EXHIBIT 13

ANNUAL REPORT TO STOCKHOLDERS

Selected Consolidated Financial Information and Other Data

The following information is derived from the audited consolidated financial statements of Flatbush Federal Bancorp, Inc. (the “Company”). For additional information about the Company and Flatbush Federal Savings and Loan Association, (the “Association”) a more detailed presentation is made in the “Management’s Discussion and Analysis,” the Consolidated Financial Statements of the Company and the related notes included in this Annual Report.

Selected Financial Condition Data:	At December 31,
(In thousands)	2011		2010
Total assets	$	142,714	$	147,019
Loans receivable, net (1)		95,162		106,478
Securities held to maturity		25,749		21,780
Cash and cash equivalents		8,801		8,184
Deposits		114,923		117,074
Borrowings		10,082		12,043
Stockholders’ equity		14,560		15,754

___________________________________

(1) Net of allowance for loan losses and deferred loan fees.

Selected Operating Data:	For the Years Ended December 31
(In thousands, except per share data)		2011			2010
Total interest income	$	6,806		$	7,962
Total interest expense		1,554			2,050
Net interest income		5,252			5,912
Provision for loan losses		1,711			821
Non-interest income		283			254
Non-interest expense		5,094			4,746
Income tax (benefit) expense		(632	)		156
Net (loss) income	$	(638	)	$	441
Net (loss) income per common share – basic and diluted	$	(0.24	)	$	0.17

Exhibit 13 -1

Selected Financial Ratios and Other Data: 

	At or for the Years Ended December 31,
	2011			2010
Performance Ratios:
Return on average assets (1)		(0.44	%)		0.29	%
Return on average equity		(4.15	%)		2.81	%
Net yield on average interest-earning assets		5.21	%		5.63	%
Net yield on average interest-bearing liabilities		1.29	%		1.59	%
Net interest rate spread (2)		3.92	%		4.04	%
Net interest margin (3)		4.02	%		4.18	%
Average interest-earning assets to average interest- bearing liabilities		1.08	x		1.10	x
Capital Ratios:
Average stockholders equity to average assets		10.72	%		10.26	%
Tier 1 core ratio (to adjusted total assets)		11.52	%		11.45	%
Total risk-based capital ratio		19.88	%		20.30	%
Asset Quality Ratios:
Allowance for loan losses to gross loans outstanding		2.30	%		1.52	%
Non-performing loans to total loans		8.39	%		7.74	%
Non-performing assets to total assets		6.26	%		5.74	%
Other Data:
Number of full-service offices		3			3

___________________________________
(1)	Ratio of net income to average total assets.
(2)	The difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3)	Net interest income divided by average interest-earning assets.

Exhibit 13 -2

Management’s Discussion and Analysis of Financial Condition

and Results of Operation

The Company is a federal corporation, which was organized in 2003 as part of the mutual holding company reorganization of the Association. The Company’s principal asset is its investment in the Association. The Company is a majority owned subsidiary of Flatbush Federal Bancorp, MHC, (“Flatbush MHC”) a federally chartered mutual holding company. At December 31, 2011, 1,484,208 shares of the Company’s common stock were held by its Flatbush MHC, and 1,252,699 shares were held by shareholders other than Flatbush MHC. At December 31, 2011, the Company had consolidated assets of $142.7 million, deposits of $114.9 million and stockholders’ equity of $14.6 million.

On January 13, 2012, the Company consummated the sale of the Association’s main branch building and a portion of adjoining real estate to a third party for consideration of $10,136,000 and recognized a pre-tax gain of $9,072,000. This transaction is more fully described in Note 20 to the consolidated financial statements.

On March 13, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between (i) Northfield Bank, Northfield Bancorp, Inc. (“Northfield Bancorp”), and Northfield Bancorp, MHC, and (ii) the Company, the Association and Flatbush Federal Bancorp, MHC. The Merger Agreement provides, among other things, that as a result of the merger of the Company into Northfield Bancorp (the “Mid-Tier Merger”), each outstanding share of the Company’s common stock will be converted into the right to receive 0.4748 shares of Northfield Bancorp common stock. The Merger Agreement contains a number of customary representations and warranties by the parties regarding certain aspects of their respective businesses, financial condition, structure and other facts pertinent to the Merger that are customary for a transaction of this kind. The obligation of the parties to complete the Merger is subject to various customary conditions. If the Merger is terminated under specified situations in the Merger Agreement (because the Company accepts a proposal to be acquired that is superior to the one contained in the Merger Agreement, enters into an agreement related to such a proposal and terminates the Merger Agreement, or fails to make, withdraws, modifies or qualifies its recommendation regarding the Merger Agreement), the Company may be required to pay a termination fee to Northfield Bancorp of approximately $700,000. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which was included in a Form 8-K filed with the Securities and Exchange Commission on March 15, 2012.

General

The results of operations depend primarily on the Company’s net interest income. Net interest income is the difference between the interest income earned on interest-earning assets, consisting primarily of loans, investment securities, mortgage-backed securities and other interest-earning assets (primarily cash and cash equivalents), and the interest paid on interest-bearing liabilities, consisting of NOW accounts, passbook and club accounts, savings accounts, time deposits and borrowings. The results of operations also are affected by provisions for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of fees and service charges, increases to the cash surrender value of bank owned life insurance and miscellaneous other income (consisting of fees for minimum balance requirements, dormant deposit accounts, fees charged to third parties for document requests and sale of money orders and travelers checks). Non-interest expense currently consists primarily of salaries and employee benefits, equipment, occupancy costs, data processing, deposit insurance premiums, other insurance premiums, and other operating expenses (consisting of legal fees, director compensation, postage, stationery, professional fees and other operational expenses). The Company’s results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Exhibit 13 -3

Critical Accounting Policies

The Company considers accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. The Company considers allowance for loan losses, benefit plan assumptions and deferred income taxes to be critical accounting policies.

Allowance for Loan Losses. The allowance for loan losses is the estimated amount considered necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for the Company.

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

The analysis has two components, specific and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. The Company also analyzes historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allowance. Actual loan losses may be significantly more than the loan loss allowance established which could have a material negative effect on the Company’s financial results.

Pension Plan Assumptions. Our pension plan costs are calculated using actuarial concepts, as required under accounting for defined benefit pension and other post retirement plans. Pension expense and the determination of our projected pension liability are based upon two critical assumptions: the discount rate and the expected return on plan assets. We evaluate each of these critical assumptions annually. Other assumptions impact the determination of pension expense and the projected liability including the primary employee demographics, such as retirement patterns, employee turnover, mortality rates, and estimated employer compensation increases. These factors, along with the critical assumptions, are carefully reviewed by management each year in consultation with our pension plan consultants and actuaries. Further information about our pension plan assumptions, the plan’s funded status, and other plan information is included in Note 11 to Consolidated Financial Statements.

Deferred Income Taxes. The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income. These judgments are reviewed on a continual basis as regulatory and business factors change.

Exhibit 13 -4

Comparison of Financial Condition at December 31, 2011 and 2010

The Company’s total assets at December 31, 2011 were $142.7 million compared to $147.0 million at December 31, 2010, a decrease of $4.3 million, or 2.9%. Loans receivable decreased $11.3 million, or 10.6%, to $95.2 million at December 31, 2011 from $106.5 million at December 31, 2010. Demand for one-to four-family residential mortgage loans decreased primarily due to the economic recession, high unemployment rate and declining real estate values. In addition, mortgage-backed securities decreased $379,000, or 1.7%, to $21.4 million at December 31, 2011 from $21.8 million as of December 31, 2010. Investment securities increased and totaled $4.3 million due to purchases during the quarters ended June 30 and September 30, 2011. Cash and cash equivalents increased $617,000, or 7.5%, to $8.8 million at December 31, 2011 from $8.2 million at December 31, 2010.

Total deposits decreased $2.2 million, or 1.9%, to $114.9 million at December 31, 2011 from $117.1 million at December 31, 2010. Borrowings from the Federal Home Loan Bank of New York decreased $1.9 million, or 15.8%, to $10.1 million at December 31, 2011 from $12.0 million at December 31, 2010. The Company borrows from the Federal Home Loan Bank of New York to fund loan commitments, securities purchases and savings withdrawals.

Total stockholders’ equity decreased $1.2 million, or 7.6%, to $14.6 million at December 31, 2011 from $15.8 million at December 31, 2010. The decrease to stockholders’ equity reflects a net loss of $638,000 and an increase of $662,000 of accumulated other comprehensive loss. This was partially offset by amortization of $25,000 of unearned ESOP shares, amortization of $41,000 of restricted stock awards for the Company’s Stock-Based Incentive Program (the “Plan”) and amortization of $41,000 of stock option awards. No shares were repurchased during the year ended December 31, 2011.

On June 30, 2005, the Company approved a stock repurchase program and authorized the repurchase of up to 50,000 shares of the Company’s outstanding shares of common stock. This repurchase program was completed on December 7, 2007 with 50,000 shares repurchased. On August 30, 2007, the Company approved a second stock repurchase program and authorized the repurchase of up to an additional 50,000 shares of the Company’s outstanding shares of common stock. Stock repurchases will be made from time to time and may be effected through open market purchases, block trades and in privately negotiated transactions. Repurchased stock will be held as treasury stock and will be available for general corporate purposes. As of December 31, 2011, a total of 12,750 shares have been acquired at a weighted average price of $4.44 per share pursuant to the second stock repurchase program. No repurchases were made for the years ended December 31, 2011 and 2010.

Comparison of Operating Results for the Years Ended December 31, 2011 and 2010

General. Net income decreased by $1.1 million, to a loss of $638,000 for the year ended December 31, 2011 from income of $441,000 for the year ended December 31, 2010. Lower yield on interest earning assets, partially offset by lower cost of deposits and borrowings, caused the Company’s net interest margin to decrease by 16 basis points from 4.18% in 2010 to 4.02% in 2011.

Interest Income. Interest income decreased by $1.16 million or 12.6%, to $6.81 million for the year ended December 31, 2011 from $7.96 million for the year ended December 31, 2010. The decrease in interest income resulted from decreases of income of $899,000 from loans receivable, $295,000 from mortgage-backed securities, and $2,000 from other interest earning assets, partially offset by an increase

Exhibit 13 -5

of $40,000 from investment securities. More generally, the decrease in interest income was attributable to a decrease of $10.8 million in the average balance of interest earning assets to $130.7 million for the year ended December 31, 2011 from $141.5 million for the year ended December 31, 2010 and a 42 basis point decrease in the average yield on interest earning assets.

Interest income on loans receivable decreased $899,000 or 13.8 %, to $5.6 million for the year ended December 31, 2011 from $6.5 million for the comparable period in 2010. The decrease resulted from a lower average balance of $100.7 million for the year ended December 31, 2011, from an average balance of $110.9 million for the year ended December 31, 2010 and a lower average yield of 5.58% for the year ended December 31, 2011 from an average yield of 5.88% for the year ended December 31, 2010.

Interest income from mortgage-backed securities decreased $295,000, or 21.4%, to $1.1 million for the year ended December 31, 2011 from $1.4 million for the year ended December 31, 2010. This decrease reflects a $2.3 million decrease in the average balance of mortgage-backed securities to $21.6 million for the year ended December 31, 2011 from $23.9 million for the same period in 2010 and an decrease in the average yield of 74 basis points to 5.03% for the year ended December 31, 2011 from 5.77% for the year ended December 31, 2010.

Interest income from investment securities increased $40,000, or 69.0%, to $98,000 for the year ended December 31, 2011 from $58,000 for the year ended December 31, 2010. The increase resulted from an increase of $2.4 million in the average balance in investment securities to $3.4 million for the year ended December 31, 2011 from an average balance of $1.0 million for the year ended December 31, 2010, partially offset by a decrease of 292 basis points to 2.86% in the average yield for the year ended December 31, 2011 from an average yield of 5.78% for the year ended December 31, 2010.

Interest income on other interest-earning assets, primarily interest-earning deposits and federal funds sold, decreased $2,000, or 33.3%, to $4,000 for the year ended December 31, 2011 from $6,000 for the year ended December 31, 2010. The decrease was attributable to the decrease of $747,000 in the average balance of interest earning deposits of $5.0 million for the year ended December 31, 2011 from $5.7 million for the year ended December 31, 2010.

Interest Expense. Total interest expense decreased $496,000, or 24.2%, to $1.6 million for the year ended December 31, 2011 from $2.1 million for the year ended December 31, 2010. The decrease in interest expense resulted from a decrease of 30 basis points in the average cost of interest-bearing liabilities to 1.29% for the year ended December 31, 2011 from 1.59% for the year ended December 31, 2010, and a $8.7 million decrease in the average balance of interest-bearing liabilities to $120.6 million for the year ended December 31, 2011 from $129.3 million for the year ended December 31, 2010. In addition, the average balance of interest-bearing deposits decreased $2.9 million to $109.7 million with an average cost of 1.31% for the year ended December 31, 2011 from $112.6 million with an average cost of 1.54% for the year ended December 31, 2010. In addition, the decrease in interest expense resulted from a decrease of $5.8 million in the average balance of Federal Home Loan Bank of New York advances to $10.9 million, with an average cost of 1.07%, for the year ended December 31, 2011, compared to $16.7 million and 1.92% for the year ended December 31, 2010. The average balance of certificates of deposit decreased by $2.9 million to $75.1 million with an average cost of 1.74% in 2011, as compared with an average balance of $78.0 million with an average cost of 2.06% in 2010. The average balance for savings and club accounts decreased by $2,000 to $34.2 million with an average cost of 0.37% in 2011, as compared to $34.2 million with an average cost of 0.37% in 2010. The average balance of interest-bearing demand deposits decreased by $26,000 to $332,000 with an average cost of 0.33% in 2011 from $358,000 with an average cost of 0.34% in 2010.

