UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 10-K





(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended June 30, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 0-28032





PATAPSCO BANCORP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 52-1951797                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                          |  |           
|----------------------------------------- |  | ----------
|1301 Merritt Boulevard, Dundalk, Maryland |  | 21222-2194
|(Address of principal executive offices)  |  | (Zip Code)

Registrants telephone number, including area code: (410) 285-1010





Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common stock, par value $.01 per share

(Title of Class)





Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No    ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x



|                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes 
  ̈    No  x

As of December 31, 2007, the aggregate market value of voting common stock held by nonaffiliates was
approximately $21,954,804, computed by reference to the closing sales price on December 31, 2007 as reported on the OTC Electronic Bulletin Board.

Number of shares of Common Stock outstanding as of September 22, 2008: 1,862,559.

DOCUMENTS INCORPORATED BY REFERENCE



| | 1. | Portions of the 2008 Annual Report to Stockholders. (Part II)
| | -- | -------------------------------------------------------------









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PART I

Forward-Looking Statements

When used in this Annual Report, the words or phrases will likely result,
are expected to, will continue, is anticipated, estimate, project or similar expressions are intended to identify forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Companys market area, changes in policies by regulatory agencies, fluctuations in interest
rates, demand for loans in the Companys market area, and competition that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Companys financial performance and could cause the Companys
actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Item 1.
Business

General

Patapsco Bancorp, Inc.Patapsco Bancorp, Inc. (the Company) was incorporated under the laws of the State of Maryland in November 1995. On April 1, 1996, Patapsco Federal Savings and Loan Association
(the Association), the predecessor of The Patapsco Bank (the Bank), converted from mutual to stock form and reorganized into the holding company form of ownership as a wholly-owned subsidiary of the Company.

Other than the note receivable for Bradford Bancorp resulting from the terminated merger agreement, the Company has no significant assets other than its
investment in the Bank. The Company is primarily engaged in the business of directing, planning and coordinating the business activities of the Bank. Accordingly, the information set forth in this report, including financial statements and related
data, focuses primarily on the Bank. In the future, the Company may become an operating company or acquire or organize other operating subsidiaries, including other financial institutions. Currently, the Company does not maintain offices separate
from those of the Bank or employ any persons other than its officers who are not separately compensated for such service.

The
Companys and the Banks executive offices are located at 1301 Merritt Boulevard, Dundalk, Maryland 21222-2194, and the main telephone number is (410) 285-1010.

The Patapsco Bank. The Bank is a Maryland commercial bank operating through five full-service offices located in Dundalk, Parkville,
Carney, Glen Arm and Baltimore City, Maryland. The primary business of the Bank is to attract deposits from individual and corporate customers and to originate residential and commercial mortgage loans, commercial loans and consumer loans, primarily
in the Greater Baltimore Metropolitan area. The Bank is subject to competition from other financial and mortgage institutions in attracting and retaining deposits and in making loans. The Bank is subject to the regulations of certain agencies of the
federal government and undergoes periodic examination by those agencies. The Bank has two active operating subsidiaries, Prime Business Leasing and Patapsco Financial Services. The primary business of Prime Leasing is the origination and servicing
of commercial leases. The primary business of Patapsco Financial Services is the sale of consumer investments.

At June 30, 2008, the
Bank had $70.0 million, $53.5 million, $29.9 million, $41.3 million, $20.9 million and $17.7 million in residential mortgage loans, small business loans, construction loans, commercial real estate loans, home equity and other consumer loans, and
equipment leases, respectively.



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Available Information

The Bank maintains a website at http://www.patapscobank.com, which makes available the Companys Section 16 filings with the Securities and Exchange Commission (SEC). The SEC maintains a website
at http://www.sec.gov that makes available the Companys annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934, as amended, free of charge, on the site as soon as reasonably practicable after the Company has electronically filed these documents with, or otherwise furnished them to, the SEC. The Companys Internet
website and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K.

Termination of Proposed Acquisition

On January 3, 2008, the Company and Bradford Bancorp, Inc. announced that they had
mutually terminated the Agreement and Plan of Merger that the parties had previously executed on March 19, 2007. Pursuant to the termination agreement, Bradford Bancorp, Inc. agreed to pay the Company a termination fee of $2.0 million payable
in the form of a promissory note, which matures on December 31, 2008 and provides for interest equal to the prime rate plus one percent. On August 1, 2008, this interest rate increased to the prime rate plus three percent. The termination
agreement also provided for a mutual release of claims in connection with the merger.

Market Area

The Banks market area for gathering deposits consists of the Hampden area of Baltimore City and eastern and northeastern Baltimore County, Maryland, while the Bank
makes loans to customers in much of the Mid-Atlantic area with a strong emphasis on the Baltimore metropolitan area. The economy of the Banks market area has historically been based on industries such as steel, shipyards and automobile
assembly. The economy in the Banks market area continues to be dependent, to some extent, on a small number of major industrial employers. A significant portion of eastern Baltimore County has been designated as an Enterprise Zone.
As a result, employers relocating to this area are entitled to significant tax and other economic incentives. Based on 2004 United States Census data, the per capita personal income for Baltimore County ($42,852) is greater than that of Maryland as
a whole ($39,631) and the United States ($33,050). The per capita personal income for Baltimore City ($29,153) is lower than both the Maryland and United States averages.

Lending Activities

General. The Companys gross loan portfolio
totaled $233.2 million at June 30, 2008, representing 89.3% of total assets at that date. At June 30, 2008, $70.0 million, or 30.0%, of the Companys gross loan portfolio, consisted of residential mortgage loans. Other loans secured
by real estate include construction and commercial real estate loans, which amounted to $71.2 million, or 30.5%, of the Companys gross loan portfolio at June 30, 2008. In addition, the Company originates consumer and other loans,
including home equity loans, home improvement loans and loans secured by deposits. At June 30, 2008, consumer and other loans totaled $20.9 million, or 9.0%, of the Companys gross loan portfolio. The Companys commercial loan
portfolio, which consists of small business loans and commercial leases totaled $71.2 million, or 30.5%, of the Companys gross loan portfolio.

Originations, Purchases and Sales of Loans. The Company generally has authority to originate and purchase loans throughout the United States. Consistent with its emphasis on being a
community-oriented financial institution, the Company concentrates its lending activities in its Maryland market area with limited loan and equipment lease origination in Delaware, Pennsylvania and Northern Virginia and on rare occasions, outside
these markets.

The Companys loan originations are derived from a number of sources, including loan brokers, advertising and
referrals by depositors and borrowers. The Companys solicitation programs consist of advertisements in local media, in addition to participation in various community organizations and events. All of the Companys loan personnel are
salaried; however, three originators do receive commissions on loans approved by officers of the Bank. With the exception of applications for home improvement loans and equipment leases, which loans may be originated on an indirect basis through a
limited number of approved home improvement contractors and loan brokers, loan applications are accepted at the Companys office. In addition, the Companys salaried loan originators may travel to meet prospective borrowers and take
applications. In all cases, the Company has final approval of the application.



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In recent years, the Company has purchased whole loans and loan participation interests. During the year
ended June 30, 2008, the Company purchased $4.7 million in participation interests and $577,000 in consumer home improvement loans. In the future, management will continue to consider purchases of whole loans or participation interests in
commercial business, residential and commercial real estate loans and consumer home improvement loans.

Loan Underwriting
Policies. The Companys lending activities are subject to the Companys non-discriminatory underwriting standards and to loan origination procedures prescribed by the Companys Board of Directors and management.
Detailed loan applications are obtained to determine the borrowers ability to repay, and the more significant items on these applications are verified through the use of credit reports, financial statements and confirmations. Certain officers
and committees have been granted authority by the Board of Directors to approve residential and commercial real estate, commercial business loans and equipment leases in varying amounts depending upon whether the loan is secured or unsecured and,
with respect to secured loans, whether the collateral is liquid or illiquid. Individual officers and certain committees of the Company have been granted authority by the Board of Directors to approve consumer loans up to varying specified dollar
amounts, depending upon the type of loan.

Applications for single-family real estate loans are typically underwritten and closed
in accordance with the standards of Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA). Generally, upon receipt of a loan application from a prospective borrower, a credit report
and verifications are ordered to confirm specific information relating to the loan applicants employment, income and credit standing. If a proposed loan is to be secured by a mortgage on real estate, an appraisal of the real estate is
undertaken, pursuant to the Companys Appraisal Policy, by an appraiser approved by the Company and licensed by the State of Maryland. In the case of single-family residential mortgage loans, except when the Company becomes aware of a
particular risk of environmental contamination, the Company generally does not obtain a formal environmental report on the real estate at the time a loan is made. A formal environmental report may be required in connection with nonresidential real
estate loans.

