UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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, 2003

                                       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.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer 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)

         Issuer's Telephone Number, Including Area Code: (410) 285-1010
                                                         --------------

    Securities registered pursuant to Section 12(b) of the Exchange Act: NONE
                                                                         ----

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                (Title of Class)

        SERIES A NON-CUMULATIVE, PERPETUAL CONVERTIBLE PREFERRED 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  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 is not  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.  [  ]

For the fiscal year ended June 30, 2003, the issuer had $11,193,641 in revenues.

As of September 22, 2003, the aggregate market value of voting common stock held
by non-affiliates  was approximately  $10,302,878,  computed by reference to the
most recent sales price on September 19, 2003 as reported on the OTC  Electronic
Bulletin Board. 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 common stock are affiliates.

Number of shares of Common Stock outstanding as of September 15, 2003: 416,833.

                       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 issuer's Annual Report to Stockholders  for the Fiscal
          Year ended June 30, 2003. (Parts II and III)
     2.   Portions  of Proxy  Statement  for  issuer's  2003  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 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
three full service  offices located in Dundalk,  Parkville and Carney,  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".  On  November  13,  2000,  the  Company  acquired
Northfield Bancorp, Inc., the parent company of Northfield Federal Savings Bank,
expanding the number of the Bank's full service offices to its current three.

     The primary business of Patapsco is to attract deposits from individual and
corporate customers and to originate  residential and commercial mortgage loans,
commercial  loans  and  consumer  loans,  primarily  in  the  Greater  Baltimore
Metropolitan  area.  Patapsco is subject to competition from other financial and
mortgage  institutions in attracting and retaining deposits and in making loans.
Patapsco  is  subject to the  regulations  of certain  agencies  of the  federal
government and undergoes  periodic  examination by those agencies.  The Bank has
two  operating  subsidiaries,  Prime  Business  Leasing and  Patapsco  Financial
Services. The primary business of Prime Leasing is the origination and servicing
of commercial leases. The primary business of Patapsco Financial Services is the
sale of consumer investments.

     At June 30, 2003, the Bank had $17.6 million, $4.3 million,  $14.6 million,
$15.1 million and $19.2 million in small  business  loans,  construction  loans,
commercial  real  estate  loans,  home  equity  and other  consumer  loans,  and
equipment leases, respectively.


                                       2
<PAGE>



MARKET AREA

     The Bank's  market  area for  gathering  deposits  consists  of eastern and
northeastern 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. The economy in
the Bank's  market area  continues to be dependent,  to some extent,  on a small
number of major industrial employers. A significant portion of eastern Baltimore
County  has been  designated  as an  "Enterprise  Zone." As a result,  employers
relocating  to this area are  entitled  to  significant  tax and other  economic
incentives.

LENDING ACTIVITIES

     General. The Company's gross loan portfolio, excluding loans held for sale,
totaled $119.4 million at June 30, 2003,  representing  75.7% of total assets at
that date. At June 30, 2003, $48.7 million, or 40.8% 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
$18.9 million,  or 15.8% of the Company's gross loan portfolio at June 30, 2003.
In addition,  the Company  originates  consumer and other loans,  including home
equity loans, home improvement loans and loans secured by deposits.  At June 30,
2003,  consumer and other loans totaled $15.1 million, or 12.6% of the Company's
gross loan portfolio. The Company's commercial loan portfolio, which consists of
small business loans and commercial leases,  totaled $36.8 million,  or 30.8% of
the Company's gross loan portfolio.

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

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

     In  recent  years,   the  Company  has  purchased   whole  loans  and  loan
participation  interests.  During  the  year  ended  June 30,  2003 the  Company
purchased  $6.3  million  in   participation   interests  and  $2.0  million  in
residential mortgage loans. In the future,  management will continue to consider
purchases of whole loans or participation  interests in commercial  business and
residential and commercial real estate loans.

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

                                       3
<PAGE>

     Applications for single-family real estate loans are typically underwritten
and  closed in  accordance  with the  standards  of Federal  Home Loan  Mortgage
Corporation  ("FHLMC")  and  Federal  National  Mortgage  Association  ("FNMA").
Generally,  upon receipt of a loan  application from a prospective  borrower,  a
credit  report and  verifications  are  ordered to 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 $2.3
million at June 30, 2003. At that date, the Company had no lending relationships
in excess of the  loans-to-one-borrower  limit.  At June 30, 2003, the Company's
largest  lending  relationship  was a $2.1  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, 2003.