Exhibit 13 -6

Net Interest Income. Net interest income decreased $660,000, or 11.2%, to $5.3 million for 2011 from $5.9 million for 2010. The Company’s interest rate spread decreased by 12 basis points to 3.92% in 2011 from 4.04% in 2010. Additionally, the Company’s interest margin decreased by 16 basis points to 4.02% in 2011 from 4.18% in 2010.

Provision for Loan Losses. The Company establishes provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information, and prevailing economic conditions. Prevailing national and local economic conditions are reflected in the continued high unemployment rate and depressed real estate values. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. Based on its evaluation of these factors, management made a provision of $1.7 million for the year ended December 31, 2011, as compared to a provision of $821,000 for the year ended December 31, 2010. The increase in provision for loan loss during the year was primarily due to increased specific loan loss reserves on construction loan participations, commercial real estate loans, one-to four-family residential loans and credit card loans, as well as an increase in general allowance for loan loss considered appropriate due to the increase of non-performing loans and to address inherent losses that are probable and estimable in the loan portfolio. Management used the same methodology and generally similar assumptions in assessing the allowance for both years. The allowance for loan losses was $2.2 million, or 2.30% of total loans outstanding at December 31, 2011, as compared with $1.6 million, or 1.51% of total loans outstanding at December 31, 2010. Non-performing loans to total assets was 574 basis points on December 31, 2011 and December 31, 2010. The level of the allowance is based on estimates, and the ultimate losses may vary from the estimates.

Management evaluates the allowance for loan losses on a quarterly basis and makes provisions for loan losses as necessary in order to maintain the adequacy of the allowance. Although management believes that it uses the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, will periodically review the allowance for loan losses. The Office of the Comptroller of the Currency may require the Association to make adjustments to the allowance based on its judgments about information available to it at the time of its examination.

Non-Interest Income. Non-interest income increased by $29,000, or 11.4%, to $283,000 in 2011 from $254,000 in 2010. This increase was primarily due to increases in fees and service charges and miscellaneous income.

Exhibit 13 -7

Non-Interest Expense. Non-interest expense increased by $347,000, or 7.3% to $5.1 million in 2011 from $4.7 million in 2010. The increase was caused primarily by increases in net occupancy expense to $625,000 from $496,000, equipment expenses to $624,000 from $477,000, director’s compensation to $199,000 from $186,000, professional fees to $412,000 from $340,000 and insurance premiums to $185,000 from $139,000, partially offset by decreases in federal deposit insurance premiums to $153,000 from $206,000 Equipment expense increased $147,000 to $624,000 for the year ended December 31, 2011, from $477,000 for the year ended December 31, 2010 primarily due to data center deconversion costs. Net occupancy expense of premises increased $129,000 to $625,000 for the year ended December 31, 2011, from $496,000 for the year ended December 31, 2010 primarily due to the loss of rental income from an expired property lease that was not renewed due to the pending sale of the property, along with new leasing terms for an existing branch location. Professional fees increased $72,000 to $412,000 for the year ended December 31, 2011, from $340,000 for the year ended December 31, 2010 primarily due to increased legal and accounting expenses. Insurance premiums increased $46,000 to $185,000 for the year ended December 31, 2011, from $139,000 for the year ended December 31, 2010 primarily due to additional insurance required for the increased other real estate owned. Federal deposit insurance premiums decreased $53,000 to $153,000 for the year ended December 31, 2011, from $206,000 for the year ended December 31, 2010 primarily due to premium calculation changes.

Income Tax Expense. The provision for income taxes decreased $788,000 to a benefit of $632,000 in 2011 from an expense of $156,000 in 2010. The decrease in the income tax expense is primarily due to the decrease in income before taxes of $1.9 million to a loss of $1.3 million in 2011 from income of $597,000 in 2010.

Exhibit 13 -8

Average Balance Sheet

The following table presents for the periods indicated the total dollar amount of interest income from average interest earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield. The amortization of loan fees is included in computing interest income; however, such fees are not material.

	At December 31,					Years Ended December 31,
	2011					2011								2010
	Outstanding   Balance		Yield/   Rate			Average Outstanding Balance		Interest Earned/ Paid			Yield/ Rate			Average Outstanding   Balance			Interest Earned/ Paid		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans receivable(1)	$	95,162		5.42	%	$	100,678		5,619			5.58	%	$	110,909	$	6,518			5.88	%
Mortgage-backed securities		21,401		4.84	%		21,572		1,085			5.03	%		23,896		1,380			5.77	%
Investment securities(2) (3)		5,046		2.50	%		3,431		98			2.86	%		1,011		58			5.78	%
Other interest-earning assets		6,930		0.01	%		4,980		4			0.08	%		5,727		6			0.10	%
Total interest-earning assets		128,538		5.34	%		130,661		6,806			5.21	%		141,543		7,962			5.63	%
Non-interest earning assets		14,176					12,986								11,475
Total assets	$	142,714				$	143,647							$	153,018
Interest-bearing liabilities:
NOW accounts	$	321		0.30	%		332		1			0.33	%	$	358		1			0.34	%
Savings and club		33,323		0.33	%		34,243		127			0.37	%		34,245		126			0.37	%
Certificates of deposit		76,081		1.71	%		75,130		1,309			1.74	%		77,994		1,603			2.06	%
Total interest-bearing deposits		109,725		1.29	%		109,704		1,437			1.31	%		112,596		1,730			1.54	%
Federal Home Loan Bank Advances		10,082		0.79	%		10,935		117			1.07	%		16,660		320			1.92	%
Total interest-bearing liabilities		119,806		1.24	%		120,640		1,554			1.29	%		129,256		2,050			1.59	%
Non-interest bearing liabilities:
Demand deposit		5,198					5,252								5,486
Other liabilities		3,150					2,360								2,583
Total non-interest-bearing liabilities		8,348					7,612								8,069
Total liabilities		128,154					128,252								137,325
Stockholders’ Equity		14,560					15,395								15,692
Total liabilities and equity	$	142,714				$	143,647							$	153,018
Net interest income								$	5,252							$	5,912
Interest rate spread(4)				4.09	%							3.92	%							4.04	%
Net interest-earning assets	$	8,732				$	10,021							$	12,286
Net interest margin(5)												4.02	%							4.18	%
Ratio of interest earning assets to interest bearing liabilities									1.08	x							1.10	x

_________________________________ 

(1)	Loans receivable are net of the allowance for loan losses.
(2)	None of the reported income is exempt from Federal income taxes.
(3)	Includes stock in Federal Home Loan Bank of New York which is reflected at the most recent quarterly dividend rate.
(4)	Net interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
(5)	Net interest margin represents net interest income as a percentage of interest earning assets.

Exhibit 13 -9

Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to changes in outstanding balances and those due to the changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). 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.

	Years Ended December 31,
	2011 vs. 2010
	Increase/(Decrease) Due to						Total   Increase
	Volume			Rate			(Decrease)
	(Dollars in thousands)
Interest income:
Loans receivable	$	(579	)	$	(320	)	$	(899	)
Mortgage-backed securities		(127	)		(168	)		(295	)
Investment securities		51			(11	)		40
Other interest-earning assets		(1	)		(1	)		(2	)
Total interest income		(656	)		(500	)		(1,156	)
Interest expense:
Demand deposits		—			—			—
Passbook and club accounts		1			—			1
Certificates of deposit		(63	)		(231	)		(294	)
Federal Home Loan Bank advances		(88	)		(115	)		(203	)
Total interest expense		(150	)		(346	)		(496	)
Net interest income	$	(506	)	$	(154	)	$	(660	)

Management of Market Risk

General. The majority of the Company’s assets and liabilities are monetary in nature. Consequently, the most significant form of market risk is interest rate risk. The Company’s assets, consisting primarily of mortgage loans, have longer maturities than its liabilities, consisting primarily of deposits and borrowings. As a result, a principal part of the business strategy is to manage interest rate risk and reduce the exposure of net interest income to changes in market interest rates. Accordingly, the board of directors has established an Asset/Liability Management Committee which is responsible for evaluating the interest rate risk inherent in the assets and liabilities, for determining the level of risk that is appropriate given the business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Management Committee, which consists of senior management operating under a policy adopted by the board of directors, meets as needed to review the asset/liability policies and interest rate risk position.

Exhibit 13 -10

The Company has sought to manage its interest rate risk in order to minimize the exposure of earnings and capital to changes in interest rates. During the low interest rate environment that has existed in recent years, the Company has implemented the following strategies to manage its interest rate risk: (i) maintaining a high level of liquid interest-earning assets invested in cash and cash equivalents; (ii) offering a variety of adjustable rate loan products, including one year adjustable rate mortgage loans and construction loans, and short-term fixed rate home equity loans. Cash and cash equivalents, deposits and borrowings from the Federal Home Loan Bank may be used to fund loan commitments, investments and other general corporate purposes. By investing in short-term, liquid instruments, management believes the Company is better positioned to react to increases in market interest rates. However, investments in shorter-term securities and cash and cash equivalents generally bear lower yields than longer term investments. Thus, during the recent sustained period of low interest rates, the strategy of investment in liquid instruments has resulted in lower levels of interest income than would have been obtained by investing in longer-term loans and investments.

 Net Portfolio Value. We use a net portfolio value analysis prepared by the OCC to review our level of interest rate risk. Such analysis measures interest rate risk by computing changes in net portfolio value of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. This analysis assesses the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 50 to 300 basis point increase or 50 and 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. Because of the low level of market interest rates, these analyses are not performed for decreases of more than 100 basis points.

The following table, which is based on information that we provide to the OCC, presents the change in the net portfolio value of the Association at December 31, 2011, which is the most recent date for which information is available, that would occur in the event of an immediate change in interest rates based on OCC assumptions, with no effect given to any steps that we might take to counteract that change.

	Net Portfolio Value							Net Portfolio Value as a Percentage of Present Value of Assets
Change in Interest Rates (basis points)		Estimated NPV		Amount of Change		Percent of Change			NPV Ratio		Change in Basis Points
	(Dollars in Thousands)
+300	$	15,740	$	(5,807	)	(27	)%		10.89	%		(325	)bp
+200	$	18,644	$	(2,903	)	(13	)%		12.59	%		(155	)bp
+100	$	20,624	$	(923	)	(4	)%		13.68	%		(46	)bp
+50	$	21,187	$	(360	)	(2	)%		13.97	%		(17	)bp
0	$	21,547		—		—	%		14.13	%		—
-50	$	21,496	$	(51	)	—	%		14.09	%		(5	)bp
-100	$	21,517	$	(30	)	—	%		14.09	%		(5	)bp

The table above indicates that at December 31, 2011, in the event of a 100 basis point decrease in interest rates, the Company would experience a minimal decrease in net portfolio value. In the event of a 100 basis point increase in interest rates, the Company would experience a 4.00% decrease in net portfolio value.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

Exhibit 13 -11

In this regard, the net portfolio value table presented assumes that the composition of interest-sensitive assets and liabilities existing at the beginning of a period remains 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 net portfolio value table provides an indication of 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 its net interest income and will differ from actual results.

Liquidity. The Company maintains liquid assets at levels considered adequate to meet its liquidity needs. The liquidity ratio averaged 6.94% for the year ended December 31, 2011. Liquidity levels are adjusted to fund deposit outflows, pay real estate taxes on mortgage loans, fund loan commitments and take advantage of investment opportunities. As appropriate, the Company also adjusts liquidity to meet asset and liability management objectives. At December 31, 2011, cash and cash equivalents totaled $8.8 million.

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

A significant portion of the Company’s liquidity consists of cash and cash equivalents, which are a product of management’s operating, investing and financing activities. At December 31, 2011, $8.8 million of assets were invested in cash and cash equivalents. The primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, principal repayments of mortgage-backed securities and increases in deposit accounts. As of December 31, 2011, there were no short-term investment securities.

Deposit flows are generally affected by the level of interest rates, the interest rates and products offered by local competitors, and other factors. Total deposits decreased $2.2 million to $114.9 million at December 31, 2011 from $117.1 million as of December 31, 2010.

Liquidity management is both a daily and long-term function of business management. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of New York which provides an additional source of funds. At December 31, 2011, the Company had $10.1 million in advances from the Federal Home Loan Bank of New York, and had an available borrowing limit of $48.2 million.

At December 31, 2011, the Company had outstanding commitments to originate loans of $405,000. At December 31, 2011, certificates of deposit scheduled to mature in less than one year totaled $59.8 million. Based on prior experience, management believes that a significant portion of such deposits will remain, although there can be no assurance that this will be the case. In the event a significant portion of deposits are not retained, management will have to utilize other funding sources, such as Federal Home Loan Bank of New York advances in order to maintain the Company’s level of assets. Alternatively, management could reduce the level of liquid assets, such as cash and cash equivalents. In addition, the cost of such deposits may be significantly higher if market interest rates are higher at the time of renewal.