It is the Companys policy to record a lien on the real estate securing a loan and to obtain title insurance, which
insures that the property is free of prior encumbrances and other possible title defects. Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood plain as designated by the Department of Housing and
Urban Development, pay flood insurance policy premiums. Upon receipt of a loan application from a prospective borrower, a credit report generally is ordered to verify specific information relating to the loan applicants employment, income and
credit standing.

With respect to single-family residential mortgage loans, the Company makes a loan commitment of between 30 and 60 days
for each loan approved. If the borrower desires a longer commitment, the commitment may be extended for good cause and upon written approval. Typically, a $500 commitment fee is charged in connection with the issuance of a commitment letter;
however, extension fees are usually charged. The interest rate is guaranteed for the commitment term.

It is the policy of the Company that
appraisals be obtained in connection with all loans for the purchase of real estate or to refinance real estate loans where the existing mortgage is held by a party other than the Company. It is the Companys policy that all appraisals be
performed by appraisers approved by the Companys Board of Directors and licensed by the State of Maryland, for properties located in the state of Maryland.

Under applicable law, with certain limited exceptions, loans and extensions of credit by a commercial bank to a person outstanding, including commitments, at one time shall not exceed 15% of the banks unimpaired
capital and surplus. Under these limits, the Companys loans to one borrower were limited to $3.2 million at June 30, 2008. At that date, the Company had no lending relationships in excess of the loans-to-one-borrower limit. At
June 30, 2008, the Companys largest lending relationship was represented by multiple loans totaling $2.8 million secured by commercial real estate, which were current and performing in accordance with their terms at June 30, 2008.

Interest rates charged by the Company on loans are affected principally by competitive factors, the demand for such loans and the supply
of funds available for lending purposes. These factors are, in turn, affected by general economic conditions, monetary policies of the federal government, including the Board of Governors of the Federal Reserve System (the Federal Reserve
Board), legislative tax policies and government budgetary matters.



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Residential Real Estate Lending. The Company historically has been an originator of
residential real estate loans in its market area. Residential real estate loans consist of both single-family and multi-family residential real estate loans. At June 30, 2008, residential mortgage loans totaled $70.5 million, or 30.0%, of the
Companys gross loan portfolio. Of such loans, $8.7 million were secured by nonowner-occupied investment properties.

The
Companys multi-family residential loan portfolio consists primarily of loans secured by small apartment buildings. Such loans generally range in size from $100,000 to $500,000. At June 30, 2008, the Company had $4.6 million of
multi-family residential real estate loans, which amounted to 2.0% of the Companys gross loan portfolio at such date. Multi-family real estate loans either are originated on an adjustable-rate basis with terms of up to 25 years or are
amortized over a maximum of 25 years with a three or five-year note maturity, and are underwritten with loan-to-value ratios of up to 80% of the lesser of the appraised value or the purchase price of the property.

Multi-family residential real estate lending entails additional risks as compared with single-family residential property lending. Multi-family
residential real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. The payment experience on such loans typically is dependent on the successful operation of the real estate project. These risks
can be significantly impacted by supply and demand conditions in the market for residential space, and, as such, may be subject to a greater extent to adverse conditions in the economy generally. To minimize these risks, the Company generally limits
itself to its market area or to borrowers with which it has prior experience or who are otherwise known to the Company. It has been the Companys policy to obtain annual financial statements of the business of the borrower or the project for
which multi-family residential real estate loans are made. The Company seeks to expand multi-family residential real estate lending.

Construction Lending.The Bank also offers residential and commercial construction loans and land acquisition and development loans. Residential construction loans are offered to individuals who are having their primary
or secondary residence built, as well as to local builders to construct single-family dwellings. Residential construction advances are made on a stage of completion basis. Generally, loans to owner/occupants for the construction of residential
properties are originated in conjunction with the permanent mortgage on the property. The term of the construction loans is normally from 6 to 18 months and has a variable interest rate, which is normally up to 2% above the prime interest rate. Upon
completion of construction, the permanent loan rate will be set at the interest rate offered by the Bank on that loan product not sooner than 60 days prior to completion. Interest rates on residential loans to builders are set at the prime interest
rate plus a margin of 0.5% to 2.0% as may be adjusted from time to time. Interest rates on commercial construction loans and land acquisition and development loans are based on the prime rate plus a negotiated margin of between 0.5% and 2.0% and
adjust from time to time, with construction terms generally not exceeding 18 months. Advances are made on a percentage of completion basis. At June 30, 2008, $29.9 million, or 12.8%, of the Companys loan portfolio consisted of
construction loans.

Prior to making a commitment to fund a loan, the Bank requires an appraisal of the property by appraisers approved by
the Board of Directors and may require a study of the feasibility of the proposed project. The Bank also reviews and inspects each project at the commencement of construction and prior to payment of draw requests during the term of the construction
loan. Dependent upon market forces, the Bank generally charges a loan fee between 1% and 2%.

Construction financing generally is
considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the propertys value at
completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be
inaccurate and the borrower is unable to meet the Banks requirements of putting up additional funds to cover extra costs or change orders, then the Bank will demand that the loan be paid off and, if necessary, institute foreclosure
proceedings, or refinance the loan. If the estimate of value proves to be inaccurate, the Bank may be confronted, at or prior to the maturity of the loan, with collateral having a value that is insufficient to assure full repayment. The Bank has
sought to minimize this risk by limiting construction lending to qualified borrowers (i.e., borrowers who satisfy all credit requirements and whose loans satisfy all other underwriting standards which would apply to the Banks permanent
mortgage loan financing for the subject property) in the Banks market area. On loans to builders, the Bank works only with selected builders with whom it has experience and carefully monitors the creditworthiness of the builders.



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Commercial Real Estate Lending.The Companys commercial real estate loan
portfolio consists of loans to finance the acquisition of small office buildings, shopping centers and commercial and industrial buildings. Such loans generally range in size from $100,000 to $2,000,000. At June 30, 2008, the Company had $41.3
million of commercial real estate loans, which amounted to 17.7% of the Companys gross loan portfolio at such date. Commercial real estate loans are typically originated on an adjustable-rate basis with terms of up to 25 years or are amortized
over a maximum of 25 years with a maturity generally of three to ten years, and are underwritten with loan-to-value ratios of up to 80% of the lesser of the appraised value or the purchase price of the property. Because of the inherently greater
risk involved in this type of lending, the Company generally limits its commercial real estate lending to borrowers within its market area or with which it has had prior experience. The Company seeks to expand commercial real estate lending.

Commercial real estate lending entails additional risks as compared with single-family residential property lending. Commercial real
estate loans typically involve larger loan balances to single borrowers or groups of related borrowers. The payment experience on such loans typically is dependent on the successful operation of the real estate project, retail establishment or
business. These risks can be significantly impacted by supply and demand conditions in the market for office, retail and residential space, and, as such, may be subject to a greater extent to adverse conditions in the economy generally. To minimize
these risks, the Company generally limits itself to its market area or to borrowers with which it has prior experience or who are otherwise known to the Company. It has been the Companys policy to obtain annual financial statements of the
business of the borrower or the project for which commercial real estate loans are made. In addition, in the case of commercial mortgage loans made to a partnership or a corporation, the Company seeks, whenever possible, to obtain personal
guarantees and annual financial statements of the principals of the partnership or corporation.

Consumer Lending. The
consumer loans currently in the Companys loan portfolio consist of home improvement loans, home equity loans, loans secured by savings deposits and overdraft protection for checking accounts and other consumer loans. At June 30, 2008,
consumer and other loans totaled $20.9 million, or 9.0%, of the Companys gross loan portfolio.

In July 1995, the Company instituted
a home improvement loan program. Such loans are made to finance a variety of other home improvement projects, such as replacement windows, siding and room additions. The Companys policy is to originate home improvement loans throughout
Maryland, Virginia, Delaware, New Jersey and Southern Pennsylvania. While the Company originates some home improvement loans on a direct basis, most of the home improvement loans in the Companys portfolio are originated on an indirect basis
through the Companys relationships with selected independent contractors. The Companys underwriting policies apply to all home improvement loans whether or not directly originated by the Company. Home improvement loans generally have
terms ranging from three to 10 years and have fixed interest rates. Home improvement loans are made on both secured and unsecured basis. However, the majority of home improvement loans with a principal loan amount over $10,000 or which have a term
longer than 84 months are made on a secured basis with loan-to-value ratios up to 80% or 90%, depending on the type of project financed. At June 30, 2008, home improvement loans amounted to $12.7 million, or 5.4%, of the Companys loan
portfolio, with $1.3 million of such loans being secured by real estate.

