SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

[X]  Annual report  pursuant to section 13 or 15 (d) of the Securities  Exchange
     Act of 1934
     For the fiscal year ended              December 31, 2005
                                ------------------------------------------------

                                      -OR-

[X]  Transition  report  pursuant  to  section  13 or  15(d)  of the  Securities
     Exchange Act of 1934
     For the transition period from ___________ to _____________.

                         Commission File Number:         0-32437
                                                 ------------------------

                               BUCS Financial Corp
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

             Maryland                                     52-2269586
-------------------------------------------           -------------------
(State or Other Jurisdiction of                        (I.R.S. Employer
 Incorporation or Organization)                       Identification No.)

10455 Mill Run Circle, Owings Mills, Maryland               21117
---------------------------------------------           ------------
(Address of Principal Executive Offices)                 (Zip Code)

Issuer's Telephone Number, Including Area Code:      (443) 394-0047
                                                 ----------------------

Securities registered under Section 12(b) of the Exchange Act:     None
                                                                -----------

Securities registered under Section 12(g) of the Exchange Act:
                     Common Stock, par value $0.10 per share
                    -----------------------------------------
                                (Title of Class)

         Check  whether the issuer is not required to file  reports  pursuant to
Section 13 or 15(d) of the Exchange Act. |_|

         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 for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. YES X  NO
                                                                      ---    ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12d-2 of the Exchange Act) |_|

         State issuer's revenues for its most recent fiscal year:  $9.6 million.

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant,  based on the average bid and asked price of the registrant's
Common Stock on March 1, 2006, was $9.3 million.

         As of March 31,  2006,  there were  882,108  outstanding  shares of the
registrant's Common Stock.

         Transitional Small Business Disclosure Format (check one): YES    NO X
                                                                       ---   ---

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year ended
     December 31, 2005. (Part II)
2.   Portions  of  the  Proxy   Statement   for  the  2006  Annual   Meeting  of
     Stockholders. (Part III)

<PAGE>

                                     PART I

Forward-Looking Statements

         BUCS Financial Corp (the  "Company") may from time to time make written
or oral "forward  looking  statements",  including  statements  contained in the
Company's  filings with the Securities and Exchange  Commission  (including this
Annual  Report on Form  10-KSB  and the  exhibits  thereto),  in its  reports to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in,  monetary  and fiscal  policies and
laws,  including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the  perceived  overall  value of these  products  and  services  by  users,
including the features, pricing and quality as compared to competitors' products
and services;  the impact of changes in financial services' laws and regulations
(including  laws   concerning   taxes,   banking,   securities  and  insurance);
technological  changes;  acquisitions;  changes in consumer  spending and saving
habits;  and the  success of the Company at managing  the risks  resulting  from
these factors.

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

Item 1.  Description of Business.
--------------------------------

General

         The Company is a Maryland corporation  organized in October 2000 at the
direction of BUCS Federal Bank (the "Bank") to acquire all of the capital  stock
that  the  Bank  issued  in its  conversion  from the  mutual  to stock  form of
ownership  (the  "Conversion").  On  March  14,  2001,  the Bank  completed  the
Conversion and became a wholly owned subsidiary of the Company. The Company is a
unitary savings and loan holding company and conducts no significant business or
operations  of its own other than  holding all of the  outstanding  stock of the
Bank and  investing the  Company's  portion of the net proceeds  obtained in the
Conversion.

         References  to the Company or  Registrant in this Annual Report on Form
10-KSB generally refer to the Company and the Bank, unless the context otherwise
indicates.

         The Bank is a federally  chartered stock savings bank  headquartered in
Owings  Mills,  Maryland,  with branch  offices  located in Columbia  and Owings
Mills, Maryland. The Bank is subject to examination and comprehensive regulation
by the Office of Thrift Supervision ("OTS") and its deposits are federally

                                        1

<PAGE>

insured by the Savings Association Insurance Fund ("SAIF"). The Bank is a member
of and  owns  capital  stock  in the  FHLB of  Atlanta,  which  is one of the 12
regional banks in the FHLB System.

         The Bank was originally  founded in 1970 as a federal credit union.  On
March 1,  1998,  the Bank  converted  its  charter to a federal  mutual  savings
association.  As a result, the Bank was able to begin serving the general public
in addition to continuing  to serve  employee  groups.  The Bank is a community-
oriented savings  organization,  providing  traditional retail banking services,
one- to  four-family  residential  mortgage  loans,  and consumer loan products,
including home equity, auto, and personal loans.  Originally,  the Bank operated
as a typical  credit union,  with an emphasis on consumer  lending.  Since 1986,
however,  the  Bank  has  also  originated  a  substantial  amount  of  one-  to
four-family  residential  mortgage loans. The Bank began originating  commercial
real estate loans in 2000. In 2001, the Bank began originating  commercial loans
to complement the array of commercial  checking and deposit  services offered by
the Bank.

         At December  31,  2005,  the Company had total  assets,  deposits,  and
stockholders'  equity of  $138.6  million,  $95.6  million,  and $11.3  million,
respectively.  The Bank attracts deposits from the general public and uses these
deposits   primarily   to   originate   loans   and  to   purchase   investment,
mortgage-backed  and other  securities.  The principal  sources of funds for the
Bank's  lending and  investing  activities  are  deposits,  FHLB  advances,  the
repayment and maturity of loans and sale, maturity, and call of securities.  The
principal   source  of  income  is   interest  on  loans  and   investment   and
mortgage-backed  securities.  The principal expense is interest paid on deposits
and FHLB advances.

Market Area and Competition

         The Bank  operates from its main office in Owings  Mills,  Maryland,  a
full-service  branch office also in Owings Mills,  and two  full-service  branch
offices in Columbia, Maryland. Drive-up facilities are available at the Columbia
and the Owings Mills offices. The Bank also maintains five remote ATM locations,
four of which offer 24-hour access.

         The Bank's  primary  market  area is  Baltimore  and  Howard  Counties,
Maryland. The Bank faces substantial  competition in its attraction of deposits,
which are its primary  source of funds for lending,  and in the  origination  of
consumer, real estate, and commercial loans. The Bank's competition for deposits
and loans historically has come from local and regional commercial banks, thrift
institutions,  and credit unions  located in the Bank's primary market area. The
Bank also competes with mortgage  banking  companies for real estate loans,  and
commercial  banks  and  savings  institutions  for  consumer  loans;  and  faces
competition for investor funds from mutual fund accounts, short-term money funds
and corporate and government securities.

                                        2

<PAGE>

Lending Activities

         Loan   Portfolio   Composition.   The  following   table  analyzes  the
composition  of the  Bank's  loan  portfolio  by  loan  category  at  the  dates
indicated.

<TABLE>
<CAPTION>
                                                         At December 31,
                                            -----------------------------------------
                                                 2005                         2004
                                            -----------------      ------------------
                                            Amount    Percent      Amount     Percent
                                            ------    -------      ------     -------
                                                      (Dollars in thousands)
<S>                                       <C>          <C>       <C>          <C>
Type of Loans:
-------------
Mortgage loans:
  Residential.......................       $19,632      17.96%    $20,352      22.15%
  Land..............................             2       0.01           3       0.01
  Commercial real estate............        24,115      22.16       9,117       9.92

Commercial loans....................         4,358       3.88       5,529       6.02

Consumer loans:
--------------
  Home equity loans.................        38,920      35.60      32,677      35.56
  Secured loans.....................        18,900      17.29      20,415      22.22
  Other.............................         3,384       3.10       3,804       4.12
                                          --------     ------     -------     ------
Total loans.........................       109,311     100.00%     91,897     100.00%
                                                       ======                 ======
Less:
  Allowance for loan losses.........          (732)                  (682)
                                          --------                -------
Total loans, net....................      $108,579                $91,215
                                          ========                =======
</TABLE>

         Loan Maturity Schedule.  The following table sets forth the maturity or
repricing of the Bank's loan portfolio at December 31, 2005. Demand loans, loans
having no stated maturity and overdrafts are shown as due in one year or less.

