interest) be transferred to the Employer Stock
Fund (the "Investment Election Form"). If a Participant wishes to invest all or
part of his or her beneficial interest in the assets of the Plan to the purchase
of Common Stock issued in connection with the Offering, he or she should
indicate that decision on the Investment Election Form.

TIME FOR DIRECTING TRANSFER

Directions to transfer amounts to the Employer Stock Fund in order to
purchase Common Stock issued in connection with the Offering must be returned to
no later than p.m. on , 1998.

IRREVOCABILITY OF TRANSFER DIRECTION

A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Offering is irrevocable.
Participants, however, will be able to direct the investment of their accounts
under the Plan as explained below.

DIRECTION TO PURCHASE COMMON STOCK AFTER THE OFFERING

After the Offering, a Participant will continue to be able to direct
that a certain percentage of his or her interest in the Plan (but not less than
10%) be transferred to the Employer Stock Fund and invested in Common Stock or
to the other investment funds available under the Plan (amounts invested in the
investment funds may be invested in multiples of 10% from 10% to 100%).
Alternatively, a Participant may direct that all or any portion of his or her
interest in the Plan be transferred to the following funds in accordance with
the terms of the Plan:

- Core Equity Fund
- Emerging Growth Equity Fund
- Value Equity Fund
- Actively Managed Bond Fund

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<PAGE> 5
- Intermediate-Term Bond Fund
- Short-Term Investment Fund

(Said funds, together with the Employer Stock Fund being hereinafter referred to
as the "Plan Funds"). Participants are permitted to direct that future
contributions (in multiples of 10%) made to the Plan by or on their behalf will
be invested among any of the Plan Funds. The allocation of a Participant's
interest in a Plan Fund may be changed not more often than once per quarter.
Special restrictions may apply to transfers directed to and from the Employer
Stock Fund by those Participants who are officers, directors and principal
shareholders of the Company who are subject to the provisions of Section 16(b)
of the Securities and Exchange Act of 1934 ("1934 Act").

PURCHASE PRICE OF COMMON STOCK

The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Offering will be used by the Employer Stock
Fund Trustee to purchase shares of Common Stock, except in the event of an
oversubscription, as discussed above. The price paid for such shares of Common
Stock will be the same price as is paid by all other persons who purchase shares
of Common Stock in the Offering.

Subsequent to the Offering, Common Stock purchased by the Employer
Stock Fund Trustee will be acquired in open market transactions. The prices paid
by the Trustee for shares of Common Stock will not exceed "adequate
consideration" as defined in Section 3(18) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").

NATURE OF A PARTICIPANT'S INTEREST IN THE COMMON STOCK

The Common Stock will be held in the name of the Employer Stock Fund
Trustee, as Trustee. Shares of Common Stock acquired at the direction of a
Participant will be allocated to the Participant's account under the Plan.
Therefore, earnings with respect to a Participant's account should not be
affected by the investment designations (including investments in Common Stock)
of other Participants. The Employer Stock Fund Trustee as record holder will
vote such allocated and unallocated shares, if any, as directed by Participants.

VOTING RIGHTS OF COMMON STOCK

The Employer Stock Fund Trustee generally will exercise voting rights
attributable to all Common Stock held by the Trust as directed by Participants
with interests in the Employer Stock Fund. With respect to each matter as to
which holders of Common Stock have a right to vote, each Participant will be
allocated voting instruction rights reflecting such Participant's proportionate
interest in the Employer Stock Fund. The number of shares of Common Stock held
in the Employer Stock Fund that are voted in the affirmative and negative on
each matter shall be proportionate to the number of voting instruction rights
exercised by participants in the affirmative and negative respectively.

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<PAGE> 6
DESCRIPTION OF THE PLAN

INTRODUCTION

Effective January 1, 1987, the Association adopted the Sound Federal
Savings and Loan Association Tax Deferral Savings Plan (the "Prior Plan").
Effective as of January 1, 1993, the Prior Plan was amended and restated in its
entirety and RSI Retirement Trust was named successor trustee. The Plan is a
profit sharing plan with a cash or deferred compensation feature established in
accordance with the requirements under Section 401(a) and Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Plan is qualified
under Section 401(a) of the Code, and its related trust is qualified under
Section 501(a) of the Code.