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

     Residential  Real  Estate  Lending.  The Company  historically  has been an
originator of residential real estate loans in its market area. Residential real
estate loans consist of both  single-family  and  multi-family  residential real
estate loans. At June 30, 2003, residential mortgage loans, excluding loans held
for sale, home  improvement  loans, and home equity loans totaled $48.7 million,
or 40.8% of the Company's gross loan portfolio. Of such loans, $4.8 million were
secured by nonowner-occupied investment properties.

     At June 30, 2003, $37.4 million, or 59.2% of the Company's  residential and
commercial real estate loan portfolio was comprised of fixed-rate mortgage loans
and $25.8  million or 40.8% of the Company's  residential  and  commercial  real
estate loan portfolio was comprised of adjustable-rate mortgage loans.

                                       4
<PAGE>

     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,  2003,  the Company had $0.3 million of
multi-family  residential  real  estate  loans,  which  amounted to 0.25% of the
Company's loan portfolio at such date. Multi-family real estate loans either are
originated  on an  adjustable-rate  basis  with  terms  of up to 25 years or are
amortized  over a maximum of 25 years  with a three or five year note  maturity,
and are underwritten with loan-to-value ratios of up to 80% of the lesser of the
appraised value or the purchase price of the property.

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

     Construction  Lending.  The Bank also  offers  residential  and  commercial
construction  loans and land  acquisition  and  development  loans.  Residential
construction  loans are offered to  individuals  who are having their primary or
secondary   residence   built  as  well  as  to  local   builders  to  construct
single-family  dwellings.  Residential construction advances are made on a stage
of completion basis. Generally, loans to owner/occupants for the construction of
residential properties are originated in conjunction with the permanent mortgage
on the  property.  The term of the  construction  loans is normally from 6 to 18
months and has a variable  interest  rate,  which is normally up to 2% above the
prime interest rate.  Upon completion of  construction,  the permanent loan rate
will be set at the  interest  rate  offered by the Bank on that loan product not
sooner than 60 days prior to completion.  Interest rates on residential loans to
builders are set at the prime interest rate plus a margin of 0.5% to 2.0% as may
be adjusted from time to time.  Interest rates on commercial  construction loans
and land  acquisition and  development  loans are based on the prime rate plus a
negotiated  margin of between  0.5% and 2.0% and adjust from time to time,  with
construction  terms  generally not  exceeding 18 months.  Advances are made on a
percentage of completion basis. At June 30, 2003, $4.3 million,  or 3.6%, of the
Company's loan portfolio consisted of construction loans.

     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  that is  insufficient  to assure  full  repayment.  The Bank has
sought to  minimize  this risk by  limiting  construction  lending to  qualified
borrowers (i.e.,  borrowers who satisfy all credit  requirements and whose loans
satisfy  all  other  underwriting  standards  which  would  apply to the  Bank's
permanent mortgage loan financing for the subject property) in the Bank's market
area. On loans to builders, the Bank works only with selected builders with whom
it has experience and carefully monitors the creditworthiness of the builders.

     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


                                       5
<PAGE>

loans generally  range in size from $100,000 to $900,000.  At June 30, 2003, the
Company had $14.6 million of commercial  real estate  loans,  which  amounted to
12.3% 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,
2003,  consumer and other loans totaled $15.1 million, or 12.6% 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 Southern Pennsylvania.
While the Company originates some home improvement loans on a direct basis, most
of the home  improvement  loans in the Company's  portfolio are originated on an
indirect  basis through the Company's  relationships  with selected  independent
contractors.  The Company's  underwriting policies apply to all home improvement
loans whether or not directly originated by the Company.  Home improvement loans
generally  have terms  ranging  from  three to 15 years and have fixed  interest
rates.  Home  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, 2003,  home  improvement  loans amounted to $9.2
million,  or 7.7% of the  Company's  loan  portfolio,  with $1.5 million of such
loans being secured by real estate.

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

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

                                       6
<PAGE>

     At June 30, 2003 the Company's  commercial loans totaled $17.6 million,  or
14.7% of the Company's loan portfolio.  This commercial  lending program employs
many of the alternative  financing and guarantee  programs available through the
U.S.  Small  Business   Administration   and  other  state  and  local  economic
development agencies.