<TABLE>
<CAPTION>
                                                                                         Auto and
                                                   Commercial                   Home      Other
                            Residential     Land   Real Estate   Commercial     Equity   Consumer      Total
                            -----------     ----   ------------  ----------     ------   --------      -----
                                                               (In thousands)
<S>                          <C>         <C>          <C>          <C>        <C>        <C>        <C>
Amounts Due:
Within 1 Year.........         $     3      $ --      $ 6,125       $1,452     $   152    $   944   $  8,676
                               -------      ----      -------       ------     -------    -------   --------
After 1 year:
  1 to 3 years........              66        --        1,069          180         258      5,338      6,911
  3 to 5 years........           1,550         2        1,295        1,402         996     13,745     18,990
  5 to 10 years.......           2,869        --        1,987        1,324      30,984      1,435     38,599
  10 to 15 years......           7,588        --        1,021           --       6,074         68     14,751
  Over 15 years.......           7,556        --       12,618           --         456        754     21,384
                               -------      ----      -------       ------     -------    -------   --------
Total due after
   one year...........          19,629         2       17,990        2,906      38,768     21,340    100,635
                               -------      ----      -------       ------     -------    -------   --------
Total amount due......         $19,632      $  2      $24,115       $4,358     $38,920    $22,284   $109,311
                               =======      ====      =======       ======     =======    =======   ========
</TABLE>

         The  following  table  sets  forth  the  dollar  amount of all loans at
December  31,  2005 which  have pre-  determined  interest  rates and which have
floating or adjustable interest rates.

                                        3

<PAGE>

<TABLE>
<CAPTION>
                                                    Floating or
                                    Fixed Rates  Adjustable Rates      Total
                                    -----------  ----------------     -------
                                                   (In thousands)
<S>                                  <C>             <C>             <C>
Residential.........................  $17,713         $1,919          $19,632
Land................................        2             --                2
Commercial real estate..............   18,322          5,793           24,115
Commercial..........................    3,358          1,000            4,358
Home equity loans...................   14,231         24,689           38,920
Auto and other consumer.............   22,284             --           22,284
                                      -------        -------         --------
  Total.............................  $75,910        $33,401         $109,311
                                      =======        =======         ========
</TABLE>

         Consumer  Loans.  As of December 31, 2005,  consumer  loans amounted to
$61.2  million  or  56.0% of the  Bank's  total  loan  portfolio  and  consisted
primarily  of home equity  loans and auto loans.  To a lesser  extent,  the Bank
originates  personal  loans  (secured  and  unsecured),  savings  secured  loans
(deposit loans), and personal lines of credit.  Consumer loans are originated in
the Bank's market area and generally have  maturities of up to 15 years for home
equity loans and up to 5 years for other  consumer  loans.  For savings  secured
loans, the Bank will generally lend up to 100% of the account balance.

         Consumer loans  generally have shorter terms and higher  interest rates
than residential loans. The consumer loan market can be helpful in improving the
spread between the average loan yield and the cost of funds and at the same time
improve the matching of rate sensitive assets and liabilities.

         Consumer loans entail greater risks than  residential  mortgage  loans,
particularly  consumer  loans  secured by  rapidly  depreciable  assets  such as
automobiles  or  loans  that are  unsecured.  In these  cases,  any  repossessed
collateral for a defaulted loan may not provide an adequate  source of repayment
of the outstanding loan balance,  since there is a greater likelihood of damage,
loss or  depreciation  of the  underlying  collateral.  Further,  consumer  loan
repayment is dependent on the borrower's  continuing financial stability and are
more likely to be adversely affected by job loss,  divorce,  illness or personal
bankruptcy.  Any late  payments  or  failure  to  repay  would  hurt the  Bank's
earnings.  Finally,  the application of various federal laws,  including federal
and state  bankruptcy  and  insolvency  laws,  may limit the amount which can be
recovered on consumer loans in the event of a default.

         The  underwriting  standards  employed by the Bank for  consumer  loans
include a determination  of the applicant's  credit history and an assessment of
the  applicant's  ability  to meet  existing  obligations  and  payments  on the
proposed loan. The stability of the applicant's monthly income may be determined
by   verification  of  gross  monthly  income  from  primary   employment,   and
additionally  from any  verifiable  secondary  income.  Creditworthiness  of the
applicant is of primary  consideration;  however,  the underwriting process also
includes a comparison of the value of the collateral in relation to the proposed
loan amount.  Applications  are taken by customer  service  representatives  via
telephone,   facsimile,   e-mail,   and   through   the  Bank's   website.   The
representatives  are  authorized to approve  consumer loan  applications  within
individual  levels of authority  and a  recommendation  to a manager is made for
loans over the authorized discretion of the representative. Every effort is made
to complete the consumer loan  application  process  within one hour of receipt.
Home equity loans and lines of credit are processed by the Bank's  mortgage loan
specialist in the same manner as other consumer loans. Outside professionals are
employed to conduct  appraisals  for loans over $25,000 and a tax  assessment or
realtors' market analysis is utilized for loans under that amount.

         Residential  Loans.  The Bank's primary  residential  lending  activity
consists of the  origination  of one- to  four-family  mortgage loans secured by
property  located in the  Bank's  market  area.  The Bank  generally  originates
single-family  residential  mortgage loans in amounts up to 80% of the lesser of
the appraised value

                                        4

<PAGE>

or selling price of the mortgaged  property without  requiring  private mortgage
insurance. The Bank will originate a mortgage loan in an amount up to 95% of the
lesser of the appraised value or selling price of a mortgaged property, however,
private  mortgage  insurance  is  generally  required on the amount  financed in
excess of 80%.

         The Bank originates both fixed rate and adjustable rate mortgage loans.
The fixed rate  mortgage  loans have  terms of 15 to 30 years.  Adjustable  rate
mortgage loans are tied to the 1-year U.S. Treasury Security Index or the 3-year
Treasury Security Index.

         The Bank  generally  makes its fixed  rate  mortgage  loans to meet the
secondary mortgage market standards of FreddieMac but also makes  non-conforming
loans. While the Bank is an approved  FreddieMac  seller/servicer,  generally it
has not sold mortgage loans in the secondary mortgage market.  However, the Bank
may in the future sell fixed rate  mortgage  loans in the secondary  market,  as
market conditions and the Bank's own portfolio needs dictate.

         Substantially all of the Bank's  residential  mortgages include "due on
sale" clauses,  which are provisions giving the Bank the right to declare a loan
immediately  payable if the borrower sells or otherwise transfers an interest in
the property to a third party.

         Property  appraisals on real estate  securing the Bank's  single-family
residential loans are made by state certified or licensed independent appraisers
approved by the Board of Directors.  Appraisals are performed in accordance with
applicable  regulations and policies.  The Bank obtains title insurance policies
on all first mortgage real estate loans  originated.  All property secured loans
require  fire  and  casualty  insurance.  Loans  made  on  property  located  in
designated  flood zones require  minimum flood  insurance  coverage based on the
amount of the loan.

         Commercial  Real  Estate  Loans.  Starting  in 2000,  the Bank began to
originate commercial real estate mortgage loans, including loans on multi-family
dwellings, retail/service space, and other income-producing properties. The Bank
requires no less than a 25% down payment or equity  position for commercial real
estate  loans.  Typically  these  loans  are made  with  terms of 5 to 20 years.
Essentially  all of the Bank's  commercial  real estate loans are on  properties
located  within  its  market  area  and  all  are  within  Maryland.   The  Bank
occasionally  sells  participation  interests  in  commercial  real estate loans
originated by it that would otherwise exceed its loans-to-one-borrower limit.

         The  commercial  real estate loan  portfolio  grew by $15.0  million or
164.5%  during  2005 and  totaled  $24.1  million at December  31,  2005.  It is
management's  intention to continue  emphasizing  the  origination of commercial
real estate loans.

         The likelihood  that commercial real estate loans will not be repaid or
will be late in  paying is  generally  greater  than  with  one- to  four-family
residential  loans.  Any failure to pay or late  payments  would hurt the Bank's
earnings.  The repayment of these loans typically is dependent on the successful
operations  and income stream of the real estate and the  borrower.  These risks
can be significantly  affected by economic conditions.  In addition,  commercial
real estate lending  generally  requires  substantially  greater  evaluation and
oversight efforts compared to one- to four-family residential lending.

         Commercial  Loans.   Commercial  loans  are  generally  made  to  small
businesses in the Bank's market area.  Approximately  one-half of the commercial
loan activity to date has been in conjunction with the guarantee programs of the
Small Business Administration (SBA).

                                        5

<PAGE>

         The Bank's  commercial  loans are  generally  secured  by real  estate.
Secured  commercial  loans are made in  amounts of up to 75% of the value of the
collateral  securing the loan.  The Bank does not make any unsecured  commercial
loans. The Bank generally requires the personal guarantee of the business owner.
Commercial  lending products include  installment loans and lines of credit. The
Bank's  commercial  term loans  have terms of up to ten years and are  generally
adjustable rate loans.

         The Bank's  commercial  loan  portfolio  dropped  from $5.5  million at
December  31, 2004 to $4.3  million at December  31,  2005  primarily  due to an
emphasis on commercial real estate lending in 2005.