Consumer lending affords the Company the opportunity to earn
yields higher than those obtainable with other types of lending. However, consumer loans entail greater risk than do other loans, particularly in the case of loans that are unsecured or secured by rapidly depreciable assets. Repossessed collateral
for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The remaining deficiency often does not warrant further substantial
collection efforts against the borrower. In addition, consumer loan collections are dependent on the borrowers continuing financial stability, and thus are more likely to be adversely affected by events such as job loss, divorce, illness or
personal bankruptcy.

Commercial Lending.The Banks commercial loans consist of commercial business loans and
the financing of lease transactions, which may not be secured by real estate.

At June 30, 2008, the Companys commercial loans
totaled $53.5 million, or 22.9%, of the Companys loan portfolio. This commercial lending program employs many of the alternative financing and guarantee programs available through the U.S. Small Business Administration and other state and
local economic development agencies.

The Bank originates commercial business loans to small and medium-sized businesses in its market
area. The Banks commercial business loans may be structured as term loans, lines of credit, or mortgages. The Banks



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commercial borrowers are generally small businesses engaged in manufacturing, distribution or retailing, or professionals in healthcare, accounting and law.
Commercial business loans are generally made to finance the purchase of inventory, new or used commercial business assets or for short-term working capital, or the purchase of real estate to be occupied by the operating company. Such loans generally
are secured by business assets and, when applicable, cross-collateralized by a real estate lien, although commercial business loans are sometimes granted on an unsecured basis. Such loans are generally made for terms of seven years or less,
depending on the purpose of the loan and the collateral. Interest rates on commercial business loans and lines of credit are either fixed for the term of the loan or adjusted periodically. Generally, commercial business loans are made in amounts
ranging between $10,000 and $2.0 million.

The Bank underwrites its commercial business loans on the basis of the borrowers cash flow
and ability to service the debt from earnings and the Bank seeks to structure such loans to have more than one source of repayment. The borrower is required to provide the Bank with sufficient information to allow the Bank to make its lending
determination. In most instances, this information consists of at least two years of financial statements, a statement of projected cash flows, current financial information on any guarantor and any additional information on the collateral. For
loans with maturities exceeding one year, the Bank requires that borrowers and guarantors provide updated financial information at least annually throughout the term of the loan.

Commercial business term loans are generally made to finance the purchase of assets and have maturities of five years or less. Commercial business lines
of credit are typically made for the purpose of providing working capital and are usually approved with a term of 12 months and are reviewed at that time to determine if extension is warranted. The Bank also offers standby letters of credit for its
commercial borrowers. The terms of standby letters of credit generally do not exceed one year but may contain a renewal option.

Commercial
business loans are often larger and may involve greater risk than other types of lending. Because payments on such loans are often dependent on successful operation of the business involved, repayment of such loans may be subject to a greater extent
to adverse conditions in the economy. The Bank seeks to minimize these risks through its underwriting guidelines, which require that the loan be supported by adequate cash flow of the borrower, profitability of the business, collateral and personal
guarantees of the individuals in the business. In addition, the Bank generally limits this type of lending to its market area and to borrowers with which it has prior experience or who are otherwise well known to the Bank.

The Company offers loans to finance lease transactions, secured by the lease and the underlying equipment, to businesses of various size through its
subsidiary, Prime Business Leasing. In extending the financing in a commercial lease transaction, the Company reviews the borrowers financial statements, credit reports, tax returns and other documentation. Generally, commercial lease
financing is made in amounts ranging between $3,000 and $120,000 with terms of up to five years and carry fixed interest rates. At June 30, 2008, commercial lease finance transaction loans totaled $17.7 million, or 7.6%, of the Companys
loan portfolio.

Loan Fees and Servicing. The Company receives fees in connection with late payments and for
miscellaneous services related to its loans. The Company also charges fees in connection with loan originations typically up to two points (one point being equal to 1% of the loan amount) on real estate loan originations. The Company generally does
not service loans for others. The Company has sold participating interests on residential, commercial real estate and commercial business loans to other local financial institutions. At June 30, 2008, the Company was servicing these
participation interests for others totaling approximately $20.7 million.

Nonperforming Loans and Other Problem
Assets. It is managements policy to continually monitor its loan portfolio to anticipate and address potential and actual delinquencies. When a borrower fails to make a payment on a loan, the Company takes immediate steps to
have the delinquency cured and the loan restored to current status. Loans, which are delinquent between ten and 15 days, depending on the type of loan, typically incur a late fee of 5% of principal and interest due. As a matter of policy, the
Company will contact the borrower after the date the late payment is due. If payment is not promptly received, the borrower is contacted again, and efforts are made to formulate an affirmative plan to cure the delinquency. Generally, after any loan
is delinquent 90 days or more, formal legal proceedings are commenced to collect amounts owed.

Loans generally are placed on nonaccrual
status if the loan becomes past due more than 90 days, except in instances where in managements judgment there is no doubt as to full collectibility of principal and interest. At June



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30, 2008, all loans past due more than 90 days were on nonaccrual. Consumer loans are generally charged off after they become more than 90 days past due. All
other loans are charged off when management concludes that they are uncollectible. See Notes 1 and 3 of the Notes to Consolidated Financial Statements.

Real estate acquired by the Company as a result of foreclosure is classified as foreclosed real estate until such time as it is sold. When such property is acquired, it is initially recorded at the estimated fair
value less costs to sell, establishing a new cost basis. Subsequent to acquisition, the property is carried at the lower of cost or fair value less estimated costs to sell. Fair value is defined as the amount in cash or cash-equivalent value or
other consideration that a real estate parcel would yield in a current sale between a willing buyer and a willing seller, as measured by market transactions. If a market does not exist, fair value of the item is estimated based on selling prices of
similar items in active markets or, if there are no active markets for similar items, by discounting a forecast of expected cash flows at a rate commensurate with the risk involved. Fair value is generally determined through an appraisal at the time
of foreclosure. Any required write-down of the loan to its fair value upon foreclosure is charged against the allowance for loan losses, with subsequent write-downs reflected in other expense. See Note 1 of the Notes to Consolidated Financial
Statements.

Investment Activities

General. The Company makes investments in order to maintain the levels of liquid assets preferred by regulatory authorities and manage cash flow, diversify its assets, obtain yield and to satisfy certain requirements
for favorable tax treatment. The investment activities of the Company consist primarily of investments in mortgage-backed securities and other investment securities. Typical investments include federally sponsored agency mortgage pass-through,
federally sponsored agency debt securities, U.S. treasury obligations and investment grade corporate securities. Investment and aggregate investment limitations and credit quality parameters of each class of investment are prescribed in the
Companys investment policy. The Company performs analyses on securities prior to purchase and on an ongoing basis to determine the impact on earnings and market value under various interest rate and prepayment conditions. Senior management and
the Companys Asset/Liability Management Committee have limited authority to sell investment securities and purchase comparable investment securities with similar characteristics. The Board of Directors reviews all securities transactions on a
monthly basis.

Under applicable accounting rules, investment securities classified as held-to-maturity are recorded at amortized cost and
those classified as available for sale are reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders equity. At June 30, 2008, the Companys entire portfolio
of investment securities was classified as available for sale and had an aggregate carrying value of $9.6 million and an unrealized net loss after tax of $188,000. Management of the Company currently does not anticipate that the presence of
unrealized losses in the Companys portfolio of investment securities and mortgage-backed securities is likely to have a material adverse effect on the Companys financial condition, results of operations or liquidity.

Deposit Activity and Other Sources of Funds

General. Deposits are the primary source of the Companys funds for lending, investment activities and general operational purposes. In addition to deposits, the Company derives funds from loan principal and interest
repayments, maturities of investment securities and mortgage-backed securities and interest payments thereon. Although loan repayments are a relatively stable source of funds, deposit inflows and outflows are significantly influenced by general
interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds, or on a long-term basis for general operational purposes. The Bank may borrow from the Federal Home
Loan Bank of Atlanta and The Bankers Bank of Atlanta, Georgia.

Deposits. The Company attracts deposits principally from
within its market area by offering a variety of deposit instruments, including checking accounts, Christmas Club accounts, money market accounts, statement and passbook savings accounts, Individual Retirement Accounts, and certificates of deposit
which range in maturity from seven days to 66 months. Deposit terms vary according to the minimum balance required, the length of time the funds must remain on deposit, and the interest rate. Maturities, terms, service fees and withdrawal penalties
for its deposit accounts are established by the Company on a periodic basis. The Company reviews its deposit mix and pricing on a weekly basis. In determining the characteristics of its deposit accounts, the Company considers the rates offered by
competing institutions, lending and liquidity requirements, growth goals and federal regulations. Management believes it prices its deposits comparably to rates offered by its competitors.