Exhibit 13 -12

Contractual Obligations and Off-Balance Sheet Arrangements
 

The following table sets forth the Company’s contractual obligations at December 31, 2011. Amounts shown do not include anticipated contributions to the Company’s defined benefit plans.

Payment Due by Period
Contractual Obligations	Total		Less than One year		More than One year to Three years		More than three years to Five years		More than Five years
	(in thousands)
FHLB Advances	$	10,082	$	10,035	$	47	$	—	$	—
Certificates of Deposit		76,081		59,843		12,677		2,597		964
Lease Obligations		2,970		285		587		611		1,487
Total	$	89,133	$	70,163	$	13,311	$	3,208	$	2,451

In the normal course of business, the Association enters into off-balance sheet arrangements consisting of commitments to fund loans. At December 31, 2011, these commitments totaled $405,000, which expire in three months or less. See Note 14 to the Consolidated Financial Statements for more information.

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike industrial companies, the Company’s assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Exhibit 13 -13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Flatbush Federal Bancorp, Inc.

Brooklyn, New York

We have audited the accompanying consolidated statements of financial condition of Flatbush Federal Bancorp, Inc. (the “Company”) and Subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Flatbush Federal Bancorp, Inc, and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ ParenteBeard LLC

ParenteBeard LLC

Clark, New Jersey

March 30, 2012

Exhibit 13-14

Flatbush Federal Bancorp, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

	December 31,
	2011			2010
Assets
Cash and amounts due from depository institutions	$	1,871,605		$	1,568,478
Interest-earning deposits in other banks		1,179,582			1,065,862
Federal funds sold		5,750,000			5,550,000
Cash and Cash Equivalents		8,801,187			8,184,340
Securities held to maturity, fair value of $27,402,087 in 2011 and $23,084,343 in 2010		25,748,582			21,779,811
Loans receivable, net of allowance for loan losses of $2,247,171 in 2011 and $1,649,319 in 2010		95,161,715			106,477,978
Other real estate owned		743,830			—
Premises and equipment		2,377,057			2,287,820
Federal Home Loan Bank of New York stock		698,200			807,900
Accrued interest receivable		554,307			607,089
Bank owned life insurance		4,523,252			4,371,605
Other assets		4,106,279			2,502,199
Total Assets	$	142,714,409		$	147,018,742
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Non-interest bearing	$	5,197,945		$	5,319,364
Interest bearing		109,724,623			111,754,193
Total Deposits		114,922,568			117,073,557
Advances from Federal Home Loan Bank of New York		10,081,574			12,042,583
Advance payments by borrowers for taxes and insurance		190,155			333,023
Other liabilities		2,960,087			1,816,062
Total Liabilities		128,154,384			131,265,225
Stockholders’ Equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value; authorized 9,000,000 shares; issued 2,799,657 shares; outstanding 2,736,907 shares		27,998			27,998
Paid-in capital		12,725,312			12,653,326
Retained earnings		5,152,987			5,791,170
Unearned employees’ stock ownership plan (ESOP) shares		(409,108	)		(443,983	)
Treasury stock, 62,750 shares, at cost		(446,534	)		(446,534	)
Accumulated other comprehensive loss		(2,490,630	)		(1,828,460	)
Total Stockholders’ Equity		14,560,025			15,753,517
Total Liabilities and Stockholders’ Equity	$	142,714,409		$	147,018,742

See notes to consolidated financial statements. 

Exhibit 13-15

Flatbush Federal Bancorp, Inc. and Subsidiaries

Consolidated Statements of Operations

	Years Ended December 31,
	2011			2010
Interest Income
Loans, including fees	$	5,619,225		$	6,518,077
Investment securities		98,256			58,471
Mortgage-backed securities held to maturity		1,085,135			1,379,515
Other interest-earning assets		3,549			5,716
Total Interest Income		6,806,165			7,961,779
Interest Expense
Deposits		1,436,290			1,730,343
Borrowings		117,481			319,712
Total Interest Expense		1,553,771			2,050,055
Net Interest Income		5,252,394			5,911,724
Provision for Loan Losses		1,711,252			821,476
Net Interest Income after Provision for Loan Losses		3,541,142			5,090,248
Non-Interest Income
Fees and service charges		109,156			99,431
Bank owned life insurance		151,647			151,623
Other		22,578			2,682
Total Non-Interest Income		283,381			253,736
Non-Interest Expense
Salaries and employee benefits		2,411,215			2,409,953
Net occupancy expense of premises		625,132			496,257
Equipment		624,162			477,069
Directors’ compensation		199,432			185,605
Professional fees		411,945			340,045
Insurance premiums		185,330			139,164
Federal deposit insurance premiums		152,894			205,826
Other		484,197			492,587
Total Non-Interest Expense		5,094,307			4,746,506
(Loss) Income before Income Tax (Benefit) Expense		(1,269,784	)		597,478
Income Tax (Benefit) Expense		(631,601	)		156,249
Net (Loss) Income	$	(638,183	)	$	441,229
Net (Loss) Income per Common Share
Basic and diluted	$	(0.24	)	$	0.17
Weighted Average Number of Shares Outstanding
Basic and diluted		2,672,129			2,666,861

See notes to consolidated financial statements. 

Exhibit 13-16

Flatbush Federal Bancorp, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Years Ended December 31, 2011 and 2010

	Common Stock		Paid-In Capital			Retained Earnings			Unearned ESOP Shares			Treasury Stock			Accumulated Other Comprehensive Loss			Total
Balance December 31, 2009	$	27,998	$	12,581,519		$	5,349,941		$	(478,857	)	$	(446,534	)	$	(1,801,114	)	$	15,232,953
Comprehensive Income:
Net income		—		—			441,229			—			—			—			441,229
Benefit Plans, net of deferred income taxes of $19,680		—		—			—			—			—			(27,346	)		(27,346	)
Comprehensive income		—		—			—			—			—			—			413,883
Amortization of MRP		—		40,584			—			—			—			—			40,584
Stock option expense		—		41,412			—			—			—			—			41,412
ESOP shares committed to be released		—		(10,189	)		—			34,874			—			—			24,685
Balance December 31, 2010		27,998		12,653,326			5,791,170			(443,983	)		(446,534	)		(1,828,460	)		15,753,517
Comprehensive Loss:
Net loss		—		—			(638,183	)		—			—			—			(638,183	)
Benefit Plans, net of deferred
Income taxes of ($476,546)		—		—			—			—			—			(662,170	)		(662,170	)
Comprehensive loss		—		—			—			—			—			—			(1,300,353	)
Amortization of MRP		—		40,584			—			—			—			—			40,584
Stock option expense		—		41,412			—			—			—			—			41,412
ESOP shares committed to be released		—		(10,010	)		—			34,875			—			—			24,865
Balance December 31, 2011	$	27,998	$	12,725,312		$	5,152,987		$	(409,108	)	$	(446,534	)	$	(2,490,630	)	$	14,560,025

See notes to consolidated financial statements. 

Exhibit 13-17

Flatbush Federal Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2011			2010
Cash Flows from Operating Activities
Net (loss) income	$	(638,183	)	$	441,229
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		120,488			171,870
Net accretion of premiums, discounts and deferred loan fees and costs		(26,538	)		(166,560	)
Deferred income tax (benefit)		(673,979	)		(382,660	)
Provision for loan losses		1,711,252			821,476
ESOP shares committed to be released		24,865			24,685
MRP amortization		40,584			40,584
Stock option expense		41,412			41,412
Decrease in accrued interest receivable		52,782			50,463
Increase in cash surrender value of bank owned life insurance		(151,647	)		(151,623	)
(Increase) decrease in other assets		(453,555	)		501,168
Increase (decrease) in other liabilities		5,309			(665,642	)
Net Cash Provided by Operating Activities		52,790			726,402
Cash Flows from Investing Activities
Purchase of investment securities held to maturity		(4,357,242	)		—
Principal repayments on mortgage-backed securities held to maturity		5,535,214			7,943,767
Purchase of mortgage-backed securities held to maturity		(5,150,439	)		(1,250,010	)
Purchase of loan participation interests		(150,403	)		(1,996,402	)
Net change in loans receivable		9,041,818			5,717,552
Additions to premises and equipment		(209,725	)		(19,377	)
Redemption of Federal Home Loan Bank of New York stock		109,700			467,000
Net Cash Provided by Investing Activities		4,818,923			10,862,530
Cash Flows from Financing Activities
Net (decrease) increase in deposits		(2,150,989	)		1,905,837
Repayment of advances from Federal Home Loan Bank of New York		(3,461,009	)		(2,808,898	)
Net change to short-term borrowings		1,500,000			(8,000,000	)
(Decrease) increase in advance payments by borrowers for taxes and insurance		(142,868	)		40,442
Net Cash Used in Financing Activities		(4,254,866	)		(8,862,619	)
Net Increase in Cash and Cash Equivalents		616,847			2,726,313
Cash and Cash Equivalents – Beginning		8,184,340			5,458,027
Cash and Cash Equivalents – Ending	$	8,801,187		$	8,184,340
Supplementary Cash Flows Information
Cash paid during the year for:
Interest	$	1,577,000		$	2,071,098
Income taxes, net of refunds	$	370,850		$	121,110
Acquisition of real estate owned in settlement of loan receivable	$	743,830		$	—

See notes to consolidated financial statements.

Exhibit 13-18

Note 1 - Summary of Significant Accounting Policies

Nature of Operations and Basis of Financial Statement Presentation

The consolidated financial statements include accounts of Flatbush Bancorp Inc. (the “Company”), Flatbush Federal Savings and Loan Association (the “Association”) and the Association’s subsidiary, Flatbush REIT, Inc. (the “REIT”), a corporation principally engaged in investing in loans secured by real estate. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany accounts and transactions have been eliminated in consolidation. At both December 31, 2011 and 2010, 54.23%, of the Company’s common stock was owned by Flatbush Federal MHC, a mutual holding company.

The Company’s primary business is the ownership and operation of the Association. The Association’s principal business consists of attracting retail deposits from the general public in the areas surrounding its various locations in Brooklyn, New York and investing those deposits, together with funds generated from operations and borrowings, primarily in one-to four-family residential mortgage loans, real estate construction loans and various securities. One-to four-family residential real estate in the Association’s market areas is characterized by a large number of attached and semi-detached homes, including a number of two- and three-family homes and cooperative apartments. Revenues are derived principally from interest on loans and securities, loan origination and servicing fees, and service charges and fees collected on deposit accounts. The primary sources of funds are deposits, principal and interest payments on loans and securities, and borrowings.

The Association’s lending area is concentrated in the neighborhoods surrounding the Association’s office locations in Brooklyn, New York. Most of the deposit customers are residents of the greater New York metropolitan area.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the determination of the projected pension liabilities and the amount of deferred taxes which are more likely than not to be realized. Management believes that the allowance for loan losses and projected pension liability are adequate and that all deferred taxes are more likely than not to be realized. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the market area. The determination of the projected pension liability and related pension expense is based upon assumptions regarding the discount rate and expected return on plan assets, as well as employee demographics, such as retirement patterns, employee turnover, mortality rates and estimated employee compensation increases. The assessment of the amount of deferred tax assets more likely than not to be realized is based upon projected future taxable income, which is subject to continual revisions for updated information.

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 about information available to them at the time of their examination.

Exhibit 13-19

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

The Company follows the Financial Accounting Standards Board (“FASB”) guidance on subsequent events, which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. The guidance sets forth the period after the balance sheet date during which management of the reporting entity, should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosure that should be made about events or transactions that occur after the balance sheet date. In preparing these consolidated financial statements, the Company evaluated the events that occurred between January 1, 2011 and the date these consolidated financial statements were issued.

On January 13, 2012, the Company consummated the sale of the Association’s main branch building and a portion of adjoining real estate to a third party for consideration of $10,136,000 and recognized a pre-tax gain of $9,072,000. This transaction is more fully described in Note 20 to the consolidated financial statements.

On March 13, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and between (i) Northfield Bank, Northfield Bancorp, Inc. (“Northfield Bancorp”), and Northfield Bancorp, MHC, and (ii) the Company, the Association and Flatbush Federal Bancorp, MHC. The Merger Agreement provides, among other things, that as a result of the merger of the Company into Northfield Bancorp (the “Mid-Tier Merger”), each outstanding share of the Company’s common stock will be converted into the right to receive 0.4748 shares of Northfield Bancorp common stock. The Merger Agreement contains a number of customary representations and warranties by the parties regarding certain aspects of their respective businesses, financial condition, structure and other facts pertinent to the Merger that are customary for a transaction of this kind. The obligation of the parties to complete the Merger is subject to various customary conditions. If the Merger is terminated under specified situations in the Merger Agreement (because the Company accepts a proposal to be acquired that is superior to the one contained in the Merger Agreement, enters into an agreement related to such a proposal and terminates the Merger Agreement, or fails to make, withdraws, modifies or qualifies its recommendation regarding the Merger Agreement), the Company may be required to pay a termination fee to Northfield Bancorp of approximately $700,000. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which was included in a Form 8-K filed with the Securities and Exchange Commission on March 15, 2012.