         Unlike  single-family  residential  mortgage loans, which generally are
made on the basis of the  borrower's  ability to make  repayment from his or her
employment  and other income and which are secured by real property  whose value
tends to be more easily  ascertainable,  commercial business loans typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the  borrower's  business.  As a result,  the  availability  of funds for the
repayment of commercial  business  loans may be  substantially  dependent on the
success of the business itself and the general economic environment.  Commercial
business loans,  therefore,  have greater credit risk than residential  mortgage
loans. In addition,  commercial  loans generally carry larger balances to single
borrowers or related  groups of borrowers  than one- to  four-family  loans.  In
addition, commercial lending generally requires substantially greater evaluation
and oversight  efforts  compared to residential or  non-residential  real estate
lending.

         Loans to One Borrower.  Under federal law, savings  institutions  have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the  institution's  unimpaired  capital and
surplus. As of December 31, 2005, the Bank's largest aggregation of loans to one
borrower  was  $1,727,798,   consisting   primarily  of  mortgages  against  two
commercial  real  estate  properties.  Other  significant  relationships  in the
amounts of $1,612,000 and $1,564,250  exist with two other customers whose loans
are secured by commercial real estate and residential real estate, respectively.

         Loan  Commitments.  The Bank gives written  commitments  to prospective
borrowers on all approved real estate loans. Generally,  the commitment requires
acceptance  within 60 days of the date of the issuance.  The total amount of the
Bank's  commitments to extend credit for mortgage loans as of December 31, 2005,
was $24.5 million including commitments on lines of credit of $23.9 million.

Non-performing Loans and Problem Assets

         Loans are reviewed on a regular  basis and are placed on a  non-accrual
status  when  they are more  than 90 days  delinquent.  Loans may be placed on a
non-accrual status at any time if, in the opinion of management,  the collection
of additional  interest is doubtful.  Interest  accrued and unpaid at the time a
loan is placed  on  non-accrual  status  is  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income,  depending  on the  assessment  of the  ultimate
collectibility of the loan. At December 31, 2005, the Bank had $114,894 of loans
that were held on a non-accrual basis.

         Non-Performing   Assets.  The  following  table  provides   information
regarding the Bank's non- performing  loans and other  non-performing  assets at
the dates indicated.  As of both of the dates  indicated,  the Bank did not have
any troubled  debt  restructurings  within the meaning of Statement of Financial
Accounting Standards No. 15.

                                        6

<PAGE>

<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                                               --------------------
                                                                                2005          2004
                                                                                ----          ----
<S>                                                                          <C>           <C>
                                                                                 (In thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans.......................................................          $   -         $   -
Consumer loans:
  Home equity loans...................................................            34            46
  Other consumer......................................................            81            52
                                                                               -----         -----
Total.................................................................         $ 115         $  98
                                                                               =====         =====
Accruing loans which are contractually past due 90 days or more:
Mortgage loans.......................................................          $   -         $   -
Consumer loans.......................................................              -             -
                                                                               -----         -----
Total.................................................................         $   -         $   -
                                                                               =====         =====
Total non-performing loans............................................         $ 115         $  98
                                                                               =====         =====
Other non-performing assets...........................................         $   -         $   -
                                                                               =====         =====
Total non-performing assets...........................................         $ 115         $  98
                                                                               =====         =====
Total non-performing loans to net loans...............................          0.11%         0.11%
                                                                               =====         =====
Total non-performing loans to total assets............................          0.08%         0.08%
                                                                               =====         =====
Total non-performing assets to total assets...........................          0.08%         0.08%
                                                                               =====         =====
</TABLE>

         For the year ended December 31, 2005, the amount of interest that would
have been recorded on loans accounted for on a non-accrual  basis if those loans
had been current  according to the original loan  agreements for the entire year
was $5,121.  This amount was not included in the Bank's  interest income for the
year.

         Classified Assets.  Management, in compliance with OTS guidelines,  has
instituted an internal  loan review  program,  whereby  loans are  classified as
special  mention,  substandard,  doubtful or loss.  When a loan is classified as
substandard or doubtful, management is required to establish a valuation reserve
for loan losses in an amount considered  prudent by management.  When management
classifies a loan as a loss asset,  a reserve  equal to 100% of the loan balance
is required to be established or the loan is to be  charged-off.  This allowance
for loan losses is composed of an allowance for both  inherent  risk  associated
with lending activities and particular problem assets.

         An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or the collateral  pledged,  if
any.  Substandard assets include those characterized by the distinct possibility
that the insured  institution will sustain some loss if the deficiencies are not
corrected.  Assets classified as "doubtful" have all of the weaknesses  inherent
in  those  classified  substandard,  with  the  added  characteristic  that  the
weaknesses  present make collection or liquidation in full, highly  questionable
and  improbable,  on the basis of  currently  existing  facts,  conditions,  and
values. Assets classified as "loss" are those considered uncollectible and of so
little value that their  continuance  as assets without the  establishment  of a
specific loss reserve is not warranted. Assets which do not currently expose the
insured institution to a sufficient degree of risk to warrant  classification in
one  of  the  aforementioned  categories  but  possess  credit  deficiencies  or
potential  weaknesses  are  required to be  designated  as "special  mention" by
management.

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy of the  allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination  process.  The
following table discloses the Bank's classification of its assets as of December
31, 2005. At December 31, 2005, all of the classified assets were loans.

                                        7

<PAGE>


                                               At December 31, 2005
                                               --------------------
                                                 (In thousands)

      Substandard....................                  $655
      Doubtful.......................                   132
      Loss...........................                    65
                                                       ----
        Total........................                  $852
                                                       ====

         Allowance for Loan Losses.  The Bank  segregates the loan portfolio for
loan  losses into the  following  broad  categories:  residential  real  estate,
commercial  real  estate,  commercial  loans and consumer  loans.  The Bank also
separately  evaluates all non-performing  loans individually.  The Bank provides
for a general  allowance  for  losses  inherent  in the  portfolio  by the above
categories,  which  consists of two  components.  General loss  percentages  are
calculated  based upon  historical  analyses and other  factors.  A supplemental
portion of the allowance is calculated for inherent  losses which probably exist
as of the evaluation date even though they might not have been identified by the
more objective  processes used. This is due to the risk of error and/or inherent
imprecision  in the  process.  This  portion of the  allowance  is  particularly
subjective and requires judgments based on qualitative factors which do not lend
themselves to exact mathematical calculations such as:

     o  trends in delinquencies and nonaccruals;
     o  trends in volume, terms and portfolio mix;
     o  new credit products;
     o  changes in lending policies and procedures;
     o  changes in the outlook for the local, regional and national economy; and
     o  peer group comparisons.

         It is the Bank's  policy to review its loan  portfolio,  in  accordance
with  regulatory  classification  procedures,  on at  least a  quarterly  basis.
Additionally,  the Bank maintains a program of reviewing loan applications prior
to making the loan and immediately after loans are made in an effort to maintain
loan quality.

         The Bank's management  evaluates the need to establish reserves against
losses on loans and other assets based on estimated losses on specific loans and
on any real  estate  held for sale or  investment  when a finding is made that a
loss is estimable and probable.  This evaluation  includes a review of all loans
for which full collectibility may not be reasonably assured and considers, among
other matters:  (1) the estimated  market value of the underlying  collateral of
problem  loans,  (2) prior loss  experience,  (3)  economic  conditions  and (4)
overall portfolio quality.

         Provisions for losses are charged  against  earnings in the period they
are  established.  The Bank made $354,859 in provisions  for loan losses for the
year ended December 31, 2005.

         While the Bank believes it has established  its existing  allowance for
loan losses in accordance with accounting  principles  generally accepted in the
United  States,  there can be no assurance  that  regulators,  in reviewing  the
Bank's loan portfolio,  will not request the Bank to significantly  increase its
allowance for loan losses, or that general economic conditions,  a deteriorating
real estate market, or other factors will

                                        8

<PAGE>

not cause the Bank to  significantly  increase its  allowance  for loans losses,
which would negatively affect the Bank's financial condition and earnings.

         In  making  loans,  the Bank  recognizes  that  credit  losses  will be
experienced  and that the risk of loss will vary with,  among other things,  the
type of loan being made, the  creditworthiness  of the borrower over the term of
the loan and, in the case of a secured loan, the quality of the security for the
loan.