     The Bank  originates  commercial  business loans to small and  medium-sized
businesses  in its market  area.  The Bank's  commercial  business  loans may be
structured as term loans 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 $1.5 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 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 businesses of various size through its
subsidiary,  Prime Business Leasing.  In extending the financing in a commercial
lease  transaction,  the Company  reviews the borrower's  financial  statements,
credit reports, tax returns and other documentation. Generally, commercial lease
financing is made in amounts  ranging  between $3,000 and $120,000 with terms of
up to five years and carry fixed interest  rates.  At June 30, 2003,  commercial
lease finance transaction loans totaled $19.2 million, or 16.1% of the Company's
loan portfolio.

     Loan Fees and Servicing.  The Company receives fees in connection with late
payments and for  miscellaneous  services related to its loans. The Company also
charges fees in connection with loan originations  typically up to 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 four 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,   commercial  real  estate  and
commercial  business loans to other local  financial  institutions.  At June 30,
2003, the Company was servicing  loans for others  totaling  approximately  $3.2
million.

                                       7
<PAGE>

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

     Loans  generally are placed on  nonaccrual  status if the loan becomes past
due more than 90 days, except in instances where in management's  judgment there
is no doubt as to full  collectibility  of principal and  interest.  At June 30,
2003,  all loans past due more than 90 days were on  nonaccrual.  Consumer loans
are  generally  charged off after they  become  more than 90 days past due.  All
other  loans  are  charged  off  when   management   concludes   that  they  are
uncollectible. See Notes 1 and 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  Notes  1  and  4 of  Notes  to
Consolidated Financial Statements.

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.
Typical investments include federally sponsored agency mortgage pass-through and
federally sponsored agency and mortgage-related  securities and investment grade
corporate securities. Investment and aggregate investment limitations and credit
quality  parameters of each class of investment  are prescribed in the Company's
investment policy. The Company performs analyses on securities prior to purchase
and on an ongoing  basis to  determine  the impact on earnings  and market value
under various interest rate and prepayment conditions. Senior management and the
Company's  Asset/Liability  Management  Committee have limited authority to sell
investment securities and purchase comparable investment securities with similar
characteristics. The Board of Directors reviews all securities transactions on a
monthly basis.

     Under applicable  accounting  rules,  investment  securities  classified as
held-to-maturity  are  recorded  at  amortized  cost  and  those  classified  as
available-for-sale  are reported at fair value, with unrealized gains and losses
excluded  from  earnings and reported as a separate  component of  stockholders'
equity.  At  June  30,  2003,  the  Company's  entire  portfolio  of  investment
securities  was  classified as available for sale and had an aggregate  carrying
value of $24.4  million and an unrealized  net gain after tax of $0.36  million.
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


                                       8
<PAGE>

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 and the Bankers Bank in Atlanta, GA.

     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. At the present time, the Company
is not accepting 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 STAR  Automatic  Teller  Machine  network  at
locations throughout the United States,  through which customers can gain access
to their accounts at any time.

     Borrowings.  While  savings  deposits  historically  have been the  primary
source of funds for the Company's  lending,  investments  and general  operating
activities,  the Bank  utilizes  advances from the 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 Bank 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 Bank has a Blanket  Agreement  for
advances  with the FHLB  under  which  the Bank may  borrow  up to 25% of assets
subject to normal  collateral and underwriting  requirements.  Advances from the
FHLB of Atlanta are secured by the Bank's stock in the FHLB of Atlanta and other
eligible assets. At June 30, 2003, the Company had outstanding Federal Home Loan
Bank of  Atlanta  advances  of $20.2  million  with an  average  rate of  4.82%.
Additionally, the Bank has a $4.9 line of credit, of which $0 was outstanding at
June 30, 2003 with the Bankers Bank of Atlanta, GA.

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 is discussed under  commercial  lending,  and Patapsco  Financial  Services,
Inc.,  which was  formed in March 2000 in order to sell  alternative  investment
products to the Company's customers.

COMPETITION

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

     Management  considers its market area for gathering  deposits to be eastern
Baltimore  County in Maryland.  The Company  originates loans throughout much of
the Mid-Atlantic  area. The Company attracts its deposits


                                       9
<PAGE>

through its offices in Dundalk,  Parkville and Carney  primarily  from the local
community.  Consequently,  competition  for deposits is  principally  from other
commercial banks, savings institutions,  credit unions, mutual funds and brokers
in the local community.  The Company competes for deposits and loans by offering
what it  believes  to be a variety of deposit  accounts  at  competitive  rates,
convenient  business hours, a commitment to outstanding  customer  service and a
well-trained staff.

