BCSB BANKCORP, INC.








         [LOGO]












                                                              2001 ANNUAL REPORT

<PAGE>


BCSB BANKCORP, INC.
================================================================================

     BCSB Bankcorp,  Inc. (the "Company")  serves as the holding company for its
wholly owned  subsidiary,  Baltimore County Savings Bank,  F.S.B.  (the "Bank").
Baltimore  County  Savings Bank,  M.H.C.  (the "MHC"),  a federal mutual holding
company,  owns 64.0% of the Company's  outstanding common stock. The Company has
no  significant  assets other than its  investment  in the Bank.  The Company is
primarily  engaged in the business of directing,  planning and  coordinating the
business activities of the Bank.

     The Bank is a federal savings bank operating through eleven banking offices
serving  Baltimore  and  Harford  Counties  in  Maryland.  The Bank's  principal
business  consists of attracting  deposits from the general public and investing
these funds in loans secured by first mortgages on owner-occupied, single-family
residences in the Bank's market area, and, to a lesser extent, other real estate
loans, consisting of construction loans, single-family rental property loans and
commercial real estate loans, and consumer loans, particularly automobile loans.
The Bank derives its income  principally from interest earned on loans and, to a
lesser  extent,  interest  earned on  mortgage-backed  securities and investment
securities and other income. Funds for these activities are provided principally
by  operating  revenues,  deposits  and  repayments  of  outstanding  loans  and
investment securities and mortgage-backed securities.

MARKET INFORMATION
================================================================================

     The  Company's  common stock began  trading  under the symbol "BCSB" on the
Nasdaq  National  Market System on July 9, 1998.  There are currently  5,867,322
shares of the common stock outstanding and approximately  1100 holders of record
of the  common  stock.  Following  are the high and low bid  prices,  by  fiscal
quarter,  as reported on the Nasdaq  National  Market  System during the periods
indicated, as well as dividends paid on the common stock during each quarter.
<TABLE>
<CAPTION>
                                                       High              Low            Dividends Per Share
                                                       ----              ---            --------------------
         <S>                                         <C>               <C>                    <C>
         Fiscal 2001
         -----------
         First quarter.............................  $   6.625         $  5.938               $.125
         Second quarter............................      9.000            6.469                .125
         Third quarter.............................      9.950            8.250                .125
         Fourth quarter............................     10.350            8.500                .125

         Fiscal 2000
         -----------
         First quarter.............................  $   7.50          $  6.375               $.125
         Second quarter............................      7.25             5.6562               .125
         Third quarter.............................      6.75             6.00                 .125
         Fourth quarter ...........................      6.625            5.935                .125

</TABLE>


     The stated high and low bid prices  reflect  inter-dealer  prices,  without
retail  mark-up,   mark-down  or  commission,   and  may  not  represent  actual
transactions.


TABLE OF CONTENTS
================================================================================

BCSB Bankcorp, Inc..........................................................(i)
Market Information..........................................................(i)
Letter to Stockholders........................................................1
Selected Consolidated Financial and Other Data................................2
Management's Discussion and Analysis of Financial Condition
 and Results of Operations....................................................4
Consolidated Financial Statements...........................................F-1
Corporate Information.........................................Inside Back Cover

<PAGE>



                        [BCSB BANKCORP, INC. LETTERHEAD]


To our Depositors, Shareholders and Friends:

     Enclosed is the fourth report on the company's  operations since its public
offering  in  July  1998.   Since  then,   the  bank  and  company   have  grown
substantially.  A significant  portion of that growth has been in the past year.
Details follow,  but highlights  include our assets increasing by $65,000,000 in
the year and deposits increasing $56,900,000.

     To diversify the bank's balance sheet, that deposit increase and additional
borrowings  were  invested  in all types of  loans,  investment  securities  and
mortgage-backed  securities.  We made over $100,000,000 in loans this past year.
This is a first for the bank.

     In March  2001,  our sixth  office  since  July 1998  opened in the  Carney
Village  Shopping  Center.  That  office,  as well as the other five are growing
faster than anticipated.