Cash and Cash Equivalents

Cash and cash equivalents include cash and amounts due from depository institutions, interest-bearing deposits in other banks, term deposits with original maturities of three months or less, and federal funds sold. Generally, federal funds are sold for one-day periods.

Investment and Mortgage-Backed Securities

Investments in debt securities that the Association has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt and equity securities not classified as trading securities nor as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive loss component of stockholders’ equity. The Company has no securities classified as available for sale or trading securities.

Exhibit 13-20

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

Premiums and discounts on all securities are amortized/accreted using the interest method. Interest income on securities, which includes amortization of premiums and accretion of discounts, is recognized in the consolidated financial statements when earned. The adjusted cost basis of an identified security sold or called is used for determining security gains and losses recognized in the consolidated statements of income.

Individual securities are considered impaired when the fair value of such security is less than its amortized cost. The Company evaluates all securities with unrealized losses quarterly to determine if such impairments are temporary or “other-than-temporary” in accordance with applicable accounting guidance. The Company accounts for temporary impairments based upon security classification as either available for sale or held to maturity. Temporary impairments on available for sale securities are recognized on a tax-effected basis, through other comprehensive income (loss) with offsetting entries adjusting the carrying value of the securities and the balance of deferred income taxes. Temporary impairments of held to maturity securities are not recognized in the consolidated financial statements; however information concerning the amount and duration of impairments on held to maturity securities is disclosed in the notes to the consolidated financial statements.

Other-than-temporary impairments on securities that the Company has decided to sell or will more likely than not be required to sell prior to the full recovery of their fair value to a level to, or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit related and noncredit-related components. The credit related impairment generally represents the amount by which the present value of the cash flows expected to be collected on a debt security falls below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. Credit related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred income taxes, in other comprehensive income (loss).

Federal Home Loan Bank of New York Stock

Federal Home Loan Bank of New York (“FHLB”) stock, which represents a required investment in the common stock of a correspondent bank, is carried at cost.

Management evaluates the FHLB stock for impairment in accordance with guidance on accounting by certain entities that lend to or finance the activities of others. Management’s determination of whether this investment is impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB stock as of December 31, 2011.

Exhibit 13-21

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

Loans Receivable

Loans receivable are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees and costs. The Association defers loan origination fees and certain direct loan origination costs and accretes/amortizes such amounts as an adjustment of yield over the contractual lives of the related loans.

Interest is recognized by use of the accrual method. An allowance for uncollectible interest on loans is maintained based on management’s evaluation of collectibility. The allowance is established by a charge to interest income. Income is subsequently recognized only to the extent that cash payments are received until, in management’s judgment, the borrower’s ability to make periodic interest and principal payments is probable, in which case the loan is returned to an accrual status.

Allowance for Loan Losses

An allowance for loan losses is maintained at a level necessary to absorb loan losses which are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with general economic and real estate market conditions. The Association utilizes a two tier approach: (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio. The Association maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, types of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified loans based on a review of such information. A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is probable that the Association will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. The Association does not aggregate such loans for evaluation purposes. Loan impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. General loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of the loan portfolio, current economic conditions and management’s judgment.

The allowance is increased through provisions charged against current earnings and recoveries of previously charged off loans. Loans which are determined to be uncollectible are charged against the allowance. Although management believes that specific and general loan loss allowances are established to absorb losses which are both probable and reasonably estimable, actual losses are dependent upon future events and, as such, further additions to the level of specific and general loan loss allowances may be necessary.

Payments received on impaired loans are applied to principal.

Concentration of Risk

The Association’s lending activities are concentrated in loans secured by real estate located in the State of New York.

Exhibit 13-22

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

Advertising

Advertising expense, which totaled $13,000 and $16,000, during the years ended December 31, 2011 and 2010, respectively, is recorded as incurred and included in other non-interest expenses.

Premises and Equipment

Premises and equipment are comprised of land, at cost, and building, building improvements, leasehold improvements and furniture, fixtures and equipment, at cost, less accumulated depreciation and amortization computed on the straight-line method over the following estimated useful lives:

	Years
Building and improvements	5 – 50
Leasehold improvements	Shorter of term of lease or useful life
Furniture, fixtures and equipment	5 – 10

Significant renewals and betterments are charged to the premises and equipment account. Maintenance and repairs are charged to expense in the year incurred. Rental income is netted against occupancy expense in the consolidated statements of income.

Bank Owned Life Insurance (BOLI)

The Company has an investment in BOLI to help offset the rising cost of employee benefits. BOLI is accounted for using the cash surrender value method and is recorded at its realizable value. The income from BOLI is recorded as other non-interest income.

Income Taxes

The Company and the Association file consolidated federal, state and city income tax returns. Income taxes are allocated to the Company and the Association based upon the contribution of their respective income or loss to the consolidated return. The REIT files a separate federal, state and city income tax return and pays its own taxes.

Federal, state and city income taxes have been provided on the basis of reported income. The amounts reflected on the tax return differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted as deferred taxes applicable to future periods. Deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not likely to be realized.

Exhibit 13-23

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements in accordance with accounting guidance which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Company’s evaluation, no significant income tax uncertainties have been identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits for the years ended December 31, 2011 and 2010. Our policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. The amount of interest and penalties for the years ended December 31, 2011 and 2010 was immaterial. The tax years subject to examination by the taxing authorities are the years ended December 31, 2010, 2009 and 2008.

Benefit Plans

The Company has a non-contributory defined benefit pension plan covering all eligible employees. The benefits are based on years of service and employees’ compensation. The benefit plan is funded in conformance with funding requirements of applicable government regulations. The Company also has an unfunded Postretirement Benefit Plan, a Supplemental Retirement Plan for executives and a Directors Retirement plan. Prior service costs for these plans generally are amortized over the estimated remaining service periods of participants.

The Company uses the corridor approach in the valuation of the defined benefit plan and other plans. The corridor approach defers all actuarial gains and losses resulting from variances between actual results and economic estimates or actuarial assumptions. For the defined benefit pension plan, these unrecognized gains and losses are amortized when net gains and losses exceed 10% of the greater of the market-related value of plan assets or the projected benefit obligation at the beginning of the year.

Stock-Based Compensation Plans

The Company has two stock-related compensation plans, including stock options and restricted stock plans, which are described in Note 11 to the Company’s Consolidated Financial Statements. The Company expenses the fair value of all share-based compensation granted over its requisite service periods.

Options vest over an eight-year service period. Upon exercise of vested options, management expects to draw on treasury stock as the source of shares. The fair values relating to all options granted were estimated using the Black-Scholes option pricing model. Expected volatilities are based on historical volatility of our stock and other factors, such as implied market volatility. The Company used historical exercise dates based on the age at grant of the option holder to estimate the options’ expected term, which represent the period of time that the options granted are expected to be outstanding. The Company anticipated the future option holding periods to be similar to the historical option holding periods. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield was based on the Company’s history and expectations of dividend payouts. The Company recognizes compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards. There were no options granted during the years ended December 31, 2011 and 2010.

Exhibit 13-24

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 1 - Summary of Significant Accounting Policies (Continued)

Interest-Rate Risk

The Association is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other funds, to make loans secured by real estate and, to a lesser extent, to purchase investment and mortgage-backed securities. The potential for interest-rate risk exists as a result of the generally shorter duration of interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing net interest income. For this reason, management regularly monitors the maturity structure of the Association’s interest-earning assets and interest-bearing liabilities in order to measure its level of interest-rate risk and to plan for future volatility.

Net Income per Common Share

Basic net income per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding, adjusted for unearned shares of the ESOP. Stock options and restricted stock awards granted are considered common stock equivalents and therefore considered in diluted net income per common share calculations, if dilutive, using the treasury stock method. During the years ended December 31, 2011 and 2010, all outstanding stock options and unvested restricted stock were anti-dilutive.

Transfer of Financial Assets

Transfer of financial assets, including loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Association; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Association does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Association has entered into off-balance sheet financial instruments consisting of commitments to extend credit. Such financial instruments are recorded in the consolidated statements of financial condition when they are funded.

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrecognized net loss or gain, unrecognized past service cost or unrecognized past transition obligation on defined benefit plans and post retirement plans, are reported as a separate component of the equity section of the consolidated statements of financial condition, such items, along with net income are components of comprehensive income.

Reclassification

Certain amounts as of and for the year ended December 31, 2010 have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on net income for 2010.

Exhibit 13-25

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 2 - Securities Held to Maturity

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Government National Mortgage Association	$	5,342,679	$	322,917	$	—	$	5,665,596
Federal National Mortgage Association		12,778,385		1,068,213		—		13,846,598
Federal Home Loan Mortgage Corporation		3,280,117		175,596		19,303		3,436,410
Total Mortgage-Backed Securities		21,401,181		1,566,727		19,303		22,948,604
Corporate Debt		4,347,401		135,320		29,238		4,453,483
	$	25,748,582	$	1,702,046	$	48,561	$	27,402,087

	December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Government National Mortgage Association	$	1,941,011	$	130,052	$	—	$	2,071,063
Federal National Mortgage Association		15,301,382		1,043,256		10,719		16,333,919
Federal Home Loan Mortgage Corporation		4,537,418		152,331		10,388		4,679,361
Total Mortgage-Backed Securities	$	21,779,811	$	1,325,639	$	21,107	$	23,084,343

Exhibit 13-26

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 2 - Securities Held to Maturity (Continued)

The age of unrealized losses and fair value of related mortgage-backed securities held to maturity are as follows:

		Less than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2011
Federal Home Loan Mortgage Corporation	$	581,132	$	17,427	$	119,298	$	1,876	$	700,430	$	19,303
Corporate debt		888,807		29,238		—		—		888,807		29,238
	$	1,469,939	$	46,665	$	119,298	$	1,876	$	1,589,237	$	48,541
December 31, 2010:
Federal National Mortgage Association	$	487,785	$	10,719	$	—	$	—	$	487,785	$	10,719
Federal Home Loan Mortgage Corporation		53,835		418		553,080		9,970		606,915		10,388
	$	541,620	$	11,137	$	553,080	$	9,970	$	1,094,700	$	21,107

Management does not believe that any of the individual unrealized losses at December 31, 2011 and 2010, represent other-than-temporary impairment. The unrealized losses reported on securities at December 31, 2011 relate to four corporate debt securities and four Federal Home Loan Mortgage Corporation mortgage-backed securities. These unrealized losses are due to changes in interest rates. The Company does not intend to sell these securities and it is not more-likely-than-not that the Company would be required to sell these securities prior to full recovery of fair value to a level which equals or exceeds amortized cost.

Exhibit 13-27

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 2 - Securities Held to Maturity (Continued)

The amortized cost and estimated fair value of securities at December 31, 2011, by contractual maturity, are shown below. Actual maturities will differ from contractual maturities because borrowers generally have the right to prepay obligations.

		Amortized Cost		Estimated Fair Value
Due within one year	$	—	$	—
Due after one year through five years		2,642,522		2,642,172
Due after five years through ten years		1,892,474		2,003,927
Due after ten years		21,213,586		22,755,988
	$	25,748,582	$	27,402,087

All mortgage-backed securities are U.S. Government Agencies backed and collateralized by residential mortgages.

There were no sales of securities held to maturity during the years ended December 31, 2011 and 2010.

At December 31, 2011 and 2010, mortgage-backed securities with amortized cost of approximately $8,719,000 and $10,702,000, respectively, and fair value of $9,087,000, and $11,265,000, respectively, were pledged to Federal Home Loan Bank of New York to secure borrowings.

Exhibit 13-28

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 3 - Loans Receivable

	December 31,
	2011			2010
Real estate mortgage:
One-to four-family	$	66,681,058		$	71,830,671
Multi family		5,749,132			5,889,520
Commercial		21,900,604			22,974,795
		94,330,794			100,694,986
Real estate construction		2,691,719			7,791,750
Land loan		386,827			393,266
Unsecured Business Loan		40,000			20,000
Consumer:
Home equity loans		87,425			112,744
Passbook or certificate		36,830			38,730
Credit cards		36,677			47,326
		160,932			198,800
Total Loans		97,610,272			109,098,802
Loans in process		(104,671	)		(894,569	)
Allowance for loan losses		(2,247,171	)		(1,649,319	)
Deferred loan fees, net		(96,715	)		(76,936	)
		(2,448,557	)		(2,620,824	)
Total Loan Receivable, Net	$	95,161,715		$	106,477,978

Exhibit 13-29

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

The following table summarizes the primary segments of the allowance for loan losses (“ALLL”) and activity therein, segregated into the amounts required for loans individually evaluated for impairment and the amounts required for loans collectively evaluated for impairment as of and for the years ended December 31, 2011 and 2010.