EMPLOYEES

     As of  June  30,  2003,  the  Company  had  48  full-time  and 7  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 Savings Association  Insurance Fund ("SAIF")  administered by
the Federal Deposit Insurance Corporation ("FDIC"). The Bank also is a member of
the Federal Reserve System. The Bank is subject to supervision,  examination and
regulation  by the  State  of  Maryland  Commissioner  of  Financial  Regulation
("Commissioner")  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, the Gramm-Leach
Bliley  ("G-L-B")  Act was signed into law and which  could have a  far-reaching
impact on the financial services industry. The 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 nonaffiliated 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, are required to comply
with state law if it is more protective of customer  privacy than the G-L-B Act.
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 have promulgated implementing regulations,  which became
effective in July 2001.

                                       10
<PAGE>

     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.

     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.

     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.


                                       11
<PAGE>

     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  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  Company'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
                                                 ---------  ---------   ---------  ---------   ---------    ------
<S>                                                 <C>         <C>          <C>        <C>       <C>           <C>
                                                                             (Dollars in thousands)
As of June 30, 2003:
   Total Capital (to Risk Weighted Assets).....  $  14,416     14.58%    $   7,912      8.00%   $  9,890    10.00%
   Tier 1 Capital (to Risk Weighted Assets)....     13,277     13.43         3,956      4.00       5,934     6.00
   Tier 1 Capital (to Average Assets).........      13,277      8.56         6,205      4.00       7,756     5.00

As of June 30, 2002:
   Total Capital (to Risk Weighted Assets).....  $  13,109     13.48%       $7,777      8.00%   $  9,721    10.00%
   Tier 1 Capital (to Risk Weighted Assets)....     11,894     12.24         3,888      4.00       5,833     6.00
   Tier 1 Capital (to Average Assets).........      11,894      7.73         6,157      4.00       7,696     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

                                       12
<PAGE>

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  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, 2003,
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


                                       13
<PAGE>

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 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,  2003 of $1.0  million.  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, 2003, the Bank had $22.2
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 over $6.0 million up to $42.1  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,  2003,  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. 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


                                       14
<PAGE>

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 currently ranges
from 0 to 27 basis points. In addition,  FDIC-insured  institutions are required
to pay  assessments to the FDIC 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. Until December
31, 1999, Bank Insurance Fund  ("BIF)-insured  institutions were required to pay
FICO  assessments  at one-fifth  the rate at which SAIF  members were  assessed.
After  December  31, 1999,  both BIF and SAIF members have been  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 articles of
incorporation  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  regulatory  capital  would  thereby be reduced  below the
remaining balance of the liquidation  account established in connection with its
conversion in April 1996 from mutual to stock form.  See Note 10 of the Notes to
Consolidated  Financial  Statements  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

                                       15
<PAGE>

Interagency  Guidelines  for Real  Estate  Lending  Policies  (the  "Interagency
Guidelines") that have been adopted by the federal banking agencies.

     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, 2003
was $2.3 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 nonaffiliate.  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.

                                       16
<PAGE>

     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 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.

     Patriot  Act.  The  Patriot  Act  is  intended  to   strengthen   U.S.  law
enforcement's and the intelligence  communities' abilities to work cohesively to
combat terrorism on a variety of fronts. The potential impact of the Patriot Act
on financial  institutions  of all kinds is  significant  and wide ranging.  The
Patriot Act contains sweeping anti-money  laundering and financial  transparency
laws and imposes various  regulations  including  standards for verifying client
identification  at  account  opening,  and rules to  promote  cooperation  among
financial  institutions,  regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

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,


                                       17
<PAGE>

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.

     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 5% 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

                                       18
<PAGE>

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  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
has  opted  out of  the  Act by  adopting  a law  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. The Company's levels of consolidated  regulatory capital exceed
the Federal Reserve Board's minimum requirements.

