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, 2002
                                           -----------------

                                      -OR-

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

                         Commission File 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:  (410) 998-5304
                                                 --------------

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

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

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

     State issuer's revenues for its most recent fiscal year: $7.8 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 13, 2003, was $6.3 million.

     As of  March  10,  2003,  there  were  364,585  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, 2002. (Part II)
2.   Portions  of  the  Proxy   Statement   for  the  2003  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
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.

                                        1

<PAGE>

     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, 2002,  commercial  real estate loans totaled $3.1 million
and commercial loans totaled $1.7 million.

     At December 31, 2002, the Company had total assets, deposits, and equity of
$96.8 million, $73.7 million, and $9.7 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 a  full-service  branch
office 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 is in the process of building a new
branch  office in Columbia,  Maryland that is expected to open in May or June of
2003.

     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.


                                                At December 31,
                                   ----------------------------------------
                                          2002                  2001
                                   ------------------     -----------------
                                    Amount    Percent      Amount   Percent
                                   --------   -------     --------  -------
                                             (Dollars in thousands)
Type of Loans:
Mortgage loans:
  Residential..................    $19,942      29.80%    $17,238     28.72%
  Land.........................          5       0.01           5      0.01
  Commercial real estate.......      3,129       4.68         912      1.52

Commercial loans...............      1,707       2.55         684      1.14

Consumer loans:
  Home equity loans............     19,948      29.81      19,045     31.73
  Secured loans................     17,428      26.04      17,563     29.26
  Other........................      4,758       7.11       4,577      7.62
                                   -------     ------     -------    ------
Total loans....................     66,917     100.00%     60,024    100.00%
                                               ======                ======
Less:
  Allowance for loan losses....       (580)                  (663)
                                   -------                -------
Total loans, net...............    $66,337                $59,361
                                   =======                =======

     Loan  Maturity  Schedule.  The  following  table sets forth the maturity or
repricing of Bank's loan  portfolio at December 31, 2002.  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.........    $    95       $-    $   94        $  123    $11,766   $ 4,027    $16,105
                          -------       --    ------        ------    -------   -------    -------
After 1 year:
  1 to 3 years........         35        -         -           195        302     6,789      7,321
  3 to 5 years........         84        -       792           216      1,506     9,683     12,018
  5 to 10 years.......      1,213        5       175         1,173      4,127     1,395      7,718
  10 to 15 years......      7,526        -         -             -      1,811       268      9,605
  Over 15 years.......     10,989        -     2,068             -        436        24     14,050
                          -------       --    ------        ------    -------   -------    -------
Total due after
   one year...........     19,847        5     3,035         1,584      8,182    18,159     50,812
                          -------       --    ------        ------    -------   -------    -------

Total amount due......    $19,942       $5    $3,129        $1,707    $19,948   $22,186    $66,917
                          =======       ==    ======        ======    =======   =======    =======
</TABLE>


                                        3
<PAGE>


     The  following  table sets forth the dollar amount of all loans at December
31, 2002 which have pre-  determined  interest  rates and which have floating or
adjustable interest rates.

                                                  Floating or
                                  Fixed Rates   Adjustable Rates     Total
                                  -----------  -----------------   ---------
                                                 (In thousands)

Residential....................    $16,227          $ 3,715         $19,942
Land...........................          5                -               5
Commercial real estate.........      1,567            1,562           3,129
Commercial.....................          -            1,707           1,707
Home equity loans..............      7,574           12,374          19,948
Auto and other consumer........     18,929            3,257          22,186
                                   -------          -------         -------
  Total........................    $44,302          $22,615         $66,917
                                   =======          =======         =======

     Consumer Loans.  As of December 31, 2002,  consumer loans amounted to $42.1
million or 63.0% 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 saving 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 member 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

                                        4

<PAGE>


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 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  the  Federal  Home  Loan  Mortgage
Corporation  ("FHLMC") but also makes non-conforming loans. While the Bank is an
approved FHLMC 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 $2.2  million or 243%
during 2002 and totaled $3.1 million at December  31, 2002.  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.