The Association intends that the Plan, in operation, will comply with
the requirements under Section 401(a) and Section 401(k) of the Code. The
Association will adopt any amendments to the Plan that may be necessary to
ensure the qualified status of the Plan under the Code and applicable Treasury
Regulations.

Employee Retirement Income Security Act. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title I
(Protection of Employee Benefit Rights) and Title II (Amendments to the Internal
Revenue Code Relating to Retirement Plans) of ERISA, except the funding
requirements contained in Part 3 of Title I of ERISA which by their terms do not
apply to an individual account plan (other than a money purchase plan). The Plan
is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding
requirements contained in Title IV of ERISA are not applicable to Participants
(as defined below) or beneficiaries under the Plan.

Reference to full Text of Plan. The following statements are summaries
of certain provisions of the Plan. They are not complete and are qualified in
their entirety by the full text of the Plan. Words capitalized but not defined
in the following discussion have the same meaning as set forth in the Plan.
Copies of the Plan are available to all employees by filing a request with the
Plan Administrator, c/o Sound Federal Savings and Loan Association, Attention:
Richard P. McStravick, President and Chief Executive Officer, 300 Mamaroneck
Avenue, Mamaroneck, New York 10543. Each employee is urged to read carefully the
full text of the Plan.

ELIGIBILITY AND PARTICIPATION

Any salaried employee of the Employer is eligible to participate in the
Plan on the first day of any calendar month following completion of a Period of
Service of one (1) year with the Association, provided he or she has reached
age 21 at such time. The plan year is January 1 to December 31 (the "Plan
Year").

As of December 31, 1997, there were approximately 39 employees eligible
to participate in the Plan, and 34 employees participating by making salary
deferral contributions.

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<PAGE> 7
CONTRIBUTIONS UNDER THE PLAN

401(k) Plan Contributions. Each Participant in the Plan is permitted to
elect to defer such Participant's compensation (as defined below) on a pre-tax
basis up to the lesser of 10% of annual Compensation (expressed in terms of
whole percentages) or the applicable limit under the Code (for 1998, the
applicable limit is $10,000) and subject to certain other restrictions imposed
by the Code, and to have that amount contributed to the Plan on such
participant's behalf. (Under the Code, the pre-tax basis could be increased to
the lesser of 25% of annual Compensation or the $10,000 applicable limit). For
purposes of the Plan, "Compensation" means, generally, a Participant's total
compensation received from the Association, including amounts the Participant
elects to defer as salary contributions to the Plan. In 1998, the annual
Compensation of each Participant taken into account under the Plan was, and is,
limited to $160,000. (Limits established by the IRS are subject to increase
pursuant to an annual cost of living adjustment, as permitted by the Code). A
Participant may elect to modify the amount contributed to the Plan not more
often than once per year, effective the first payroll period that includes the
first day of March, by providing written notice to the Plan Administrator at
least ten (10) days prior to the effective date of the modification. However,
special restrictions apply to persons subject to Section 16 of the Exchange Act.

Employer Contributions. The Association makes matching contributions to
the Plan equal to 50% of the elective deferral contributions.

The Association may also make discretionary Qualified Non-Elective
Contributions on behalf of Non-Highly Compensated Employees equal to a
percentage of each eligible Participant's Compensation, to be determined each
year by the Association.

LIMITATIONS ON CONTRIBUTIONS

Limitation on Employee Salary Deferrals. The annual amount of deferred
Compensation of a Participant (when aggregated with any elective deferrals of
the Participant under a simplified employee pension plan or a tax-deferred
annuity) may not exceed the limitation contained in Section 402(g) of the Code,
adjusted for increases in the cost of living as permitted by the Code (the
limitation for 1998 is $10,000). Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross income for
federal income tax purposes in the year they are made. In addition, any such
excess deferral will again be subject to federal income tax when distributed by
the Plan to the Participant, unless the excess deferral (together with any
income allocable thereto) is distributed to the Participant not later than the
first April 15th following the close of the taxable year in which the excess
deferral is made. Any income on the excess deferral that is distributed not
later than such date shall be treated, for federal income tax purposes, as
earned and received by the Participant in the taxable year in which the
distribution is made.