     Stock  Repurchases.  As a bank holding company,  the Company is required to
give  the  Federal  Reserve  Board  prior  written  notice  of any  purchase  or
redemption of its outstanding  equity securities if the gross  consideration for
the purchase or redemption,  when combined with the net  consideration  paid for
all such  purchases


                                       19
<PAGE>

or  redemptions  during the preceding 12 months,  is equal to 10% or more of the
Company's  consolidated net worth. The Federal Reserve Board may disapprove such
a purchase or redemption if it  determines  that the proposal  would violate any
law,  regulation,  Federal  Reserve  Board order,  directive,  or any  condition
imposed  by,  or  written  agreement  with,  the  Federal  Reserve  Board.  This
requirement   does   not   apply   to   bank   holding    companies   that   are
"well-capitalized," received one of the two highest examination ratings at their
last examination and are not the subject of any unresolved supervisory issues.

     Sarbanes-Oxley  Act of 2002. On July 30, 2002,  the  Sarbanes-Oxley  Act of
2002 ("SOX") was signed into law which mandated a variety of reforms intended to
address corporate and accounting fraud. SOX contained provisions which amend the
Securities  Exchange Act of 1934,  as amended (the "Act") and  provisions  which
directed the SEC to promulgate  rules.  The resultant law and regulations  under
the Act as of the time of this  annual  report  is set  forth  in the  following
paragraphs.  SOX  provides  for  the  establishment  of  a  new  Public  Company
Accounting  Oversight  Board  ("PCAOB"),  which will enforce  auditing,  quality
control and independence  standards for firms that audit Securities and Exchange
Commission  ("SEC")-reporting  companies  and will be  funded  by fees  from all
SEC-reporting  companies.  SOX imposed higher standards for auditor independence
and restricts  provision of consulting  services by auditing  firms to companies
they audit.  Any  non-audit  services  being  provided  to an audit  client will
require  preapproval  by the Company's  audit  committee  members.  In addition,
certain  audit  partners  must  be  rotated  periodically.  SOX  requires  chief
executive officers and chief financial officers, or their equivalent, to certify
to the  accuracy of periodic  reports  filed with the SEC,  subject to civil and
criminal  penalties if they  knowingly or willfully  violate this  certification
requirement. In addition, under SOX, counsel will be required to report evidence
of a material  violation of the securities laws or a breach of fiduciary duty by
a company to its chief  executive  officer or its chief legal  officer,  and, if
such  officer does not  appropriately  respond,  to report such  evidence to the
audit  committee  or other  similar  committee  of the board of directors or the
board itself.

     Longer  prison  terms  will also be  applied to  corporate  executives  who
violate federal  securities laws, the period during which certain types of suits
can be brought against a company or its officers has been extended,  and bonuses
issued  to  top  executives  prior  to  restatement  of  a  company's  financial
statements  are now  subject  to  disgorgement  if such  restatement  was due to
corporate  misconduct.  Executives  are  also  prohibited  from  trading  during
retirement  plan  "blackout"  periods,  and  loans  to  company  executives  are
restricted.  In addition, a provision directs that civil penalties levied by the
SEC as a result  of any  judicial  or  administrative  action  under  the Act be
deposited in a fund for the benefit of harmed investors. Directors and executive
officers  must also  report  most  changes  in their  ownership  of a  company's
securities  within two  business  days of the change,  and as of the end of June
2003, all ownership reports must be electronically filed.

     SOX also  increases  the  oversight  and  authority of audit  committees of
publicly traded  companies.  Audit committee members must be independent and are
barred from accepting  consulting,  advisory or other compensatory fees from the
issuer. In addition, all SEC-reporting  companies must disclose whether at least
one member of the committee is an audit  committee  "financial  expert" (as such
term is  defined  by the SEC rules) and if not,  why not.  Audit  committees  of
publicly  traded  companies  will have authority to retain their own counsel and
other advisors funded by the company. Audit committees must establish procedures
for the receipt,  retention and treatment of complaints regarding accounting and
auditing  matters and  procedures  for  confidential,  anonymous  submission  of
employee concerns regarding  questionable  accounting or auditing matters. It is
the  responsibility  of the  audit  committee  to  hire,  oversee  and  work  on
disagreements with the Company's independent auditor.