     The company was profitable for the year. This occurred  despite a decreased
interest rate spread that was  attributable to the prevailing rates on loans and
investments  versus deposit  accounts.  As the Federal Reserve lowered  interest
rates in 2001, we have seen  improvements in the spread.  This  improvement will
effect results more so in the future than in the year just completed.

     Likewise,  as we continue to grow,  the company will become more  efficient
with its operating  expenses.  Similarly,  the affect on operations will be more
evident in the future than in this year just completed.

     Details on the past year's operations are on the following pages.

                                           Very truly yours,

                                           /s/ Gary C. Loraditch

                                           Gary C. Loraditch
                                           President
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
================================================================================


SELECTED CONSOLIDATED FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
                                                                          At September 30,
                                                                  -----------------------------
                                                                    2001                 2000
                                                                  --------             --------
                                                                          (In thousands)
<S>                                                               <C>               <C>
Total assets....................................................  $ 390,883         $   325,879
Loans receivable, net...........................................    268,010             241,520
Cash............................................................      4,056               6,571
Interest-bearing deposits in other banks........................      7,953               5,256
Federal funds sold..............................................      3,313                 455

Investment securities:
    Available for sale..........................................     23,969                   0
    Held to maturity............................................     18,494              41,158
Mortgage-backed securities:
    Available for sale..........................................     11,442                   0
    Held to maturity............................................     41,655              19,824
FHLB stock......................................................      1,834               1,834
Deposits........................................................    325,786             268,882
FHLB advances...................................................     17,800               9,500
Stockholders' equity  - substantially restricted................     42,730              43,343
</TABLE>


SELECTED CONSOLIDATED OPERATIONS DATA
<TABLE>
<CAPTION>
                                                                   Year Ended September 30,
                                                                  -------------------------
                                                                    2001             2000
                                                                  -------           -------
                                                                          (In thousands)

<S>                                                               <C>               <C>
Interest income.................................................  $24,348           $21,480
Interest expense................................................   14,240            11,757
                                                                  -------           -------
Net interest income before
   provision for loan losses....................................   10,108             9,723
Provision for loan losses.......................................      332               162
                                                                  -------           -------
Net interest income.............................................    9,776             9,561
Other income....................................................      737               530
Non-interest expense............................................   10,329             8,967
                                                                  -------           -------
Income before income taxes......................................      184             1,124
Income tax provision............................................       79               437
                                                                  -------           -------
Net Income......................................................  $   105           $   687
                                                                  =======           =======
</TABLE>

                                       2
<PAGE>

KEY OPERATING RATIOS:
<TABLE>
<CAPTION>
                                                                     At or for the Year
                                                                      Ended September 30,
                                                                  -------------------------
                                                                    2001             2000
                                                                  -------           -------
<S>                                                                <C>               <C>
PERFORMANCE RATIOS:
   Return on average assets (net income
      divided by average total assets)..........................       .03 %            .22%
   Return on average equity (net income
      divided by average equity)................................       .25             1.58
   Interest rate spread (combined
      weighted average interest rate
      earned less combined weighted
      average interest rate cost)...............................      2.59             2.77
   Net interest margin (net interest
      income divided by average
      interest-earning assets)..................................      2.99             3.26
   Ratio of average interest-earning assets
      to average interest-bearing liabilities...................    109.70           112.46
   Ratio of non-interest expense to
      average total assets......................................      2.90             2.86

ASSET QUALITY RATIOS:
   Nonperforming assets to total assets at
      end of period.............................................       .08              .16
   Nonperforming loans to gross loans at
      end of period.............................................       .08              .15
   Allowance for loan losses to gross loans
      at end of period..........................................       .55              .55
   Allowance for loan losses to nonperforming
      loans at end of period....................................    653.97           366.32
   Provision for loan losses to gross loans ....................       .12              .06
   Net charge-offs to average loans
      outstanding...............................................       .07              .01

CAPITAL RATIOS:
   Equity to total assets at end
      of period.................................................     10.91            13.30
   Average equity to average
      assets....................................................     12.04            13.83

</TABLE>

                                       3
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
================================================================================


GENERAL

     The  Company  was  formed in June 1998 by the Bank to  become  the  holding
company for the Bank following the Bank's reorganization into the mutual holding
company  form  of   organization   (the   "Reorganization").   As  part  of  the
Reorganization,  the Company became a majority-owned  subsidiary of the MHC. The
Reorganization  was  consummated  on July 8, 1998. All references to the Company
prior to July 8, 1998, except where otherwise indicated, are to the Bank.

