SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(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, 2000

                                       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                               (I.R.S. employer
of incorporation or organization)                         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)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act during the past 12 months (or 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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [X]

For the fiscal  year ended June 30,  2000,  the  registrant  had  $8,245,532  in
revenues.

As of September  16, 2000,  the  aggregate  market value of voting stock held by
non-affiliates was approximately  $5,199,369,  computed by reference to the most
recent sales price on September 16, 2000 as reported on the OTC Bulletin Boards.
For  purposes  of this  calculation,  it is assumed  that  directors,  executive
officers and beneficial  owners of more than 5% of the registrant's  outstanding
voting stock are affiliates.

Number of shares of Common Stock outstanding as of September 16, 2000: 327,390.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The  following  lists the documents  incorporated  by reference and the
Part of the Form 10-KSB into which the document is incorporated:

1.   Portions of the  registrant's  Annual Report to Stockholders for the Fiscal
     Year ended June 30, 2000. (Parts II and III)

2.   Portions  of Proxy  Statement  for  registrant's  2000  Annual  Meeting  of
     Stockholders. (Part III)


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF 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  (the  "Stock  Conversion").  In  the  Stock
Conversion,  the Company issued and sold 362,553 shares of its common stock at a
price of $20.00 per share to the Bank's depositors, the Company's employee stock
ownership plan and the public, thereby recognizing net proceeds of $6.7 million.

         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,  relates  primarily to 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 their main telephone number
is (410) 285-1010.

         The Patapsco  Bank.  The Bank is a Maryland  commercial  bank operating
through a single  office  located  in  Dundalk,  Maryland  and  serving  eastern
Baltimore County. The Bank was originally  chartered by the State of Maryland in
1910 under the name Patapsco Building and Loan  Association.  The Bank adopted a
federal charter and received federal  insurance of its deposit accounts in 1957,
at  which  time it  adopted  the  name of  Patapsco  Federal  Savings  and  Loan
Association.   The  Association  converted  to  a  commercial  bank  (the  "Bank
Conversion")  on September  30,  1996,  at which time it changed its name to The
Patapsco Bank.

         The principal  business of the Bank  historically was the investment of
deposits from the general public in loans secured by first  mortgages on one- to
four-family  ("single-family")  residences in the Bank's  market area.  The Bank
derived its income  principally  from interest  earned on loans and, to a lesser
extent, interest earned on mortgage-backed  securities and investment securities
and noninterest income.  Funds for these activities were provided principally by
operating revenues,  deposits and repayments of outstanding loans and investment
securities and mortgage-backed securities.

         The Bank's  Board of Directors  believe the Bank's  market area has not
been  adequately  served by the  existing  financial  institutions  and there is
strong local demand for commercial real estate,  commercial business , equipment
leases and consumer  loans.  As a result,  the Board of Directors  refocused the
Bank's  strategy to pursue its existing  business of  originating  single-family
residential   mortgage  loans,   and  expanding  into  commercial  real  estate,
commercial  business,  consumer lending,  construction loans and small equipment
leases. In furtherance of this strategy,  in June 1995, the Bank began financing
home  improvement  loans and had $9.3  million of such loans,  or 10.1% of total
loans  outstanding  at June 30, 2000.  In addition,  the Board of Directors  and
management have  implemented  other new lending  programs such as small business
loans,  residential  and  non-residential  construction  loans,  commercial real
estate loans, home equity and other consumer loans and equipment leases. At June
30, 2000, the Bank had $9.9 million,  $1.6 million,  $11.8 million, $1.8 million
and $7.1 million in small business loans,  construction  loans,  commercial real
estate  loans,  home equity and other  consumer  loans,  and  equipment  leases,
respectively.


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<PAGE>

PENDING ACQUISITION

         On May 16, 2000,  the Company  announced that it had agreed to purchase
Northfield Bancorp, Inc., the parent company of Northfield Federal Savings Bank.
Under the terms of the  agreement of merger,  each share of  Northfield  Bancorp
common stock  outstanding  at the effective  time of the merger will be canceled
and  converted  into the  right to  receive  $12.50  in cash and .24  shares  of
Patapsco Bancorp's Series A Noncumulative Convertible Perpetual Preferred Stock.
At any time after issuance, this preferred stock will be convertible into shares
of Patapsco Bancorp common stock, on a one for one basis. Each share of Patapsco
Bancorp's  outstanding preferred stock will earn dividends at the annual rate of
7.5%  of  its  liquidation   preference  of  $25.00  per  share.  Dividends  are
noncumulative,  which means that if the  Company's  Board does not pay dividends
for a quarterly period, it is not obligated to pay a dividend for that period at
a later date. After five years from the date of issuance of the Patapsco Bancorp
preferred  stock,  Patapsco  Bancorp may redeem  some or all of the  outstanding
Patapsco  Bancorp  preferred  stock at $25.00  per share plus any  declared  but
unpaid dividends for the then current quarter.

         The merger is subject to the  approval of the Board of Governors of the
Federal Reserve System, the Commissioner of Financial Regulation of the Maryland
Department  of  Labor,  Licensing  and  Regulation,  and  the  approval  of  the
stockholders of Northfield Bancorp. If all approvals are received, the merger is
expected to close some time in the fourth quarter of calendar year 2000.

MARKET AREA


         The Bank's  market  area for  gathering  deposits  consists  of eastern
Baltimore County,  Maryland,  while the Bank makes loans to customers in much of
the Mid-Atlantic area with 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.  Major employers in the area
include  Bethlehem Steel and General Motors.  In recent years, the local economy
has  stabilized  from the  layoffs  and plant  closings  by local  employers  in
previous years. The economy in the Bank's market area continues to be dependent,
to some extent,  on a small number of major industrial  employers.  Recently,  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.

LENDING ACTIVITIES

         General.  The Company's  gross loan portfolio  totaled $92.7 million at
June 30,  2000,  representing  90.3% of total  assets  at that  date.  It is the
Company's  policy to concentrate its lending within its market area. At June 30,
2000, $49.9 million,  or 53.9% 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 $13.4 million,
or 14.6% of the  Company's  gross loan  portfolio at June 30, 2000. In addition,
the Company  originates  consumer and other loans,  including home equity loans,
home improvement loans and loans secured by deposits. At June 30, 2000, consumer
and other loans totaled  $12.3  million,  or 13.4% of the  Company's  gross loan
portfolio.  The Company's  commercial  loan  portfolio,  which consists of small
business loans and  commercial  leases,  totaled $16.9 million,  or 18.3% of the
Company's gross loan portfolio.

         Originations,  Purchases and Sales of Loans. The Company  generally has
authority  to  originate  and  purchase  loans  secured by real  estate  located
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  home  improvement  loan
origination in the Delaware, Pennsylvania and Northern Virginia markets.

         The Company's loan  originations  are derived from a number of sources,
including  referrals by realtors,  depositors and borrowers and advertising,  as
well  as  loan  brokers.   The  Company's   solicitation   programs  consist  of
advertisements  in local  media,  in addition  to  occasional  participation  in
various community  organizations and events. All of the Company's loan personnel
are salaried, and the Company does not compensate loan personnel on a commission
basis  for  loans  originated.  With  the  exception  of  applications  for home
improvement  loans, which loans may be originated on an indirect basis through a
limited number of approved home improvement  contractors



                                       3
<PAGE>

and loan brokers,  loan  applications are accepted at the Company's  office.  In
addition,  the Company has one salaried loan  originator  who may travel to meet
prospective borrowers and take applications. In all cases, the Company has final
approval of the application.