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The Company attempts to compete for deposits with other institutions in its market area by offering
competitively priced deposit instruments that are tailored to the needs of its customers. Additionally, the Company seeks to meet customers needs by providing convenient customer service to the community, efficient staff and convenient hours
of service. Substantially all of the Companys depositors are Maryland residents. To provide additional convenience, the Company participates in the STAR Automatic Teller Machine network at locations throughout the United States, through which
customers can gain access to their accounts at any time.

Borrowings.While savings deposits historically have been the
primary source of funds for the Companys lending, investments and general operating activities, the Bank utilizes advances from the Federal Home Loan Bank of Atlanta to supplement its supply of lendable funds and to meet deposit withdrawal
requirements. The Federal Home Loan Bank of Atlanta functions as a central reserve bank providing credit for member financial institutions. As a member of the Federal Home Loan Bank System, the Bank is required to own stock in the Federal Home Loan
Bank of Atlanta and is authorized to apply for advances. Advances are pursuant to several different programs, each of which has its own interest rate and range of maturities. The Bank has a Blanket Agreement for advances with the Federal Home Loan
Bank under which the Bank may borrow up to 25% of assets subject to normal collateral and underwriting requirements. As of August 1, 2008, this borrowing limit increased to 30% of assets. Advances from the Federal Home Loan Bank of Atlanta are
secured by the Banks stock in the Federal Home Loan Bank of Atlanta and other eligible assets. At June 30, 2008, the Company had outstanding Federal Home Loan Bank of Atlanta advances of $37.3 million with an average rate of 4.46%.
Additionally, the Bank has a $5.1 million line of credit, none of which was outstanding at June 30, 2008 with The Silverton Bank of Atlanta, Georgia.

Subsidiary Activities

The Bank has three subsidiaries, PFSL Holding Corp. (PFSL), which it formed in November
1995 to hold certain real estate owned at that time and which is currently inactive, Prime Business Leasing that was formed in October 1998 and is discussed under commercial lending and Patapsco Financial Services, Inc., which was formed in March
2000 in order to sell alternative investment products to the Companys customers.

Competition

The Company faces strong competition both in originating loans and in attracting deposits. The Company competes for loans principally on the basis of
interest rates, the types of loans it originates, the deposit products it offers and the quality of services it provides to borrowers. The Company also competes by offering products that are tailored to the local community. Its competition in
originating loans comes primarily from other commercial banks, savings institutions and mortgage bankers, credit unions and finance companies.

Management considers its market area for gathering deposits to be eastern Baltimore County, Baltimore City, and Harford County in Maryland. The Company originates loans throughout much of the Mid-Atlantic area. The Company attracts its
deposits through its offices in Dundalk, Parkville, Carney, Hampden and Glen Arm primarily from the local community. Consequently, competition for deposits is principally from other commercial banks, savings institutions, credit unions, mutual funds
and brokers in the local community. The Company competes for deposits and loans by offering what it believes to be a variety of deposit accounts at competitive rates, convenient business hours, a commitment to outstanding customer service and a
well-trained staff.

Employees

As of
June 30, 2008, the Company had 71 full-time and 15 part-time employees, none of who were represented by a collective bargaining agreement.Management considers the Companys relationships with its employees to be good.



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Depository Institution Regulation

General. The Bank is a Maryland commercial bank and its deposit accounts are insured by the Deposit Insurance Fund (DIF) administered by the Federal Deposit Insurance Corporation
(FDIC). The Bank also is a member of the Federal Reserve System. The Bank is subject to supervision, examination and regulation by the State of Maryland Commissioner of Financial Regulation (Commissioner), the Federal Reserve
Board, Maryland and federal statutory and regulatory provisions governing such matters as capital standards, mergers and establishment of branch offices, and it is subject to the FDICs authority to conduct special examinations. The Bank is
required to file reports with the Commissioner and the Federal Reserve Board concerning its activities and financial condition and is required to obtain regulatory approvals prior to entering into certain transactions, including mergers with, or
acquisitions of, other depository institutions.

The system of regulation and supervision applicable to the Bank establishes a
comprehensive framework for the operations of the Bank and is intended primarily for the protection of the FDIC and the depositors of the Bank. Changes in the regulatory framework could have a material effect on the Bank and their respective
operations that in turn, could have a material adverse effect on the Company.

Business Activities.The Commissioner
regulates the Banks internal organization as well as its deposit, lending and investment activities. The basic authority for the Banks activities is specified by Maryland law. Additionally, Maryland law contains a parity statute by which
Maryland commercial banks may, with the approval of the Commissioner, engage in any additional activity, service or practice permitted for national banks.

The Federal Reserve and FDIC also regulate many of the areas regulated by the Commissioner and federal law may limit some of the authority provided to the Bank by Maryland law. Approval of the Commissioner and the
Federal Reserve is required for, among other things, business combinations and the establishment of branch offices.

Capital
Requirements. The Bank is subject to Federal Reserve Board capital requirements, as well as statutory capital requirements imposed under Maryland law. Federal Reserve Board regulations establish two capital standards for state-chartered
banks that are members of the Federal Reserve System (state member banks): a leverage requirement and a risk-based capital requirement. In addition, the Federal Reserve may, on a case-by-case basis, establish individual minimum capital
requirements for a bank that vary from the requirements that would otherwise apply under Federal Reserve Board regulations. A bank that fails to satisfy the capital requirements established under the Federal Reserve Boards regulations will be
subject to such administrative action or sanctions as the Federal Reserve Board deems appropriate.

The leverage ratio adopted by the
Federal Reserve Board requires a minimum ratio of Tier 1 capital to adjusted total assets of 3% for banks rated composite 1 under the CAMELS examination rating system for banks. Banks not rated composite 1 under the CAMELS rating system
for banks are required to maintain a minimum ratio of Tier 1 capital to adjusted total assets of at least 4%. Additional capital may be necessary for institutions with supervisory, financial, operational or managerial weaknesses, as well as
institutions experiencing significant growth. For purposes of the Federal Reserve Boards leverage requirement, Tier 1 capital consists primarily of common stockholders equity, certain perpetual preferred stock (which must be
noncumulative with respect to banks), and minority interests in the equity accounts of consolidated subsidiaries; less most intangible assets, except for specified servicing assets and purchased credit card receivables and other specified
deductions.

The risk-based capital requirements established by the Federal Reserve Boards regulations require state member banks to
maintain total capital equal to at least 8% of total risk-weighted assets. For purposes of the risk-based capital requirement, total capital means Tier 1 capital (as described above) plus Tier 2 capital (as
described below), provided that the amount of Tier 2 capital may not exceed the amount of Tier 1 capital, less certain assets. Tier 2 capital elements include, subject to certain limitations, the allowance for losses on loans and leases, perpetual
preferred stock that does not qualify for Tier 1 and long-term preferred stock with an original maturity of at least 20 years from issuance, hybrid capital instruments, including perpetual debt and mandatory convertible securities, and subordinated
debt and intermediate-term preferred stock and up to 45% of unrealized gains on equity securities. Total risk-weighted assets are determined under the Federal Reserve Boards regulations, which generally establish four risk categories, with
general risk weights of 0%, 20%, 50% and 100%, based on the risk believed inherent to the type of loan involved.

In addition, the Bank is
subject to the statutory capital requirements imposed by the State of Maryland. Under Maryland statutory law, if the surplus of a Maryland commercial bank at any time is less than 100% of its capital stock, then, until the surplus is 100% of the
capital stock, the commercial bank: (i) must transfer to its surplus annually at least 10% of its net earnings; and (ii) may not declare or pay any cash dividends that exceed 90% of its net earnings.