         The following table sets forth  information with respect to the  Bank's
allowance for loan losses at the dates indicated:

<TABLE>
<CAPTION>
                                                           At December 31,
                                                     -------------------------
                                                       2005            2004
                                                     ---------       ---------
                                                          (In thousands)
<S>                                                 <C>             <C>
Allowance balance (at beginning of period) .....     $     682       $     631
                                                     ---------       ---------
Provision for loan losses ......................           355             294
                                                     ---------       ---------
Charge-offs:
  Commercial ...................................           (68)              -
  Consumer .....................................          (301)           (301)
Recoveries .....................................            64              58
                                                     ---------       ---------
Net charge-offs ................................          (305)           (243)
                                                     ---------       ---------
Allowance balance (at end of period) ...........     $     732       $     682
                                                     =========       =========

Total loans outstanding ........................     $ 109,312       $  91,898
                                                     =========       =========
Average loans outstanding ......................     $ 100,981       $  85,848
                                                     =========       =========
Allowance for loan losses as
  a percent of total loans outstanding .........          0.67%           0.74%
                                                     =========       =========
Net loans charged off as a percent of
average loans outstanding ......................          0.30%           0.28%
                                                     =========       =========
</TABLE>

                                        9

<PAGE>

         Allocation of Allowance for Loan Losses. The following table sets forth
the  allocation  of the  Bank's  allowance  for loan  losses by loan  type.  The
percentage  of loans  in each  category  to  total  loans  receivable,  net,  is
presented  at the  dates  indicated.  The  portion  of the loan  loss  allowance
allocated to each loan  category  does not  represent  the total  available  for
losses  which may  occur  within  the loan  category  since the total  loan loss
allowance is a valuation reserve applicable to the entire loan portfolio.

<TABLE>
<CAPTION>
                                                     At December 31,
                                        ---------------------------------------------
                                                2005                  2004
                                        --------------------   ----------------------
                                                  Percent of              Percent of
                                                   Loans to                Loans to
                                        Amount   Total Loans    Amount    Total Loans
                                        ------   -----------    ------    -----------
                                                 (Dollars in thousands)
<S>                                     <C>         <C>         <C>         <C>
At end of period allocated to:
Mortgage loans:
Residential:
  Permanent........................       $ 28        17.97%      $  -        22.14%
  Commercial real estate...........        214        22.16         70         9.88

  Commercial loans.................         38         3.88        148         6.02

Consumer Loans:
  Home equity loans................         25        35.60         73        35.61
  Auto loans.......................        315        17.29        210        22.21
  Other............................        112         3.10        181         4.14
                                          ----       ------       ----       ------
Total allowance....................       $732       100.00%      $682       100.00%
                                          ====       ======       ====       ======
</TABLE>


Investment Activities

         General. Federally chartered savings associations have the authority to
invest in various  types of liquid  assets,  including  United  States  Treasury
obligations,  securities of various government agencies and government-sponsored
entities   (including   securities   collateralized   by   mortgages),   certain
certificates  of deposits of insured banks and savings  institutions,  municipal
securities, corporate debt securities and loans to other banking institutions.

         Investment  Securities.  The Bank  maintains a portfolio of  investment
securities,  classified  as either  available  for sale or held to maturity.  At
December 31, 2005,  all of the Bank's  investment  securities  consisted of U.S.
government agency,  government-sponsored  entity  obligations,  mortgage- backed
securities, and collateralized mortgage obligations with varying characteristics
as to rate, maturity and call provisions. Callable securities, representing 100%
of the Bank's U.S.  government agency  securities,  totaled  approximately  $1.0
million at December  31, 2005 and could  reduce the Bank's  investment  yield if
called  prior to  maturity.  At  December  31,  2005,  the Bank did not have any
investments in the obligations of state or local governments.

         The  mortgage-backed  securities in the Bank's portfolio are classified
as  either  available  for  sale  or  held  to  maturity.   The  securities  are
participation  certificates  that are secured by interest in pools of mortgages.
At December 31, 2005, the Bank held mortgage-backed  securities that were issued
and  guaranteed  by  the  Government  National  Mortgage  Association  ("GNMA"),
FannieMae and FreddieMac.

                                       10

<PAGE>

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate or adjustable
rate mortgage loans.  The interest rate risk  characteristics  of the underlying
pool of mortgages,  including fixed-rate or adjustable-rate,  and the prepayment
risk, are passed on to the  certificate  holder.  The life of a  mortgage-backed
pass-through security is equal to the life of the underlying mortgages. Expected
maturities will differ from contractual  maturities due to scheduled  repayments
and because  borrowers may have the right to call or prepay  obligations with or
without prepayment penalties.

         The Bank also invests in collateralized  mortgage  obligations  (CMOs),
issued or sponsored by FannieMae and FreddieMac.  The Bank's  investment  policy
classifies  CMO's  as  mortgage   derivative   products,   with  the  investment
restrictions  applicable to such category as described above. CMOs are a type of
debt security that aggregates pools of mortgages and mortgage-backed  securities
and creates  different  classes of CMO  securities  with varying  maturities and
amortization  schedules  as well as a residual  interest  with each class having
different risk  characteristics.  The cash flows from the underlying  collateral
are usually divided into "tranches" or classes whereby  tranches have descending
priorities with respect to the distribution of principal and interest  repayment
of the underlying  mortgages and mortgage- backed  securities as opposed to pass
through mortgage-backed  securities where cash flows are distributed pro rata to
all security holders. Unlike mortgage-backed  securities from which cash flow is
received and prepayment risk is shared pro rata by all securities holders,  cash
flows from the mortgages and mortgage-  backed  securities  underlying  CMOs are
paid in accordance  with a predetermined  priority to investors  holding various
tranches of the  securities or  obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral and other tranches.

         Other securities used by the Bank, but not necessarily  included in the
investment portfolio,  consist of equity securities,  interest-bearing  deposits
and federal funds sold.  Equity  securities owned at December 31, 2005 consisted
of a $1,583,500  investment in FHLB of Atlanta  common stock (this amount is not
shown  in the  securities  portfolio).  As a  member  of the  FHLB  of  Atlanta,
ownership of FHLB of Atlanta common shares is required. The remaining securities
provide diversification and complement the Bank's overall investment strategy.

         The  following  table  sets  forth  the  carrying  value of the  Bank's
investment securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                                             -------------------------
                                                                                2005            2004
                                                                               -------         -------
                                                                               (Dollars in thousands)
<S>                                                                           <C>             <C>
Securities Held to Maturity:
---------------------------
 Mortgage-backed securities.............................................       $ 7,533         $ 9,083
 Collateralized mortgage obligations....................................            91             203
                                                                               -------         -------
 Total securities held to maturity......................................         7,624           9,286
                                                                               -------         -------

Securities Available for Sale (at fair value):
---------------------------------------------
 U.S. government agency and government-sponsored entity securities .....           980             990
 Mortgage-backed securities.............................................         3,241           4,939
                                                                               -------         -------
 Total securities available for sale....................................         4,221           5,929
                                                                               -------         -------

 Total..................................................................       $11,845         $15,215
                                                                               =======         =======
</TABLE>

                                       11

<PAGE>

         The  following  table  sets forth  certain  information  regarding  the
carrying values, weighted average yields and maturities of the Bank's investment
and mortgage-backed securities portfolio at December 31, 2005.

<TABLE>
<CAPTION>
                                                                At December 31, 2005
                               ----------------------------------------------------------------------------------------------------
                                                                                         More than
                               One Year or Less  One to Five Years Five to Ten Years     Ten Years     Total Investment Securities
                               ----------------- ----------------- ----------------- ----------------- ----------------------------
                               Amortized Average Amortized Average Amortized Average Amortized Average Amortized Average Estimated
                                 Cost     Yield     Cost    Yield     Cost    Yield     Cost    Yield     Cost    Yield  Fair Value
                                ------   ------    ------  -------   ------  -------   ------  -------   ------  ------- ----------
                                                                 (Dollars in thousands)
<S>                            <C>       <C>       <C>      <C>        <C>            <C>      <C>      <C>       <C>     <C>
U.S. government agency and
  government-sponsored
  entity securities............ $     -       -%    $1,000   3.50%      $  -      -%   $     -      -%   $ 1,000   3.50%   $   980

Collateralized mortgage
   obligations.................      12    4.33         79   3.77          -      -          -      -         91   3.84         90

Mortgage-backed securities(1)..       -       -        123   5.00        436   5.00     10,229   4.53     10,788   4.56     10,459
                                -------   -----      -----   ----        ---   ----     ------   ----     ------   ----     ------

  Total........................ $    12    4.33%    $1,202   3.67%      $436   5.00%   $10,229   4.53%   $11,879   4.46%   $11,529
                                 ======   ====       =====  ====         ===  ====      ======  ====      ======  ====      ======
</TABLE>

--------------------------------
(1)  The   totals  include  approximately  $3,787  million  of  adjustable  rate
     securities that reprice annually.

                                       12

<PAGE>

Sources of Funds

         General.  Deposits are the major source of the Bank's funds for lending
and other investment purposes.  Borrowings  (principally from the FHLB) are used
to  supplement  the amount of funds for lending and  investment.  In addition to
deposits and  borrowings,  the Bank derives funds from loan and  mortgage-backed
securities principal repayments,  and proceeds from the maturity,  call and sale
of   mortgage-backed   securities   and   investment   securities.    Loan   and
mortgage-backed  securities  payments are a relatively  stable  source of funds,
while deposit inflows are significantly influenced by general interest rates and
money market conditions.