	Construction, Land and Unsecured Business Loan			Commercial Real Estate			Residential Multifamily Real Estate			Residential One-to four- Family Real Estate			Credit Card			Home Equity		Passbook Loans		Total
	(Dollars in thousands)
Allowance for loan losses:
Year ended December 31, 2011:
Beginning Balance	$	810		$	583		$	36		$	214		$	6		$	—	$	—	$	1,649
Charge-offs		(813	)		(248	)		—			(45	)		(8	)		—		—	$	(1,113	)
Provision		498			945			(1	)		266			4			—		—	$	1,711
Ending Balance	$	495		$	1,280		$	35		$	436		$	2		$	—	$	—	$	2,247

Exhibit 13-30

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

	Construction, Land and Unsecured Business Loan		Commercial Real Estate		Residential Multifamily Real Estate		Residential One-to four-family Real Estate		Credit Card		Home Equity		Passbook Loan		Total
	(Dollars in thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	407	$	623	$	—	$	260	$	—	$	—	$	—	$	1,290
Ending balance: collectively evaluated for impairment	$	88	$	656	$	35	$	176	$	2	$	—	$	—	$	957
Loan receivables:
Ending balance	$	3,118	$	21,901	$	5,749	$	66,681	$	37	$	87	$	37	$	97,610
Ending balance: individually evaluated for impairment	$	2,176	$	2,325	$	—	$	5,143	$	—	$	—	$	—	$	9,644
Ending balance: collectively evaluated for impairment	$	942	$	19,575	$	5,749	$	61,538	$	37	$	87	$	37	$	87,965

Exhibit 13-31

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

	Construction, Land and Unsecured Business Loan		Commercial Real Estate		Residential Multifamily Real Estate		Residential One-to four- Family Real Estate		Credit Card			Home Equity		Passbook Loans		Total
	(Dollars in thousands)
Allowance for loan losses:
Year ended December 31, 2010:
Beginning Balances	$	555	$	173	$	13	$	85	$	3		$	—	$	—	$	829
Charge-offs		—		—		—		—		(1	)		—		—		(1	)
Provision		255		410		23		129		4			—		—		821
Ending Balance	$	810	$	583	$	36	$	214	$	6		$	—	$	—	$	1,649

Exhibit 13-32

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

	Construction, Land and Unsecured Business Loan		Commercial Real Estate		Residential Multifamily Real Estate		Residential One-to four-family Real Estate		Credit Card		Home Equity		Passbook Loan		Total
	(Dollars in thousands)
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	627	$	207	$	—	$	60	$	4	$	—	$	—	$	898
Ending balance: collectively evaluated for impairment	$	183	$	376	$	36	$	154	$	2	$	—	$	—	$	751
Loan receivables:
Ending balance	$	8,205	$	22,975	$	5,890	$	71,830	$	47	$	113	$	39	$	109,099
Ending balance: individually evaluated for impairment	$	2,040	$	3,156	$	—	$	3,801	$	4	$	—	$	—	$	9,001
Ending balance: collectively evaluated for impairment	$	6,165	$	19,819	$	5,890	$	68,029	$	43	$	113	$	39	$	100,098

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for, commercial real estate loans and commercial construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.

Exhibit 13-33

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.

For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual smaller balance residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, 2011 and 2010.

	Impaired Loans With Specific Allowances				Impaired Loans With No Specific Allowances		Total Impaired Loans
	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance
	(Dollars in thousands)
December 31, 2011:
Construction and land	$	2,176	$	407	$	—	$	2,176	$	2,176
Commercial Real Estate		2,297		623		29		2,325		2,325
Residential one-to four-family Real Estate		2,239		260		2,904		5,143		5,143
Credit Card		—		—		3		3		3
Total impaired loans	$	6,712	$	1,290	$	2,936	$	9,648	$	9,648

Exhibit 13-34

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

	Impaired Loans With Specific Allowances				Impaired Loans With No Specific Allowances		Total Impaired Loans
	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance
	(Dollars in thousands)
December 31, 2010:
Construction and land	$	2,040	$	627	$	—	$	2,040	$	2,040
Commercial Real Estate		2,143		207		1,013		3,156		3,156
Residential one-to four-family Real Estate		1,480		60		2,321		3,801		3,801
Credit Card		4		4		—		4		4
Total impaired loans	$	5,667	$	898	$	3,334	$	9,001	$	9,001

The following table presents the average recorded investment and interest income recognized on impaired loans during the period of impairment during the year ended December 31, 2011.

	Year ended December 31, 2011
	Average Recorded Investment		Interest Income Recorded
	(Dollars in thousands)
Construction and land	$	2,962	$	—
Commercial Real Estate		2,600		36
Residential one-to four-family Real Estate		4,299		29
Credit Card		2		—
Total	$	9,863	$	65

During the years ended December 31, 2010, the average investment in impaired loans was $5,523,000 No interest income was collected in 2010 on these loans during the time of impairment.

At December 31, 2011 and 2010, 90.00%, and 100% respectively, of impaired loan balances were measured for impairment based on the fair value of the loan’s collateral.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of substandard, doubtful, loss and special mention. An asset is

Exhibit 13-35

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

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 insured 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. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated special mention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans which are not classified as noted above are rated “pass”.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

The following table presents the classes of the loan portfolio summarized by the pass category and the criticized categories of special mention, substandard and doubtful within the internal risk rating system as of December 31, 2011 and 2010.

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2011	(Dollars in thousands)
Construction and land	$	—	$	515	$	2,563	$	—	$	3,079
Commercial real estate		19,575		—		2,325		—		21,901
Residential mortgage multifamily real estate		5,749		—		—		—		5,749
Residential mortgage one-to four-family real estate		60,732		1,720		4,230				66,681
Unsecured business loan		40		—		—		—		40
Credit card		37		—				—		37
Home equity		87		—		—		—		87
Passbook loan		37		—		—		—		37
Total	$	86,257	$	2,235	$	9,118	$	—	$	97,610

Exhibit 13-36

Flatbush Federal Bancorp, Inc. and Subsidiaries

3 - Loans Receivable (Continued)

	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2010	(Dollars in thousands)
Construction and land	$	3,790	$	2,355	$	2,040	$	—	$	8,185
Commercial real estate		19,819		—		3,156		—		22,975
Residential mortgage multifamily real estate		5,890		—		—		—		5,890
Residential mortgage one-to four-family real estate		66,963		1,066		3,801		—		71,830
Unsecured business loan		20		—		—		—		20
Credit card		43		—		4		—		47
Home equity		113		—		—		—		113
Passbook loan		39		—		—		—		39
Total	$	96,677	$	3,421	$	9,001	$	—	$	109,099

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2011 and 2010:

	Current		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Total Loans Receivable		Non-Accrual
	(Dollars in thousands)
December 31, 2011:
Construction and land	$	387	$	515	$	—	$	2,176	$	2,692	$	3,079	$	2,176
Commercial real estate		20,122		—		—		1,779		1,779		21,901		1,779
Unsecured Business Loan		40		—		—		—		—		40		—
Residential Multi family Real Estate		5,749		—		—		—		—		5,749		—
Residential One-to four-family Real Estate		60,438		2,014				4,230		6,244		66,681		4,230
Credit Card		33		—		3		—		3		37		—
Home Equity		87		—		—		—		—		87		—
Passbook Loan		37		—		—		—		—		37		—
Total	$	86,893	$	2,529	$	3	$	8,185	$	10,717	$	97,610	$	8,185

Exhibit 13-37

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 3 - Loans Receivable (Continued)

	Current		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Total Loans Receivable		Non-Accrual
	(Dollars in thousands)
December 31, 2010:
Construction and land	$	6,144	$	—	$	—	$	2,041	$	2,041	$	8,185	$	2,041
Commercial real estate		20,378		—		—		2,597		2,597		22,975		2,597
Unsecured Business Loan		20		—		—		—		—		20		—
Residential Multi family Real Estate		5,890		—		—		—		—		5,890		—
Residential One-to four-family Real Estate		65,985		1,912		132		3,801		5,845		71,830		3,801
Credit Card		40		—		3		4		7		47		4
Home Equity		99		—		14		—		14		113		—
Passbook Loan		39		—		—		—		—		39		—
Total	$	98,595	$	1,912	$	149	$	8,443	$	10,504	$	109,099	$	8,443

The Association may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (TDR). The Association may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculation the Company’s allowance for loan losses.

The Association identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

Exhibit 13-38

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 3 - Loans Receivable (Continued)

The following table reflects information regarding troubled debt restructurings for the year ended December 31, 2011:

		Pre-		Post
		Modification		Modification
		Outstanding		Outstanding
	Number of	Recorded		Recorded
	Contracts	Investments		Investments
Troubled debt restructurings:
Residential mortgage	3	$	819,085	$	777,229

There were no troubled debt restructuring which subsequently defaulted during 2011.

Loans whose terms are modified are classified as troubled debt restructurings if the Association grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired.

The Association has granted loans to its directors and officers and to their associates. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability. The aggregate dollar amount of these loans was $775,000 and $804,000 at December 31, 2011 and 2010, respectively. During the year December 31, 2011, no new related party loans were made.

Note 4 - Loan Servicing

The Association originated loans held for sale and sold them, with servicing retained, to the FHLB under the Mortgage Partnership Finance Program. The conditions for sale include a credit enhancement liability as determined at the time of sale. The FHLB pays the Association a fee for credit enhancement as the loans are paid down. At December 31, 2011 and 2010, the potential contingent liability for credit enhancement amounted to $84,000, which is not recorded in the consolidated financial statements. The total loans serviced under this program amounted to approximately $359,000 and $398,000 at December 31, 2011 and 2010, respectively, which amounts are also not included in the consolidated financial statements. In accordance with guidelines for regulatory capital computations, the contingent liability has been subtracted to compute regulatory capital (see Note 9). No loans were sold to the FHLB during the years ended December 31, 2011 and 2010.

Exhibit 13-39

Flatbush Federal Bancorp, Inc. and Subsidiaries

Custodial escrow balances maintained in connection with loans serviced under this program amounted to approximately $530 and $1,064 at December 31, 2011 and 2010, respectively, and are included in the consolidated statements of financial condition as demand deposits.

Note 5 - Premises and Equipment

	December 31,
	2011			2010
Land	$	919,753		$	919,753
Buildings and improvements		2,368,327			2,363,327
Accumulated depreciation		(1,201,304	)		(1,146,718	)
		1,167,023			1,221,609
Leasehold improvements		203,518			203,518
Accumulated amortization		(131,259	)		(115,192	)
		72,259			88,326
Furniture, fixtures and equipment		709,889			500,164
Accumulated depreciation		(491,867	)		(442,032	)
		218,022			58,132
	$	2,377,057		$	2,287,820

Note 6 - Accrued Interest Receivable

	2011		2010
Loans	$	428,893	$	511,517
Securities held to maturity		125,414		95,572
	$	554,307	$	607,089

Exhibit 13-40

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 7 – Deposits

	December 31,
	2011					2010
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Demand deposits:
Non-interest bearing	$	5,197,945		0.00	%	$	5,319,364		0.00	%
NOW		320,676		0.30	%		318,607		0.30	%
		5,518,621					5,637,971
Passbook and club accounts		33,322,694		0.33	%		34,690,578		0.33	%
Certificates of deposit		76,081,253		1.71	%		76,745,008		1.86	%
	$	114,922,568		1.23	%	$	117,073,557		1.32	%

The scheduled maturities of certificates of deposit are as follows (in thousands):

	At December 31,
	2011
Year Ending December 31,
2012	$	59,843
2013		8,360
2014		4,317
2015		1,563
2016		1,034
Thereafter		964
	$	76,081

Certificates of deposit with balances of $100,000 or more totaled approximately $35,993,000 and $33,844,000 at December 31, 2011 and 2010, respectively. Deposits in excess of $250,000 are generally not insured by FDIC.

Exhibit 13-41

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 7 - Deposits (Continued)

Interest expense on deposits is summarized as follows:

	Years Ended December 31,
	2011		2010
Demand	$	1,080	$	1,230
Passbook and club		127,220		125,710
Certificates of deposit		1,307,990		1,603,403
	$	1,436,290	$	1,730,343

Note 8 - Advances from Federal Home Loan Bank of New York

	December 31,
	2011					2010
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
Amortizing Loans:
Principal repayment in
Years ended December 31,
2011	$	—		—	%	$	1,461,007		4.80	%
2012		1,034,952		4.78			1,034,954		4.78
2013		46,622		5.25			46,622		5.25
Total amortizing loans		1,081,574		4.80	%		2,542,583		4.80	%
Term loans:
Due within one year	$	9,000,000		0.31	%		9,500,000		1.13	%
Total Advances	$	10,081,574		0.79	%	$	12,042,583		1.90	%

The carrying value of collateral pledged for the above advances was as follows (in thousands):

	December 31,
	2011		2010
Loans receivable	$	46,145	$	50,566
Mortgage-backed securities		8,719		10,702
	$	54,864	$	61,268

Exhibit 13-42

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 9 - Regulatory Capital

The Association is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Association. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines that involve quantitative measures of Association’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Association’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted total assets (as defined). The following tables present a reconciliation of capital per GAAP and regulatory capital and information as to the Association’s capital levels at the dates presented:

	December 31,
	2011			2010
	(In Thousands)
GAAP capital	$	13,772		$	14,881
Accumulated other comprehensive loss		2,491			1,829
Tier 1 (Core) capital		16,263			16,710
General valuation allowance		957			751
Low-level recourse adjustment		(84	)		(84	)
Total Regulatory Capital	$	17,137		$	17,377

Exhibit 13-43

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 9 - Regulatory Capital (Continued)

	Actual					For Capital Adequacy Purposes					To be Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
December 31, 2011:
Total capital (to risk-weighted assets)	$	17,137		19.88	%	$	≥6,895		≥8.00	%	$	≥8,619		≥10.00	%
Tier 1 capital (to risk-weighted assets) (1)		16,179		18.77	%		≥—		≥—			≥5,171		≥6.00	%
Core (Tier 1) capital (to adjusted total assets)		16,263		11.52	%		≥5,645		≥4.00	%		≥7,056		≥5.00	%
Tangible capital (to adjusted total assets)		16,263		11.52	%		≥2,117		≥1.50	%		≥—		≥—	%
December 31, 2010:
Total capital (to risk-weighted assets)	$	17,377		20.30	%	$	≥6,847		≥8.00	%	$	≥8,558		≥10.00	%
Tier 1 capital (to risk-weighted assets) (1)		16,626		19.43	%		≥—		≥—			≥5,135		≥6.00	%
Core (Tier 1) capital (to adjusted total assets)		16,710		11.45	%		≥5,836		≥4.00	%		≥7,295		≥5.00	%
Tangible capital (to adjusted total assets)	$	16,710		11.45	%	$	≥2,188		≥1.50	%	$	≥—		≥—	%

(1) Net of contingent liability credit enhancement of $84,000.