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The table below provides information with respect to the Banks compliance with its regulatory
capital requirements at the dates indicated.



|                                         |  |                        |        |       |                                                    |   |        |                                                                                     |        |  |      |        |  |       |        |  |       |  
|---------------------------------------- |  | ---------------------- | ------ | ----- | -------------------------------------------------- | - | ------ | ----------------------------------------------------------------------------------- | ------ |  | ---- | ------ |  | ----- | ------ |  | ----- | -
|                                         |  | Actual                 |        |       | RegulatoryRequirementsfor
CapitalAdequacy Purposes |   |        | RegulatoryRequirementsto be WellCapitalized
UnderPrompt CorrectiveAction Provisions |       
|                                         |  | Amount                 |        | Ratio |                                                    |   | Amount |                                                                                     | Ratio  |  |      | Amount |  | Ratio |       
|                                         |  | (Dollars in thousands) |       
|As of June 30, 2008:                     |  |                        |        |       |                                                    |   |        |                                                                                     |        |  |      |        |  |       |        |  |       |  
|Total Capital (to Risk Weighted Assets)  |  | $                      | 21,585 |       | 10.45                                              | % |        | $                                                                                   | 16,532 |  | 8.00 | %      |  | $     | 20,665 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  |                        | 19,572 |       | 9.56                                               |   |        |                                                                                     | 8,266  |  | 4.00 |        |  |       | 12,399 |  | 6.00  |  
|Tier 1 Leverage                          |  |                        | 19,572 |       | 7.63                                               |   |        |                                                                                     | 10,352 |  | 4.00 |        |  |       | 12,940 |  | 5.00  |  
|                                         |  |                        |        |       |                                                    |  
|As of June 30, 2007:                     |  |                        |        |       |                                                    |   |        |                                                                                     |        |  |      |        |  |       |        |  |       |  
|Total Capital (to Risk Weighted Assets)  |  | $                      | 20,091 |       | 10.31                                              | % |        | $                                                                                   | 15,589 |  | 8.00 | %      |  | $     | 19,487 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  |                        | 18,981 |       | 9.74                                               |   |        |                                                                                     | 7,795  |  | 4.00 |        |  |       | 11,692 |  | 6.00  |  
|Tier 1 Leverage                          |  |                        | 18,981 |       | 7.57                                               |   |        |                                                                                     | 10,030 |  | 4.00 |        |  |       | 12,537 |  | 5.00  |  

Prompt Corrective Regulatory Action. Under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA), the federal banking regulators are required to take prompt corrective action if an insured depository institution fails to satisfy certain minimum capital requirements. All institutions, regardless of
their capital levels, are restricted from making any capital distribution or paying any management fees if the institution would thereafter fail to satisfy the minimum levels for any of its capital requirements. An institution that fails to meet the
minimum level for any relevant capital measure (an undercapitalized institution) may be, among other things, subject to increased monitoring by the appropriate federal banking regulator, required to submit an acceptable capital
restoration plan within 45 days and are subject to asset growth limits. The capital restoration plan must include a guarantee by the institutions holding company that the institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters, under which the holding company would be liable up to the lesser of 5% of the institutions total assets or the amount necessary to bring the institution into capital compliance as of the
date it failed to comply with its capital restoration plan. A significantly undercapitalized institution, as well as any undercapitalized institution that did not submit an acceptable capital restoration plan, may be subject to
regulatory demands for recapitalization, broader application of restrictions on transactions with affiliates, limitations on interest rates paid on deposits, asset growth and other activities, possible replacement of directors and officers, and
restrictions on capital distributions by any bank holding company controlling the institution. Any company controlling the institution could also be required to divest the institution or the institution could be required to divest subsidiaries. In
their discretion, the federal banking regulators may also impose the foregoing sanctions on an undercapitalized institution if the regulators determine that such actions are necessary to carry out the purposes of the prompt corrective action
provisions. If an institutions ratio of tangible capital to total assets falls below a critical capital level, the institution will be subject to conservatorship or receivership within 90 days unless periodic determinations are
made that forbearance from such action would better protect the deposit insurance fund. Unless appropriate findings and certifications are made by the appropriate federal bank regulatory agencies, a critically undercapitalized institution must be
placed in receivership if it remains critically undercapitalized on average during the calendar quarter beginning 270 days after the date it became critically undercapitalized.

For purposes of these restrictions, an undercapitalized institution is a depository institution that has (i) a total risk-based capital
ratio less than 8.0%; or (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0% (or less than 3.0% if the institution has a composite 1 CAMELS rating). A significantly
undercapitalized institution is defined as a depository institution that has: (i) a total risk-based capital ratio of less than 6.0%; or (ii) a Tier 1 risk-based capital ratio of less than 3.0%; or (iii) a leverage ratio of less
than 3.0%. A critically undercapitalized institution is defined as a depository institution that has a ratio of tangible equity to total assets of less than 2.0%. The appropriate federal banking agency may reclassify a well
capitalized depository institution as adequately capitalized and may require an adequately capitalized or undercapitalized institution to comply with the



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supervisory actions applicable to institutions in the next lower capital category (but may not reclassify a significantly undercapitalized institution as
critically under-capitalized) if it determines, after notice and an opportunity for a hearing, that the institution is in an unsafe or unsound condition or that the institution has received and not corrected a less-than-satisfactory rating for any
examination rating category. At June 30, 2008, the Bank was classified as well capitalized under Federal Reserve regulations.

Safety and Soundness Guidelines. Under FDICIA, as amended by the Riegle Community Development and Regulatory Improvement Act of 1994, each federal banking agency was required to establish safety and soundness
standards for institutions under its authority. The federal banking agencies, including the Federal Reserve Board, have released Interagency Guidelines Establishing Standards for Safety and Soundness. The guidelines require depository institutions
to maintain internal controls and information systems and internal audit systems that are appropriate for the size, nature and scope of the institutions business, establish certain basic standards for loan documentation, credit underwriting,
asset quality, capital adequacy, earnings, interest rate risk exposure and asset growth, information security and further provide that depository institutions should maintain safeguards to prevent the payment of compensation, fees and benefits that
are excessive or that could lead to material financial loss. If the appropriate federal banking agency determines that a depository institution is not in compliance with the safety and soundness guidelines, it may require the institution to submit
an acceptable plan to achieve compliance with the guidelines. Failure to submit or implement a compliance plan may subject the institution to regulatory sanctions.

Federal Home Loan Bank System. The Federal Home Loan Bank System consists of 12 district Federal Home Loan Banks. The Federal Home Loan
Banks provide a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of Atlanta, the Bank is required to acquire and hold specified amounts of capital stock in that Federal Home Loan Bank. The Bank was
in compliance with this requirement with an investment in Federal Home Loan Bank of Atlanta stock at June 30, 2008 of $2.2 million.

Federal Reserve System.Pursuant to regulations of the Federal Reserve Board, a financial institution must maintain average daily reserves equal to 3% on transaction accounts of between $9.3 million and $43.9
million, plus 10% on the remainder. The first $9.3 million of transaction accounts are exempt. These percentages are subject to adjustment by the Federal Reserve Board. Because required reserves must be maintained in the form of vault cash or in a
noninterest-bearing account at a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institutions interest-earning assets. As of June 30, 2008, the Bank met its reserve requirements.

The monetary policies and regulations of the Federal Reserve Board have a significant effect on the operating results of commercial
banks. The Federal Reserve Boards policies affect the levels of bank loans, investments and deposits through its open market operation in United States government securities, its regulation of the interest rate on borrowings from Federal
Reserve Banks and its imposition of nonearning reserve requirements on all depository institutions, such as the Bank, that maintain transaction accounts or non-personal time deposits.

Insurance of Deposit Accounts. The Banks deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The
Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged in 2006. The FDIC amended its risk-based assessment system to implement authority granted by the Federal Deposit
Insurance Reform Act of 2005 (Reform Act). Under this risk-based system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors. An
institutions assessment rate depends upon the category to which it is assigned. Risk Category I, which contains the least risky depository institutions, includes more than 90% of all institutions. Unlike the other categories, Risk Category I
contains further risk differentiation based on the FDICs analysis of financial ratios, examination component ratings and other information. Assessment rates are determined by the FDIC and currently range from five to seven basis points for the
healthiest institutions (Risk Category I) to 43 basis points of assessable deposits for the riskiest (Risk Category IV). The FDIC may adjust rates uniformly from one quarter to the next, except that no single adjustment can exceed three basis
points. No institution may pay a dividend if in default of the FDIC assessment.

The Reform Act also provided for a one-time credit for
eligible institutions based on their assessment base as of December 31, 1996. Subject to certain limitations with respect to institutions that are exhibiting weaknesses, credits can be used to offset assessments until exhausted. The Banks
one-time credit was approximately $188,000, of which $47,000 remains unused as of June 30, 2008. The Reform Act also provided for the possibility that the FDIC may pay dividends to insured institutions once the Deposit Insurance fund reserve
ratio equals or exceeds 1.35% of estimated insured deposits.



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In addition to the assessment for deposit insurance, institutions are required to make payments on bonds
issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. This payment is established quarterly and during the four quarters ending June 30, 2008 averaged 1.12 basis points of assessable
deposits.

The Reform Act provided the FDIC with authority to adjust the Deposit Insurance Fund ratio to insured deposits within a range of
1.15% and 1.50%, in contrast to the prior statutorily fixed ratio of 1.25%. The ratio, which is viewed by the FDIC as the level that the fund should achieve, was established by the agency at 1.25% for 2008, which remains unchanged from 2007.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect
on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future although increases are likely given recent bank failures and increases in the numbers of problem
institutions.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.