         In  recent  years,  the  Company  has  purchased  whole  loans and loan
participation interests. During the year ended June 30, 2000 the company did not
purchase any whole loans or participation  interests. In the year ended June 30,
1999,  the  Company  purchased  whole  loans  and loan  participation  interests
totaling $337,000 from local financial  institutions and local mortgage brokers.
In the future,  management  intends to consider limited purchases of whole loans
or participation  interests in loans secured by  single-family,  multi-family or
commercial real estate.

         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.  First mortgage loans in amounts of up to $252,700,  $350,000 and
$500,000  may be approved  by the Vice  President  - Real  Estate  Landing,  the
Officers Loan  Committee  (consisting  of three  officers of the Bank),  and the
Directors  Loan  Committee  (consisting  of  any  two  non-employee  directors),
respectively. Certain officers and committees have been granted authority by the
Board of  Directors  to approve  commercial  business  loans 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 FNMA.  Generally,  upon  receipt of a loan
application from a prospective  borrower,  a credit report and verifications are
ordered  to  verify  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.  No fees are 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.

         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 $1.4  million at June 30,  2000.  At that date,  the  Company  had no
lending relationships in excess of the loans-to-one-borrower  limit. At June 30,


                                       4
<PAGE>
2000, the Company's largest lending  relationship was a $1.3 million  commercial
loan secured by commercial  real estate,  which  includes a 55% guarantee by the
United States Small Business Administration, which was current and performing in
accordance with its terms at June 30, 2000.

         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
Federal  Reserve  Board,  legislative  tax  policies  and  government  budgetary
matters.

         Residential Real Estate Lending.  The Company historically has been and
continues to be 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,  2000,  residential
mortgage loans,  excluding home improvement loans, and home equity loans totaled
$49.9 million,  or 53.9% of the Company's gross loan  portfolio.  Of such loans,
$4.6 million were secured by nonowner-occupied investment properties.

         The Company originates fixed-rate and adjustable rate mortgage loans at
competitive  interest  rates.  At June 30, 2000,  $36  million,  or 57.7% of the
Company's residential and commercial real estate loan portfolio was comprised of
fixed-rate   mortgage  loans  and  $26.2  million  or  42.3%  of  the  Company's
residential   and  commercial  real  estate  loan  portfolio  was  comprised  of
adjustable rate mortgage loans.

         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, 2000, the Company had $1.6
million of multi-family  residential real estate loans,  which amounted to 1.71%
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.  Because of
the  inherently  greater  risk  involved  in this type of  lending,  the Company
generally  limits its  multi-family  real estate lending to borrowers within its
market  area or with which it has had prior  experience.  The  Company  seeks to
expand multi-family residential real estate lending.

         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.

         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 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 six to 18
months and have 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 .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  .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, 2000, $1.6 million,  or 1.7%, of the
Company's gross loan portfolio consisted of construction loans.


                                       5
<PAGE>


         Prior to making a commitment to fund a loan,  the Bank requires both an
appraisal of the property by appraisers approved by the Board of Directors and 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. The Bank generally
charges a construction 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 which 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.

         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 $900,000. At June 30, 2000, the Company
had $11.8 million of commercial  real estate loans,  which  amounted to 12.9% of
the Company's  gross loan portfolio at such date.  Commercial  real estate loans
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 maturity  generally of three to five
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.  At June 30,
2000,  consumer and other loans totaled $12.3 million, or 13.4% 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,  except for the western
portion of the state, and northern  Virginia,  Delaware and 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 15 years and have fixed  interest
rates.  Home

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<PAGE>

improvement  loans are made on both secured and unsecured  bases.  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, 2000, home improvement loans amounted to $9.3 million, or
10.1% of the  Company's  gross loan  portfolio,  with $1.8 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 which
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.

     During fiscal 1996 the Company began a commercial lending program.  At June
30, 2000 the Company's  commercial  loans totaled $9.9 million,  or 10.8% of the
Company's gross 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 or as lines of credit. The Bank's 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.  Such loans
generally are secured by business assets and, if possible,  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  with the  prime  rate as stated in the Wall
Street Journal plus a negotiated margin.  Generally,  commercial  business loans
are made in amounts ranging between $10,000 and $1.3 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  rather than
on the basis of  underlying  collateral  value,  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


                                       7
<PAGE>
addition,  the Bank  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 small  businesses.  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, 2000,  commercial lease finance transaction loans totaled  $7.1million,
or 7.6% of the Company's gross 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 3 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,  except
for 30 year  fixed-rate  residential  mortgage loans  originated and sold by the
Company with  servicing  retained,  and earns minimal income from this activity.
The Company has sold participating  interests on residential and commercial real
estate loans to other local financial institutions. At June 30, 2000 the Company
was servicing loans for others totaling approximately $2.1 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.  Consumer
loans are generally  charged off, or any expected  loss is reserved  for,  after
they  become  more than 90 days past due.  All other  loans are charged off when
management  concludes  that  they  are  uncollectible.  See  Note 4 of  Notes to
Consolidated Financial Statements.

         Real  estate  acquired  by the  Company as a result of  foreclosure  is
classified  as real  estate  owned  until  such  time as it is sold.  When  such
property is acquired, it is initially recorded at the lower of cost or estimated
fair  value and  subsequently  at the  lower of book  value or fair  value  less
estimated  costs to  sell.  Fair  value  is  defined  as the  amount  in cash or
cash-equivalent  value of 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.  See Note 4 of Notes to  Consolidated
Financial Statements.

                                       8
<PAGE>


         The  following  table  sets  forth  information  with  respect  to  the
Company's nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>

                                                                           At June 30,
                                                                 -----------------------------
                                                                    2000               1999
                                                                 ----------         ----------
                                                                         (In thousands)
<S>                                                              <C>                <C>
Loans accounted for on a non-accrual basis: (1)
    Real estate:
       Residential.............................................  $     279          $     173
       Commercial..............................................         --                 --
       Construction............................................         --                 --
    Consumer...................................................         14                 --
    Commercial.................................................         10                 --
                                                                 ---------          ---------
       Total...................................................  $     303          $     173
                                                                 =========          =========

Accruing loans which are contractually past due
   90 days or more.............................................  $      --          $      --
                                                                 ---------          ---------
       Total...................................................  $      --          $      --
                                                                 ---------          =========

       Total nonperforming loans...............................  $     303          $     173
                                                                 =========          =========

Percentage of total loans......................................       0.33%              0.23%
                                                                 =========          =========
Other non-performing assets (2)................................  $      72          $      31
                                                                 =========          =========
<FN>

-------------
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a  nonaccrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         management's assessment collectibility of the loan.
(2)      Other nonperforming  assets represents property acquired by the Company
         through  foreclosure or  repossession.  This property is carried at the
         lower of its fair  market  value less  estimated  selling  costs or the
         principal balance of the related loan, whichever is lower.
</FN>
</TABLE>

         During the year ended June 30, 2000,  gross interest  income of $11,000
would have been  recorded on loans  accounted  for on a nonaccrual  basis if the
loans had been current throughout the respective periods. Interest on such loans
included in income during that period amounted to $8,600.