                                        5
<PAGE>


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). In December 2001, the Bank hired a second
commercial  account  officer in an effort to further expand its commercial  loan
business.

     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 commercial loan portfolio grew significantly during 2002, from $684,000
at December 31, 2001 to $1.7 million at December  31, 2002.  The Bank's  largest
commercial lending relationship at that date was a $500,000 loan secured by real
estate.

     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, 2002, the Bank's largest aggregation of loans to one
borrower  was  $750,534,  consisting  of one loan  secured by  residential  real
estate, two loans secured by investment property and a guaranty of $347,906 on a
commercial loan, which was within the Bank's legal lending limit to one borrower
at that date. At December 31, 2002, the loans were current.

     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, 2002,
was $16.2 million including commitments on lines of credit of $15.4 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

                                        6

<PAGE>

ultimate  collectibility of the loan. At December 31, 2002, the Bank had $54,000
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 each of the dates indicated, the Bank did not have any troubled
debt  restructurings  within the meaning of Statement  of  Financial  Accounting
Standards No. 15.


                                                              At December 31,
                                                            -----------------
                                                             2002       2001
                                                            ------     ------
                                                              (In thousands)
Loans accounted for on a non-accrual basis:
Mortgage loans:
  Residential...........................................      $   -      $116
Consumer loans:
  Home equity loans.....................................         16         -
  Other consumer........................................         38       134
                                                              -----      ----
Total...................................................      $  54      $250
                                                              =====      ====
Accruing loans which are contractually
 past due 90 days or more:
Mortgage loans:
  Residential ..........................................      $   -      $  -
  All other mortgage loans..............................          -         -
Consumer loans:
  Home equity and second mortgages......................          -         -
  Other consumer........................................          -         -
                                                              -----      ----
Total...................................................      $   -      $  -
                                                              =====      ====
Total non-performing loans..............................      $  54      $250
                                                              =====      ====
Other non-performing assets.............................      $   -      $  -
                                                              =====      ====
Total non-performing assets.............................      $  54      $250
                                                              =====      ====
Total non-performing loans to net loans.................      0.08%     0.42%
                                                              =====     =====
Total non-performing loans to total assets..............      0.06%     0.30%
                                                              =====     =====
Total non-performing assets to total assets.............      0.06%     0.30%
                                                              =====     =====

     For the year ended  December  31, 2002,  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 $7,100.  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.


                                        7
<PAGE>

     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, 2002.
At December 31, 2002, all of the classified assets were loans.


                                              At December 31,
                                            -------------------
                                             2002         2001
                                            ------       ------
                                               (In thousands)

      Substandard....................         $447        $296
      Doubtful.......................           18         246
      Loss...........................           39          73
                                              ----        ----
        Total........................         $504        $615
                                              ====        ====

     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.

                                        8

<PAGE>

     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 $216,000 in provisions  for loan losses for the year
ended December 31, 2002.

     While the Bank believes it has established its existing  allowance for loan
losses in accordance with GAAP,  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 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:


                                                         At December 31,
                                                      ----------------------
                                                        2002          2001
                                                      -------       -------
                                                         (In thousands)

Allowance balance (at beginning of period)........    $   663       $   600
                                                      -------       -------
Provision for loan losses.........................        216           180
                                                      -------       -------
Charge-offs:
  Residential real estate.........................         --            --
  Commercial real estate..........................         --            --
  Consumer........................................       (366)         (166)
Recoveries........................................         67            49
                                                      -------       -------
Net (charge-offs) recoveries......................       (299)         (117)
                                                      -------       -------
Allowance balance (at end of period)..............    $   580       $   663
                                                      =======       =======
Total loans outstanding...........................    $66,917       $60,024
                                                      =======       =======
Average loans outstanding.........................    $61,885       $53,114
                                                      =======       =======
Allowance for loan losses as
  a percent of total loans outstanding............      0.87%         1.11%
                                                        ====          ====
Net loans charged off as a percent of
   average loans outstanding......................      0.48%         0.22%
                                                        ====          ====



                                        9

<PAGE>


     Allocation of Allowance for Loan Losses. The following table sets forth the
allocation of the Bank's allowance for loan losses by collateral and the percent
of  loans  in each  category  to  total  loans  receivable,  net,  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.