     The Company's net income is dependent primarily on its net interest income,
which is the difference  between interest income earned on its loan,  investment
securities  and  mortgage-backed  securities  portfolio  and  interest  paid  on
interest-bearing  liabilities.  Net  interest  income is  determined  by (i) the
difference  between yields earned on  interest-earning  assets and rates paid on
interest-bearing  liabilities  ("interest  rate  spread")  and (ii) the relative
amounts  of  interest-earning  assets  and  interest-bearing   liabilities.  The
Company's  interest  rate  spread  is  affected  by  regulatory,   economic  and
competitive  factors  that  influence  interest  rates,  loan demand and deposit
flows.  To a lesser  extent,  the  Company's  net income also is affected by the
level of other income,  which primarily consists of fees and charges, and levels
of non-interest expenses such as salaries and related expenses.

     The  operations  of the Company are  significantly  affected by  prevailing
economic  conditions,  competition  and  the  monetary,  fiscal  and  regulatory
policies of  governmental  agencies.  Lending  activities  are influenced by the
demand  for and  supply of  housing,  competition  among  lenders,  the level of
interest rates and the  availability of funds.  Deposit flows and costs of funds
are  influenced by prevailing  market rates of interest,  primarily on competing
investments, account maturities and the levels of personal income and savings in
the Company's market area.

FORWARD-LOOKING STATEMENTS

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

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


ASSET/LIABILITY MANAGEMENT

     The Company  strives to achieve  consistent net interest  income and reduce
its exposure to adverse  changes in interest  rates by  attempting  to match the
terms to repricing of its  interest-sensitive  assets and  liabilities.  Factors
beyond the Bank's control,  such as market interest rates and  competition,  may
also have an impact on the Bank's interest income and interest expense.

                                       4
<PAGE>

     In the absence of any other factors, the overall yield or return associated
with the Bank's earning assets generally will increase from existing levels when
interest rates rise over an extended  period of time,  and  conversely  interest
income will decrease when interest rates decrease. In general,  interest expense
will  increase  when interest  rates rise over an extended  period of time,  and
conversely  interest  expense will  decrease when interest  rates  decrease.  By
controlling  the  increases  and  decreases in its interest  income and interest
expense which are brought about by changes in market  interest  rates,  the Bank
can significantly influence its net interest income.

     The  senior  officers  of the Bank meet on a weekly  basis to  monitor  the
Bank's  interest  rate risk  position and to set prices on loans and deposits to
manage  interest rate risk within the  parameters set by the Board of Directors.
The  President of the Bank reports to the Board of Directors on a regular  basis
on interest rate risk and trends,  as well as liquidity  and capital  ratios and
requirements. The Board of Directors reviews the maturities of the Bank's assets
and liabilities and establishes policies and strategies designed to regulate the
Bank's flow of funds and to  coordinate  the  sources,  uses and pricing of such
funds.  The first  priority in  structuring  and  pricing the Bank's  assets and
liabilities is to maintain an acceptable interest rate spread while reducing the
net effects of changes in interest rates.  The Bank's  management is responsible
for administering the policies and determinations of the Board of Directors with
respect to the Bank's asset and liability goals and strategies.

     The Bank's  principal  strategy in managing  interest rate risk has been to
emphasize the  acquisition  of short- and  intermediate-term  assets,  including
locally  originated  15-year  fixed-rate  mortgage  loans  and  consumer  loans,
particularly  automobile  loans.  In  addition,  in managing  its  portfolio  of
investment securities and mortgage-backed securities, the Bank in recent periods
has  purchased  investment  securities  so as to reduce the Bank's  exposure  to
fluctuations  in interest  rates. To further manage interest rate risk, the Bank
will  occasionally  sell loans into the secondary  market,  while  retaining the
servicing of said loans.

     In addition to shortening the average  repricing period of its assets,  the
Bank has sought to lengthen the average  maturity of its liabilities by adopting
a tiered pricing program for its certificates of deposit,  which provides higher
rates of  interest  on its  longer  term  certificates  in  order  to  encourage
depositors to invest in certificates with longer maturities.