         At June 30,  2000,  nonaccrual  loans  consisted  of 3  mortgage  loans
secured by single-family residential real estate properties aggregating $279,000
and one commercial  lease  transaction  totaling  $10,000 and two consumer loans
totaling  $14,000.  At that date,  the  Company had no loans not  classified  as
non-accrual,  90 days past due or  restructured  where known  information  about
possible credit problems of borrowers caused management to have serious concerns
as to the ability of the borrowers to comply with present loan  repayment  terms
and may result in disclosure as non-accrual, 90 days past due or restructured.

         At June 30, 2000,  the Company had $72,000 in real estate owned,  which
consisted of one residential  property  located in the Dundalk area of Baltimore
County, Maryland.

         Allowance for Loan Losses. In originating loans, the Company recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things,  the type of loan being made,  the  creditworthiness  of the
borrower over the term of the loan, general economic conditions and, in the case
of a secured loan, the quality of the security for the loan. It is  management's
policy to maintain an adequate  allowance for loan losses. The Company increases
its  allowance for loan losses by charging  provisions  for possible loan losses
against the Company's income.

         Management  will  continue to  actively  monitor  the  Company's  asset
quality and  allowance  for loan  losses.  Management  will charge off loans and
properties  acquired in settlement of loans against the allowances for losses on
such loans and such properties when  appropriate and will provide  specific loss
allowances  when  necessary.  Although  management  believes  it uses  the  best
information  available to make determinations with respect to the allowances for
losses and believes such  allowances  are adequate,  future  adjustments  may be
necessary  if  economic


                                       9
<PAGE>
conditions differ  substantially from the economic conditions in the assumptions
used in making the initial determinations.

         The  Company's  methodology  for  establishing  the  allowance for loan
losses takes into  consideration  probable  losses that have been  identified in
connection  with specific assets as well as losses that have not been identified
but can be  expected  to  occur.  Management  conducts  regular  reviews  of the
Company's assets and evaluates the need to establish  allowances on the basis of
this  review.  Allowances  are  established  on a  quarterly  basis  based on an
assessment  of, among  others:  lending risks  associated  with new products and
markets,  loss  allocations  for  specific  problem  credits,  the  level of the
allowance  to  nonperforming   loans,   historical  loss  experience,   economic
conditions, portfolio trends and credit concentrations and management's judgment
with respect to current and expected economic conditions and their impact on the
existing loan portfolio.  Additional  provisions for losses on loans are made in
order to bring the allowance to a level deemed adequate.  Management anticipates
that the Company's  provisions for loan losses will increase in the future as it
implements  the Board of  Directors'  strategy of continuing  existing  lines of
business while gradually expanding  commercial real estate,  commercial business
and  consumer   lending,   which  loans  generally  entail  greater  risks  than
single-family  residential  mortgage  loans. At the date of foreclosure or other
repossession, the Company would transfer the property to real estate acquired in
settlement of loans  initially at the lower of cost or estimated  fair value and
subsequently  at the lower of book value or fair value  less  estimated  selling
costs.  Any portion of the outstanding loan balance in excess of fair value less
estimated  selling  costs would be charged off  against the  allowance  for loan
losses.

         Banking regulatory  agencies have adopted a policy statement  regarding
maintenance of an adequate  allowance for loan and lease losses and an effective
loan review system.  This policy includes an arithmetic formula for checking the
reasonableness of an institution's  allowance for loan loss estimate compared to
the average loss experience of the industry as a whole. Examiners will review an
institution's  allowance  for loan losses and compare it against the sum of: (i)
50% of the portfolio that is classified doubtful; (ii) 15% of the portfolio that
is classified as  substandard;  and (iii) for the portions of the portfolio that
have not been classified  (including those loans designated as special mention),
estimated  credit  losses  over the  upcoming  12  months  given  the  facts and
circumstances  as of the evaluation  date.  This amount is considered  neither a
"floor"  nor a "safe  harbor"  of the  level of  allowance  for loan  losses  an
institution should maintain, but examiners will view a shortfall relative to the
amount  as  an  indication  that  they  should  review  management's  policy  on
allocating these  allowances to determine  whether it is reasonable based on all
relevant factors.

         The following  table sets forth an analysis of the Company's  allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>

                                                                        Year Ended June 30,
                                                                 --------------------------------
                                                                     2000               1999
                                                                  ---------          ----------
                                                                       (Dollars in thousands)

<S>                                                              <C>                <C>
Balance at beginning of period.................................. $     631          $     554
Loans charged off:
   Residential real estate mortgage.............................        --                 48
    Commercial Loan/Lease.......................................        29                 --
   Consumer.....................................................       225                126
                                                                 ---------          ---------
      Total charge-offs.........................................       254                174
Recoveries:
   Single-family residential mortgage...........................         1                  5
   Commercial Loan/Lease........................................        18
   Consumer.....................................................        21                  1
                                                                 ---------          ---------
      Total recoveries..........................................        41                  6
                                                                 ---------          ---------
Net loans charged off...........................................       213                167
Provision for loan losses.......................................       325                245
                                                                 ---------          ---------
Balance at end of period........................................ $     743          $     631
                                                                 =========          =========
Ratio of net charge-offs to average
   loans outstanding during the period..........................       .25%               .21%
                                                                 =========          =========
</TABLE>


                                       10
<PAGE>


The following  table allocates the allowance for loan losses by loan category at
the dates  indicated.  The  allocation  of the allowance to each category is not
necessarily  indicative  of future  losses and does not  restrict the use of the
allowance to absorb losses in any category.
<TABLE>
<CAPTION>

                                                                             At June 30,
                                                     --------------------------------------------------------------
                                                               2000                       1999
                                                     -----------------------------  -------------------------------
                                                                  Percent of Loans             Percent of Loans
                                                                 in Each Category              in Each Category
                                                     Amount        to Total Loans   Amount     to Total Loans
                                                     ------        --------------   ------     --------------
                                                                           (Dollars in thousands)
<S>                                                  <C>              <C>           <C>                 <C>
Real estate mortgage:
   Residential...................................... $   125          54.35%        $   117             61.83%
   Commercial.......................................     103          12.87              83             10.02
   Construction.....................................      24           1.71              18              2.99
Consumer and other..................................     159          13.42             144             14.54
Commercial..........................................     199          17.65              85             10.62
Unallocated.........................................     133           0.00             184              0.00
                                                     -------       --------         -------          --------
     Total allowance for loan losses................ $   743         100.00%        $   631            100.00%
                                                     =======         ======         =======            ======
</TABLE>

INVESTMENT ACTIVITIES

         General.  The Company makes investments in order to maintain the levels
of liquid  assets  required  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,  consisting primarily of securities issued or guaranteed by the U.S.
government or agencies thereof.  Typical investments include federally sponsored
agency mortgage pass-through and federally sponsored agency and mortgage-related
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 mortgage-related  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.  Under
the Company's current investment policy,  securities  purchases must be approved
by  the   Company's   Asset/Liability   Management   Committee.   The  Company's
Asset/Liability  Management  Committee has 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,  2000,  the  Company's  entire  portfolio  of  investment
securities  was  classified as available for sale and had an aggregate  carrying
value of $5.9 million and an  unrealized  net loss after tax of  $112,000.  As a
result,  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 longer term basis for  general  operational  purposes.  The Bank may borrow
from the FHLB of Atlanta.


                                       11
<PAGE>

         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 five  years.  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.  The Company
does not accept brokered deposits.