                                                At December 31,
                                  -------------------------------------------
                                        2002                    2001
                                  --------------------  ---------------------
                                           Percent of             Percent of
                                             Loans to               Loans to
                                   Amount  Total Loans    Amount  Total Loans
                                  -------- -----------   -------- -----------
                                            (Dollars in thousands)
At end of period allocated to:
Mortgage loans:
Residential:
  Permanent.....................    $ 87      29.80%       $285      28.73%
  Commercial real estate........      70       4.68           -       1.52

  Commercial loans..............      84       2.55           -       1.14

Consumer Loans:
  Home equity loans.............      83      29.81          26      31.73
  Auto loans....................     112      26.04         198      29.26
  Other.........................     144       7.12         154       7.62
                                    ----     ------        ----     ------
Total allowance.................    $580     100.00%       $663     100.00%
                                    ====     ======        ====     ======


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, 2002,  all of the Bank's  investment  securities  consisted of U.S.
government  agency and  government-sponsored  entity  obligations  with  varying
characteristics as to rate, maturity and call provisions.  Callable  securities,
representing 100% of the Bank's U.S. government agency and  government-sponsored
entity obligations,  totaled approximately $2.0 million at December 31, 2002 and
could  reduce  the  Bank's  investment  yield if called  prior to  maturity.  At
December 31, 2002, the Bank did not have any  investments in the  obligations of
state or local governments.

     Mortgage-backed  Securities.  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

                                       10

<PAGE>

are secured by interest in pools of  mortgages.  At December 31, 2002,  the Bank
held  mortgage-backed   securities  that  were  issued  and  guaranteed  by  the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").

     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.

     Collateralized  Mortgage  Obligations  ("CMOs").  The Bank also  invests in
CMOs,  issued or  sponsored  by FNMA and  FHLMC.  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.  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, 2002  consisted of a $875,000  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.


                                       11
<PAGE>


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

                                                          At December 31,
                                                       --------------------
                                                           2002        2001
                                                       --------     -------
Securities Held to Maturity:
 Collateralized mortgage obligations..................  $ 1,431     $   723
                                                        -------     -------
 Total securities held to maturity....................    1,431         723
                                                        -------     -------
Securities available for sale (at fair value):
 U.S. government agency and government-sponsored
   entity securities .................................    2,029         990
 Mortgage-backed securities...........................   17,994      18,113
                                                        -------     -------
 Total securities available for sale..................   20,023      19,103
                                                        -------     -------
 Total................................................  $21,454     $19,826
                                                        =======     =======


                                       12

<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, 2002.

<TABLE>
<CAPTION>

                                                               At December 31, 2002
                   ------------------------------------------------------------------------------------------------------------
                    One Year or Less  One to Five Years  Five to Ten Years  More than 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>      <C>



U.S. government
  agency and
  government-
  sponsored
  entity
  securities.......  $  -       -%     $  999     4.64%     $1,000   6.49%   $     -       -%    $ 1,999    5.57%    $ 2,029
Collateralized
  mortgage
  obligations......     -       -         412     3.41          57   2.37        962    4.40       1,431    4.03       1,449

Mortgage-backed
  securities(1)....   173    7.30       5,690     5.18       2,301   5.78      9,430    4.35      17,594    4.83      17,994
                     ----    ----      ------     ----      ------   ----    -------    ----     -------    ----     -------
  Total............  $173    7.30%     $7,101     5.00%     $3,358   5.93%   $10,392    4.35%    $21,024    4.85%    $21,472
                     ====    ====      ======     ====      ======   ====    =======    ====     =======    ====     =======

</TABLE>

----------------
(1)  The totals  include  $7,354 of  adjustable  rate  securities  that  reprice
     annually.


                                       13
<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,
2002 and 2001 the average amount of and average rate paid on deposits.

