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Dear Fellow Stockholders: It is with great pleasure we report that fiscal year 2008 was another successful and exciting year for Brooklyn Federal Bancorp. It seems every day brought a new upheaval in the continuing challenges facing the financial markets, not only in our nation, but also across the globe. Instead of looking forward to a new day, many of us in the banking industry found ourselves waiting for the next shoe to drop. As our nation's top regulators look for ways to prop up our economy, we are still waiting to see if any of the objectives relating to the actions taken by the Federal government, including the passage of the Emergency Economic Stabilization Act of 2008, which allocates $700 billion to broadly support the financial industry, will start turning things around. While we are all concerned with the current economic environment and each of us hopes these unprecedented interventions will restore confidence and get our country back on the road to financial health, none of us can accurately predict when this cycle will end. Many of these actions have found community banks being penalized for a crisis they did not create. Most community banks acted responsibly, and most came into this challenging environment stable and sound. We can assure you that the leadership and staff of Brooklyn Federal Bancorp are working hard to communicate your concerns to Congress and the banking regulators. We are spreading the word about the unique role the banking industry plays in our communities and that our strength and well-being is vitally important to the people and businesses in our communities. We are using these events to drive home the point that the concentration of financial assets in a handful of Wall Street institutions is wrong and needs to change. Your Company is working hard on your behalf day in and day out. That’s what Brooklyn Federal is all about; this is our mission. Rest assured we are making sure that our government leaders hear your concerns and take them seriously. In light of all this negative news we are happy to report that your Company reported net income for the fiscal year ended September 30, 2008 of $5.6 million, an increase of $1.7 million, or 45.1%, compared to $3.8 million for the year ended September 30, 2007. Considering the unprecedented turmoil in the nation’s economy and financial markets, our fiscal year results are commendable. For this, the Board of Directors and management are very proud. On October 21, 2008 the Company’s Board of Directors approved a cash dividend of $0.10 per share of common stock. The dividend was paid to stockholders of record as of November14, 2008. In 2008, Brooklyn Federal Savings Bank celebrated its 121st year. Since being chartered in 1887, the Bank has been dedicated to meeting the savings and borrowing needs of the communities it serves. We help meet the credit needs of all segments of these communities, while continuing to operate in a safe and sound manner. After 121 years, the hallmark of this organization continues to be solid capital strength, good earnings, a diversified business strategy and a reputation for excellent service. We sincerely hope you share the feeling of pride in our organization, and look forward with us to an exciting future. Our objective has been and will continue to be to sustain earnings in a fluctuating interest rate environment by carefully structuring our assets and diversifying our investments. Our investment decisions are affected by our desire to maintain a satisfactory interest rate risk position, as well as excellent loan quality, while increasing our income at the same time. Credit quality is always a priority, and we will continue to maintain the Bank’s loan loss reserves at appropriate levels. At Brooklyn Federal Savings Bank, we believe that growth in deposits and loans should always be done in a sound and profitable manner. Our Bank’s growth resulted from a constant focus on relationship banking. Our products are competitive and our strategy is to provide quality customer service under the leadership of an experienced team of bankers. Since we entered the equity markets, the price of our common stock went from $10.00 at inception to a high of $15.66 on August 15, 2008. As of January 2, 2009, our stock price closed at $14.10. The developing subprime mortgage loan crisis and market perceptions regarding the risk to mortgage lenders have resulted in a lack of stock market confidence in financial institutions. Unfortunately, these conditions have also had an adverse affect on our Company’s stock price despite the fact that we do not originate subprime loans and do not participate in predatory lending. To the contrary, our asset quality remains strong. From an operating standpoint, we intend to continue our program of controlled growth, conservative underwriting of loans and investments, managing interest rate risk and monitoring our costs. We believe that these efforts will increase our capital strength and overall value to our shareholders. In April of 2008, Brooklyn Federal Savings Bank opened a full service branch in Commack, Suffolk County, Long Island, New York. To this date this branch’s growth in deposits have exceeded initial projections for which we are very pleased. The strength and character of Brooklyn Federal Bancorp comes from our people. Our employees are experienced and dedicated to our organization. Each employee is recruited and trained to offer professional, friendly and knowledgeable advice to our customers. We want to build long-term relationships that will add value to our customers’ financial decisions.At the Company’s June 17, 2008 Board of Directors’ meeting, Angelo J. Di Lorenzo, the Vice Chairman and Chief Executive Officer, announced his retirement effective January 2, 2009. He will continue to service as Vice Chairman of the Company and the Bank. Daniel O. Reich, Chairman of the Board of Directors of the Company, noted, “The Board of Directors reluctantly accepted Mr. Di Lorenzo’s notice of retirement. We are very appreciative of the excellent service and commitment that Mr. Di Lorenzo has made in his 47 plus years with Brooklyn Federal Savings Bank. We believe and expect that he will continue to contribute to the future success of the Company in his role as a member of the Board of Directors.” Mr. Di Lorenzo said, “I am grateful to have had the opportunity to head the organization as its President and Chief Executive Officer for the past 36 years and look forward to my continued contributions. It is time for me to retire. I do so knowing that I am comfortable with the succession plans that were implemented years ago for this inevitable event. The Company’s President and Chief Operating Officer, Richard Kielty, has been named the President and Chief Executive Officer of the Company effective on my retirement January 2, 2009. Mr. Kielty has been with the Bank for over 37 years. We have worked side-by-side and I know he has the experience and know-how to lead our organization to greater heights. It has been a great privilege to work with the extraordinarily dedicated and talented people who make up the Brooklyn Federal family. I am honored to have been their leader over these many years, and I know they will be supportive as we move through this transition period.” At the Company’s November 18, 2008 Board of Directors’ meeting, Director Vincent E. Caccese announced his intention to retire from the Board of Directors of Brooklyn Federal Bancorp, Inc. (the "Company"), Brooklyn Federal Savings Bank (the "Bank") and BFS Bancorp, MHC (the "MHC") effective at each entity's annual meeting, scheduled for February 17, 2009. Director Caccese's three-year terms on the Boards expire at their respective annual meeting and Director Caccese has decided not to seek nomination to the Boards for another term. The Company's Board of Directors has nominated Richard A. Kielty, the Company's President and Chief Operating Officer, for the vacancy on the Board that will be created by Mr. Caccese's retirement. The Boards of the MHC and the Bank have also nominated Mr. Kielty to fill Mr. Caccese's position. Mr. Caccese has served on the Bank's Board of Directors since 1975 and has served on the MHC's and Company's Boards since their inception in 2005 as part of the Bank's reorganization and minority stock offering. “Vice Chairman and Chief Executive Angelo J. Di Lorenzo thanked Mr. Caccese for the contributions he made to the success of Brooklyn Federal Savings Bank over his 34 years of service. Mr. Kielty has been an employee of the Bank since 1970 and served as Chief Financial Officer from 2000 until his appointment as President and Chief Operating Officer effective January 1, 2008. Effective January 2, 2009, Mr. Kielty will assume the roles of President and Chief Executive Officer.” All of us at Brooklyn Federal consider it a privilege to serve the interest of our stockholders. As challenging as the up-coming year may be, we look forward to continuing our progress toward meeting our goals. We will concentrate on what is most important to our stockholders, value, growth and financial stability. Our challenge for fiscal year 2009 will be to continue to guide Brooklyn Federal on a course that will deliver the best financial services to our customers and continued returns for our stockholders. Sincerely,
Angelo
J. DiLorenzo Daniel O. Reich
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