         Deposits.  The following  table sets forth for the years ended December
31, 2005 and 2004 the average amount of and average rate paid on deposits.

<TABLE>
<CAPTION>
                                                Average                                Average
                                            Balance for the                        Balance for the
                                               year ended          Weighted           year ended          Weighted
                                              December 31,          Average          December 31,          Average
Category                                          2005           Interest Rate           2004           Interest Rate
--------                                         ------          -------------          ------          -------------
                                                                       (Dollars in thousands)
<S>                                            <C>                <C>                 <C>                 <C>
Checking accounts........................        $14,940                --%             $11,073                --%
Money Market and floating rate
   IRA accounts..........................         24,070              1.92               20,653              1.24
Savings accounts.........................         27,573              0.51               28,536              0.53
Certificates of deposit..................         25,429              3.78               28,425              3.58
                                                 -------                                -------
             Total.......................        $92,012                                $88,687
                                                 =======                                =======
</TABLE>

         The  following  table  shows the amount of the Bank's  certificates  of
deposit of $100,000 or more by time remaining  until maturity as of December 31,
2005.

<TABLE>
<CAPTION>

                                                                 Certificates
Maturity Period                                                   of Deposit
---------------                                                   ----------
                                                                (In thousands)
<S>                                                               <C>
Within three months................................                $  950
Three through six months...........................                   458
Six through twelve months..........................                   369
Over twelve months.................................                 3,670
                                                                   ------
                                                                   $5,447
                                                                   ======
</TABLE>

         Borrowings.  The Bank, as the need arises or in order to take advantage
of funding opportunities, borrows funds in the form of advances from the FHLB to
supplement  its  supply of funds and to meet  deposit  withdrawal  requirements.
Advances from the FHLB are typically secured by the Bank's stock in the FHLB and
a portion of the Bank's  residential  mortgage loans and may be secured by other
assets,  mainly  securities  which are  obligations of or guaranteed by the U.S.
Government.  Short-term advances at December 31, 2005 totaled $18.8 million. See
Note 7 to the Consolidated Financial Statements.

                                       13

<PAGE>

         The following  table sets forth certain  information  regarding  Bank's
borrowed funds.

<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                                    -------------------------------
                                                                        2005               2004
                                                                    ------------       ------------
                                                                            (In thousands)
<S>                                                                 <C>                 <C>
FHLB Advances:
Average balance outstanding...............................            $22,928             $21,879
Maximum amount outstanding
  at any month-end during the year........................             27,700              21,500
Balance outstanding at end of year........................             27,700              19,500
Weighted average interest rate during the year............               3.84%               3.03%
Weighted average interest rate at end of year.............               3.97%               2.92%
</TABLE>

Contractual Obligations

         Payments due by period for the Company's contractual obligations (other
than  deposit  accounts  with no  stated  maturity)  at  December  31,  2005 are
presented below:

<TABLE>
<CAPTION>
                                                                   After 1          After 3
                                                   Within         but Within       but Within        After
                                                   1 Year          3 Years          5 Years         5 Years           Total
                                                  -------         ---------         -------         -------          ------
                                                                                 (In thousands)
<S>                                              <C>               <C>               <C>            <C>            <C>
Time deposits...............................      $ 9,099           $12,696           $1,773         $    0         $23,568
Junior subordinated debentures..............            -             3,000               --              -           3,000
Federal Home Loan Bank advances.............       18,800             7,400               --          1,500          27,700
Operating lease obligations.................           83               176              127              -             386
Purchase obligations........................            -                 -               --              -               -
                                                  -------           -------           ------         ------         -------
    Total contractual obligations...........      $27,982           $23,272           $1,900         $1,500         $54,654
                                                  =======           =======           ======         ======         =======
</TABLE>

Subsidiary Activity

         The Bank is permitted to invest its assets in the capital  stock of, or
originate secured or unsecured loans to, subsidiary corporations. In addition to
the Bank, the Company has one other subsidiary,  BUCS Financial Capital Trust I,
which was formed to sell trust preferred securities.

Personnel

         As of December 31,  2005,  the Bank had 46  full-time  employees  and 2
part-time employees. The Bank believes its relationship with its employees to be
satisfactory.

                                       14

<PAGE>

Regulation

         Set forth below is a brief  description  of certain laws that relate to
the regulation of the Bank and the Company.  The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.  The Bank and the Company operate in a highly  regulated  industry.
The U.S.  government  could adopt  regulations  or enact laws which restrict the
operations of the Bank and/or the Company or impose burdensome requirements upon
one or both of them.

         Sarbanes-Oxley  Act of 2002.  On July 30, 2002,  President  Bush signed
into law the  Sarbanes-  Oxley  Act of 2002  (the  "Act").  The  Securities  and
Exchange Commission (the "SEC") has promulgated new regulations  pursuant to the
Act  and  may  continue  to  propose   additional   implementing  or  clarifying
regulations  as necessary in  furtherance  of the Act. The passage of the Act by
Congress  and  the   implementation  of  new  regulations  by  the  SEC  subject
publicly-traded   companies  to  additional   and  more   cumbersome   reporting
regulations   and  disclosure.   Compliance  with  the  Act  and   corresponding
regulations may increase the Company's expenses.

Regulation of the Company

         General.  The Company is a savings and loan holding  company within the
meaning of Section  10(o) of the Home  Owners'  Loan Act and is required to file
reports with the OTS and is subject to regulation and examination by the OTS. In
addition, the OTS has enforcement authority over the Company and any non-savings
institution  subsidiaries.   This  permits  the  OTS  to  restrict  or  prohibit
activities  that it determines to be a serious risk. This regulation is intended
primarily for the protection of the depositors and is not for the benefit of the
stockholders of the Company.

         Activities  Restrictions.  As a savings and loan holding company formed
after May 4, 1999, the Company is not a  grandfathered  unitary savings and loan
holding company under the  Gramm-Leach-Bliley  Financial Services  Modernization
Act of 1999 (the "GLB  Act").  As a result,  the  Company  and its non-  savings
institution  subsidiaries,  if any exist in the future,  is subject to statutory
and regulatory restrictions on their business activities. Under the Home Owners'
Loan Act, as amended by the GLB Act, the  nonbanking  activities  of the Company
are restricted to certain activities specified by OTS regulation,  which include
performing  services  and  holding  properties  used  by a  savings  institution
subsidiary,  activities  authorized for savings and loan holding companies as of
March 5, 1987, and nonbanking activities  permissible for bank holding companies
pursuant to the Bank Holding  Company Act of 1956 (the "BHC Act") or  authorized
for financial holding companies pursuant to the GLB Act. Furthermore, no company
may acquire  control of the Company  unless the acquiring  company was a unitary
savings and loan holding company on May 4, 1999 (or became a unitary savings and
loan holding company pursuant to an application  pending as of that date) or the
company is only engaged in activities  that are  permitted for multiple  savings
and loan holding  companies or for financial holding companies under the BHC Act
as amended by the GLB Act.

                                       15

<PAGE>

Regulation of the Bank

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to  extensive  regulation  by the OTS and the FDIC.  Lending
activities  and  other  investments  must  comply  with  federal  statutory  and
regulatory requirements. The Bank is also subject to reserve requirements of the
Federal  Reserve  System.  Federal  regulation  and  supervision  establishes  a
comprehensive  framework of activities in which an institution can engage and is
intended  primarily  for  the  protection  of  the  SAIF  and  depositors.  This
regulatory  structure gives the regulatory  authorities  extensive discretion in
connection with their  supervisory  and  enforcement  activities and examination
policies,  including  policies  regarding the  classification  of assets and the
establishment of adequate allowance for loan losses.

         The OTS regularly  examines the Bank and prepares reports to the Bank's
board of directors on deficiencies,  if any, found in its operations. The Bank's
relationship with its depositors and borrowers is also regulated by federal law,
especially in such matters as the ownership of savings accounts and the form and
content of the Bank's mortgage documents.

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities and financial  condition,  and must obtain regulatory approvals prior
to entering into certain  transactions  such as mergers with or  acquisitions of
other financial institutions.  Any change in applicable statutory and regulatory
requirements,  whether by the OTS, the FDIC or the United States Congress, could
have  a  material  adverse  impact  on the  Company  and  the  Bank,  and  their
operations.

         Insurance  of  Deposit  Accounts.  The FDIC  administers  two  separate
deposit insurance funds. Generally,  the Bank Insurance Fund (the "BIF") insures
the deposits of commercial  banks and the SAIF ("SAIF")  insures the deposits of
savings  institutions.  The FDIC is  authorized  to increase  deposit  insurance
premiums if it  determines  such  increases  are  appropriate  to  maintain  the
reserves of either the SAIF or BIF or to fund the administration of the FDIC. In
addition,  the FDIC is authorized to levy emergency  special  assessments on BIF
and SAIF members.