<TABLE>
<CAPTION>

                                          Average                           Average
                                      Balance for the                   Balance for the
                                        year ended                        year ended
                                       December 31,        Average       December 31,       Average
Category                                   2002         Interest Rate        2001        Interest Rate
--------                              ---------------   -------------  ----------------  -------------
                                                               (Dollars in thousands)

<S>                                    <C>               <C>            <C>               <C>

Non-interest checking accounts....        $ 8,058               -%          $ 7,499              -%
Money Market and floating rate
   IRA accounts...................         13,287            2.29            10,701           2.52
Savings accounts..................         24,641            1.75            21,458           2.00
Certificates of deposit...........         23,990            4.95            18,671           5.57
                                          -------                           -------
             Total................        $69,976                           $58,329
                                          =======                           =======
</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, 2002.


                                                        Certificates
Maturity Period                                          of Deposit
---------------                                         ------------
                                                       (In thousands)

Within three months................................          $  714
Three through six months...........................           1,668
Six through twelve months..........................           1,175
Over twelve months.................................           4,030
                                                             ------
                                                             $7,587
                                                             ======

     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, 2002 totaled $12.5 million. See
Note 8 to Notes to Consolidated Financial Statements.

                                       14

<PAGE>

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


                                                        Year Ended December 31,
                                                        ------------------------
                                                          2002            2001
                                                        -------         --------
FHLB Advances:
Average balance outstanding............................ $12,500         $11,989
Maximum amount outstanding
  at any month-end during the period...................  13,202          15,000
Balance outstanding at end of period...................  12,500          12,500
Weighted average interest rate during the period.......    4.83%           5.79%
Weighted average interest rate at end of period........    4.26%           5.22%


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 two other  subsidiaries,  Armor Insurance Group,  Inc.
("Armor") and C.U. Benefits, Inc.

     Armor  is a  service  corporation  organized  in  early  2000 as a  limited
liability  company  under  Maryland law for the purpose of engaging in insurance
and related  activities.  Armor offers a full range of individual and commercial
property and casualty  products  primarily to depositor  members of the Bank but
also to the general public.

     C.U.  Benefits,  Inc. is a service  corporation  incorporated in 1988 under
Maryland  law for the  purpose of  performing  financial  planning  and  related
services to the members of the Bank through third party providers. C.U. Benefits
operations were discontinued during 2002 due to lack of activity.

Personnel

     As of  December  31,  2002,  the Bank had 32  full-time  employees  and one
part-time employee and Armor had six full-time and two part-time employees.  The
Bank believes its relationship with its employees to be satisfactory.

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.

     Recent Legislation to Curtail Corporate Accounting Irregularities.  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
certain regulations  pursuant to the Act and will continue to propose additional
implementing  or clarifying  regulations as necessary in furtherance of the Act.
The  passage  of the Act  and the  regulations  implemented  by the SEC  subject
publicly-traded companies to

                                       15

<PAGE>

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.

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

                                       16

<PAGE>

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 at an
annual  rate of  approximately  .0212%  of  insured  deposits  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, 2002.

     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.  A savings institution must
file an application for prior approval of a capital  distribution  if: (i) it is
not eligible for expedited treatment under the applications  processing rules of
the OTS;  (ii) the total  amount of all  capital  distributions,  including  the
proposed capital distribution,  for the applicable calendar year would exceed an
amount  equal to the  savings  bank's  net income for that year to date plus the
institution's  retained net income for the preceding  two years;  (iii) it would
not  adequately  be  capitalized  after the  capital  distribution;  or (iv) the
distribution would violate an agreement with the OTS or applicable regulation.

     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

                                       17

<PAGE>

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, 2002 and in each of the last 12 months and, therefore, qualifies as
a QTL.

     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.

     Liquidity  Requirements.  All federal savings  institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings  payable in one year or less.  Depending on economic  conditions  and
savings  flows of all  savings  institutions,  the OTS can  vary  the  liquidity
requirement  from time to time  between 4% and 10%.  Monetary  penalties  may be
imposed on institutions for liquidity requirement violations.

     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.

                                       18

<PAGE>

     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 2.  Description of Property.

(a)  Properties.