Dividend Restrictions. The Banks ability to pay dividends is
governed by Maryland law and the regulations of the Federal Reserve Board. Maryland law provides that dividends may be paid out of individual profits or with approval of the Commissioner, surplus of 100% of capital stock. Under Maryland law relating
to financial institutions, if the surplus of a commercial bank at any time is less than 100% of its capital stock, then, until the surplus is 100% of the capital stock, the commercial bank: (i) must transfer to its surplus annually at least 10%
of its net earnings; and (ii) may not declare or pay any cash dividends that exceed 90% of its net earnings.

The Banks payment
of dividends is also subject to the Federal Reserve Boards Regulation H, which provides that a state member bank may not pay a dividend if the total of all dividends declared by the bank in any calendar year exceeds the total of its net
profits for the year combined with its retained net profits for the preceding two calendar years, less any required transfers to surplus or to a fund for the retirement of preferred stock, unless the bank has received the prior approval of the
Federal Reserve Board. The previously referenced prompt corrective action requirements prohibit dividends where the Bank would be undercapitalized, significantly undercapitalized, or critically undercapitalized
after the dividend. Additionally, both the Commissioner and the Federal Reserve Board has the authority to prohibit the payment of dividends by a Maryland commercial bank when it determines such payment to be an unsafe and unsound banking practice.
Finally, the Bank is not able to pay dividends on its capital stock if its regulatory capital would thereby be reduced below the remaining balance of the liquidation account established in connection with its conversion in April 1996 from mutual to
stock form. See Note 10 of the Notes to Consolidated Financial Statements appearing in Item 7 of this Annual Report on Form 10-K.

Uniform Lending Standards. Under Federal Reserve Board regulations, state member banks must adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens
or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards, including loan-to-value limits that
are clear and measurable, loan administration procedures and documentation, approval and reporting requirements. The real estate lending policies of state member banks must reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies (the Interagency Guidelines) that have been adopted by the federal banking agencies.

Management will periodically
evaluate its lending policies to assure conformity to the Interagency Guidelines and does not anticipate that the Interagency Guidelines have a material effect on its lending activities.

Limits on Loans to One Borrower. The Bank has chosen to be subject to federal law with respect to limits on loans to one borrower.
Generally, under federal law, the maximum amount that a commercial bank may loan to one



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borrower at one time may not exceed 15% of the unimpaired capital and surplus of the commercial bank, plus an additional 10% if secured by specified
readily marketable collateral. The Banks lending limit to one borrower as of June 30, 2008 was $3.2 million.

Transactions with Related Parties. Transactions between a state member bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a state member bank is any company or entity, which
controls, is controlled by or is under common control with the state member bank. In a holding company context, at a minimum, the parent holding company of a state member bank and any companies which are controlled by such parent holding company are
affiliates of the state member bank. Generally, Sections 23A and 23B (i) limit the extent to which an institution or its subsidiaries may engage in covered transactions with any one affiliate to an amount equal to 10% of such
institutions capital stock and surplus, and contain an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus, and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable, to the institution or subsidiary as those provided to a nonaffiliate. The term covered transaction includes the making of loans, purchase of assets, issuance of a guarantee and similar
other types of transactions. Certain types of covered transactions must be collateralized according to a schedule set forth in the statute based on the type of collateral.

State member banks are also subject to the restrictions contained in Section 22(h) of the Federal Reserve Act and the Federal Reserves
Regulation O on loans to executive officers, directors and principal stockholders (insiders). Under Section 22(h), aggregate loans to directors, executive officers and greater than 10% stockholders may not exceed the
institutions unimpaired capital and unimpaired surplus. Section 22(h) also prohibits loans, above amounts prescribed by the appropriate federal banking agency, to insiders of a state member bank, and their respective affiliates, unless
such loan is approved in advance by a majority of the board of directors of the institution with any interested director not participating in the voting. Regulation O prescribes the loan amount (which includes all other outstanding loans
to such person) as to which prior board of director approval is required as being the greater of $25,000 or 5% of capital and surplus; however loans aggregating to $500,000 or more always require such approval. Further, Section 22(h) requires
that loans to insiders be made on terms substantially the same as offered in comparable transactions to other persons with an exception for loans made to a bank-wide benefit or compensation program that does not give preference to insiders.
Section 22(g) of the Federal Reserve Act places further restrictions on the types of loans that can be made to executive officers.

Additionally, Maryland statutory law imposes restrictions on certain transactions with affiliated persons of Maryland commercial banks. Generally, under Maryland law, a director, officer or employee of a commercial bank may not borrow,
directly or indirectly, any money from the bank, unless the loan has been approved by a resolution adopted at and recorded in the minutes of the board of directors of the bank, or the executive committee of the bank, if that committee is authorized
to make loans. If such a loan is approved by the executive committee, the loan approval must be reported to the board of directors at its next meeting. Certain commercial loans made to non-employee directors of a bank and certain consumer loans made
to nonofficer and nondirector employees of the bank are exempt from the statutes coverage.

Enforcement.The Federal
Reserve has primary federal enforcement responsibility over member banks and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or
directors to institution or receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases. The FDIC has
the authority to recommend to the Federal Reserve Board that enforcement action to be taken with respect to a particular savings institution. If action is not taken by the Federal Reserve Board, the FDIC has authority to take such action under
certain circumstances. Federal law also establishes criminal penalties for certain violations.

The Commissioner has extensive enforcement
authority over Maryland banks. Such authority includes the ability to issue cease and desist orders and civil money penalties and to remove directors or officers. The Commissioner may also take possession of a Maryland bank whose capital is impaired
and seek to have a receiver appointed by a court.



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Regulation of the Company

General. The Company, as the sole shareholder of the Bank, is a bank holding company and is registered as such with the Federal Reserve Board. Bank holding companies are subject to comprehensive
regulation and examination by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended (the BHCA), and the regulations of the Federal Reserve Board. The Federal Reserve Board also has extensive enforcement
authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank
subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

Under the BHCA, a bank holding company must obtain Federal Reserve Board approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or
(iii) merging or consolidating with another bank holding company. In evaluating such applications, the Federal Reserve Board considers a variety of financial, managerial and competitive factors.

The BHCA also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The principal
exceptions to these prohibitions involve certain non-bank activities which, by statute or by Federal Reserve Board regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks.
The list of activities includes, among other things, operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and
financial advice; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.

The Gramm-Leach-Bliley Act of 1999 authorized bank holding companies that meet certain management, capital and other criteria to choose to become a
financial holding company and thereby engage in a broader array of financial activities including insurance underwriting and investment banking. The Company has not, up to now, opted to become a financial holding company.

Acquisitions of Bank Holding Companies and Banks. Under the BHCA, any company must obtain approval of the Federal Reserve Board
prior to acquiring control of the Company or the Bank. For purposes of the BHCA, control is defined as ownership of more than 25% of any class of voting securities of the Company or the Bank, the ability to control the election of a majority of the
directors, or the exercise of a controlling influence over management or policies of the Company or the Bank. Any bank holding company must secure Federal Reserve Board approval prior to acquiring 5% or more of the stock of the Company or the Bank.

The Change in Bank Control Act and the related regulations of the Federal Reserve Board require any person or persons acting in concert
(except for companies required to make application under the BHCA), to file a written notice with the Federal Reserve Board before such person or persons may acquire control of the Company or the Bank. The Change in Bank Control Act presumes control
as the power, directly or indirectly, to vote 10% or more of any voting securities or to direct the management or policies of a bank holding company, such as the Company, that has securities registered under the Securities Exchange Act of 1934.

Under Maryland law, acquisitions of 25% or more of the voting stock of a commercial bank or a bank holding company and other acquisitions
of voting stock of such entities which affect the power to direct or to cause the direction of the management or policy of a commercial bank or a bank holding company must be approved in advance by the Commissioner. Any person proposing to make such
an acquisition must file an application with the Commissioner at least 60 days before the acquisition becomes effective. The Commissioner may deny approval of any such acquisition if the Commissioner determines that the acquisition is
anticompetitive or threatens the safety or soundness of a banking institution. Any voting stock acquired without the approval required under the statute may not be voted for a period of five years. This restriction is not applicable to certain
acquisitions by bank holding companies of 5% or more of the stock of Maryland banks or Maryland bank holding companies which are governed by Marylands holding company statute and also require prior approval of the Commissioner.



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Dividends. The Federal Reserve Board has issued a policy statement on the payment of cash
dividends by bank holding companies, which expresses the Federal Reserve Boards view that a bank holding company should pay cash dividends only to the extent that the companys net income for the past year is sufficient to cover both the
cash dividends and a rate of earning retention that is consistent with the companys capital needs, asset quality and overall financial condition. The Federal Reserve Board also indicated that it would be inappropriate for a company
experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve Board pursuant to FDICIA, the Federal Reserve Board may prohibit a bank holding
company from paying any dividends if the holding companys bank subsidiary is classified as undercapitalized. See Depository Institution Regulation  Prompt Corrective Regulatory Action.