         FDIC-insured  institutions  are required to pay assessments to the FDIC
to fund interest payments on bonds issued by the Financing Corporation ("FICO"),
an agency of the Federal government  established to recapitalize the predecessor
to the SAIF.  These  assessments  will  continue  until the FICO bonds mature in
2017.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total  adjusted  assets,  (2) "Tier 1" or "core"  capital equal to at
least 4% (3% if the institution  has received the highest  rating,  "composite 1
CAMELS," on its most  recent  examination)  of total  adjusted  assets,  and (3)
risk-based  capital equal to 8% of total  risk-weighted  assets. The Bank was in
compliance with these regulatory capital standards at December 31, 2005.

         Dividend and Other Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

         A  savings  institution  that is a  subsidiary  of a  savings  and loan
holding company, such as the Bank, must file an application or a notice with the
OTS at least 30 days before making a capital distribution.  Savings associations
are not  required  to file  an  application  for  permission  to make a  capital
distribution  and need only file a notice if the following  conditions  are met:
(1) they are eligible for expedited treatment

                                       16

<PAGE>

under OTS regulations,  (2) they would remain  adequately  capitalized after the
distribution,  (3) the annual amount of capital distribution does not exceed net
income for that year to date added to retained net income for the two  preceding
years, and (4) the capital distribution would not violate any agreements between
the OTS and the savings institution or any OTS regulations.  Any other situation
would require an application to the OTS.

         The  Bank  is  required  to  file  a  capital  distribution  notice  or
application  with the OTS before  paying any dividend to the  Company.  However,
capital distributions by the Company, as a savings and loan holding company, are
not subject to the OTS capital distribution rules.

         The OTS may  disapprove a notice or deny an  application  for a capital
distribution if: (i) the savings institution would be undercapitalized following
the capital  distribution;  (ii) the proposed capital distribution raises safety
and  soundness  concerns;  or (iii) the  capital  distribution  would  violate a
prohibition contained in any statute, regulation or agreement.

         In addition,  the Bank may not declare or pay a dividend on its capital
stock if the dividend would reduce the regulatory  capital of the Bank below the
amount required for the liquidation  account  established in connection with its
conversion from mutual to stock form. The liquidation account is maintained as a
separate  account at the Bank and was  established in an amount equal to its net
worth as of the latest  practicable date prior to the Conversion.  Depositors of
the  Bank  at  the  eligibility  and  supplemental   eligibility   record  dates
established for the Conversion  hold interests in the liquidation  account equal
to their pro rata  deposits in the Bank at such  dates.  If the amount in any of
these deposit  accounts on any annual  closing date of the Bank (December 31) is
less than the amount in the  liquidation  account on the respective  eligibility
dates, then such depositor's  interest in the liquidation  account is reduced by
an amount  proportionate  to the  reduction  and the  reduction  in  interest is
reflected by a corresponding decrease in the balance of the liquidation account.
However, an individual's  interest in and the balance of the liquidation account
is not increased  despite any increase in deposit  accounts after the respective
eligibility dates.

         No merger,  consolidation,  purchase of bulk assets with assumptions of
savings accounts and other  liabilities,  or similar  transactions  with another
insured  institution  in which  the  Bank,  in its  converted  form,  is not the
surviving  institution,  shall be  considered a complete  liquidation.  In these
transactions,  the  liquidation  account  shall  be  assumed  by  the  surviving
institution.

         Qualified Thrift Lender Test. Federal savings  institutions must meet a
qualified  thrift  lender  ("QTL")  test or they become  subject to the business
activity  restrictions  and branching  rules  applicable to national  banks.  To
qualify as a QTL, a savings  institution  must  either (i) be deemed a "domestic
building and loan association" under the Internal Revenue Code by maintaining at
least 60% of its total  assets in  specified  types of assets,  including  cash,
certain  government  securities,  loans  secured by and other assets  related to
residential real property,  educational loans and investments in premises of the
institution or (ii) satisfy the statutory QTL test set forth in the Home Owners'
Loan Act by  maintaining  at least  65% of its  "portfolio  assets"  in  certain
"Qualified Thrift  Investments"  (defined to include  residential  mortgages and
related equity investments,  certain mortgage-related securities, small business
loans,  student  loans and  credit  card  loans,  and 50% of  certain  community
development loans). For purposes of the statutory QTL test, portfolio assets are
defined  as  total  assets  minus  intangible  assets,   property  used  by  the
institution in conducting its business,  and liquid assets equal to 10% of total
assets.  A savings  institution  must  maintain its status as a QTL on a monthly
basis in at least nine out of every 12  months.  The Bank met the QTL test as of
December 31, 2005 and in each of the last 12 months and, therefore, qualifies as
a QTL.

                                       17

<PAGE>

         Transactions with Affiliates.  Generally,  federal banking law requires
that  transactions  between a savings  institution or its  subsidiaries  and its
affiliates  must  be on  terms  as  favorable  to  the  savings  institution  as
comparable transactions with non-affiliates. In addition, certain types of these
transactions   are  restricted  to  an  aggregate   percentage  of  the  savings
institution's capital.  Collateral in specified amounts must usually be provided
by  affiliates  in order to  receive  loans  from the  savings  institution.  In
addition,  a savings  institution may not extend credit to any affiliate engaged
in  activities  not  permissible  for a bank  holding  company  or  acquire  the
securities of any affiliate that is not a subsidiary. The OTS has the discretion
to treat  subsidiaries  of savings  institutions as affiliates on a case-by-case
basis.

         Federal  Reserve  System.  The  Federal  Reserve  System  requires  all
depository institutions to maintain  non-interest-bearing  reserves at specified
levels against their checking accounts and non- personal  certificate  accounts.
The balances maintained to meet the reserve  requirements imposed by the Federal
Reserve System may be used to satisfy the OTS liquidity requirements.

         Savings  institutions have authority to borrow from the Federal Reserve
System "discount  window," but Federal Reserve System policy generally  requires
savings  institutions  to exhaust all other sources  before  borrowing  from the
Federal Reserve System.

Item 1A. Risk Factors
---------------------

         The  following is a summary of the material  risks of an  investment in
the Company's securities.

We realize income primarily from the difference between interest earned on loans
and  investments  and interest paid on deposits and  borrowings,  and changes in
interest rates may adversely affect our profitability and assets.

         Changes in prevailing  interest rates may hurt our business.  We derive
our income mainly from the difference or "spread" between the interest earned on
loans,  securities  and other  interest-earning  assets,  and  interest  paid on
deposits,  borrowings and other  interest-bearing  liabilities.  In general, the
larger the spread,  the more we earn. When market rates of interest change,  the
interest  we receive on our assets and the  interest  we pay on our  liabilities
will fluctuate.  This can cause decreases in our spread and can adversely affect
our income.

         Interest  rates affect how much money we can lend.  For  example,  when
interest rates rise, the cost of borrowing  increases and loan originations tend
to decrease. In addition,  changes in interest rates can affect the average life
of loans and  investment  securities.  A reduction in interest  rates  generally
results in increased  prepayments of loans and  mortgage-backed  securities,  as
borrowers  refinance  their debt in order to reduce their  borrowing  cost. This
causes  reinvestment  risk,  because  we  generally  are not  able  to  reinvest
prepayments  at rates that are  comparable to the rates we earned on the prepaid
loans or  securities.  Changes in market  interest  rates  could also reduce the
value of our financial assets. If we are unsuccessful in managing the effects of
changes in interest  rates,  our  financial  condition and results of operations
could suffer.

If we experience  loan losses in excess of our  allowance,  our earnings will be
adversely affected.

         The risk of credit  losses on loans  varies with,  among other  things,
general economic  conditions,  the type of loan being made, the creditworthiness
of the borrower  over the term of the loan and, in the case of a  collateralized
loan, the value and marketability of the collateral for the loan. Management

                                       18

<PAGE>

maintains  an  allowance  for  loan  losses  based  upon,  among  other  things,
historical experience,  an evaluation of economic conditions and regular reviews
of delinquencies and loan portfolio quality. Based upon such factors, management
makes various assumptions and judgments about the ultimate collectibility of the
loan portfolio and provides an allowance for loan losses based upon a percentage
of  the  outstanding  balances  and  for  specific  loans  when  their  ultimate
collectibility  is considered  questionable.  If  management's  assumptions  and
judgments  prove to be incorrect and the allowance for loan losses is inadequate
to absorb future losses,  or if the bank  regulatory  authorities  require us to
increase the allowance for loan losses as a part of their  examination  process,
our earnings and capital could be significantly and adversely affected.