     The Bank maintains two office locations in Owings Mills, Maryland. One is a
branch  facility  located in the CareFirst  BlueCross  BlueShield  ("CareFirst")
headquarters  building and the other an  administrative  center and full-service
branch office in a newly built office building leased entirely by CareFirst. The
Bank  also  conducts  its  business  through  a  full-service  branch  office in
Columbia,  Maryland, and through five 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 Bank is in the  process of  building a new branch  office in  Columbia,
Maryland.  The anticipated  opening of this new branch location is currently May
or June 2003.

     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.


                                 Year Facility       Lease    Net Book Value at
Office Location                      Opened         or Own    December 31, 2002
---------------                  -------------     --------   -----------------

Main Office - Owings Mills            1991         Leased        $  347,146
Branch Office - Columbia              1999         Leased(1)     $  462,996
Branch Office - Owings Mills          2002         Leased        $  621,028
Branch Office - Columbia              2002         Owned(2)      $1,489,685

----------------------
(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.
(2)  New  branch  to  open  in May or  June  2003,  includes  value  of  land of
     approximately $1,045,000.


(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.


                                       19

<PAGE>

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

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

     No matter was  submitted  to a vote of security  holders  during the fourth
quarter of the fiscal year.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

     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,  2002  (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 financial statements listed under Item 13 are incorporated
herein by reference.

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

     Not applicable.


                                       20

<PAGE>

                                    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, 2002 (the "Proxy Statement")
is incorporated herein by reference.

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.

(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)  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, 2002 with  respect to
compensation   plans  under  which  equity  securities  of  the  Registrant  are
authorized for issuance.


                                       21

<PAGE>

<TABLE>
<CAPTION>

                                                            EQUITY COMPENSATION PLAN INFORMATION
                                                (a)                       (b)                         (c)
                                                                                             Number of securities
                                        Number of securities        Weighted-average        remaining available for
                                         to be issued upon         exercise price of         future issuance under
                                            exercise of               outstanding             equity compensation
                                        outstanding options,       options, warrants      plans (excluding securities
                                        warrants 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..............           10,300                  $21.12                     30,208
BUCS Federal Bank 2002
    Restricted Stock Plan..........                -                  $    -                     16,203
Equity compensation plans
  not approved by
  shareholders
Not applicable.....................                -                  $    -                          -
                                              ------                  ------                     ------
     TOTAL.........................           10,300                  $21.12                     46,411
                                              ======                  ======                     ======

</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, List, and Reports on Form 8-K

     (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, 2002 and 2001 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.

     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 *
               10.2 BUCS Financial Corp 2002 Stock Option Plan**
               10.3 BUCS Federal Bank 2002 Restricted Stock Plan**
               13   Annual  Report to  Stockholders  for the  fiscal  year ended
                    December 31, 2002
               21   Subsidiaries of the Registrant (See "Item 1.  Description of
                    Business")
               23   Consent of Stegman & Company
               99   Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       22

<PAGE>

          ---------------
          *    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).


         (b)  Reports on Form 8-K:

              None.

Item 14.  Controls and Procedures

     (a)  Evaluation  of  disclosure  controls  and  procedures.  Based on their
evaluation  as of a date within 90 days of the filing date of this Annual Report
on Form 10-KSB,  the  Registrant's  principal  executive  officer and  principal
financial officer have concluded that the Registrant's  disclosure  controls and
procedures  (as defined in Rules  13a-14(c) and 15d-14(c)  under the  Securities
Exchange  Act of 1934  (the  "Exchange  Act"))  are  effective  to  ensure  that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.

     (b) Changes in internal controls.  There were no significant changes in the
Registrant's  internal  controls or in other  factors  that could  significantly
affect these controls subsequent to the date of their evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.



                                       23


<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 28, 2003.

                                  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 28, 2003.