         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 HONOR  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  Company  in recent  years has used  advances  from the FHLB of
Atlanta  to  supplement  its  supply  of  lendable  funds  and to  meet  deposit
withdrawal requirements. The FHLB of Atlanta functions as a central reserve bank
providing  credit for  member  financial  institutions.  As a member of the FHLB
System,  the  Company is  required  to own stock in the FHLB 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
Company  has a Blanket  Agreement  for  advances  with the FHLB under  which the
Company  may  borrow  up to 22% of  assets  subject  to  normal  collateral  and
underwriting requirements.  Advances from the FHLB of Atlanta are secured by the
Company's  stock in the FHLB of Atlanta and other eligible  assets.  At June 30,
2000, the Company had outstanding  Federal Home Loan Bank of Atlanta advances of
$14.9 million with an average rate of 5.92%.

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 is inactive, Prime Business Leasing that was formed in October 1998
and Patapsco Financial  Services,  Inc., which was formed in March 2000 in order
to sell alternative  investment products to the Company's customers.  As of June
30, 2000, Patapsco Financial Services, Inc had not yet commenced operations.

COMPETITION

         The Company faces strong  competition  both in originating  real estate
and consumer 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 which 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 in Maryland.  The Company  originates loans throughout
much of the  Mid-Atlantic  area. The Company  attracts its deposits  through its
office in Dundalk 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.


                                       12
<PAGE>

EMPLOYEES

         As of June 30,  2000,  the  Company  had 33  full-time  and 3 part-time
employees,  none of whom were represented by a collective  bargaining agreement.
Management considers the Company's relationships with its employees to be good.

DEPOSITORY INSTITUTION REGULATION

         General.  The  Bank is a  Maryland  commercial  bank  and  its  deposit
accounts  are  insured  by the SAIF.  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")
and the  Federal  Reserve  Board  and to  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.

         As a federally insured depository  institution,  the Bank is subject to
various  regulations   promulgated  by  the  Federal  Reserve  Board,  including
Regulation B (Equal Credit  Opportunity),  Regulation D (Reserve  Requirements),
Regulations  E  (Electronic  Fund  Transfers),  Regulation Z (Truth in Lending),
Regulation CC (Availability of Funds and Collection of Checks) and Regulation DD
(Truth in Savings).

         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.

         Financial  Modernization  Legislation.  On November 12, 1999, President
Clinton  signed  legislation  which  could  have a  far-reaching  impact  on the
financial services  industry.  The  Gramm-Leach-Bliley  ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding  companies  and national  banks to engage in a variety of new  financial
activities.  Among the new  activities  that will be  permitted  to bank holding
companies are  securities  and  insurance  brokerage,  securities  underwriting,
insurance  underwriting  and merchant  banking.  The Federal  Reserve Board,  in
consultation  with  the  Secretary  of  the  Treasury,  may  approve  additional
financial activities.  The G-L-B Act, however,  prohibits future acquisitions of
existing  unitary savings and loan holding  companies by firms which are engaged
in  commercial  activities  and limits  the  permissible  activities  of unitary
holding companies formed after May 4, 1999.

         The G-L-B Act imposes new requirements on financial  institutions  with
respect to customer  privacy.  The G-L-B Act generally  prohibits  disclosure of
customer  information  to  non-affiliated  third parties unless the customer has
been given the  opportunity  to object and has not objected to such  disclosure.
Financial  institutions  are further required to disclose their privacy policies
to customers  annually.  Financial  institutions,  however,  will be required to
comply  with state law if it is more  protective  of customer  privacy  than the
G-L-B Act.  The G-L-B Act directs the federal  banking  agencies,  the  National
Credit Union Administration,  the Secretary of the Treasury,  the Securities and
Exchange  Commission and the Federal Trade Commission,  after  consultation with
the National Association of Insurance Commissioners,  to promulgate implementing
regulations  within six months of enactment.  The privacy provisions will become
effective in November 2000, with full compliance required by July 1, 2001.

         The G-L-B Act contains  significant  revisions to the FHLB System.  The
G-L-B Act imposes new capital  requirements  on the FHLBs and authorizes them to
issue  two  classes  of stock  with  differing  dividend  rates  and  redemption
requirements.  The G-L-B Act  deletes  the  current  requirement  that the FHLBs
annually   contribute  $300  million  to  pay  interest  on  certain  government
obligations in favor of a 20% of net earnings formula. The G-L-B Act expands the
permissible  uses of FHLB advances by community  financial  institutions  (under
$500  million in assets) to include  funding  loans to small  businesses,  small
farms and small  agri-businesses.  The  G-L-B Act makes  membership  in the FHLB
voluntary for federal savings associations.

                                       13
<PAGE>

         The G-L-B  Act  contains  a variety  of other  provisions  including  a
prohibition  against ATM surcharges  unless the customer has first been provided
notice of the  imposition  and  amount of the fee.  The  G-L-B Act  reduces  the
frequency of Community  Reinvestment Act  examinations for smaller  institutions
and imposes certain reporting requirements on depository  institutions that make
payments  to   non-governmental   entities  in  connection  with  the  Community
Reinvestment  Act.  The  G-L-B  Act  eliminates  the SAIF  special  reserve  and
authorizes a federal  savings  association  that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

         The  Company  is unable to  predict  the impact of the G-L-B Act on its
operations at this time.

         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 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 4% to 5%, depending upon the
level and  nature of risks of their  operations.  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,  primarily
goodwill.

         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 generally are determined under the Federal Reserve Board's
regulations, which establish four risk categories, with risk weights of 0%, 20%,
50% and 100%. These computations result in the total risk-weighted  assets. Most
loans are assigned to the 100% risk  category,  except for first  mortgage loans
fully  secured  by  residential  property  and,  under  certain   circumstances,
residential  construction  loans,  both  of  which  carry  a  50%  rating.  Most
investment securities are assigned to the 20% category,  except for municipal or
state revenue bonds, which have a 50% risk-weight,  and direct obligations of or
obligations guaranteed by the United States Treasury or United States Government
agencies,  which have a 0% risk-weight.  In converting  off-balance sheet items,
direct credit  substitutes,  including general guarantees and standby letters of
credit  backing  financial  obligations,  are  given a 100%  conversion  factor.
Transaction-related  contingencies  such as bid bonds,  other standby letters of
credit  and  undrawn  commitments,  including  commercial  credit  lines with an
initial  maturity  of  more  than  one  year,  have  a  50%  conversion  factor.
Short-term,  self-liquidating  trade  contingencies  are  converted  at 20%, and
short-term commitments have a 0% factor.

         The Federal Reserve Board has proposed to revise its risk-based capital
requirements to ensure that such requirements provide for explicit consideration
of interest rate risk.  Under the proposed rule, a state member bank's  interest
rate risk exposure would be quantified  using either the measurement  system set
forth in the proposal or the bank's  internal model for measuring such exposure,
if such model is determined to be adequate by the bank's examiner. If the dollar
amount of a bank's  interest  rate  risk  exposure,  as  measured  under  either
measurement


                                       14
<PAGE>
system,  exceeds 1% of the bank's total assets, the bank would be required under
the proposed rule to hold  additional  capital equal to the dollar amount of the
excess.  Management  of the Bank has not  determined  what  effect,  if any, the
Federal Reserve Board's proposed  interest rate risk component would have on the
Bank's capital if adopted as proposed.

         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.