Limitations on Annual Additions and Benefits. Pursuant to the
requirements of the Code, the Plan provides that the amount of contributions and
forfeitures allocated to each Participant's account during any Plan Year may not
exceed the lesser of $30,000 or 25% of the Participant's Compensation for the
Plan Year. In addition, annual additions are limited to the extent necessary

5
<PAGE> 8
to prevent contributions on behalf of any employee from exceeding the employee's
combined plan limit, i.e., a limit that takes into account the contributions and
benefits made on behalf of an employee to all plans of the Association. To the
extent that these limitations have been exceeded with respect to a Participant,
the Plan Administrator shall use the excess amounts in the next limitation year
(and succeeding limitation years, if necessary) to reduce Basic Contributions,
Matching Contributions and Special Contributions for that Participant if such
Participant is an Eligible Employee (as defined) during the next limitation
year, or if the Participant is not an Eligible Employee, allocate and reallocate
the excess amounts in the next limitation year (and succeeding limitation years,
if necessary) to all Participants then actively participating in the Plan.

Limitation on Plan Contributions for Highly Compensated Employees.
Sections 401(k) and 401(m) of the Code limits the amount of salary deferral
contributions and matching contributions that may be made to the Plan in any
Plan Year on behalf of Highly Compensated Employees (defined below) in relation
to the amount of salary deferral contributions made by or on behalf of all other
employees eligible to participate in the Plan. Specifically, the "actual
deferral percentage" ("ADP") (i.e., the average of the actual deferral ratios,
expressed as a percentage, of each eligible employee's salary deferral
contribution if any, for the Plan Year over the employee's Compensation), of the
Highly Compensated Employees must meet either of the following tests: (i) the
ADP of the eligible Highly Compensated Employees is not more than 125% of the
ADP of all other eligible employees, or (ii) the ADP of the eligible Highly
Compensated Employees is not more than 200% of the ADP of all other eligible
employees, and the excess of the ADP for the eligible Highly Compensated
Employees over the ADP of all other eligible employees is not more than two
percentage points. Similarly, the actual contribution percentage ("ACP") (i.e.,
the average of the actual contribution ratios, expressed as a percentage, of
each eligible employee's matching contributions, if any, for the Plan Year over
the employees Compensation) of the Highly Compensated Employees must meet either
of the following tests: (i) the ACP of the eligible Highly Compensated Employees
is not more than 125% of the ACP of all other eligible employees, or (ii) the
ACP of the eligible Highly Compensated Employees is not more than 200% of the
ACP of all other eligible employees, and the excess of the ACP for the eligible
Highly Compensated Employees over the ACP of all other employees is not more
than two percentage points.

In general, for Plan Years beginning in 1998, a Highly Compensated
Employee includes any employee, who, (1) during the Plan Year or the preceding
Plan Year, was at any time a 5% owner (i.e., owns directly or indirectly more
than 5% of the stock of an employer, or stock possessing more than 5% of the
total combined voting power of all stock of an employer), or (2) for the
preceding Plan Year, received Compensation from an employer in excess of $80,000
(in 1998), and (if the employer elects for a Plan Year) was in the group
consisting of the top 20% of employees when ranked on the basis of Compensation
paid during the Plan Year. The dollar amounts set forth above are adjusted
annually to reflect increases in the cost of living.

In order to prevent the disqualification of the Plan, any amount
contributed by Highly Compensated Employees that exceed the ADP limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. Moreover, the Association will be subject

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<PAGE> 9
to a 10% excise tax on any excess contributions unless such excess
contributions, together with any income allocable thereto, either are
re-characterized or are distributed before the close of the first 2-1/2 months
following the Plan Year to which such excess contributions relate. In addition,
in order to avoid disqualification of the Plan, any contributions by Highly
Compensated Employees that exceed the average contribution limitation in any
Plan Year ("excess aggregate contributions") together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the 10% excise tax will be imposed on
the Association with respect to any excess aggregate contributions, unless such
amounts, plus any income allocable thereto, are distributed within 2-1/2 months
following the close of the Plan Year in which they arose.