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


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


                                            /s/ A. Virginia Wampler
----------------------------------         -------------------------------------
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
Chief Financial Officer (Principal
 Accounting and Financial Officer)




<PAGE>

                      Certification Pursuant to Section 302
                        of the Sarbanes-Oxley Act of 2002

     I,  Herbert  J.  Moltzan,  President  and Chief  Executive  Officer of BUCS
Financial Corp (the "Company"), hereby certify that:

1.   I have  reviewed  the  Annual  Report  on Form  10-KSB  for the year  ended
     December 31, 2002, of the Company;

2.   Based on my knowledge,  the report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made, not misleading with respect to the period covered by the report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in the report, fairly present in all material respects
     the  financial  condition,  results  of  operations  and cash  flows of the
     Company as of, and for, the periods presented in the report;

4.   The  Company's  other   certifying   officer  and  I  are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rule 13a-14(c)) for the Company and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material   information   relating  to  the  Company,   including   its
          consolidated  subsidiaries,  is made known to me by others  within the
          Company,  particularly  during the period in which the report is being
          prepared;

     (b)  evaluated the effectiveness of the Company's  disclosure  controls and
          procedures as of a date within 90 days prior to the filing date of the
          report (the "Evaluation Date"); and

     (c)  presented in the report my conclusions  about the effectiveness of the
          disclosure  controls and  procedures  based on my evaluation as of the
          Evaluation Date;

5.   The Company's other certifying  officer and I have disclosed,  based on our
     most recent  evaluation,  to the Company's auditors and the audit committee
     of Company's board of directors:

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls which could adversely affect the Company's ability to record,
          process,  summarize and report  financial data and have identified for
          the Company's  auditors any material  weaknesses in internal controls;
          and

     (b)  any fraud, whether or not material,  that involves management or other
          employees  who  have a  significant  role  in the  Company's  internal
          controls; and

6.   The Company's other  certifying  officer and I have indicated in the report
     whether  there were  significant  changes in internal  controls or in other
     factors that could significantly affect internal controls subsequent to the
     date of our most recent  evaluation,  including any corrective actions with
     regard to significant deficiencies and material weaknesses.


Date: March 28, 2003                           /s/  Herbert J. Moltzan
      ----------------------                   ---------------------------------
                                               Herbert J. Moltzan, President and
                                                Chief Executive Officer



<PAGE>


                      Certification Pursuant to Section 302
                        of the Sarbanes-Oxley Act of 2002

     I, Matthew J. Ford,  Chief  Financial  Officer of BUCS  Financial Corp (the
"Company"), hereby certify that:

1.   I have  reviewed  the  Annual  Report  on Form  10-KSB  for the year  ended
     December 31, 2002, of the Company;

2.   Based on my knowledge,  the report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made, not misleading with respect to the period covered by the report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in the report, fairly present in all material respects
     the  financial  condition,  results  of  operations  and cash  flows of the
     Company as of, and for, the periods presented in the report;

4.   The  Company's  other   certifying   officer  and  I  are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rule 13a-14(c)) for the Company and have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material   information   relating  to  the  Company,   including   its
          consolidated  subsidiaries,  is made known to me by others  within the
          Company,  particularly  during the period in which the report is being
          prepared;

     (b)  evaluated the effectiveness of the Company's  disclosure  controls and
          procedures as of a date within 90 days prior to the filing date of the
          report (the "Evaluation Date"); and

     (c)  presented in the report my conclusions  about the effectiveness of the
          disclosure  controls and  procedures  based on my evaluation as of the
          Evaluation Date;

5.   The Company's other certifying  officer and I have disclosed,  based on our
     most recent  evaluation,  to the Company's auditors and the audit committee
     of Company's board of directors:

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls which could adversely affect the Company's ability to record,
          process,  summarize and report  financial data and have identified for
          the Company's  auditors any material  weaknesses in internal controls;
          and

     (b)  any fraud, whether or not material,  that involves management or other
          employees  who  have a  significant  role  in the  Company's  internal
          controls; and

6.   The Company's other  certifying  officer and I have indicated in the report
     whether  there were  significant  changes in internal  controls or in other
     factors that could significantly affect internal controls subsequent to the
     date of our most recent  evaluation,  including any corrective actions with
     regard to significant deficiencies and material weaknesses.


Date: March 28, 2003                           /s/ Matthew J. Ford
      ----------------------                   ---------------------------------
                                               Matthew J. Ford
                                               Chief Financial Officer