The most recent notification from the Association’s primary regulator categorized the Association as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions existing, or events which have occurred since this notification that management believes have changed the Association’s category.

Note 10 – Stock Repurchase Program

In July 2005, the Company’s Board of Directors authorized a repurchase program of its common stock for up to 50,000 shares which was completed. On August 30, 2007, the Company approved a second stock repurchase program and authorized the repurchase of up to 50,000 shares of the Company’s outstanding shares of common stock. As of December 31, 2011 and 2010, the Company had repurchased 62,750 shares of common stock. No shares were repurchased in 2011 and 2010.

Exhibit 13-44

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans

Pension Plan

The Association maintains a defined benefit pension plan (the “Plan”) covering all employees who have met the Plan’s eligibility requirements. The Association’s policy is to fund the Plan annually with the minimum contribution deductible for Federal income tax purposes.

On February 26, 2009, the Company froze its defined benefit pension plan effective March 31, 2009. The freezing of the Plan is consistent with ongoing cost reduction strategies and shift focus on future savings of retirement benefit expense. The changes included a discontinuation of accrual of future service cost in the defined benefit pension plan and fully preserving retirement benefits that employees will have earned as of March 31, 2009.

The following table sets forth the Plan’s funded status:

	December 31,
	2011			2010
Change in benefit obligation:
Benefit obligation - beginning	$	5,647,829		$	5,235,702
Service cost		—			—
Interest cost		304,864			305,372
Actuarial loss		647,643			394,924
Benefits Payments		(285,580	)		(288,169	)
Benefit obligation - ending	$	6,314,756		$	5,647,829
Change in plan assets:
Fair value of assets - beginning	$	5,621,314		$	4,838,494
Actual return on plan assets		(81,112	)		570,989
Annuity Payments		(285,580	)		(288,169	)
Contributions		—			500,000
Fair value of assets - ending	$	5,254,622		$	5,621,314

Exhibit 13-45

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Pension Plan (Continued)

	December 31,
	2011			2010
Reconciliation of funded status:
Accumulated benefit obligation	$	(6,314,756	)	$	(5,647,829	)
Projected benefit obligation		(6,314,756	)		(5,647,829	)
Fair value of assets		5,254,622			5,621,314
Funded status	$	(1,060,134	)	$	(26,515	)
Valuation assumptions:
Discount rate		4.40	%		5.54	%
Rate of return on long-term assets		8.00	%		9.00	%

	Years Ended December 31,
	2011			2010
Net periodic pension expense:
Service cost	$	—		$	—
Interest cost		304,864			305,372
Expected return on assets		(492,880	)		(424,680	)
Amortization of unrecognized net loss		242,712			229,604
Total Net Periodic Pension Expense Included in Salaries and Employee Benefits	$	54,696		$	110,296
Valuation assumptions:
Discount rate		5.54	%		6.00	%
Rate of return on long-term assets		9.00	%		9.00	%

The Association expects to make a contribution of $1,500,000 during 2012.

The Plan has invested in following categories of investments:

	December 31,
	2011			2010
Equity/mutual funds	61.98		%	64.98		%
Fixed income		38.02	%		35.02	%
		100.00	%		100.00	%

Exhibit 13-46

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Pension Plan (Continued)

The long-term investment objective is to allocate the Plan’s assets to a range of approximately 65% equities, and 35% bond funds to achieve an optimal risk/reward profile. Based on an analysis of the current market environment, the Company projects a 4% return from fixed income and a 7% return from equities, for an overall expected return of approximately 6%. The long-term rate of return on assets assumption is set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the Plan’s actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the ranges of 5 - 9% and 2 - 6%, respectively. Additionally, the long-term inflation rate is projected to be 3%. When these overall return expectations are applied to a typical plan’s target allocation, the result is an expected return of 7% to 11%.

The fair values of the Company’s pension plan assets at December 31, 2011 and 2010, by asset category (see Note 16 for the definitions of Levels), are as follows:

December 31, 2011	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Asset Category:
Mutual funds – Equity:
Large-Cap Value (a)	$	470,534	$	470,534	$	—	$	—
Small-Cap Core (b)		620,538		620,538		—		—
		1,091,072		1,091,072				—
Common/Collective Trusts – Equity:
Large-Cap Core (c)		556,298		—		556,298		—
Large-Cap Value (d)		274,036		—		274,036		—
Large-Cap Growth (e)		756,620		—		756,620		—
International Growth (f)		578,759		—		578,759		—
		2,165,713		—		2,165,713		—
Common/Collective Trusts – Fixed Income:
Market Duration Fixed (g)		1,997,836		—		1,997,836		—
	$	5,254,622	$	1,091,072	$	4,163,550		—

(a)	This category consists of investments whose sector and industry exposures are maintained within a narrow band around Russell 1000 index. The portfolio holds approximately 150 stocks.
(b)	This category contains stocks whose sector weightings are maintained within a narrow band around those of the Russell 2000 index. The portfolio will typically hold more than 150 stocks.
(c)	This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in approximately the same weightings as the Index.
(d)	This category contains large-cap stocks with above-average yield. The portfolio typically holds between 60 and 70 stocks.
(e)	This category consists of a portfolio of between 45 and 65 stocks that will typically overweight technology and health care.
(f)	This category consists of a broadly diversified portfolio of non-U.S. domiciled stocks. The portfolio will typically hold more than 200 stocks with 0%-35% invested in emerging markets securities.
(g)	This category consists of an index fund that tracks the Barclays Capital U.S. Aggregate Bond index. The fund invests in Treasury, agency, corporate, mortgage-backed and asset-backed securities.

Exhibit 13-47

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Pension Plan (Continued)

December 31, 2010	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
Asset Category:
Mutual funds – Equity:
Large-Cap Value (a)	$	507,220	$	507,220	$	—	$	—
Small-Cap Core (b)		673,134		673,134		—		—
		1,180,354		1,180,354		—		—
Common/Collective Trusts – Equity:
Large-Cap Core (c)		578,123		—		578,123		—
Large-Cap Value (d)		293,325		—		293,325		—
Large-Cap Growth (e)		829,019		—		829,019		—
International Growth (f)		772,022		—		772,022		—
		2,472,489		—		2,472,489		—
Common/Collective Trusts – Fixed Income:
Market Duration Fixed (g)		1,968,471		—		1,968,471		—
	$	5,621,314	$	1,180,354	$	4,440,960	$	—

(a)	This category consists of investments whose sector and industry exposures are maintained within a narrow band around Russell 1000 index. The portfolio holds approximately 150 stocks.
(b)	This category contains stocks whose sector weightings are maintained within a narrow band around those of the Russell 2000 index. The portfolio will typically hold more than 150 stocks.
(c)	This fund tracks the performance of the S&P 500 Index by purchasing the securities represented in the Index in approximately the same weightings as the Index.
(d)	This category contains large-cap stocks with above-average yield. The portfolio typically holds between 60 and 70 stocks.
(e)	This category consists of a portfolio of between 45 and 65 stocks that will typically overweight technology and health care.
(f)	This category consists of a broadly diversified portfolio of non-U.S. domiciled stocks. The portfolio will typically hold more than 200 stocks with 0%-35% invested in emerging markets securities.
(g)	This category consists of an index fund that tracks the Barclays Capital U.S. Aggregate Bond index. The fund invests in Treasury, agency, corporate, mortgage-backed and asset-backed securities.

Expected benefit payments under the Plan are as follows:

Year Ended December 31,
2012	$	283,899
2013		290,982
2014		309,678
2015		330,145
2016		347,612
2017-2021		1,966,674

Exhibit 13-48

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Pension Plan (Continued)

At December 31, 2011, unrecognized net loss amounted to $3,895,593, which is included in accumulated other comprehensive loss. At December 31, 2010, unrecognized net loss amounted to $2,916,670 and was included in accumulated other comprehensive loss. For the year ending December 31, 2012, $382,216 of net loss is expected to be amortized in pension expense.

Postretirement Benefits

The Association provides certain health care and life insurance benefits to employees retired as of January 1, 1995. The following tables set forth the Plan’s funded status and the components of net postretirement benefit cost:

	December 31,
	2011			2010
Changes in benefit obligations:
Benefit obligation - beginning	$	237,044		$	237,867
Interest cost		12,480			13,584
Unrecognized net loss (gain) amortization		235			6,187
Benefits paid		(19,922	)		(20,594	)
Benefit obligation - ending	$	229,837		$	237,044
Reconciliation of funded status:
Accumulated benefit obligation	$	(229,837	)	$	(237,044	)
Postretirement benefit obligation	$	(229,837	)	$	(237,044	)
Valuation assumptions:
Discount rate		4.40	%		5.54	%

Exhibit 13-49

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Postretirement Benefits (Continued)

	Years Ended December 31,
	2011			2010
Net periodic expense:
Unrecognized net loss amortization	$	5,180		$	4,732
Interest cost		12,480			13,584
Unrecognized past service liability		3,824			3,824
Net postretirement benefit cost included in salaries and employee benefits	$	21,484		$	22,140
Valuation assumptions:
Discount rate		5.54	%		6.00	%
Current medical trend		9.00	%		9.00	%
Ultimate medical trend		5.00	%		5.00	%

The Plan is unfunded. It is estimated that contributions of approximately $23,330 will be made during the year ending December 31, 2012. Expected benefit payments under the Plan are as follows:

Year Ended December 31,
	2012	$	23,330
	2013		23,836
	2014		24,008
	2015		23,807
	2016		23,150
	2017-2021		97,933

At the year ended December 31, 2011, a medical cost trend rate of 8.0%, was estimated. For the year ended December 31, 2010, a medical cost trend of 9.00% was estimated. Increasing the assumed medical cost trend by one percent in each year would increase the accumulated postretirement benefit obligation as of December 31, 2011 and 2010, by $13,000 and $14,000, respectively. The aggregate of the service and interest components of net periodic postretirement benefit cost for the years ended December 31, 2011 and 2010 were not affected.

At December 31, 2011, unrecognized prior service cost and unrecognized net loss amounted to $23,692 and $65,479, respectively, and were included in accumulated other comprehensive loss. At December 31, 2010, unrecognized prior service cost and unrecognized net loss amounted to $27,516 and $70,424, respectively, and were included in accumulated other comprehensive loss. For the year ended December 31, 2012, $5,304 of net loss and $3,824 of prior service cost are expected to be amortized in post-retirement benefit expense.

Exhibit 13-50

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Supplemental Employee Retirement Plan (“SERP”)

	December 31,
	2011			2010
Changes in benefit obligations:
Benefit obligation - beginning	$	740,644		$	742,790
Service cost		13,552			11,448
Interest cost		38,456			41,776
Actuarial loss(gain)		139,702			37,630
Benefits paid		(93,000	)		(93,000	)
Benefit obligation - ending	$	839,354		$	740,644
Reconciliation of funded status:
Accumulated benefit obligation	$	(733,033	)	$	(678,084	)
Projected benefit obligation	$	(839,354	)	$	(740,644	)
Fair value of assets		—			—
Funded status	$	(839,354	)	$	(740,644	)
Valuation assumptions:
Discount rate		4.40	%		5.54	%
Salary increase rate		3.00	%		3.00	%

	Years Ended December 31,
	2011			2010
Net periodic expense:
Service cost	$	13,552		$	11,448
Interest cost		38,456			41,776
Unrecognized past service liability		11,776			11,776
Net SERP cost included in salaries and employee benefits	$	63,784		$	65,000
Valuation assumptions:
Discount rate		5.54	%		6.00	%
Salary increase rate		3.00	%		3.00	%

Exhibit 13-51

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Supplemental Employee Retirement Plan (“SERP”) (Continued)

The Plan is unfunded. It is estimated that contributions of approximately $93,185 will be made during the year ending December 31, 2012. Expected benefit payments under the Plan are as follows:

Year Ended December 31,
	2012	$	93,185
	2013		93,398
	2014		96,541
	2015		101,054
	2016		13,542
	2017-2021		170,938

At December 31, 2011, unrecognized prior service cost and unrecognized net loss amounted to $69,848 and $193,165, respectively, and were included in accumulated other comprehensive loss. At December 31, 2010, unrecognized prior service cost and unrecognized net loss of $81,624 and $51,680, respectively, were included in accumulated other comprehensive loss. For the year ended December 31, 2012, $11,776 of prior service cost and $13,520 of unrecognized net loss is expected to be amortized in SERP expense.