INVESTMENT OF CONTRIBUTIONS AND ACCOUNT BALANCES

All amounts credited to Participants' accounts under the Plan are held
in the Plan Trust (the "Trust") which is administered by the Trustee appointed
by the Association's Board of Directors.

Prior to the Offering, Participants have been provided the opportunity
to direct the investment of their accounts into one of the following Plan Funds:

A. Core Equity Fund

B. Emerging Growth Equity Fund

C. Value Equity Fund

D. Actively Managed Bond Fund

E. Intermediate-Term Bond Fund

F. Short-Term Investment Fund

The Plan now provides that in addition to the funds specified above, a
Participant may direct the Trustee to invest all or a portion of his account in
the Employer Stock Fund. A Participant may elect to have both past contributions
(and earnings), as well as future contributions to the Participant's accounts
invested in either the Employer Stock Fund or among the Plan Funds listed above.
Transfers of past contributions (and the earnings thereon) do not affect the
investment mix of future contributions. The transfer of past contributions will
be effective on the effective date of the Participant's written notice to the
Plan Administrator, provided such notice is filed with the Plan Administrator at
least 10 days before it is to become effective. The election to change the
investment of future contributions will be effective the first payroll period
following the Participant's written notice to the Plan Administrator, provided
such notice is filed with the Plan Administrator at least 10 days before it is
to become effective. Alternatively, a Participant's investment elections will be
effective if made in any other manner deemed appropriate by the Plan
Administrator if such manner is communicated in writing to the Participants by
the Plan Administrator. Any amounts credited to a Participant's accounts for
which investment directions are not given will be invested in the Short-Term
Investment Fund.

The net gain (or loss) of the Plan Funds from investments (including
interest payments, dividends, realized and unrealized gains and losses on
securities, and expenses paid from the Trust)

7
<PAGE> 10
will be allocated daily. For purposes of such allocations, all assets of the
Trust are valued at fair market value.

A. PREVIOUS FUNDS

Prior to the effective date of the Offering, contributions under the
Plan have been invested in the six funds specified above. The following table
provides performance data with respect to the investment funds available under
the Plan, based on information provided to the Company by RSI Retirement Trust.

NET INVESTMENT PERFORMANCE
<TABLE>
<CAPTION>
Quarter Annualized
Ended
Fund 3/31/98 12 Months 3 Years 5 years 10 Years
- ---- ------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
A. Core Equity Fund 15.45% 44.22% 31.67% 21.48% 17.81%
B. Emerging Growth Equity Fund 11.19 32.74 26.81 22.16 17.59
C. Value Equity Fund 11.53 43.90 31.25 20.29 15.26
D. Actively Managed Bond Fund 1.55 12.57 8.89 6.50 8.41
E. Intermediate-Term Bond Fund 1.43 8.56 7.29 5.43 7.56
F. Short-Term Investment Fund 1.21 5.07 4.96 4.28 5.32
</TABLE>

The following is a description of each of the Plan's six investment funds:

Account A (Core Equity Fund). This fund seeks capital appreciation and
income and invests in a broadly diversified group of high quality, large
capitalization companies exhibiting sustainable growth in earnings and
dividends.

Account B (Emerging Growth Equity Fund). This fund seeks capital
appreciation and income by investing primarily in stocks of smaller companies
with higher-than-average earnings and dividend growth potential. The fund will
generally have a higher degree of risk and price volatility than the portfolios
of the Core Equity Fund and the Value Equity Fund.

Account C (Value Equity Fund). This fund seeks capital appreciation and
income and invests heavily in out-of-favor stocks of financially sound companies
that are selling at unjustifiably low market valuations based on price/earnings
ratios, price-to-book ratios, etc.

Account D (Active Managed Bond Fund). This fund invests in high quality
fixed income securities and seeks both principal appreciation and income. The
maturity structure of this fund is expected to vary substantially based on the
perceived relative attractiveness of different areas of the fixed income market.
At least 65% of its assets must be invested in securities issued or backed by
the United States government, or its agencies or instrumentalities.