     Beginning  six months  after the SEC  determines  that the PCAOB is able to
carry  out its  functions,  it will be  unlawful  for any  person  that is not a
registered  public  accounting firm ("RPAF") to audit an SEC-reporting  company.
Under the Act, a RPAF is prohibited from performing  statutorily  mandated audit
services  for a  company  if  such  company's  chief  executive  officer,  chief
financial officer,  comptroller,  chief accounting officer or any person serving
in equivalent  positions has been employed by such firm and  participated in the
audit of such company during the one-year period  preceding the audit initiation
date.  SOX also  prohibits  any  officer or  director  of a company or any other
person  acting  under their  direction  from  taking any action to  fraudulently
influence,  coerce,  manipulate or mislead any  independent  public or certified
accountant  engaged in the audit of the Company's  financial  statements for the
purpose of rendering the financial statement's  materially  misleading.  The SEC
has  prescribed  rules  requiring  inclusion of an internal  control  report and
assessment by management in the annual report


<PAGE>

to shareholders. SOX requires the RPAF that issues the audit report to attest to
and report on management's  assessment of the Company's  internal  controls.  In
addition,  SOX requires that each  financial  report  required to be prepared in
accordance with (or reconciled to) generally accepted accounting  principles and
filed  with  the SEC  reflect  all  material  correcting  adjustments  that  are
identified by a RPAF in accordance with generally accepted accounting principles
and the rules and regulations of the SEC.

     Although  the  Company  anticipates  it will  incur  additional  expense in
complying with the provisions of the Act and the related rules,  management does
not expect that such  compliance  will have a material  impact on the  Company's
financial condition or results of operations.

TAXATION

     The Company and the Bank, together with the Bank's subsidiary, to date have
not filed a  consolidated  federal  income tax return for the fiscal  year ended
June 30, 2003.  The Company has had no material tax  liability  through June 30,
2003.

     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.

     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 offices at June 30, 2003.
<TABLE>
<CAPTION>

                                                                         Book Value at
                                          Year           Owned or           June 30,           Approximate
                                         Opened           Leased             2003            Square Footage
                                         ------          --------        -------------       --------------
<S>                                       <C>              <C>               <C>                   <C>
                                                                 (Dollars in thousands)
Headquarters and Branch Office
1301 Merritt Boulevard                    1970             Owned             $ 578                9,600
Dundalk, Maryland
</TABLE>


                                       21
<PAGE>


<TABLE>
<CAPTION>
<S>                                       <C>              <C>               <C>                   <C>

Branch Office
8705 Harford Road
Baltimore, Maryland                       1923             Owned              $99                  750

Branch Office
1844 E. Joppa Road
Baltimore, Maryland                       1983            Leased              $11                 3,150

Administrative Center
8005 Harford Road
Baltimore, Maryland                       1998            Leased              $20                 2,915
</TABLE>


     The book value of the Bank's  investment in premises and equipment  totaled
$1.0 million at June 30,  2003.  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, 2003, 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, 2003 (the "Annual Report") filed as Exhibit 13 hereto is incorporated herein
by reference.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------

     The information contained in the section captioned "Management's Discussion
and  Analysis  of  Financial  Condition  and Results of  Operations"  on pages 1
through 20 in the Annual Report is incorporated herein by reference.

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

     The  Consolidated  Financial  Statements,  Notes to Consolidated  Financial
Statements and Independent  Auditors' Report contained on pages 21 through 43 in
the Annual  Report,  which are listed  under  Item 13 herein,  are  incorporated
herein by reference.

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

         Not applicable.


                                       22

<PAGE>
ITEM 8A.  CONTROLS AND PROCEDURES
---------------------------------

     As of the end of the  period  covered  by this  report,  management  of the
Company  carried  out  an  evaluation,   under  the  supervision  and  with  the
participation  of  the  Company's  principal  executive  officer  and  principal
financial officer, of the effectiveness of the Company's disclosure controls and
procedures.  Based on this evaluation, the Company's principal executive officer
and principal financial officer concluded that the Company's disclosure controls
and  procedures  are  effective  in  ensuring  that  information  required to be
disclosed  by the  Company  in  reports  that it  files  or  submits  under  the
Securities Exchange Act of 1934, as amended, is recorded, processed,  summarized
and reported,  within the time periods  specified in the Securities and Exchange
Commission's rules and forms.

     In addition,  there have been no changes in the Company's  internal control
over financial  reporting (to the extent that elements of internal  control over
financial  reporting are subsumed  within  disclosure  controls and  procedures)
identified in connection  with the evaluation  described in the above  paragraph
that occurred  during the Company's  last fiscal  quarter,  that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

     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 AND
          RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

     (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.

