Related Party Transactions and Outside Related Director Information

Sound Federal Bancorp, Inc. (SFFS)

7/8/2005 Proxy Information

The Bank offers loans to directors, officers, and employees which are made by the Bank to such persons in the ordinary course of business on substantially the same terms (other than interest rate), including collateral, as those prevailing at the time for comparable transactions with other persons, and which do not involve more than the normal risk of collectibility or present other unfavorable features. All such loans were performing in accordance with their terms as of the date of this proxy statement. Federal regulations permit executive officers and directors to participate in loan programs that are available to other employees, so long as the director or executive officer is not given preferential treatment compared to other participating employees. The interest rate on loans to directors and officers is the same as that offered to the Bank's other employees.

Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer from: (1) extending or maintaining credit; (2) arranging for the extension of credit; or (3) renewing an extension of credit in the form of a personal loan for an officer or director. There are several exceptions to this general prohibition, one of which is applicable to the Company. Sarbanes-Oxley does not apply to loans made by a depository institution that is insured by the FDIC and is subject to the insider lending restrictions of the Federal Reserve Act. All loans to the Company's directors and officers are made in conformity with the Federal Reserve Act and applicable regulations.

Set forth below is certain information as to loans made by Sound Federal Savings to certain of its directors and executive officers, or their affiliates, whose aggregate indebtedness to Sound Federal Savings exceeded $60,000 at any time since April 1, 2004. All of the loans are secured loans and all loans designated as residential loans are first mortgage loans secured by the borrower's principal place of residence.

(See page 17 for table).

Bruno J. Gioffre, in addition to his duties as Chairman of the Board of the Company, is counsel to the law firm of Gioffre & Gioffre Professional Corporation, which represents the Bank in mortgage loan transactions. For the year ended March 31, 2005, the Bank paid Gioffre & Gioffre Professional Corporation fees of $222,000. The terms and conditions of these fees and services are substantially the same as those for similar transactions with other parties.

James Staudt, in addition to his duties as general counsel and a Director of the Company, is a partner in the law firm of McCullough, Goldberger & Staudt, LLP, which also represents the Bank in mortgage loan transactions. For the year ended March 31, 2005, the Bank paid McCullough, Goldberger & Staudt fees of $194,000.

Joseph A. Lanza, in addition to his duties as a Director of the Company, is the President of Lanza Electric, an electrical contractor. Lanza Electric provides services to the Bank. For the year ended March 31, 2005, the Bank paid Lanza Electric $35,000.