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<PAGE> 11
Account E (Intermediate-Term Bond Fund). This fund seeks principal
appreciation and income and invests in high quality fixed-income vehicles that
mature within 10 years or have expected average lives of 10 years or less. At
least 65% of its assets must be invested in securities issued or backed by the
United States government, or its agencies or instrumentalities.

Account F (Short-Term Investment Fund). This fund is invested in high
quality, money market instruments with a maximum average maturity of one year.
This fund focuses on preservation of principal will producing a competitive
money market return.

B. THE EMPLOYER STOCK FUND

The Employer Stock Fund will consist of investments in Common Stock made on
and after the completion of the Offering and Reorganization. After the Offering,
the Trustee will, to the extent practicable, use all amounts held by it in the
Employer Stock Fund, including cash dividends paid on Common Stock held in the
Employer Stock Fund, to purchase shares of Common Stock of the Company. All
purchases will be made at prevailing market prices. Under certain circumstances,
the Trustee may be required to limit the daily volume of shares purchased.
Pending investment in Common Stock, assets held in the Employer Stock Fund may
be placed in the Association deposits and other short-term investments.

The expenses of managing each Plan Fund, including investment management
fees, commissions, and other transaction costs, are charged against the assets
of the total applicable Fund. A Participant's account will be adjusted to
reflect changes in the value of shares of Common Stock resulting from stock
dividends, stock splits and similar changes.

As of the date of this Prospectus Supplement, none of the shares of Common
Stock have been issued or are outstanding and there is no established market for
the Common Stock. Accordingly, there is no record of the historical performance
of the Employer Stock Fund. Performance will be dependent upon a number of
factors, including the financial condition and profitability of the Company and
the Bank and market conditions for the Common Stock generally.

INVESTMENT IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN SPECIAL RISKS IN
INVESTMENT IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE RISKS
FACTORS, SEE THE PROSPECTUS. NEITHER THE ASSOCIATION NOR THE PLAN GUARANTEE THE
PERFORMANCE OF THE EMPLOYER STOCK FUND NOR ARE THE AMOUNTS IN THE EMPLOYER STOCK
FUND OR ANY OF THE PLAN FUNDS INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION.

BENEFITS UNDER THE PLAN

Vesting. A Participant, at all times, has a fully vested,
nonforfeitable interest in his or her account under the Plan.

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<PAGE> 12
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN

APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE ASSOCIATION. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON
WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59-1/2,
REGARDLESS OF WHETHER SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH
THE ASSOCIATION OR AFTER TERMINATION OF EMPLOYMENT.

Withdrawals Prior to Termination of Employment. A Participant may make a
withdrawal from his or her accounts after age 59-1/2 for any reason. A
Participant may make a withdrawal from his or her accounts prior to termination
of employment before age 59-1/2 only in the event of financial hardship, subject
to the hardship distribution rules under the Plan. These requirements insure
that Participants have a true financial need before a withdrawal may be made.

Distribution Upon Retirement or Disability. Payment of benefits to a
Participant who retires, incurs a disability, or otherwise terminates employment
shall be made in a lump-sum payment. Benefit payments ordinarily shall commence
as soon as practicable after age 65 following: (i) retirement on or after
attainment of normal retirement age; (ii) retirement before attainment of normal
retirement age; or (iii) termination of service due to disability.
Alternatively, at the Participant's election, a Participant may receive a
distribution of his accounts after he has terminated employment. With respect of
a 5% owner, benefit payments must commence no event later than April 1 following
the calendar year in which the Participant attains age 70-1/2.

Distribution Upon Death. If a Participant dies prior to receipt of the
entire value of his or her Plan accounts, payment will be made to the
beneficiary or contingent beneficiary in a single cash payment generally as soon
as possible following the Participant's death. Payment will be deferred if the
Participant had previously elected a later payment date. However, a Participant
who has designated his or her surviving spouse as beneficiary and the
Participant dies prior to age 70-1/2, payment to his or her spouse will be made
no later than the date the Participant would have attained age 70-1/2. If the
Participant dies after age 70-1/2, payment to the spouse will be made as soon as
possible after the date of death. If the beneficiary is not the Participant's
spouse, payment will be made within one year of the date of death.