MARKET RISK

     Management  measures the Bank's  interest rate risk by computing  estimated
changes in the net  portfolio  value  ("NPV")  of its cash  flows  from  assets,
liabilities  and  off-balance  sheet  items in the  event of a range of  assumed
changes in market interest  rates.  NPV represents the market value of portfolio
equity and is the difference between incoming and outgoing discounted cash flows
from assets and liabilities,  with adjustments made for off-balance sheet items.
These computations estimate the effect on the Bank's NPV of sudden and sustained
increases and decreases in market interest rates.  The Bank's Board of Directors
has adopted an interest rate risk policy which establishes  maximum decreases in
the  Bank's  estimated  NPV in the  event of 1%, 2% and 3%  increases  in market
interest  rates,  and in the event of 1%, 2% and 3% decreases in market interest
rates.  The following table presents the Bank's  projected change in NPV for the
various  rate shock levels at  September  30, 2001.  All changes meet the Bank's
policy requirements.

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                   Net Portfolio Value                NPV as % of PV of Assets
 Change                 ----------------------------------------     -------------------------
in Rates               $ Amount       $ Change(1)    % Change(2)     NPV Ratio (3)  Change(4)
--------               --------       -----------    -----------     ------------   ----------
                                         (Dollars in thousands)
<S>                    <C>             <C>              <C>             <C>         <C>
 + 300 bp              $ 22,980        (22,891)         (50)%           6.14%       (519) bp
 + 200 bp                30,655        (15,217)         (33)            7.98        (336) bp
 + 100 bp                38,586         (7,286)         (16)            9.78        (156) bp
     0 bp                45,872                                        11.34
 - 100 bp                50,310          4,439           10            12.22          88  bp
 - 200 bp                53,193          7,322           16            12.73         140  bp
 - 300 bp                    --              0            0                0           0  bp
<FN>
---------------
(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
     indicated  change in interest  rates minus the  estimated  NPV  assuming no
     change in interest rates.
(2)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
     estimated NPV assuming no change in interest rates.
(3)  Calculated as the estimated NPV divided by average total assets.
(4)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.
</FN>
</TABLE>
<TABLE>
<CAPTION>
***Risk Measures: 200 bp rate shock***                             At               At
                                                              September 30,     September 30,
                                                                  2001              2000
                                                              ------------      ------------
<S>                                                               <C>               <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets...............      11.34 %           11.26%
Exposure Measure: Post Shock NPV Ratio......................       7.98               8.77
Sensitivity Measure: Change in NPV Ratio....................        336 bp          249 bp
</TABLE>

     The above table  indicates  that at  September  30,  2001,  in the event of
sudden and sustained  increases in prevailing  market interest rates, the Bank's
NPV would be expected to decrease, and that in the event of sudden and sustained
decreases in prevailing  market interest rates, the Bank's NPV would be expected
to  increase.  The Bank's  Board of  Directors  reviews the Bank's NPV  position
quarterly,  and,  if  estimated  changes  in NPV  are  not  within  the  targets
established  by the Board,  the Board may direct  management to adjust its asset
and liability mix to bring interest rate risk within Board approved targets.  At
September 30, 2001, the Bank's estimated  changes in NPV were within the targets
established by the Board of Directors.

     NPV is calculated by the OTS by using information provided by the Bank. The
calculation is based on the net present value of discounted cash flows utilizing
market prepayment assumptions and market rates of interest provided by Bloomberg
quotations and surveys  performed  during the quarter ended  September 30, 2001,
with  adjustments  made to reflect the shift in the Treasury yield curve between
the survey date and the quarter-end date.

     Computations of prospective  effects of hypothetical  interest rate changes
are based on numerous assumptions,  including relative levels of market interest
rates,  loan  prepayments  and deposit  decay,  and should not be relied upon as
indicative of actual results.  Further,  the computations do not contemplate any
actions the Bank may undertake in response to changes in interest rates.