Retirement Plan for Directors

	December 31,
	2011			2010
Changes in benefit obligations:
Benefit obligation – beginning	$	209,088		$	210,030
Service cost		8,444			7,248
Interest cost		11,164			11,768
Actuarial loss (gains)		42,005			7,042
Benefits paid		(19,300	)		(27,000	)
Benefit obligation - ending	$	251,401		$	209,088
Reconciliation of funded status:
Accumulated benefit obligation	$	(190,213	)	$	(166,620	)
Projected benefit obligation	$	(251,401	)	$	(209,088	)
Market value of assets		—			—
Funded status	$	(251,401	)	$	(209,088	)
Valuation assumptions:
Discount rate		4.00	%		5.54	%
Salary increase rate		3.00	%		3.00	%

Exhibit 13-52

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Retirement Plan for Directors (Continued)

	Year Ended December 31,
	2011			2010
Net periodic expense:
Service cost	$	8,444		$	7,248
Interest cost		11,164			11,768
Unrecognized (gain)		(2,360	)		(3,000	)
Unrecognized past service liability		5,512			5,512
Net cost included in directors’ compensation	$	22,760		$	21,528
Valuation assumptions:
Discount rate		5.54	%		6.00	%
Salary increase rate		3.00	%		3.00	%

The Plan is unfunded. It is estimated that contributions of approximately $1,786 will be made during the year ending December 31, 2012. Expected benefit payments under the Plan are as follows:

Year Ended December 31,
	2012	$	1,786
	2013		3,591
	2014		17,813
	2015		18,222
	2016		18,694
	2017-2021		71,454

Exhibit 13-53

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Retirement Plan for Directors (Continued)

At December 31, 2011, unrecognized prior service cost and unrecognized net gain amounted to $42,275 and $7,320, respectively, and are included in accumulated other comprehensive loss. At December 31, 2010, unrecognized prior service cost and unrecognized net gain of $47,787 and $51,685, respectively, were included in accumulated other comprehensive loss. For the year ended December 31, 2012, $5,512 of prior service cost is expected to be amortized in expense.

ESOP

The Company has established an ESOP for all eligible employees. The ESOP used $696,160 of proceeds from a term loan from the Company to purchase 105,294 shares (adjusted for the February, 2005 and March, 2006 stock dividends) of Company common stock in the initial offering. The term loan from the Company to the ESOP is payable over 20 years. Interest on the term loan is payable monthly, commencing on November 1, 2003, at the rate of 5.5% per annum. The Association intends to make discretionary contributions to the ESOP which will be equal to principal and interest payments required from the ESOP on the term loan. Shares purchased with the loan proceeds are initially pledged as collateral for the term loan and are held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from the suspense account will be allocated among the participants on the basis of compensation, as described by the ESOP, in the year of allocation. During the years ended December 31, 2011 and 2010, the Association made cash contributions of $57,000 to the ESOP, of which $29,000 and $28,000, respectively, was applied to loan principal. At December 31, 2011 and 2010, the loan had an outstanding balance of $495,000 and $524,000, respectively.

The ESOP shares pledged as collateral are reported as unearned ESOP shares in the consolidated statements of financial condition. As shares are committed to be released from collateral, the Company records compensation expense equal to the current market price of the shares, and the shares become outstanding for net income per common share computations. Dividends on allocated ESOP shares are recorded as a reduction of stockholders’ equity. Contributions equivalent to dividends on unallocated ESOP shares are recorded as a reduction of debt. ESOP compensation expense was $25,000 and $25,000 for the years ended December 31, 2011 and 2010, respectively, which is included in salary and employee benefits.

The ESOP shares are summarized as follows:

	December 31,
	2011		2010
Unearned shares		61,858		67,123
Shares committed to be released		—		—
Shares released		35,232		29,967
Shares distributed		8,204		8,204
		105,294		105,294
Fair value of unearned shares	$	194,853	$	402,738

Exhibit 13-54

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Restricted Stock Awards

Restricted Stock Awards under the Stock-Based Incentive Plan are granted in the form of Company common stock, and vest over a period of eight years (12.5% annually from the date of grant). The Restricted Stock Awards become fully vested upon the death or disability of the holder. At December 31, 2011 and 2010, there were no shares remaining available for future restricted stock awards.

The following is a summary of the status of the Company’s non-vested restricted shares for the years ended December 31, 2011 and 2010:

	Restricted Shares		Weighted Average Grant Date Fair Value
Non-vested as of December 31, 2009		11,398	$	9.71
Vesting		3,800		9.71
Non-vested as of December 31, 2010		7,598		9.71
Vesting		3,800		9.71
Non-vested as of December 31, 2011		3,798	$	9.71

No shares were granted or forfeited during the years ended December 31, 2011 and 2010. During both the years ended December 31, 2011 and 2010, the Company recorded $41,000 of stock-based compensation expense and the income tax benefit attributed to this expense was $17,000 during each year. Expected future compensation expense relating to the 3,798 non-vested restricted share awards as of December 31, 2011 is $41,000 over a weighted average period of 1 year.

Stock Options

Stock Options granted under the Stock-Based Incentive Plan may be either options that qualify as incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or non-statutory options. Options granted will vest and will be exercisable on a cumulative basis in equal installments at the rate of 12.5% per year commencing one year after the grant date. All options granted will be exercisable in the event the optionee terminates his employment due to death or disability. The options expire ten years from the date of grant. At December 31, 2011 and 2010, there were 57,357 shares available for future option grants.

Exhibit 13-55

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 11 - Benefit Plans (Continued)

Stock Options (Continued)

A summary of stock option activity follows:

	Number of Stock Options		Weighted Average Exercise price
Balance at December 31, 2009		82,378	$	9.71
Granted		—
Exercised		—
Forfeited		—
Balance at December 31, 2010		82,378		9.71
Granted		—
Exercised		—
Forfeited		—
Balance at December 31, 2011		82,378	$	9.71
Exercisable at December 31, 2011		75,503	$	9.71

During both the years ended December 31, 2011 and 2010, the Company recorded $41,000 for stock option expense and the tax benefit attributed to non-qualified stock option expense was $3,000 in each year.

Expected future compensation expense relating to the 6,875 nonvested options outstanding as of December 31, 2011 is $27,843 over a weighted-average period of 1 year.

At December 31, 2011 and 2010, the intrinsic value of stock options outstanding and stock options exercisable amounted to $0 and the weighted average remaining contractual term was 3 and 4 years, respectively. At and for the years ended December 31, 2011 and 2010, there was no dilutive effect of stock options.

Note 12 - Income Taxes

The Association qualifies as a savings and loan association under the provisions of the Internal Revenue Code and, therefore, was permitted, prior to January 1, 1996, to deduct from Federal taxable income an allowance for bad debts based on eight percent of taxable income before such deduction, less certain adjustments, subject to certain limitations. Beginning January 1, 1996, the Association, for Federal income tax purposes, must calculate its tax bad debt deduction using either the experience or the specific charge off method. Retained earnings at December 31, 2011 and 2010, include approximately $3,368,000 of such bad debt deductions for which income taxes have not been provided. During 2010, amendments of the New York State and New York City’s tax law and ordinance conformed the bad debt deduction to the deduction allowed under the Federal income tax law for taxable years beginning on or after January 1, 2010.

Exhibit 13-56

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 12 - Income Taxes (Continued)

The components of income taxes are summarized as follows:

	Years Ended December 31,
	2011			2010
Current income tax expense:
Federal	$	7,610		$	435,949
State and city		34,768			102,960
		42,378			538,909
Deferred income tax (benefit):
Federal		(307,983	)		(220,694	)
State and city		(365,996	)		(161,966	)
		(673,979	)		(382,660	)
	$	(631,601	)	$	156,249

The following table presents a reconciliation between reported income taxes and the income taxes which would be computed by applying the applicable Federal income tax rate of 34% to consolidated (loss) income before income taxes:

	Years Ended December 31,
	2011			2010
Federal income tax (benefit) expense	$	(431,726	)	$	203,143
(Decreases) increases in income taxes resulting from:
New York State and City taxes, net of federal income tax effect		(218,610	)		(38,944	)
BOLI income and other non-taxable items		(18,735	)		(7,950	)
Income Tax (Benefit) Expense	$	(631,601	)	$	156,249
Effective Income Tax Rate		49.74	%		26.15	%

Exhibit 13-57

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 12 - Income Taxes (Continued)

The income tax effects of existing temporary differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities are as follows:

	December 31,
	2011		2010
Deferred income tax assets:
Allowance for loan losses	$	1,013,995	$	686,302
Non-accrual interest		437,777		276,891
Depreciation		73,902		134,011
Deferred compensation		308,592		309,342
Benefit plans		774,357		346,695
Net operating loss carry forward		341,961		—
Other		86		46,904
		2,950,670		1,800,145
Deferred income tax liabilities		—		—
Net Deferred Income Tax Asset Included in Other Assets	$	2,950,670	$	1,800,145

At December 31, 2011, the Company had net operating loss carry forwards of $634,000 for federal purposes and $1.1 million for New York State and New York City purposes. As a result of the $9.1 million gain recognized on the January 2012 building sale (discussed in Notes 1 and 20 to these consolidated financial statements), the Company expects to fully utilize all net operating loss carry forwards in 2012.

Exhibit 13-58

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 13 – Comprehensive Income

The components of accumulated other comprehensive loss included in stockholders’ equity are as follows:

	December 31,
	2011			2010
Pension plan:
Unrecognized net loss	$	(3,895,593	)	$	(2,916,670	)
Postretirement benefits:
Unrecognized net loss		(65,479	)		(70,424	)
Unrecognized prior service cost		(23,692	)		(27,516	)
SERP:
Unrecognized net loss		(193,165	)		(51,680	)
Unrecognized prior service cost		(69,848	)		(81,624	)
Retirement Plan for Directors:
Unrecognized net gain		7,320			51,685
Prior service cost		(42,275	)		(47,787	)
Accumulated comprehensive loss before taxes		(4,282,732	)		(3,144,016	)
Tax Effect		1,792,102			1,315,556
Accumulated other comprehensive loss	$	(2,490,630	)	$	(1,828,460	)

Exhibit 13-59

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 13 – Comprehensive Income (Continued)

The components of other comprehensive loss and related tax effect is presented in the following table:

	Years Ended December 31,
	2011			2010
Pension plan:
Net (loss)	$	(978,923	)	$	(19,011	)
Postretirement benefits:
Net gain (loss)		4,945			(1,455	)
Prior service cost		3,824			3,824
SERP:
Net (loss)		(141,485	)		(37,630	)
Prior service cost		11,776			11,776
Retirement Plan for Directors:
Net (loss)		(44,365	)		(10,042	)
Prior service cost		5,512			5,512
Other comprehensive (loss) before taxes		(1,138,716	)		(47,026	)
Tax effect		476,546			19,680
Other comprehensive (loss)		(662,170	)	$	(27,346	)

Note 14 - Commitments

The Association is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contract or notional amounts of those instruments reflect the extent of involvement the Association has in particular classes of financial instruments.

The Association’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Association uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Exhibit 13-60

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 14 - Commitments (Continued)

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The total commitment amounts do not necessarily represent future cash requirements. The Association evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Association upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but primarily includes residential and income-producing real estate.

The Association has outstanding various commitments to originate or purchase loans as follows:

	December 31,
	2011		2010
Mortgage loans	$	405,000	$	2,244,000
Secured credit cards		136,223		131,000
	$	541,223	$	2,375,000

At December 31, 2011, the outstanding mortgage loan commitments included $405,000 for fixed interest rates at 4.75%.

At December 31, 2010, the outstanding mortgage loan commitments included $1,644,000 for fixed interest rates ranging from 4.25% to 5.75% and $600,000 for adjustable interest rates at 5.50%.

Rentals, including related expenses, under long-term operating leases for certain branch offices amounted to approximately $201,000 and $116,000 for the years ended December 31, 2011 and 2010, respectively. At December 31, 2011, the minimum rental commitments under all noncancellable leases with initial or remaining terms of more than one year are as follows:

Year Ended December 31,	Amount
2012	$	284,699
2013		290,396
2014		296,201
2015		302,125
2016		308,930
Thereafter		1,487,513

The Company and the Association also have, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on any of these transactions.

Exhibit 13-61

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 15 - Contingencies

The Company and the Association are parties to litigation which arises primarily in the ordinary course of business. In the opinion of management, the ultimate disposition of such litigation should not have a material effect on the consolidated financial position or operations of the Company.

Note 16 - Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Association could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amount reported at each year-end.

FASB’s guidance on fair value measurement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. The guidance clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement.

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

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

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

The Company had no assets which are required to be measured on a recurring basis at December 31, 2011 and 2010.

Exhibit 13-62

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 16 - Fair Value Measurements and Fair Values of Financial Instruments (Continued)

For assets measured at fair value on a non-recurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:

Description	Total		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(In Thousands)
Impaired Loans
December 31, 2011	$	5,422	$	—	$	—	$	5,422
December 31, 2010	$	4,769	$	—	$	—	$	4,769

The Company had no liabilities which are required to be measured on a recurring or non-recurring basis at December 31, 2011 and 2010.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at December 31, 2011 and 2010:

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities

The fair value of securities held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Loan Receivable (Carried at Cost)

The fair value of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Exhibit 13-63

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 16 - Fair Value Measurements and Fair Values of Financial Instruments (Continued)

Impaired Loans

Impaired loans are those for which the Company has measured and recorded impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Accrued Interest Receivable

The carrying amounts reported in the balance sheet for accrued interest receivable approximate those assets’ fair values.