Distribution Upon Termination for Any Other Reason. Distribution of
benefits to a Participant with a Plan account value exceeding $3,500, who
terminates employment for any other reason, will not be made to the Participant
at the time of termination but shall be made upon the Participant's attainment
of normal retirement age. Alternatively, at the Participant's election, a
Participant may receive a distribution of his accounts after he has terminated
employment.

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<PAGE> 13
Nonalienation of Benefits. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.

ADMINISTRATION OF THE PLAN

The trustee with respect to the Plan is the named fiduciary of the Plan for
purposes of Section 402 of ERISA.

Trustee. The trustee is appointed by the Board of Directors of the
Association to serve at its pleasure. The trustees of the RSI Retirement Trust
are the trustees of the Plan, other than of the Employer Stock Fund, for which
serves as trustee. The trustees are referred to collectively
herein as the Trustee.

The Trustee receives and holds the contributions to the Plan in trust and
distributes the account balances to Participants and beneficiaries in accordance
with the terms of the Plan and the directions of the Plan Administrator. The
Trustee is responsible for investment of the assets of the Trust.

REPORTS TO PLAN PARTICIPANTS

The Trustee will furnish to each Participant a statement quarterly showing
(i) the balance in the Participant's accounts as of the end of that period, (ii)
the amount of contributions allocated to such Participant's accounts for that
period, and (iii) the adjustments to such Participant's accounts to reflect
earnings or losses (if any).

PLAN ADMINISTRATOR

Pursuant to the terms of the Plan, the Plan is administered by the plan
administrator (the "Plan Administrator"). The Association is the Plan
Administrator and has designated Richard P. McStravick, the Association's
President and Chief Executive Officer, to supervise its responsibilities as
such. The address and telephone number of the Plan Administrator is c/o Sound
Federal Savings and Loan Association, 300 Mamaroneck Avenue, Mamaroneck, NY
10543, Telephone number (914) 698-6400. The Plan Administrator is responsible
for the administration of the Plan, interpretation of the provisions of the
Plan, prescribing procedures for filing applications for benefits, preparation
and distribution of information explaining the Plan, maintenance of plan
records, books of account and all other data necessary for the proper
administration of the Plan, and preparation and filing of all returns and
reports relating to the Plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
Participants, beneficiaries, and others under Sections 104 and 105 of ERISA.

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<PAGE> 14
AMENDMENT AND TERMINATION

It is the intention of the Association to continue the Plan indefinitely.
Nevertheless, the Association may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee affected by such termination shall have a fully vested interest in
his or her accounts. The Association reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not cause any part of the
Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of Participants or their beneficiaries; provided, however, that the
Association may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with ERISA.

MERGER, CONSOLIDATION OR TRANSFER

In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust assets to another plan, the Plan requires that each
Participant would (if either the Plan or the other plan then terminated) receive
a benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).

FEDERAL INCOME TAX CONSEQUENCES

The following is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws. Participants are urged to
consult their tax advisors with respect to any distribution from the Plan and
transactions involving the Plan.

The Plan is qualified under Section 401(a) and 401(k) of the Code and the
related Trust is exempt from tax under Section 501(a) of the Code. A plan that
is qualified. under these sections of the Code is afforded special tax treatment
which include the following: (1) the Association is allowed an immediate tax
deduction for the amount contributed to the Plan each year; (2) Participants pay
no current income tax on amounts contributed by the Association on their behalf;
and (3) Earnings of the plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Association expects to timely adopt
any amendments to the Plan that may be necessary to maintain the qualified
status of the Plan under the Code.

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Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:

(a) Amounts contributed to a Participant's account and the investment
earnings on the account are not includable in a Participant's federal taxable
income until such contributions or earnings are actually distributed or
withdrawn from the Plan. Special tax treatment may apply to the taxable portion
of any distribution that includes Common Stock or qualifies as a Lump Sum
Distribution (as described below).

(b) Income earned on assets held by the Trust will not be taxable to the
Trust.