         As  of  December  31,  2005,   our   allowance   for  loan  losses  was
approximately  $732,315 which  represented  .67% of outstanding  loans.  At such
date, we had 13 nonperforming  loans totaling  $114,894.  We actively manage our
nonperforming loans in an effort to minimize credit losses.  Although management
believes  that its  allowance  for loan  losses  is  adequate,  there  can be no
assurance that the allowance will prove  sufficient to cover future loan losses.
Further,  although  management  uses  the  best  information  available  to make
determinations with respect to the allowance for loan losses, future adjustments
may  be  necessary  if  economic   conditions  differ   substantially  from  the
assumptions   used  or  adverse   developments   arise   with   respect  to  our
non-performing or performing loans. Material additions to our allowance for loan
losses would result in a decrease in our net income and capital,  and could have
a material adverse effect on our financial condition and results of operations.

We engage in a greater percentage of consumer lending than a typical thrift. The
risk  related to these  loans is greater  than the risk  related to  residential
loans.

         Because of our credit union history,  consumer loans comprise a greater
percentage  of our lending than a typical  thrift  institution.  At December 31,
2005, consumer loans totaled  approximately $60.5 million, or 55.4% of our total
loan portfolio.  The risk that consumer loans will not be repaid or will be late
in paying is generally  greater than the same risks  associated with residential
loans. Any failure to pay or late payments would hurt our earnings.

A portion of our total loan portfolio  consists of commercial  real estate loans
and  commercial  loans.  The  repayment  risk related to these types of loans is
considered  to  be  greater  than  the  risk  related  to  one-  to  four-family
residential loans.

         At December 31, 2005, our loan portfolio included  approximately  $28.6
million of commercial real estate loans and commercial  business loans, or 26.1%
of our total loan portfolio.

         Unlike one- to four-family  residential mortgage loans, which generally
are made on the basis of the  borrower's  ability to make  repayment from his or
her  employment  and other income and which are secured by real  property  whose
value tends to be more easily  ascertainable,  the repayment of commercial  real
estate  loans and  commercial  business  loans  typically  is  dependent  on the
successful  operations  and income  stream of the  borrower  and the real estate
securing the loan as collateral, which can be significantly affected by economic
conditions.  In addition,  these loans generally carry larger balances to single
borrowers or related  groups of borrowers than one- to  four-family  loans.  Any
late  payments  or the failure to repay such loans  would  adversely  affect our
earnings.

Our business is geographically  concentrated and is subject to regional economic
factors that could have an adverse impact on our business.

                                       19

<PAGE>

         Substantially  all of our business is with customers in our market area
of Baltimore  and Howard  Counties,  Maryland.  Adverse  changes in economic and
business  conditions in our markets could adversely affect our borrowers,  their
ability to repay their loans and to borrow  additional  funds,  and consequently
our financial condition and performance.

         We often secure our loans with real estate collateral, most of which is
located in Baltimore  and Howard  Counties,  Maryland.  As of December 31, 2005,
approximately  75.6% of our loans had real  estate as a  primary,  secondary  or
tertiary component of collateral. Real estate values and real estate markets are
generally  affected by,  among other  things,  changes in national,  regional or
local economic  conditions,  fluctuations in interest rates and the availability
of loans to  potential  purchasers,  changes in tax laws and other  governmental
statutes,  regulations  and  policies,  and  acts of  nature.  The  real  estate
collateral in each case  provides an alternate  source of repayment in the event
of default by the borrower.  If real estate prices in our markets  decline,  the
value of the real estate collateral  securing our loans could be reduced.  If we
are  required to  liquidate  the  collateral  securing a loan during a period of
reduced real estate  values to satisfy the debt,  our earnings and capital could
be adversely  affected.  A decline in local economic  conditions could adversely
affect the values of such real estate. Consequently, a decline in local economic
conditions  may have a greater  effect on our  earnings  and capital than on the
earnings  and capital of larger  financial  institutions  whose real estate loan
portfolios are geographically diverse.

We operate in a highly  regulated  environment and may be adversely  affected by
changes in laws and regulations.

         We are subject to extensive regulation,  supervision and examination by
the Office of Thrift Supervision,  our chartering authority,  and by the Federal
Deposit  Insurance  Corporation,  as insurer  of our  deposits.  As a  federally
chartered holding company, the Company is subject to regulation and oversight by
the Office of Thrift  Supervision.  Such regulation and  supervision  govern the
activities in which an institution and its holding  companies may engage and are
intended  primarily for the  protection of the  insurance  fund and  depositors.
Regulatory  authorities  have  extensive  discretion  in  connection  with their
supervisory and enforcement activities, including the imposition of restrictions
on  the  operation  of an  institution,  the  classification  of  assets  by the
institution and the adequacy of an institution's  allowance for loan losses. Any
change in such  regulation  and  oversight,  whether  in the form of  regulatory
policy,  regulations,  or  legislation,  including  changes  in the  regulations
governing mutual holding companies,  could have a material impact on the Company
and the Bank, and their operations.

Strong   competition   within  our   market   area  may  limit  our  growth  and
profitability.

         Competition in the banking and financial  services industry is intense,
competing for deposits and loans with commercial banks, savings associations and
other  financial  entities.  Competition for deposits comes primarily from other
commercial banks, savings  associations,  credit unions, money market and mutual
funds and other investment  alternatives.  Competition for loans comes primarily
from other  commercial  banks,  savings  associations,  mortgage  banking firms,
credit unions and other financial intermediaries. Many of these competitors have
substantially  greater  resources  and  lending  limits than we do and may offer
certain services that we do not or cannot provide.  There are large  competitors
operating  throughout our total market area and we face strong  competition from
other community institutions in certain counties. Our profitability depends upon
our continued ability to successfully compete in our market area.

                                       20

<PAGE>

Item 1B. Unresolved Staff Comments
----------------------------------

         None.

Item 2.  Description of Property.
--------------------------------

(a)      Properties.

         The Bank maintains  three office  locations in Owings Mills,  Maryland.
One  is  a  branch  facility  located  in  the  CareFirst  BlueCross  BlueShield
("CareFirst")  headquarters  building and the second is an administrative center
and full-service  branch office in a newly built office building leased entirely
by  CareFirst.  The third office is a computer and telephone  operations  center
with a seven year lease  terminating  November 30, 2010.  The Bank also conducts
its business through two full-service branch offices in Columbia,  Maryland, and
through six remote ATM locations in Columbia,  Timonium and  Baltimore,  four of
which offer 24-hour  access.  All branches and remote ATMs are accessible to the
general public.  The branch in the CareFirst  headquarters  building is occupied
under a Financial  Services  Agreement with CareFirst  whereby the Bank provides
various  financial  services to CareFirst  employees and customers in return for
office  space.  There are no rent  payments  under such  agreement.  The current
agreement  runs  through  March 31, 2009 and is subject to earlier  termination,
with three months notice required,  in the event that CareFirst ceases to occupy
at least half of the building.  The space occupied by the administrative  center
and full-service  Owings Mills branch is under a sublease with CareFirst with an
initial term through November 30, 2009.

         The  following  table sets forth the location of the Bank's main office
and branch  offices,  the year the offices were opened and the net book value of
each office and its related equipment.

<TABLE>
<CAPTION>
                               Year Facility     Lease         Net Book Value at
Office Location                    Opened        or Own        December 31, 2005
---------------                    ------        -------       -----------------
<S>                             <C>           <C>               <C>
Main Office - Owings Mills          1991         Leased           $   378,132
Branch Office - Columbia            1999         Leased(1)        $   268,858

Branch Office - Owings Mills        2003         Leased           $   466,274
Branch Office - Columbia            2003         Owned            $ 2,578,532
Operations Center - Owings          2003         Leased           $   146,005
Mills
</TABLE>

----------------
(1)      The  building  is owned  by the  Bank and the land is under an  assumed
         ground  lease  agreement,  expiring  on  July 1,  2009.  The  lease  is
         renewable for three five-year extensions at the Bank's option.

(b)      Investment Policies.

         See "Item 1.  Description of Business" above for a general  description
of the Bank's  investment  policies and any  regulatory  or Board of  Directors'
percentage  of assets  limitations  regarding  certain  investments.  The Bank's
investments are primarily  acquired to produce  income,  and to a lesser extent,
possible capital gain.

         (1)  Investments in Real Estate or Interests in Real Estate.  See "Item
1. Description of Business -

                                       21

<PAGE>

Lending  Activities  and  -  Bank  Regulation,"  and  "Item  2.  Description  of
Property."

         (2) Investments in Real Estate  Mortgages.  See "Item 1. Description of
Business - Lending Activities and - Bank Regulation."

         (3)  Investments  in  Securities  of or Interests in Persons  Primarily
Engaged  in Real  Estate  Activities.  See "Item 1.  Description  of  Business -
Lending Activities and -Bank Regulation."