Capital Requirements. The Federal Reserve Board has established capital requirements generally similar to the capital requirements
for state member banks described above, for bank holding companies. Formerly, these were applied to bank holding companies with total assets of $150 million or above, including the Company. However, in 2007, the Federal Reserve Board raised the
threshold for the applicability of its capital requirements to a $500 million asset size except where the company (i) engages in significant non-banking activities; (ii) conducts significant off balance sheet activities or has a material
amount of debt or equity securities outstanding registered with the Securities Exchange Commission. The Federal Reserve Board has reserved the right to apply its requirements to bank holding companies of any size when required for supervisory
purposes.

Stock Repurchases.As a bank holding company, the Company is required to give the Federal Reserve Board
prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the
preceding 12 months, is equal to 10% or more of the Companys consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would violate any law, regulation, Federal Reserve
Board order, directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. This requirement does not apply to bank holding companies that are well-capitalized, received one of the two highest examination
ratings at their last examination and are not the subject of any unresolved supervisory issues.

Taxation

For fiscal year 2008, the Companys maximum federal income tax rate was 34%. The Company and the Bank, together with the Banks subsidiary, to
date have not filed a consolidated federal income tax return for the fiscal year ended June 30, 2008.

The Banks federal income
tax returns have been audited through June 30, 1995. The Companys tax returns have never been audited.

State Income
Taxation. The State of Maryland imposes an income tax of approximately 7.00% on income measured substantially the same as federally taxable income, except that U.S. Government interest is not fully taxable. Effective July 1, 2008, the
rate increased to 8.25%.

For additional information regarding taxation, see Note 8 of Notes to Consolidated Financial Statements.

Item 1A. Risk Factors

This item is not applicable as the Company is a smaller reporting company.

Item 1B. Unresolved Staff Comments

Not applicable.



15



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Item 2. Properties

The following table sets forth the location and certain additional information regarding the Banks offices at June 30, 2008.



|                               |  |                        |  |                |  |                                |       |                           |      
|------------------------------ |  | ---------------------- |  | -------------- |  | ------------------------------ | ----- | ------------------------- | -----
|                               |  | YearOpened             |  | Owned orLeased |  | Net Book Value atJune 30, 2008 |       | ApproximateSquare Footage
|                               |  | (Dollars in thousands)
|Headquarters and Branch Office |  |                        |  |                |  |                                |       |                           |      
|1301 Merritt Boulevard         |  | 1970                   |  | Owned          |  | $                              | 395   |                           | 9,600
|Dundalk, Maryland 21222        |  |                        |  |                |  |                                |       |                           |      
|                               |  |                        |  |               
|Branch Office                  |  |                        |  |                |  |                                |       |                           |      
|2028 Joppa Road                |  |                        |  |                |  |                                |       |                           |      
|Baltimore, Maryland 21234      |  | 2007                   |  | Leased         |  |                                | 3,003 |                           | 7,000
|                               |  |                        |  |               
|Branch Office                  |  |                        |  |                |  |                                |       |                           |      
|7802 Harford Road              |  |                        |  |                |  |                                |       |                           |      
|Baltimore, Maryland 21234      |  | 1979                   |  | Owned          |  |                                | 220   |                           | 2,000
|                               |  |                        |  |               
|Branch Office                  |  |                        |  |                |  |                                |       |                           |      
|821 W. 36thStreet              |  |                        |  |                |  |                                |       |                           |      
|Baltimore, Maryland 21211      |  | 1988                   |  | Owned          |  |                                | 110   |                           | 1,100
|                               |  |                        |  |               
|Branch Office                  |  |                        |  |                |  |                                |       |                           |      
|12128 Long Green Pike          |  |                        |  |                |  |                                |       |                           |      
|Glen Arm, Maryland 21057       |  | 1988                   |  | Leased         |  |                                | 22    |                           | 1,400
|                               |  |                        |  |               
|Branch Office                  |  |                        |  |                |  |                                |       |                           |      
|11630 Glen Arm Road            |  |                        |  |                |  |                                |       |                           |      
|Glen Arm, Maryland 21057       |  | 2006                   |  | Leased         |  |                                |      |                           | 400  

The net book value of the Banks investment in premises and equipment totaled $4.2 million at
June 30, 2008. See Note 4 of Notes to Consolidated Financial Statements.

Item 3. Legal Proceedings

From time to time, the Bank is a party to various legal proceedings incident to its business. At June 30, 2008, there were no legal proceedings to
which the Company or the Bank was a party, or to which any of their property was subject, which were expected by management to result in a material loss to the Company or the Bank. There are no pending regulatory proceedings to which the Company,
the Bank or its subsidiary is a party or to which any of their properties is subject which are currently expected to result in a material loss.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a)The information
contained under the section captioned Market Information in the Companys Annual Report to Stockholders for the Fiscal Year Ended June 30, 2008 (the Annual Report) filed as Exhibit 13 hereto is incorporated herein
by reference.

(b)Not applicable.



16



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(c)The Company did not repurchase any shares of its common stock during the fourth quarter of the
fiscal year ended June 30, 2008.

Item 6. Selected Financial Data

The information contained in the section captioned Selected Consolidated Financial and Other Data in the Annual Report is incorporated herein
by reference.

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

The information contained in the section captioned Managements Discussion and Analysis of Financial Condition and Results of Operations
in the Annual Report is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable as the Company is a smaller reporting company.

Item 8. Financial Statements and Supplementary Data

The financial statements contained in the Annual Report and listed in Item 15 hereof are incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants in Accounting and Financial Disclosure

None.



17



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Item 9A(T). Controls and Procedures



| | (a) | Disclosure Controls and Procedures
| | --- | ----------------------------------

The
Companys management, including the Companys principal executive officer and principal financial officer, have evaluated the effectiveness of the Companys disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange Act). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the
period covered by this report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act
with the Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (2) is accumulated and communicated to the
Companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.



| | (b) | Internal Control Over Financial Reporting
| | --- | -----------------------------------------

MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Patapsco
Bancorp, Inc. (the Company) is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The Companys consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America and, as such, include some amounts that are based on the best estimates and judgments of management.

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting. This
internal control system is designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of the companys financial reporting and the preparation and presentation of financial statements for
external reporting purposes in conformity with accounting principles generally accepted in the United States of America, as well as to safeguard assets from unauthorized use or disposition. The system of internal control over financial reporting is
evaluated for effectiveness by management and tested for reliability through a program of internal audit with actions taken to correct potential deficiencies as they are identified. Because of inherent limitations in any internal control system, no
matter how well designed, misstatements due to error or fraud may occur and not be detected, including the possibility of the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable
assurance with respect to financial statement preparation. Further because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of the companys internal control over financial reporting as of June 30, 2008 based upon criteria set forth in Internal Control  Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment and on the forgoing
criteria, management has concluded that, as of June 30, 2008, the Companys internal control over financial reporting is effective.

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to
attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.



|                                                     |  |  |  |                                                                         
|---------------------------------------------------- |  |  |  | ------------------------------------------------------------------------
|                                                     |  | 
|/s/ Michael J. Dee                                   |  |  |  | /s/ William C. Wiedel, Jr.                                              
|Michael J. Dee President and Chief Executive Officer |  |  |  | William C. Wiedel, Jr. Senior Vice President and
Chief Financial Officer
|                                                     |  | 
|September 26, 2008                                   |  |  |  |                                                                         



| | (c) | Changes to Internal Control Over Financial Reporting
| | --- | ----------------------------------------------------

There were no changes in the Companys internal control over financial reporting during the three months ended June 30, 2008 that have materially affected, or are reasonable likely to materially affect, the Companys internal
control over financial reporting.



18



---

Item 9B. Other Information

Not applicable.

Item 10. Directors, Executive
Officers and Corporate Governance

Directors

The information relating to the directors of the Company is incorporated herein by reference to the section captioned Proposal I - Election of Directors in the Companys Proxy Statement for the 2008
Annual Meeting of Stockholders (the Proxy Statement).

Executive Officers

The information relating to executive officers of the Company is incorporated herein by reference to the section captioned Proposal I - Election of
Directors - Executive Officers Who Are Not Directors in the Proxy Statement.

Corporate Governance

Information regarding the Companys Audit Committee and audit committee financial expert is incorporated herein by reference to the section captioned
Corporate Governance  Meetings and Committees of the Board of Directors  Audit Committee in the Proxy Statement.

Compliance
with Section 16(a) of the Exchange Act

With respective information regarding compliance with Section 16(a) of the Exchange
Act, the cover page to this Annual Report on Form 10-K and the section captioned Section 16(a) Beneficial Ownership Compliance Reporting in the Proxy Statement is incorporated herein by reference.