Lump Sum Distribution. A distribution from the Plan to a Participant or the
beneficiary of a Participant will qualify as a lump sum distribution ("Lump Sum
Distribution") if it is made: (i) within one taxable year of the Participant or
beneficiary; (ii) on account of the Participant's death, disability or
separation from service, or after the Participant attains age 59-1/2; and (ii)
consists of the balance to the credit of the Participant under this Plan and all
other profit sharing plans, if any, maintained by the Association. The portion
of any Lump Sum Distribution that is required to be included in the
Participant's or beneficiary's taxable income for federal income tax purposes
(the"total taxable amount") consists of the entire amount of such Lump Sum
Distribution less the amount of after-tax contributions, if any, made by the
Participant to any other profit sharing plan maintained by the Association which
is included in such distribution.

Averaging Rules. The portion of the total taxable amount of a Lump Sum
Distribution that is attributable to participation after 1973 in the Plan or in
any other profit-sharing plan maintained by the Association (the "ordinary
income portion") will be taxable generally as ordinary income for federal income
tax purposes. However, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit-sharing plan maintained by the Association), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59-1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. Under a special grandfather rule, individuals who
turned 50 by 1985 may elect to have their Lump Sum Distribution taxed under
either the five-year averaging rule or under the prior law ten-year averaging
rule.

Common Stock Included in Lump Sum Distribution. If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or

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beneficiary for purposes of computing gain or loss on its subsequent sale will
be the value of the Common Stock at the time of distribution less the amount of
net unrealized appreciation. Any gain on a subsequent sale or other taxable
disposition of such Common Stock, to the extent of the amount of net unrealized
appreciation at the time of distribution, will be considered long-term capital
gain regardless of the holding period of such Common Stock. Any gain on a
subsequent or other taxable disposition of the Common Stock in excess of the
amount of net unrealized appreciation at the time of distribution will be
considered either short-term capital gain or long-term capital gain depending
upon the length of the holding period of the Common Stock. The recipient of a
distribution may elect to include the amount of any net unrealized appreciation
in the total taxable amount of such distribution to the extent allowed by the
regulations to be issued by the IRS.

Contribution to Another Qualified Plan or to an IRA. A Participant may
defer federal income taxation of all or any portion of the total taxable amount
of a Lump Sum Distribution (including the proceeds from the sale of any Common
Stock included in the Lump Sum Distribution) to the extent that such amount, or
a portion thereof, is contributed, within 60 days after the date of its receipt
by the Participant, to another qualified plan or to an individual retirement
account ("IRA"). If less than the total taxable amount of a Lump Sum
Distribution is contributed to another qualified plan or to an IRA within the
applicable 60-day period, the amount not so contributed must be included in the
Participant's income for federal income tax purposes and will not be eligible
for the special averaging rules or for capital gains treatment. Additionally, a
Participant may defer the federal income taxation of any portion of an amount
distributed from the Plan on account of the Participant's disability or
separation from service, generally, if the amount is distributed within one
taxable year of the Participant, and such amount is contributed, within 60 days
after the date of its receipt by the Participant, to an IRA. Prior to 1993,
following the partial distribution of a Participant's account, any remaining
balance under the Plan (and the balance to the credit of the Participant under
any other profit sharing plan sponsored by the Association) would not be
eligible for the special averaging rules or for capital gains treatment. For
these purposes, a "partial distribution" is a distribution within one taxable
year of the Participant equal to at least 50% of the balance of a Participant's
account ("Partial Distribution").

Pursuant to a change in the law, effective January 1, 1993, virtually all
distributions from the Plan may be rolled over to another qualified Plan or to
an IRA without regard to whether the distribution is a Lump Sum Distribution or
a Partial Distribution. Effective January 1, 1993, Participants have the right
to elect to have the Trustee transfer all or any portion of an "eligible
rollover distribution" directly to another plan qualified under Section 401(a)
of the Code or to an IRA. If the Participant does not elect to have an "eligible
rollover distribution" transferred directly to another qualified plan or to an
IRA, the distribution will be subject to a mandatory federal withholding tax
equal to 20% of the taxable distribution. An "eligible rollover distribution"
means any amount distributed from the Plan except: (1) a distribution that is
(a) one of a series of substantially equal periodic payments made (not less
frequently than annually ) over the Participant's life or the joint life of the
Participant and the Participant's designated beneficiary, or (b) for a specified
period of ten years or more; (2) any amount that is required to be distributed
under the minimum distribution rules; and (3) any other distributions excepted
under applicable federal law.