         The  table  below  provides  information  with  respect  to the  Bank's
compliance with its regulatory capital requirements at the dates indicated.
<TABLE>
<CAPTION>
                                                                                                       Regulatory
                                                                                                      Requirements
                                                                                 Regulatory            To Be Well
                                                                                Requirements        Capitalized Under
                                                                                 For Capital        Prompt Corrective
                                                          Actual               Adequacy Purposes    Action Provisions
                                                   --------------------       ------------------   --------------------
                                                   Amount         Ratio       Amount      Ratio    Amount      Ratio
                                                  ------         -----      -------      -----    -------     -----
                                                                         (Dollars in thousands)
<S>                                              <C>          <C>        <C>           <C>     <C>          <C>
As of June 30, 2000:
   Total Capital (to Risk Weighted Assets).....  $   9,822     14.31%    $   5,490      8.00%  $   6,863     10.00%
   Tier 1 Capital (to Risk Weighted Assets)....      9,079     13.23         2,745      4.00       4,118     6.00
   Tier 1 Capital (to Average Assets).........       9,079      8.89         4,083      4.00       5,104     5.00

As of June 30, 1999
   Total Capital (to Risk Weighted Assets).....  $   9,120     15.35%    $   4,752      8.00%  $   5,941     10.00%
   Tier 1 Capital (to Risk Weighted Assets)....      8,489     14.19         2,376      4.00       3,564     6.00
   Tier 1 Capital (to Average Assets).........       8,489      9.35         3,630      4.00       4,537     5.00
</TABLE>


         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: (i) subject
to increased  monitoring by the  appropriate  federal  banking  regulator;  (ii)
required to submit an acceptable capital  restoration plan within 45 days; (iii)
subject to asset growth  limits;  and (iv)  required to obtain prior  regulatory
approval for  acquisitions,  branching and new lines of businesses.  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.   The  senior  executive   officers  of  a  significantly
undercapitalized   institution   may  not  receive   bonuses  or   increases  in
compensation  without prior  approval and the  institution  is  prohibited  from
making  payments of principal  or interest on its  subordinated  debt.  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


                                       15
<PAGE>

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.

         Federal banking  regulators have adopted  regulations  implementing the
prompt  corrective  action provisions of FDICIA.  Under these  regulations,  the
federal  banking  regulators will generally  measure a depository  institution's
capital  adequacy on the basis of the  institution's  total  risk-based  capital
ratio  (the  ratio  of  its  total  capital  to  risk-weighted  assets),  Tier 1
risk-based capital ratio (the ratio of its core capital to risk-weighted assets)
and  leverage  ratio (the ratio of its core capital to adjusted  total  assets).
Under the regulations, an institution that is not subject to an order or written
directive  by its  primary  federal  regulator  to meet or  maintain  a specific
capital  level will be deemed  "well  capitalized"  if it also has:  (i) a total
risk-based  capital  ratio of 10% or greater;  (ii) a Tier 1 risk-based  capital
ratio of 6.0% or  greater;  and (iii) a leverage  ratio of 5.0% or  greater.  An
"adequately  capitalized" depository institution is an institution that does not
meet the definition of well capitalized and has: (i) a total risk-based  capital
ratio of 8.0% or  greater;  (ii) a Tier 1  risk-based  capital  ratio of 4.0% or
greater;  and (iii) a leverage  ratio of 4.0% or greater  (or 3.0% or greater if
the   depository   institution   has  a   composite   1   CAMELS   rating).   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%.  Tangible  equity is defined as core  capital  plus  cumulative
perpetual  preferred stock (and related surplus) less all intangibles other than
qualifying  supervisory  goodwill and certain  mortgage  servicing  rights.  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  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 CAMELS rating  category.  At June 30, 2000, 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 (the "CDRI Act"),
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.  The guidelines  also  establish  certain basic
standards  for loan  documentation,  credit  underwriting,  interest  rate  risk
exposure,  and asset growth.  The  guidelines  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,  and should take into  account  factors  such as  comparable  compensation
practices at  comparable  institutions.  In addition,  a depository  institution
should maintain systems,  commensurate with its size and the nature and scope of
its operations,  to identify  problem assets and prevent  deterioration in those
assets as well as to evaluate and monitor  earnings and ensure that earnings are
sufficient to maintain adequate capital and reserves. 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.  A
depository  institution must submit an acceptable compliance plan to its primary
federal  regulator  within  30 days of  receipt  of a  request  for such a plan.
Failure to submit or implement a compliance  plan may subject the institution to
regulatory sanctions.  Management believes that the Bank meets substantially all
the standards adopted in the interagency guidelines.

         Federal Home Loan Bank System.  The FHLB System consists of 12 district
FHLBs subject to supervision and regulation by the Federal Housing Finance Board
("FHFB").  The FHLBs  provide a central  credit  facility  primarily  for member
institutions.  As a member  of the FHLB of  Atlanta,  the  Bank is  required  to
acquire and hold


                                       16
<PAGE>

shares of capital stock in the FHLB of Atlanta in an amount at least equal to 1%
of the  aggregate  unpaid  principal of its home mortgage  loans,  home purchase
contracts, and similar obligations at the beginning of each year, or 1/20 of its
advances  (borrowings) from the FHLB of Atlanta,  whichever is greater. The Bank
was in compliance with this requirement with investment in FHLB of Atlanta stock
at June 30, 2000 of $845,000. The FHLB of Atlanta serves as a reserve or central
bank for its member  institutions  within its  assigned  district.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.  It offers  advances to members in  accordance  with  policies and
procedures  established  by the FHFB and the Board of  Directors  of the FHLB of
Atlanta.  Long-term advances may only be made for the purpose of providing funds
for residential  housing finance and small  businesses and small farms and small
agri-businesses.  At June 30,  2000,  the Bank had  $14.9  million  in  advances
outstanding from the FHLB of Atlanta.

         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 $4.9 million and $44.3 million,  plus 10% on
the remainder.  This  percentage is subject to adjustment by the Federal Reserve
Board. Because required reserves must be maintained in the form of vault cash or
in a non-interest  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,  2000,  the  Bank  met  its  reserve
requirements.

         The Bank is a member of the Federal  Reserve  System and subscribed for
stock in the Federal  Reserve  Bank of Richmond in an amount  equal to 6% of the
Bank's  paid-up  capital  and  surplus.  The  Bank  is  subject  to the  reserve
requirements to which the Bank is presently  subject under Federal Reserve Board
regulations.

         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 of member banks
from  Federal   Reserve  Banks  and  its  imposition  of   non-earning   reserve
requirements  on all depository  institutions,  such as the Bank,  that maintain
transaction accounts or non-personal time deposits.

         Deposit Insurance. The Bank's savings deposits are insured by the SAIF,
which is  administered  by the FDIC.  The Bank is required  to pay  assessments,
based on a percentage of its insured deposits,  to the FDIC for insurance of its
deposits by the FDIC through the Savings Association Insurance Fund of the FDIC.
The  FDIC  is  required  to  set  semi-annual   assessments   for   SAIF-insured
institutions  at a level  necessary to maintain the designated  reserve ratio of
the SAIF at 1.25% of estimated  insured  deposits,  or at a higher percentage of
estimated  insured  deposits  that the FDIC  determines to be justified for that
year by circumstances indicating a significant risk of substantial future losses
to the SAIF.