Federal Home Loan Bank of New York (FHLB) Stock (Carried at Cost)

The carrying amount of restricted investment in FHLB stock approximates fair value, and considers the limited marketability of such securities.

Deposit Liabilities (Carried at Cost)

The fair value disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-Term Borrowings (Carried at Cost)

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Borrowings (Carried at Cost)

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Accrued Interest Payable

The carrying amounts reported in the balance sheet for accrued interest payable approximate the assets’ fair values.

Exhibit 13-64

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 16 - Fair Value Measurements and Fair Values of Financial Instruments (Continued)

Off-Balance Sheet Financial Instruments (Disclosed at Cost)

Fair value for the Association’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

As of December 31, 2011 and 2010, the fair value of commitments to extend credit were not considered to be material.

The estimated fair values of the Association’s financial instruments were as follows at December 31, 2011 and 2010.

	December 31,
	2011				2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	8,801	$	8,801	$	8,184	$	8,184
Securities held to maturity		25,749		27,402		21,780		23,084
FHLB stock		698		698		808		808
Loans receivable		95,162		101,557		106,478		112,166
Accrued interest receivable		554		554		607		607
Financial liabilities:
Deposits		114,923		116,442		117,074		118,460
Advances from FHLB		10,082		10,113		12,043		12,209
Accrued interest payable		5		5		28		28

Exhibit 13-65

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 17 - Parent Only Financial Information

The Company operates its wholly owned subsidiary, the Association. The earnings of the Association are recognized by the Company under the equity method of accounting. The following are the condensed financial statements for the Company (Parent Company only) as of and for the years ended December 31, 2011 and 2010.

CONDENSED STATEMENTS OF FINANCIAL CONDITION
	December 31,
	2011		2010
Assets
Cash and cash equivalents	$	124,408	$	227,008
Investment in the Association		13,772,427		14,881,231
ESOP loan receivable		494,736		523,959
Other assets		191,457		125,530
Total Assets	$	14,583,028	$	15,757,728
Liabilities and Stockholders’ Equity
Other liabilities	$	23,003	$	4,211
Stockholders’ equity		14,560,025		15,753,517
Total Liabilities and Stockholders’ Equity	$	14,583,028	$	15,757,728

CONDENSED STATEMENTS OF INCOME
	Years Ended December 31,
	2011			2010
Interest income	$	29,529		$	31,765
Undistributed earnings (distribution in excess of earnings) of Association		(553,496	)		474,794
		(523,967	)		506,559
Non-interest expenses		157,842			93,507
(Loss) income before Income Tax Benefit		(681,809	)		413,052
Income tax benefit		(43,626	)		(28,177	)
Net (Loss) Income	$	(638,183	)	$	441,229

Exhibit 13-66

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 17 - Parent Only Financial Information (Continued)

CONDENSED STATEMENTS OF CASH FLOWS
	Years Ended December 31,
	2011			2010
Cash Flows from Operating Activities
Net income	$	(638,183	)	$	441,229
Undistributed earnings (distribution in excess of earnings) of Association		553,496			(474,794	)
Increase in other assets		(65,927	)		(30,927	)
(Decrease) increase in other liabilities		18,791			(3,154	)
Net Cash (Used in) Operating Activities		(131,823	)		(67,646	)
Cash Flows from Investing Activities
Repayments ESOP loan receivable		29,223			27,669
Net (Decrease) in Cash and Cash Equivalents		(102,600	)		(39,977	)
Cash and Cash Equivalents - Beginning		227,008			266,985
Cash and Cash Equivalents - Ending	$	124,408		$	227,008

Exhibit 13-67

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 18 - Quarterly Financial Data (Unaudited)

	Year Ended December 31, 2011
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(In Thousands, Except Per Share Data)
Interest income	$	1,763		$	1,712		$	1,662		$	1,669
Interest expense		412			388			378			376
Net Interest Income		1,351			1,324			1,284			1,293
Provision for loan losses		139			1,564			—			8
Net Interest Income (loss) after Provision for Loan Losses		1,212			(240	)		1,284			1,285
Non-interest income		63			96			62			62
Non-interest expenses		1,252			1,201			1,385			1,256
Income (loss) before Income Tax Expense (Benefit)		23			(1,345	)		(39	)		91
Income tax expense (benefit)		(13	)		(548	)		(19	)		(52	)
Net Income (loss)	$	36		$	(797	)	$	(20	)	$	143
Net income (loss) per common share, basic and diluted	$	0.01		$	(0.30	)	$	(0.01	)	$	(0.05	)

Exhibit 13-68

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 18 - Quarterly Financial Data (Unaudited) (Continued)

	Year Ended December 31, 2010
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(In Thousands, Except Per Share Data)
Interest income	$	2,087	$	2,004	$	1,988	$	1,883
Interest expense		557		531		499		463
Net Interest Income		1,530		1,473		1,489		1,420
Provision for loan losses		154		134		100		433
Net Interest Income after Provision for Loan Losses		1,376		1,339		1,389		987
Non-interest income		63		65		64		61
Non-interest expenses		1,212		1,194		1,171		1,170
Income (loss) before Income Tax
Expense (Benefit)		227		210		282		(122	)
Income tax expense (benefit)		87		64		32		(27	)
Net Income (loss)	$	140	$	146	$	250	$	(95	)
Net income (loss) per common share, basic and diluted	$	0.05	$	0.05	$	0.09	$	(0.04	)

Note 19 - Recent Accounting Pronouncements

The following is a summary of recently issued authoritative pronouncements that could have an impact on the accounting, reporting, and/or disclosure of the consolidated financial information of the Company.

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Comprehensive Income - Presentation of Comprehensive Income”. The provisions of this ASU amend FASB Accounting Standards Codification (“ASC”) Topic 220, “Comprehensive Income,” to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of stockholder’s equity. Reporting entities are allowed to present either: a statement of comprehensive income, which reports both net income and other comprehensive income; or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all 3 presentations were acceptable. Regardless of the presentation selected, the Reporting Entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements.

Exhibit 13-69

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 19 - Recent Accounting Pronouncements (Continued)

The FASB subsequently issued ASU 2011-12, which defers the presentation of all reclassification adjustments while the FASB considers the operational concerns raised with regard to this presentation, as well as whether or not this presentation meets the needs of financial statement users. Until the FASB has reached a decision, reporting entities should continue to present reclassifications out of accumulated other comprehensive income consistent with pre-existing requirements.

The provision to prepare either a combined statement of comprehensive income or separate, but consecutive, statements of net income and other comprehensive income remains in effect for fiscal years and interim periods beginning after December 15, 2011 for public companies, and for fiscal years ending after December 15, 2012 for nonpublic companies. As the two remaining options for presentation existed prior to the issuance of this ASU, early adoption is permitted. The Company does not expect the adoption of these pronouncements to have a material impact on consolidated operations or financial position.

The FASB issued ASU 2011-04 to amend FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The ASU clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s stockholder’s equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of level 3 assets. The ASU also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The ASU also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. For nonpublic entities, the ASU is effective for annual periods beginning after December 15, 2011. The Company does not expect the adoption of these pronouncements to have a material impact on consolidated operations or financial position.

Note 20 – Property Sale

During 2010, the Company entered into an agreement (the “Agreement”) to sell its current main branch building and a portion of Flatbush Federal’s adjoining real estate to a third party (the “Purchaser”) (the “Transfer”). Under the Agreement, Purchaser would acquire Flatbush Federal’s current main branch building located at 2146 Nostrand Avenue, Brooklyn, New York (“Property A”). In addition thereto, the Purchaser would take title to 2158 Nostrand Avenue, Brooklyn, New York (“Property B”), and an approximately 12,305 square foot parcel (“Property C”) of a larger adjoining parking lot (“Lot 124”) abutting parts of Nostrand Avenue and Hillel Place, Brooklyn, New York (Property A, Property B, and Property C are collectively, the “Properties”).

Exhibit 13-70

Flatbush Federal Bancorp, Inc. and Subsidiaries

Note 20 – Property Sale (Continued)

On March 24, 2011, the Company and the Purchaser entered into an amendment to the Agreement. The significant terms of the Agreement, as amended, are as follows:

1.	The Purchaser was required to subdivide Lot 124 (of which Property C forms a part of) into two separate tax lots or parcels (the “Subdivision”). Lot 124 consists of (i) Parcel C and (ii) a 3,100 square foot parcel which abuts Hillel Place (the “Retained Property”). Flatbush Federal will retain title to the Retained Parcel, which will become the site of a new branch building (“Branch Building”).
2.	The Transfer must close (the “Closing”) five (5) days after the date the Subdivision has been approved and new tax lot numbers are assigned to Property C and the Retained Property.
3.	The Purchaser is obligated to complete construction of and deliver to the Company a building containing a 3,000 square foot ground floor bank branch, a cellar, and three (3) additional floors of office space. In consideration of constructing the three (3) additional floors of office space, the Purchaser shall receive a credit at the Closing.
4.	One of the principals of the Purchaser will personally guarantee the Purchaser’s obligation to deliver the bank branch and office building to Flatbush Federal.

The Company plans to use the additional three (3) floors of office space (consisting of approximately 7,125 of additional square feet) for its executive and administrative offices.

The transfer closed on January 13, 2012; at that date the Company received $6,340,000 in cash and a building valued at $3,176,000 and recorded a pre-tax gain of $9,073,000.

Upon the Closing, Flatbush Federal began leasing back Property A on an interim basis for its continued use as a temporary bank branch (the “Branch Lease”) for one ($1.00) dollar per year. Flatbush Federal must relocate to the new Branch Building no later than 45 days after the Purchaser completes the construction of the Branch Building and if applicable, the Purchaser’s contractor has completed construction of the interior build-out and delivers to Flatbush Federal a temporary certificate of occupancy for the Branch Building, Bank branch expansion and interior build-out. At that time, the Branch Lease will terminate, and Flatbush Federal will open the Branch Building for business as its new bank branch.

Exhibit 13-71

Flatbush Federal Bancorp, Inc. and Subsidiaries

Directors and Executive Officers

Directors

Jesus R. Adia

Chairman of the Board,

President and Chief Executive Officer,

Flatbush Federal Bancorp, Inc. and

Flatbush Federal Savings and Loan Association

D. John Antoniello

President of Anbro Supply Company, an

industrial supply company

Patricia Ann McKinley Scanlan

Marketing Professional for a Long Island-based newspaper

New York State real estate agent

Alfred S. Pantaleone

Retired, formerly Deputy Executive Director of

the New York City Board of Elections

Charles J. Vorbach

President of John L. Vorbach Co., Inc., an insurance

brokerage and consulting business

Michael J. Lincks

Certified Public Accountant and a private investor

Executive Officers

Jesus R. Adia

President and Chief Executive Officer

John S. Lotardo

Executive Vice President and Chief Financial Officer

Exhibit 13-72

Flatbush Federal Bancorp, Inc. and Subsidiaries

Shareholder Information

Annual Meeting

The Annual Meeting of Shareholders will be held at 2146 Nostrand Avenue, Brooklyn, NY 11210 on May 24, 2012 at 11:00 a.m.

Stock Listing

Over-the-Counter Bulletin Board under the symbol “FLTB”

Special Counsel

Luse Gorman Pomerenk & Schick, P.C.

5335 Wisconsin Avenue, NW, Suite 780

Washington, D.C. 20015

Independent Auditors

ParenteBeard LLC

100 Walnut Avenue, Suite 200

Clark, NJ 07066

Transfer Agent and Registrar

Registrar and Transfer Company

10 Commerce Drive

Cranford, NJ 07016

(800) 368-5948

Please contact our transfer agent directly for assistance in changing your address, elimination of duplicate mailing, transferring stock, or replacing lost, stolen or destroyed stock certificates.

Annual Report on Form 10-K

A copy of the Company’s Form 10-K for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission is available without charge to shareholders by written request to the Company. It may also be accessed on our website at: www.flatbush.com

Exhibit 13-73

Flatbush Federal Bancorp, Inc. and Subsidiaries

Market Information

The Company’s Common Stock is traded on the Over-the-Counter Bulletin Board under the symbol “FLTB.”

The following table sets forth the range of the high and low bid prices of the Company’s Common Stock since December 31, 2009, and is based upon information provided on the Yahoo Finance website. The Company declared 10% stock dividends on February 23, 2006 and March 22, 2005.

	Prices of Common Stock
	High		Low
Calendar Quarter Ended
December 31, 2011	$	4.00	$	3.15
September 30, 2011	$	5.00	$	3.50
June 30, 2011	$	5.60	$	4.70
March 31, 2011	$	6.00	$	5.40
December 31, 2010	$	6.00	$	5.15
September 30, 2010	$	6.97	$	4.20
June 30, 2010	$	5.25	$	4.11
March 31, 2010	$	4.55	$	3.70

As of December 31, 2011, the Company had 460 stockholders of record.

Exhibit 13-74