     (d)  Equity Compensation Plans


                                       23
<PAGE>

                  The following table sets forth certain information with
                  respect to the Company's equity compensation plans.
<TABLE>
<CAPTION>

                                                (a)                         (b)                             (c)
                                                                                                Number of securities remaining
                                     Number of securities to be                                 available for future issuance
                                      issued upon exercise of       Weighted-average exercise     under equity compensation
                                        outstanding options,          price of outstanding       plans (excluding securities
                                          warrants & rights       options, warrants and rights     reflected in column (a))
                                     --------------------------   ----------------------------  ------------------------------
<S>                                             <C>                             <C>                             <C>
Equity compensation plans
  approved by security holders                 65,917                         17.77                         2,022

Equity compensation plans not
  approved by security holders                 12,165                          NA                             0

       Total
</TABLE>


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.

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, 2003
                and 2002
               Consolidated  Statements  of Income for the Years  Ended June 30,
                2003 and 2002
               Consolidated  Statements  of  Stockholders'  Equity for the Years
                Ended June 30, 2003 and 2002
               Consolidated  Statements  of Cash Flows for the Years  Ended June
                30, 2003 and 2002
               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., as amended
**       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 Agreement between Patapsco Federal Savings and
                   Loan Association and John McClean
*       10.4(b)   Severance Agreement between Patapsco Bancorp, Inc. 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, as amended


                                       24
<PAGE>

*       10.7      Deferred  Compensation  Agreements between Patapsco Federal
                   Savings and Loan Association and each
                   of Directors McGowan and Patterson
****    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 Patapsco  Bancorp,  Inc. and
                   Michael J. Dee and Frank J. Duchacek, Jr.
******  10.12     Patapsco Bancorp, Inc. Cash Deferred Compensation Plan
        13        2003 Annual Report to Stockholders
        21        Subsidiaries of the Registrant
        23        Consent of Anderson Associates, LLP
        31.1      Rule 13a-14(a) Certification of Chief Executive Officer
        31.2      Rule 13a-14(a) Certification of Chief Financial Officer
        32        Certification pursuant to 18 U.S.C. Section 1350
------------

*    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).
*****Incorporated  herein by reference from the Company's  Annual Report on Form
     10-KSB for the year ended June 30, 2000 (File No. 0-28032).
******Incorporated herein by reference from the Company's Annual Report on Form
     10-KSB for the year ended June 30, 2002 (File No. 0-28032).

       (b)        REPORTS ON FORM 8-K
                  -------------------

               The Company filed the following Current Report on Form 8-K during
          the fourth quarter of the fiscal year ended June 30, 2003:

          DATE OF REPORT       ITEM(S) REPORTED      FINANCIAL STATEMENTS FILED
          --------------       ----------------      --------------------------

          April 17, 2003            7, 12                      N/A



                                       25
<PAGE>

                                   SIGNATURES

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

                                        PATAPSCO BANCORP, INC.
September 17, 2003
                            By:/s/ Joseph J. Bouffard
                               -----------------------------------------------
                               Joseph J. Bouffard
                               President and Chief Executive Officer
                               (Duly Authorized Officer)

     In  accordance  with the Exchange Act, 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 17, 2003
-----------------------------------------------------
Joseph J. Bouffard
President, Chief Executive Officer
  and Director
(Principal Executive Officer)


/s/ Michael J. Dee                                     September 17, 2003
-----------------------------------------------------
Michael J. Dee
Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)


/s/ Thomas P. O'Neill                                  September 17, 2003
-----------------------------------------------------
Thomas P. O'Neill
Chairman of the Board


/s/ Theodore C. Patterson                              September 17, 2003
-----------------------------------------------------
Theodore C. Patterson
Director and Secretary


/s/ Douglas H. Ludwig                                  September 17, 2003
-----------------------------------------------------
Douglas H. Ludwig
Director


/s/ Nicole N. Glaeser                                  September 17, 2003
-----------------------------------------------------
Nicole N. Glaeser
Director


/s/ William R. Waters                                  September 17, 2003
-----------------------------------------------------
William R. Waters
Director


/s/ Gary R. Bozel                                      September 17, 2003
-----------------------------------------------------
Gary R. Bozel
Director


/s/ J. Thomas Hoffman                                  September 17, 2003
-----------------------------------------------------
J. Thomas Hoffman
Director