         Under the FDIC's risk-based  deposit insurance  assessment  system, the
assessment rate for an insured depository  institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the  institution's  capital level and supervisory  evaluations.  Based on the
data reported to regulators  for the date closest to the last day of the seventh
month preceding the semi-annual assessment period,  institutions are assigned to
one of three  capital  groups -- well  capitalized,  adequately  capitalized  or
undercapitalized  -- using the same  percentage  criteria  as under  the  prompt
corrective action  regulations.  See " -- Prompt Corrective  Regulatory Action."
Within each capital group,  institutions  are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority,  and such other  information as the FDIC determines to be relevant to
the  institution's  financial  condition  and  the  risk  posed  to the  deposit
insurance fund.  Subgroup A consists of financially sound institutions with only
a few minor  weaknesses.  Subgroup B consists of institutions  that  demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the  institution  and  increased  risk of loss to the  deposit  insurance  fund.
Subgroup C consists of institutions that pose a substantial  probability of loss
to the deposit insurance fund unless effective corrective action is taken.

         Regular  semi-annual SAIF assessment rates set by the FDIC range from 0
to 27 basis points. Until December 31, 1999, however,  SAIF-insured institutions
were required to pay assessments to the FDIC at the rate of 6.44 basis points to
help fund interest payments on certain bonds issued by the Financing Corporation
("FICO"),  an agency of the federal government  established to finance takeovers
of insolvent  thrifts.  During this period,  BIF


                                       17
<PAGE>
members were  assessed for these  obligations  at the rate of 1.3 basis  points.
After December 31, 1999,  both BIF and SAIF members will be assessed at the same
rate for FICO payments.

         FDIC regulations provide that any insured depository institution with a
ratio of Tier 1  capital  to total  assets  of less than 2% will be deemed to be
operating in an unsafe or unsound condition,  which would constitute grounds for
the  initiation  of  termination  of deposit  insurance  proceedings.  The FDIC,
however,  would  not  initiate  termination  of  insurance  proceedings  if  the
depository  institution  has entered  into and is in  compliance  with a written
agreement with its primary regulator,  and the FDIC is a party to the agreement,
to increase its Tier 1 capital to such level as the FDIC deems appropriate. Tier
1 capital is defined as the sum of common  stockholders'  equity,  noncumulative
perpetual preferred stock (including any related surplus) and minority interests
in consolidated  subsidiaries,  minus all intangible  assets other than mortgage
servicing rights and qualifying  supervisory  goodwill eligible for inclusion in
core capital under FDIC regulations and minus identified  losses and investments
in certain securities subsidiaries.  Insured depository institutions with Tier 1
capital  equal to or  greater  than 2% of total  assets may also be deemed to be
operating in an unsafe or unsound condition  notwithstanding such capital level.
The regulation  further provides that in considering  applications  that must be
submitted to it by savings  banks,  the FDIC will take into account  whether the
savings bank meets the Tier 1 capital  requirement for state non-member banks of
4% of total assets for all but the most highly-rated state non-member banks.

         Dividend Restrictions.  The Bank's ability to pay dividends is governed
by the  Maryland  General  Corporation  Law,  Maryland law relating to financial
institutions,  and the  regulations  of the  Federal  Reserve  Board.  Under the
Maryland  General  Corporation  Law,  dividends may not be paid if, after giving
effect  to the  dividend:  (i)  the  corporation  would  not be  able to pay the
indebtedness  of the corporation as the  indebtedness  becomes due in the normal
course of business;  or (ii) the  corporation's  total assets would be less than
the sum of the corporation's  total liabilities plus, unless the charter permits
otherwise,  the amount needed,  if the  corporation  were to be dissolved at the
time of  distribution,  to satisfy the  preferential  rights upon dissolution of
stockholders  whose  preferential  rights are  superior to those  receiving  the
dividend. 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.  Additionally,  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  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.

                  In  addition,  the Bank may not pay  dividends  on its capital
stock if its  regulatory  capital would thereby be reduced below the amount then
required  for the  liquidation  account  established  for the benefit of certain
depositors of the  Association  at the time of the  Association's  conversion to
stock  form.  See  Note 9 of the  Notes  to  Consolidated  Financial  Statements
contained in the Company's  Annual  Report to  Stockholders  attached  hereto as
Exhibit 13.

         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.


                                       18
<PAGE>


         The Interagency  Guidelines,  among other things,  call upon depository
institutions to establish  internal  loan-to-value  limits for real estate loans
that are not in  excess  of the  following  supervisory  limits:  (i) for  loans
secured by raw land, the supervisory  loan-to-value limit is 65% of the value of
the collateral;  (ii) for land development loans (i.e., loans for the purpose of
improving  unimproved  property  prior  to  the  erection  of  structures),  the
supervisory  limit is 75%; (iii) for loans for the  construction  of commercial,
multifamily or other nonresidential property, the supervisory limit is 80%; (iv)
for loans for the construction of one-to-four family properties, the supervisory
limit is 85%;  and (v) for  loans  secured  by other  improved  property  (e.g.,
farmland,  completed  commercial  property and other  income-producing  property
including  non-owner-occupied,  one-to-four family property),  the limit is 85%.
Although  no  supervisory   loan-to-value   limit  has  been   established   for
owner-occupied,  one-to-four  family  and home  equity  loans,  the  Interagency
Guidelines  state that for any such loan with a loan-to-value  ratio that equals
or exceeds 90% at origination,  an institution should require appropriate credit
enhancement  in the form of either  mortgage  insurance  or  readily  marketable
collateral.

         The  Interagency  Guidelines  state  that  it  may  be  appropriate  in
individual  cases to originate or purchase  loans with  loan-to-value  ratios in
excess of the supervisory loan-to-value limits, based on the support provided by
other credit factors. The aggregate amount of loans in excess of the supervisory
loan-to-value limits,  however,  should not exceed 100% of total capital and the
total of such loans secured by commercial,  agricultural,  multifamily and other
non-one-to-four  family  residential  properties  should not exceed 30% of total
capital. The supervisory loan-to-value limits do not apply to certain categories
of loans  including  loans insured or guaranteed by the U.S.  government and its
agencies or by  financially  capable  state,  local or municipal  governments or
agencies, loans backed by the full faith and credit of a state government, loans
that are to be sold promptly after origination without recourse to a financially
responsible  party, loans that are renewed,  refinanced or restructured  without
the advancement of new funds, loans that are renewed, refinanced or restructured
in connection with a workout,  loans to facilitate sales of real estate acquired
by the  institution  in the  ordinary  course of  collecting  a debt  previously
contracted and loans where the real estate is not the primary collateral.

         Management will  periodically  evaluate its lending  policies to assure
conformity  to the  Interagency  Guidelines  and  does not  anticipate  that the
Interagency Guidelines will 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 borrower
at one time may not  exceed 15% of the  unimpaired  capital  and  surplus of the
commercial  bank.  The Bank's  lending limit to one borrower as of June 30, 2000
was $1.3 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, 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 non-affiliate.  The term "covered transaction"
includes the making of loans,  purchase of assets,  issuance of a guarantee  and
similar other types of transactions.  In addition to the restrictions imposed by
Sections  23A and 23B,  no state  member bank may (i) loan or  otherwise  extend
credit  to an  affiliate,  except  for  any  affiliate  which  engages  only  in
activities which are permissible for bank holding companies, or (ii) purchase or
invest in any stocks,  bonds,  debentures,  notes or similar  obligations of any
affiliate,  except for  affiliates  which are  subsidiaries  of the state member
bank.