     Certain  shortcomings  are inherent in the method of analysis  presented in
the  computation  of NPV.  Actual values may differ from those  projections  set
forth in the table,  should market  conditions vary from assumptions used in the
preparation of the table. Additionally,  certain assets, such as adjustable-rate
loans,  have features which  restrict  changes in interest rates on a short-term
basis  and  over  the  life  of  the  asset.  In  addition,  the  proportion  of
adjustable-rate  loans in the Bank's  portfolio could decrease in future periods
if market  interest  rates  remain at or decrease  below  current  levels due to
refinance  activity.  Further,  in the  event of a  change  in  interest  rates,
prepayment and early withdrawal levels would likely deviate  significantly  from
those  assumed in the tables.
                                       6
<PAGE>

Finally,  the ability of many borrowers to repay their  adjustable-rate debt may
decrease in the event of an interest rate increase.

AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

     The  following  table  sets  forth  certain  information  relating  to  the
Company's average  interest-earning assets and interest-bearing  liabilities and
reflects  the average  yield on assets and average cost of  liabilities  for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or  expense by the  average  monthly  balance  of assets or  liabilities,
respectively,  for the periods  presented.  Average  balances  are derived  from
month-end  balances.  Management  does not  believe  that  the use of  month-end
balances  instead of daily  balances has caused any material  difference  in the
information presented.
<TABLE>
<CAPTION>
                                                                     Year Ended September 30,
                                            ------------------------------------------------------------------------
                                                           2001                                   2000
                                            --------------------------------        --------------------------------
                                                                     Average                                 Average
                                            Average                  Yield/         Average                   Yield/
                                            Balance       Interest    Cost          Balance      Interest      Cost
                                            -------       --------   ------         -------      --------     ------
                                                                        (Dollars in thousands)
<S>                                        <C>             <C>        <C>          <C>            <C>          <C>
Interest-earning assets:
  Loans receivable (1).................    $ 248,035      $18,938     7.64 %       $ 230,409      $ 17,153     7.44%
  Mortgage backed securities...........       32,598        1,948     5.98            22,107         1,446     6.54
  Investment securities and FHLB stock.       43,384        2,751     6.34            38,619         2,456     6.36
  Other interest-earning assets........       13,948          711     5.10             6,837           425     6.22
                                           ---------      -------                  ---------      --------
      Total interest-earning assets ...      337,966       24,348     7.21           297,972        21,480     7.21
Non-interest-earning assets............       17,800                                  15,707
                                           ---------                               ---------
      Total assets.....................    $ 355,766                               $ 313,679
                                           =========                               =========

Interest-bearing liabilities:
  Deposits.............................    $ 297,732       13,785     4.63         $ 251,306      $ 10,867     4.32
  FHLB advances........................        8,725          451     5.17            11,930           885     7.42
  Other liabilities....................        1,618            4      .25             1,723             5      .29
                                           ---------      -------                  ---------      --------
      Total interest-bearing
        liabilities....................      308,075       14,240     4.62           264,959        11,757     4.44
                                                          -------   ------                        --------     ----
Non-interest-bearing liabilities.......        4,852                                   4,652
                                           ---------                               ---------
      Total liabilities................      312,427                                 269,611
Stockholders' equity...................       42,839                                  44,068
                                           ---------                               ---------
      Total liabilities and retained
        earnings.......................    $ 355,766                               $ 313,679
                                           =========                               =========

Net interest income....................                   $10,108                                 $  9,723
                                                          =======                                 ========

Interest rate spread...................                               2.59%                                    2.77%
                                                                    ======                                   ======
Net interest margin (2)................                               2.99%                                    3.26%
                                                                    ======                                   ======
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities.........................                              109.70%                                  112.46%
                                                                    ======                                   ======
<FN>
_____________
(1)  Includes nonaccrual loans.
(2)  Represents  net  interest   income  divided  by  the  average   balance  of
     interest-earning assets.
</FN>
</TABLE>