Code of Ethics

The Company has adopted a written
code of ethics, which applies to all employees and Directors. The Company intends to disclose any amendments to or waivers from our Code of Ethics applicable to any senior financial officers on our website at http://www.patapscobank.com or in
a report on Form 8-K. A copy of the Code of Ethics is available, without charge, upon written request to Douglas H. Ludwig, Secretary, Patapsco Bancorp, Inc., 1301 Merritt Boulevard, Dundalk, Maryland 21222-2194.

Item 11. Executive Compensation

The
information required by this item is incorporated herein by reference to the sections captioned Director Compensation and Executive Compensation in the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a) Security Ownership of Certain Beneficial Owners.Information with respect to security ownership of certain beneficial owners required by
this item is incorporated herein by reference to the section captioned Voting Securities and Principal Holders of Voting Securities in the Proxy Statement.

(b) Security Ownership of Management.Information with respect to security ownership of management required by this item is incorporated
herein by reference to the section captioned Security Ownership of Management in the Proxy Statement.

(c) Changes in
Control.Management of the Company knows of no arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.



19



---

(d) Equity Compensation Plans. The following table sets forth certain information with respect to
the Companys equity compensation plans.



|                                                           |  |                                                                                        |  |                                                                           |  |                                                                                                                                       
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|                                                           |  | (a)                                                                                    |  | (b)                                                                       |  | (c)                                                                                                                                   
|                                                           |  | Number of securities to beissued upon exercise ofoutstanding options,warrants & rights |  | Weighted-average exerciseprice of outstandingoptions, warrants and rights |  | Number of securitiesremainingavailable for future issuanceunder equity compensationplans (excluding securitiesreflected in column (a))
|Equity compensation plans approved by security holders     |  | 62,819                                                                                 |  | $6.29                                                                     |  | 60,484                                                                                                                                
|Equity compensation plans not approved by security holders |  |                                                                                       |  |                                                                          |  |                                                                                                                                      
|                                                           |  |                                                                                        |  |                                                                           |  |                                                                                                                                       
|Total                                                      |  | 62,819                                                                                 |  | $6.29                                                                     |  | 60,484                                                                                                                                
|                                                           |  |                                                                                        |  |                                                                           |  |                                                                                                                                       

Item 13. Certain Relationships and Related Transactions; and Director Independence

Certain Relationships and Related Transactions

The
information required by this item is incorporated herein by reference to the section captioned Transactions with Management in the Proxy Statement.

Corporate Governance

With respect to the information regarding director independence, the section captioned Proposal
I  Election of Directors is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the section captioned Independent Registered Public Accounting
Firm in the Proxy Statement.

PART IV

Item 15. Exhibits

(a) List of Documents Filed as Part of this Report

(1) Financial Statements. The following consolidated financial statements are incorporated by reference from Item 7 hereof (see
Exhibit 13 to this Annual Report on Form 10-K):

Report of Registered Independent Accounting Firm

Consolidated Statements of Financial Condition as of June 30, 2008 and 2007

Consolidated Statements of Income for the Years Ended June 30, 2008 and 2007

Consolidated Statements of Stockholders Equity for the Years Ended June 30, 2008 and 2007

Consolidated Statements of Cash Flows for the Years Ended June 30, 2008 and 2007

Notes to Consolidated Financial Statements

(2) Exhibits. The following is a list of exhibits filed as part of this Annual Report on Form 10-K and also constitutes the Exhibit Index.



20



---

|     |  |                                                                                                                                           
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                               
|3.1  |  | Articles of Incorporation of Patapsco Bancorp, Inc. and Articles Supplementary (1)                                                        
|     | 
|3.2  |  | Bylaws of Patapsco Bancorp, Inc., as amended (2)                                                                                          
|     | 
|4    |  | Form of Common Stock Certificate of Patapsco Bancorp, Inc. (3)                                                                            
|     | 
|10.1 |  | Patapsco Bancorp, Inc. 1996 Stock Option and Incentive Plan (4)                                                                          
|     | 
|10.2 |  | Form of Severance Agreement by and between The Patapsco Bank and John McClean, Francis Broccolino and William Peters (5)                 
|     | 
|10.3 |  | Form of Amended and Restated Severance Agreement by and between The Patapsco Bank and Laurence S. Mitchell and Frank J. Duchacek, Jr. (6)
|     | 
|10.4 |  | Patapsco Bancorp, Inc. 2000 Stock Option and Incentive Plan (1)                                                                          
|     | 
|10.5 |  | Patapsco Bancorp, Inc. 2004 Stock Incentive Plan (7)                                                                                     
|     | 
|10.6 |  | Employment Agreement by and between The Patapsco Bank and Michael J. Dee (8)                                                             
|     | 
|10.7 |  | Severance Agreement by and between The Patapsco Bank and William C. Wiedel, Jr. (8)                                                      
|     | 
|13   |  | Annual Report to Stockholders for the Fiscal Year Ended June 30, 2008                                                                     
|     | 
|21   |  | Subsidiaries of the Registrant                                                                                                            
|     | 
|23   |  | Consent of Beard Miller Company LLP                                                                                                       
|     | 
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                         
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                         
|     | 
|32   |  | Section 1350 Certifications                                                                                                               



| | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------

|(1) | Incorporated herein by reference from the Companys Annual Report on Form 10-KSB for the year ended June 30, 2000 (File No. 0-28032).
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated herein by reference from the Companys Current Report on Form 8-K for the event on July 23, 2008, filed with the SEC on July 25, 2008 (File No. 0-28032).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated herein by reference from the Companys Registration Statement on Form 8-A (File No. 0-28032).
|--- | ----------------------------------------------------------------------------------------------------------

|(4) | Incorporated herein by reference from the Companys Annual Report on Form 10-KSB for the year ended June 30, 1996 (File No. 0-28032).
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated herein by reference from the Companys Annual Report on Form 10-KSB for the year ended June 30, 2005 (File No. 0-28032).
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated herein by reference from the Companys Annual Report on Form 10-KSB/A for the year ended June 30, 2006 filed on December 6, 2006 (File No. 0-28032).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated herein by reference from the Companys Registration Statement on Form S-8 (File No. 333-122300).
|--- | -------------------------------------------------------------------------------------------------------------

|(8) | Incorporated herein by reference from the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2008 (File No. 0-28032).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



21



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  |                        |  |                                      
|------------------ |  |  |  | ---------------------- |  | -------------------------------------
|                   |  |  |  | PATAPSCO BANCORP, INC.
|September 26, 2008 |  |  |  |                        |  |                                      
|                   |  |  |  | By:                    |  | /s/ Michael J. Dee                   
|                   |  |  |  |                        |  | Michael J. Dee                       
|                   |  |  |  |                        |  | President and Chief Executive Officer
|                   |  |  |  |                        |  | (Duly Authorized Officer)            

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                  |  |  |  |                   
|------------------------------------------------- |  |  |  | ------------------
|/s/ Michael J. Dee                                |  |  |  | September 26, 2008
|Michael J. Dee                                    |  |  |  |                   
|President, Chief Executive Officer and Director   |  |  |  |                   
|(Principal Executive Officer)                     |  |  |  |                   
|                                                  |  | 
|/s/ William C. Wiedel, Jr.                        |  |  |  | September 26, 2008
|William C. Wiedel, Jr.                            |  |  |  |                   
|Senior Vice President and Chief Financial Officer |  |  |  |                   
|(Principal Financial and Accounting Officer)      |  |  |  |                   
|                                                  |  | 
|/s/ Thomas P. ONeill                             |  |  |  | September 26, 2008
|Thomas P. ONeill                                 |  |  |  |                   
|Chairman of the Board                             |  |  |  |                   
|                                                  |  | 
|                                                  |  |  |  |                   
|Douglas H. Ludwig                                 |  |  |  |                   
|Director and Secretary                            |  |  |  |                   
|                                                  |  | 
|/s/ Nicole N. Glaeser                             |  |  |  | September 26, 2008
|Nicole N. Glaeser                                 |  |  |  |                   
|Director                                          |  |  |  |                   
|                                                  |  | 
|/s/ William R. Waters                             |  |  |  | September 26, 2008
|William R. Waters                                 |  |  |  |                   
|Director                                          |  |  |  |                   
|                                                  |  | 
|/s/ Gary R. Bozel                                 |  |  |  | September 26, 2008
|Gary R. Bozel                                     |  |  |  |                   
|Director                                          |  |  |  |                   
|                                                  |  | 
|/s/ J. Thomas Hoffman                             |  |  |  | September 26, 2008
|J. Thomas Hoffman                                 |  |  |  |                   
|Director                                          |  |  |  |                   



22