         State  member banks also are subject to the  restrictions  contained in
Section 22(h) of the Federal Reserve Act and the Federal Reserve's  Regulation O
thereunder on loans to executive officers, directors and principal stockholders.
Under Section  22(h),  loans to a director,  executive  officer and to a greater
than 10% stockholder of a state member bank and certain affiliated  interests of
such persons, may not exceed,  together with all other



                                       19
<PAGE>

outstanding  loans to such person and affiliated  interests,  the  institution's
loans-to-one-borrower  limit  (generally  equal  to  15%  of  the  institution's
unimpaired capital and surplus) and all loans to such persons 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 directors,  executive officers and greater than 10% stockholders 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 such prior board of director  approval is required as being the greater
of $25,000 or 5% of capital and surplus (up to $500,000). Further, Section 22(h)
requires that loans to directors,  executive officers and principal stockholders
be made on terms substantially the same as offered in comparable transactions to
other persons.  Section 22(h) also generally prohibits a depository  institution
from paying the overdrafts of any of its executive officers or directors.

         State   member  banks  also  are  subject  to  the   requirements   and
restrictions  of Section 22(g) of the Federal  Reserve Act on loans to executive
officers  and  the   restrictions  of  12  U.S.C.  ss.  1972  on  certain  tying
arrangements and extensions of credit by correspondent  banks.  Section 22(g) of
the Federal  Reserve Act  requires  loans to  executive  officers of  depository
institutions  not be made on terms more  favorable  than those afforded to other
borrowers,  requires  approval  by  the  board  of  directors  of  a  depository
institution  for extension of credit to executive  officers of the  institution,
and imposes reporting requirements for and additional  restrictions on the type,
amount and terms of credits  to such  officers.  Section  1972 (i)  prohibits  a
depository  institution from extending credit to or offering any other services,
or fixing or varying the  consideration for such extension of credit or service,
on the  condition  that the  customer  obtain some  additional  service from the
institution or certain of its affiliates or not obtain  services of a competitor
of the institution, subject to certain exceptions, and (ii) prohibits extensions
of credit to executive officers, directors, and greater than 10% stockholders of
a depository  institution  by any other  institution  which has a  correspondent
banking relationship with the institution, unless such extension of credit is on
substantially  the same  terms as those  prevailing  at the time for  comparable
transactions  with other  persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

         Additionally,  Maryland  statutory law imposes  restrictions on certain
transactions  with affiliates 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  non-officer  and
non-director employees of the bank are exempt from the statute's coverage.

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 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.  As a bank holding  company,  the
Company is required to file with the Federal  Reserve  Board annual  reports and
such  additional  information as the Federal  Reserve Board may require,  and is
subject to regular  examinations  by 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.


                                       20
<PAGE>

         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  permitted by
the Federal  Reserve Board  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;  underwriting and acting as an insurance agent
for  certain  types  of   credit-related   insurance;   leasing  property  on  a
full-payout,  non-operating basis;  selling money orders,  travelers' checks and
United  States  Savings  Bonds;  real estate and personal  property  appraising;
providing  tax  planning  and  preparation  services;  and,  subject  to certain
limitations, providing securities brokerage services for customers.

         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.

         Under the Holding  Company Act, a bank holding  company must obtain the
prior  approval of the Federal  Reserve  Board  before (1)  acquiring  direct or
indirect  ownership or control of any voting  shares of any bank or bank holding
company if, after such  acquisition,  the bank holding company would directly or
indirectly  own or control more than 5% of such  shares;  (2)  acquiring  all or
substantially all of the assets of another bank or bank holding company;  or (3)
merging  or  consolidating  with  another  bank  holding  company.  Satisfactory
financial  condition,   particularly  with  regard  to  capital  adequacy,   and
satisfactory  Community  Reinvestment Act ratings generally are prerequisites to
obtaining federal regulatory approval to make acquisitions.

         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  defines
control as the power, directly or indirectly,  to vote 25% or more of any voting
securities or to direct the management or policies of a bank holding  company or
an insured bank.

         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 the stock of
Maryland  banks or  Maryland  bank  holding  companies  which  are  governed  by
Maryland's holding company statute.

         Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and
its Application in Maryland.  The Riegle-Neal  Interstate  Banking and Branching
Efficiency  Act of  1994  (the  "Act")  was  enacted  to  ease  restrictions  on
interstate  banking.  Effective  September 29, 1995,  the Act allows the Federal
Reserve  Board to  approve  an  application  of an  adequately  capitalized  and
adequately managed bank holding company to acquire control of, or acquire all or
substantially  all of the assets of, a bank  located in a state  other than such
holding  company's  home state,  without  regard to whether the  transaction  is
prohibited by the laws of any state.  The Federal  Reserve Board may not approve
the  acquisition  of a bank that has not been in existence  for the minimum time
period (not  exceeding  five years)  specified by the  statutory law of the host
state.  The Act also  prohibits  the Federal  Reserve  Board from  approving  an
application  if  the  applicant  (and  its  depository  institution  affiliates)
controls or would  control  more than 10% of the insured  deposits in the United
States or 30% or more of the deposits in the target



                                       21
<PAGE>
bank's home state or in any state in which the target  bank  maintains a branch.
The Act does not affect the authority of states to limit the percentage of total
insured  deposits in the state which may be held or controlled by a bank or bank
holding  company to the extent such  limitation  does not  discriminate  against
out-of-state banks or bank holding  companies.  Individual states may also waive
the 30% state-wide concentration limit contained in the Act.

         Additionally,  the Act  authorizes  the  federal  banking  agencies  to
approve   interstate  merger   transactions   without  regard  to  whether  such
transaction is prohibited by the law of any state,  unless the home state of one
of the banks opts out of the Act by  adopting a law after the date of  enactment
of the Act and prior to June 1, 1997 that  applies  equally to all  out-of-state
banks and expressly prohibits merger transactions  involving out-of-state banks.
The State of Maryland has enacted legislation that authorizes interstate mergers
involving  Maryland banks.  The Maryland  statute also  authorizes  out-of-state
banks to  establish  branch  offices  in  Maryland  by means of  merger,  branch
acquisition  or  de  novo  branching,  provided  that  the  home  state  of  the
out-of-state bank provides reciprocal interstate branching authority to Maryland
banks. The Maryland statute permits an out-of-state bank to branch into Maryland
without regard to the laws of such bank's home state.

         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."

         Bank holding  companies are 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  their
consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or redemption if it determines  that the proposal would  constitute an unsafe or
unsound  practice or would violate any law,  regulation,  Federal  Reserve Board
order,  or any  condition  imposed by, or written  agreement  with,  the Federal
Reserve Board.

         Capital Requirements. The Federal Reserve Board has established capital
requirements,  similar  to the  capital  requirements  for  state  member  banks
described above,  for bank holding  companies with  consolidated  assets of $150
million  or more.  Since the  Company's  consolidated  assets are less than $150
million, the Federal Reserve Board's holding company capital requirements do not
apply to the Company.  However, assuming the application of such requirements to
the Company,  the  Company's  levels of  consolidated  regulatory  capital would
exceed the Federal Reserve Board's minimum requirements.

TAXATION

         The Company and the Bank, together with the Bank's subsidiary,  to date
have not filed a consolidated  federal income tax return. The Company has had no
material tax liability through June 30, 2000.

         The  federal  tax  bad  debt   reserve   method   available  to  thrift
institutions  was  repealed in 1996 for tax years  beginning  after  1995.  As a
result,  the Bank was  required  to change to a reserve  method  based on actual
experience to compute its bad debt deduction. In addition, the Bank was required
to  recapture  into income the portion of its bad debt  reserve that exceeds its
base year reserves of approximately $200,000.