(c)      Description of Real Estate and Operating Data.

         Not Applicable.

Item 3.  Legal Proceedings.
--------------------------

         There are various  claims and lawsuits in which the Company or the Bank
are  periodically  involved,  such as  claims  to  enforce  liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the Bank's business. In the opinion of management,  no material loss
is expected from any of such pending claims or lawsuits as of December 31, 2005.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended December 31, 2005.

                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
--------------------------------------------------------------------------------
        Issuer Purchases of Equity Securities.
        --------------------------------------

         The  information  contained  under the section  captioned  "Stock Price
Information" of the Company's  Annual Report to Stockholders for the fiscal year
ended  December  31,  2005  (the  "Annual  Report")  is  incorporated  herein by
reference.

Item  6.  Management's Discussion and Analysis or Plan of Operation.
-------------------------------------------------------------------

         The  information  contained under the section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Annual Report is incorporated herein by reference.

Item  7.  Financial Statements.
------------------------------

         The Registrant's consolidated financial statements listed under Item 13
are incorporated herein by reference.

Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
         Financial Disclosure.
         ---------------------

         None.

                                       22

<PAGE>

Item 8A.  Controls and Procedures.
---------------------------------

         (a) Evaluation of disclosure  controls and  procedures.  Based on their
evaluation of the Company's  disclosure  controls and  procedures (as defined in
Rule 13a-15(e) under the Securities  Exchange Act of 1934 (the "Exchange Act")),
the Company's  principal  executive officer and principal financial officer have
concluded that as of the end of the period covered by this Annual Report on Form
10-KSB such disclosure controls and procedures are effective.

         (b) Changes in internal  control over financial  reporting.  During the
last  quarter of the year  under  report,  there was no change in the  Company's
internal control over financial  reporting that has materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

Item  8B.  Other Information.
----------------------------

         None.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
        with Section 16(a) of the Exchange Act.
        ---------------------------------------

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I -  Election  of
Directors"  in  the  Company's   Proxy  Statement  for  the  Annual  Meeting  of
Stockholders for the Fiscal Year ended December 31, 2005 (the "Proxy Statement")
is incorporated herein by reference.

         The Company has adopted a Code of Ethics that applies to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller or persons performing similar functions. The Company's Code of Ethics
will be provided  without charge upon request to the Corporate  Secretary,  BUCS
Financial Corp., 10802 Red Run Boulevard, Owings Mills, Maryland 21117.

Item 10.  Executive Compensation.
--------------------------------

         The  information  contained under the section  captioned  "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to  the  first  chart  in  the  section   captioned
                  "Proposal I - Election of Directors" in the Proxy Statement.

                                       23

<PAGE>

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference  to  the  first  chart  in  the  section   captioned
                  "Proposal I - Election of Directors" in the Proxy Statement.

         (c)      Changes of Control

                  Management  of  the  Registrant   knows  of  no  arrangements,
                  including  any  pledge  by any  person  of  securities  of the
                  Registrant,  the  operation of which may at a subsequent  date
                  result in a change in control of the Registrant.

         (d)      Securities Authorized for Issuance Under  Equity  Compensation
                  Plans

                  Set forth below is  information  as of December  31, 2005 with
                  respect to compensation plans under which equity securities of
                  the Registrant are authorized for issuance.

<TABLE>
<CAPTION>
                                                          EQUITY COMPENSATION PLAN INFORMATION
                                                                                                     (c)
                                                (a)                     (b)                  Number of securities
                                        Number of securities        Weighted-average        remaining available for
                                         to be issued upon         exercise price of         future issuance under
                                      exercise of outstanding         outstanding          equity compensation plans
                                          options, warrants        options, warrants         (excluding securities
                                             and rights                and rights          reflected in column (a))
                                             ----------                ----------          ------------------------
<S>                                           <C>                     <C>                          <C>
Equity compensation plans
  approved by shareholders:
BUCS Financial Corp 2002
    Stock Option Plan...............             95,586                  $ 9.18                       2,442
BUCS Federal Bank 2002
    Restricted Stock Plan...........                n/a                     n/a                      39,211
Equity compensation plans
  not approved by
  shareholders:
Not applicable......................                  -                                                   -
                                                 ------                                              ------
     TOTAL.........................              95,586                  $ 9.18                      41,653
                                                 ======                  ======                      ======
</TABLE>


Item 12.  Certain Relationships and Related Transactions.
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.

Item 13.  Exhibits and Lists
----------------------------

         (a)      Listed below are all financial  statements  and exhibits filed
                  as part of this report.

         1.       The  consolidated  balance sheets of BUCS Financial Corp as of
                  December  31,  2005  and  2004  and the  related  consolidated
                  statements of operations,  changes in stockholders' equity and
                  cash flows for the years then ended, together with the related
                  notes and the independent auditors' report.

                                       24

<PAGE>

         2. Schedules omitted as they are not applicable.

         3. The following  exhibits are included in this Report or  incorporated
herein by reference:

               (a)  List of Exhibits:

                    3(i) Articles of Incorporation of BUCS Financial Corp*
                    3(ii) Bylaws of BUCS Financial Corp*
                    10.1 Employment  Agreement with Herbert J. Moltzan,  amended
                         and restated
                    10.2 BUCS Financial Corp 2002 Stock Option Plan**
                    10.3 BUCS Federal Bank 2002 Restricted Stock Plan**
                    10.4 Executive  Supplemental  Retirement  Plan Agreement and
                         Endorsement  Method  Split  Dollar Plan  Agreement  for
                         Herbert J. Moltzan***
                    10.5 Change in Control  Severance  Agreement with Matthew J.
                         Ford****
                    10.6 Change in  Control  Severance  Agreement  with Debra J.
                         Vinson****
                    10.7 Change in  Control  Severance  Agreement  with James E.
                         Shinsky
                    10.8 Change in Control  Severance  Agreement with William H.
                         Howard, Jr.
                    13   Annual Report to Stockholders for the fiscal year ended
                         December 31, 2005
                    21   Subsidiaries   of  the   Registrant   (See   "Item   1.
                         Description of Business")
                    23   Consent of Stegman & Company
                    31   Certification   pursuant   to   Section   302   of  the
                         Sarbanes-Oxley Act of 2002
                    32   Certification   pursuant   to   Section   906   of  the
                         Sarbanes-Oxley Act of 2002

---------------

*      Incorporated by reference to the Company's Registration Statement on
       Form SB-2 (File No. 333-47524) filed with the SEC on October 6, 2000.
**     Incorporated by reference to the Company's proxy statement dated
       March 27, 2002 (File No. 000-32437).
***    Incorporated  by reference to the  Company's  Annual Report on
       Form 10-KSB for the fiscal year ended  December 31, 2003 (File
       No. 000-32437).
****   Incorporated  by reference to the  Company's  Annual Report on
       Form 10-KSB for the fiscal year ended  December 31, 2004 (File
       No.000-32437)

Item 14.  Principal Accounting Fees and Services.
------------------------------------------------

         The  information  relating  to this  item  is  incorporated  herein  by
reference to the information  contained under the section  captioned  "Principal
Accounting Fees and Services" in the Registrant's Proxy Statement.

                                       25

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the registrant has duly caused this report to
be signed on its behalf by the  undersigned,  thereunto  duly  authorized  as of
March 31, 2006.

                                      BUCS FINANCIAL CORP

                                      By:  /s/Herbert J. Moltzan
                                           -------------------------------------
                                           Herbert J. Moltzan
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)

         Pursuant to the requirement of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated as of March 31, 2006.

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

/s/Allen Maier
---------------------------------------------       ------------------------------------------
Allen Maier                                         Joseph Pescrille
Chairman and Director                               Vice Chairman and Director

/s/Brian Bowers                                     /s/M. Robin Copeland
---------------------------------------------       ------------------------------------------
Brian Bowers                                        M. Robin Copeland
Treasurer and Director                              Secretary and Director

/s/Thomas Markel
---------------------------------------------       ------------------------------------------
Thomas Markel                                       A. Virginia Wampler
Director                                            Director

/s/Harry Fox
---------------------------------------------       ------------------------------------------
Harry Fox                                           Peg Ohrt
Director                                            Director

/s/Dale Summers                                     /s/Herbert J. Moltzan
---------------------------------------------       ------------------------------------------
Dale Summers                                        Herbert J. Moltzan
Director                                            President, Chief Executive Officer
                                                    and Director (Principal Executive Officer)

/s/Matthew J. Ford
---------------------------------------------       ------------------------------------------
Matthew J. Ford                                     Joseph Mezzanotte
Chief Financial Officer (Principal Accounting       Director
and Financial Officer)

/s/Gregory A. Devou
---------------------------------------------
Gregory A. Devou
Director
</TABLE>

                                       26