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The beneficiary of a Participant who is the Participant's surviving spouse
also may defer federal income taxation of all or any portion of a distribution
from the Plan to the extent that such amount, or a portion thereof, is
contributed within 60 days after the date of its receipt by the surviving
spouse, to an IRA. If all or any portion of the total taxable amount of a Lump
Sum Distribution is contributed by the surviving spouse of a Participant to an
IRA within the applicable 60-day period, any subsequent distribution from the
IRA will not be eligible for the special averaging rules or for capital gains
treatment. Any amount received by the Participant's surviving spouse that is not
contributed to another qualified plan or to an IRA within the applicable 60-day
period, and any amount received by a nonspouse beneficiary will be included in
such beneficiary's income for federal tax purposes in the year in which it is
received.

Additional Tax on Early Distributions. A Participant who receives a
distribution from the Plan prior to attaining age 59-1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate or a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his beneficiary, (iv)
made to the Participant after separation from service on account of early
retirement under the Plan after attainment of age 55, (v) made to pay medical
expenses to the extent deductible for federal income tax purposes, (vi) payments
made to an alternate payee pursuant to a qualified domestic relations order, or
(vii) made to effect the distribution of excess contributions or excess
deferrals.

ERISA AND OTHER QUALIFICATIONS

As noted above, the Plan is subject to certain provisions of the ERISA and
has received a favorable determination that it is qualified under Section 401(a)
of the Code.

The foregoing is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan.
Accordingly, each Participant is urged to consult a tax advisor concerning the
federal, state and local tax consequences of participating in and receiving
distributions from the Plan.

SEC REPORTING AND SHORT-SWING PROFIT LIABILITY

Section 16 of the 1934 Act imposes reporting and liability requirements on
officers, directors, and persons beneficially owning more than 10% of the equity
securities (such as the "Common Stock") of public companies. Section 16(a) of
the 1934 Act requires the filing of reports of beneficial ownership. Within 10
days of becoming a person subject to the reporting requirements of Section
16(a), a Form 3 reporting initial beneficial ownership must be filed with the
Securities

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and Exchange Commission ("SEC") . Certain changes in beneficial ownership, such
as purchases, sales and gifts must be reported periodically, either on a Form 4
within 10 days after the end of the month in which a change occurs, or annually
on a Form 5 within 45 days after the close of the Company's fiscal year. Certain
discretionary transactions in and beneficial ownership of the Common Stock
through the Employer Stock Fund of the Plan by officers, directors and persons
beneficially owning more than 10% of the Common Stock of the Company must be
reported to the SEC by such individuals.

In addition to the reporting requirements described above, Section 16(b) of
the 1934 Act provides for the recovery by the Company of profits realized by an
officer, director or any person beneficially owning more than 10% of the
Company's Common Stock ("Section 16(b) Persons") resulting from non-exempt
purchases and sales of the Company's Common Stock within any six-month period.

The SEC has adopted rules that provide exemption from the profit recovery
provisions of Section 16(b) for participant-directed employer security
transactions within an employee benefit plan, such as the Plan, provided certain
requirements are met. These requirements generally involve restrictions upon the
timing of elections to acquire or dispose of employer securities for the
accounts of Section 16(b) Persons.

Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, under the Plan, Section 16(b) Persons are required to hold shares of
Common Stock distributed from the Plan for six months following such
distribution and are prohibited from directing additional purchases of units
within the Employer Stock Fund for six months after receiving such a
distribution.

LEGAL OPINION

The validity of the issuance of the Common Stock will be passed upon by
Luse Lehman Gorman Pomerenk & Schick, A Professional Corporation, Washington,
D.C., which firm acted as special counsel to the Association in connection with
the Association's conversion from a mutual savings association to a stock based
organization and the concurrent formation of the Company.