         Earnings  appropriated  to the Bank's bad debt reserve and claimed as a
tax  deduction  are not  available  for the  payment  of cash  dividends  or for
distribution to  stockholders  (including  distributions  made on dissolution or
liquidation),  unless the Bank includes the amount in taxable income, along with
the amount deemed necessary to pay the resulting federal income tax.


                                       22
<PAGE>


         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% on income measured  substantially the same as federally taxable
income, except that U.S. Government interest is not fully taxable.

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

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

         The  following  table sets forth the  location  and certain  additional
information regarding the Bank's office at June 30, 2000.
<TABLE>
<CAPTION>

                                                                         Book Value at
                                          Year           Owned or           June 30,           Approximate
                                         Opened           Leased             2000            Square Footage
                                         ------          --------        -------------       --------------
                                                                       (Dollars in thousands)

<S>                                       <C>              <C>                <C>                 <C>
1301 Merritt Boulevard                    1970             Owned              $651                9,600
Dundalk, Maryland 21222-2194
</TABLE>

         The book value of the  Bank's  investment  in  premises  and  equipment
totaled  $1.1  million  at June 30,  2000.  See Note 5 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, 2000, 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 VOTE OF SECURITY HOLDERS.
----------------------------------------------------------

         Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

         The  information   contained  under  the  sections   captioned  "Market
Information" in the Company's  Annual Report to Stockholders for the Fiscal Year
Ended  June 30,  2000  (the  "Annual  Report")  filed as  Exhibit  13  hereto is
incorporated herein by reference.

ITEM 6.  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"  on
pages 5 through 18 in the Annual Report is incorporated herein by reference.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

         The Consolidated Financial Statements,  Notes to Consolidated Financial
Statements,  Independent  Auditors' Report and Selected Financial Data contained
on pages 19  through  46 in the Annual  Report,  which are listed  under Item 13
herein, are incorporated herein by reference.


                                       23
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
-------------------------------------------------------------------------

         Not applicable.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
         -------------------------------------------------------------

         For  information  concerning  the  Board  of  Directors  and  executive
officers of the Company,  the information  contained under the section captioned
"Proposal  I -- Election of  Directors"  in the  Company's  Proxy  Statement  is
incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

         The information  contained under the sections captioned  "Proposal I --
Election of Directors -- Executive  Compensation," " -- Director  Compensation,"
and " -- Employment Agreements" in the Proxy Statement is incorporated herein by
reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders thereof" in the Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the  sections  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.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to the section  captioned  "Proposal I --  Election of  Directors  --
Transactions with Management" in the Proxy Statement.


                                       24
<PAGE>

ITEM 13.  EXHIBITS LIST AND REPORTS ON FORM 8-K.
-----------------------------------------------

     (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):


          Independent Auditors' Report Consolidated
          Statement of Financial Condition as of June 30, 2000 and 1999
          Consolidated  Statements  of Income for the Years  Ended June 30, 2000
          and 1999
          Consolidated  Statements of  Stockholders'  Equity for the Years Ended
          June 30, 2000 and 1999
          Consolidated  Statements  of Cash  Flows for the Years  Ended June 30,
          2000 and 1999 Notes to Consolidated Financial Statements

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

          No.     Description
          --      -----------

          3.1 Articles of Incorporation of Patapsco  Bancorp,  Inc. and Articles
              Supplementary

        * 3.2 Bylaws of Patapsco Bancorp, Inc.

       ** 4   Form of Common Stock Certificate of Patapsco Bancorp, Inc.

      ***10.1 Patapsco Bancorp, Inc. 1996 Stock Option and Incentive Plan

      ***10.2 Patapsco Bancorp, Inc. Management Recognition Plan

     * 10.3(a)Employment  Agreement  between Patapsco Federal Savings and Loan
              Association and Joseph J. Bouffard

     * 10.3(b)Employment Agreement between Patapsco Bancorp, Inc. and Joseph J.
              Bouffard

     * 10.4(a)Severance  Agreements  between Patapsco Federal Savings and Loan
              Association  and  Debra  Penczek  and  John  McClean

     * 10.4(b)Severance  Agreements  between Patapsco  Bancorp,  Inc. and Debra
              Penczek  and  John  McClean

     * 10.5   Patapsco  Federal Savings and Loan  Association  Retirement Plan
              for Non-Employee Directors

     * 10.6   Patapsco Federal Savings and Loan Association Incentive
              Compensation Plan

     * 10.7   Deferred Compensation Agreements between Patapsco Federal Savings
              and Loan Association and each of Directors  McGowan and Patterson

     * 10.8(a)Severance  Agreement  between  Patapsco Federal Savings and Loan
              Association  and Frank J. Duchacek

     * 10.8(b)Severance  Agreement between Patapsco Bancorp,  Inc. and Frank J.
              Duchacek,  Jr.

  **** 10.9   The Patapsco  Bank  Retirement  Plan for  Non-Employee  Directors

       10.10  Patapsco  Bancorp,  Inc. 2000 Stock Option and Incentive  Plan

       10.11  Severance Agreements between The Patapsco Bank and Michael J.
              Dee and Frank J. Duchacek, Jr.

       13     2000 Annual Report to  Stockholders

       21     Subsidiaries of the Registrant

       23     Consent of Anderson Associates, LLP

       27     Financial   Data   Schedule

----------------
*    Incorporated herein by reference from the Company's  Registration Statement
     on Form SB-2 (File No. 33-99734).
**   Incorporated herein by reference from the Company's  Registration Statement
     on Form 8-A (File No. 0-28032).
***  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)
**** Incorporated  herein by reference from the Company's  Annual Report on Form
     10-KSB for the year ended June 30, 1999 (File No. 0-28032).


                                       25
<PAGE>

     (B) REPORTS ON FORM 8-K.
         -------------------

     On May 19, 2000,  the Company filed a Current Report on Form 8-K under Item
5 announcing  that it had entered  into an  Agreement of Merger with  Northfield
Bancorp,  Inc. pursuant to which Northfield  Bancorp,  Inc. would be acquired by
the Company.




                                       26
<PAGE>



                                   SIGNATURES

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

                             PATAPSCO BANCORP, INC.

September 16, 2000
                             By: /s/ Joseph J. Bouffard
                                 ---------------------------------------
                                  Joseph J. Bouffard
                                  President and Chief Executive Officer

         In accordance with 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/ Joseph J. Bouffard                                    September 16, 2000
------------------------------------------------
Joseph J. Bouffard
President, Chief Executive Officer
  and Director
(Principal Executive Officer)

/s/ Michael J. Dee                                        September 16, 2000
------------------------------------------------
Michael J. Dee
Vice-President and Treasurer
(Principal Financial and Accounting Officer)

/s/ Thomas P. O'Neill                                     September 16, 2000
------------------------------------------------
Thomas P. O'Neill
Chairman of the Board

/s/ Theodore C. Patterson                                 September 16, 2000
------------------------------------------------
Theodore C. Patterson
Director and Secretary

/s/ Douglas H. Ludwig                                     September 16, 2000
------------------------------------------------
Douglas H. Ludwig
Director

/s/ Nicole N. Glaeser                                     September 16, 2000
------------------------------------------------
Nicole N. Glaeser
Director


/s/ William R. Waters                                     September 16, 2000
------------------------------------------------
William R. Waters
Director