                                       7
<PAGE>

RATE/VOLUME ANALYSIS

     The table  below  sets  forth  certain  information  regarding  changes  in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  multiplied  by old rate);  (ii) changes in rates  (change in
rate  multiplied by old volume);  and (iii) changes in  rate/volume  (changes in
rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
                                                            Year Ended September 30,
                                                -------------------------------------------------
                                                    2001               vs.               2000
                                                -------------------------------------------------
                                                               Increase (Decrease)
                                                                      Due to
                                                -------------------------------------------------
                                                                                Rate/
                                                Volume         Rate            Volume      Total
                                                ------         ----            ------      -----
                                                                   (In thousands)
<S>                                            <C>            <C>            <C>         <C>
Interest income:
  Loans receivable..........................   $  1,312       $    439       $     34    $  1,785
  Mortgage-backed securities................        686           (125)           (59)        502
  Investment securities and
      FHLB Stock............................        304             (7)            (1)        296
  Other interest-earning assets.............        442            (77)           (80)        285
                                               --------       --------       --------    --------
    Total interest-earning assets...........      2,744            230           (106)      2,868

Interest expense:
  Deposits..................................      2,008            768            142       2,918
  FHLB advances.............................       (238)          (268)            72        (434)
  Other liabilities.........................          0             (1)             0          (1)
                                               --------       --------       --------    --------
     Total interest-bearing
       liabilities..........................      1,770            499            214       2,483
                                               --------       --------       --------    --------

Change in net interest income...............   $    974       $   (269)      $   (320)   $    385
                                               ========       ========       ========    ========
</TABLE>

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2001 AND 2000

     During the year ended  September 30, 2001, the Company  focused its efforts
on pursuing  its growth  strategy  through the  addition of new branch  offices.
During the year ended September 30, 2001, the Bank opened a new branch office in
Carney.  This office is in addition to the three new offices  opened  during the
year ended  September  30,  2000.  While the  building and opening of new branch
offices  has  resulted  in  additional  expense  in the short  term,  management
believes that these branch offices will enhance the  profitability and growth of
the  Company  over the long  term.  Based on  deposit  growth to date in the new
offices, all will break even within three years of the date they opened.

     Total assets increased by $65.0 million,  or 19.9%,  from $325.9 million at
September  30, 2000 to $390.9  million at September  30,  2001.  The increase in
assets during fiscal year 2001 was  attributable  to a $26.5 million,  or 11.0%,
increase in loans  receivable,  net from $241.5 million at September 30, 2000 to
$268.0 million at September 30, 2001, and a $33.3 million,  or 168%, increase in
mortgage  backed  securities  from $19.8  million at September 30, 2000 to $53.1
million at September 30, 2001. There was also a $1.3 million,  or 3.2%, increase
in  investment  securities  from $41.1  million at  September  30, 2000 to $42.4
million at September 30, 2001.  This strategy was used in an effort to diversify
the balance sheet.

     In recent years,  the Company has emphasized the  origination of automobile
loans  because of the higher rates and shorter terms to maturity of those loans.
Through these efforts,  the Company increased  automobile loans by $4.9 million,
or 7.2%,  from $67.9 million at September 30, 2000 to $72.8 million at September
30, 2001.  Most

                                       8
<PAGE>

of the  remaining  increase  in the loan  portfolio  reflected  an  increase  in
single-family  residential  mortgage loans, which increased by $12.5 million, or
8.2%, from $152.5 at September 30, 2000 to $165.0 million at September 30, 2001,
reflecting  increased loan demand and the addition of new customers from the new
branch offices.

     The  Company's  loan growth was funded with  deposits,  which  increased by
$56.9  million,  or 21.2%,  from $268.9  million at September 30, 2000 to $325.8
million at  September  30,  2001.  The Bank was able to  increase  its  deposits
through the new branch offices and with increased marketing efforts.

     Stockholders' equity decreased by $613,000,  or 1.4%, from $43.3 million at
September  30,  2000 to $42.7  million  at  September  30,  2001 as the  Company
repurchased  19,750  shares of its Common Stock during the year ended  September
30, 2001 at a cost of $165,000, and paid dividends of $996,000.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

     Net Income.  Net income  decreased by $582,000,  or 84.7% from $687,000 for
the year ended  September 30, 2000 to $105,000 for the year ended  September 30,
2001.  Although net  interest  income  increased by $385,000 or 4.1%,  from $9.7
million for the year  September  30, 2000,  to $10.1  million for the year ended
September 30, 2001,  non-interest  expenses increased by $1.4 million,  or 15.2%
from $9.0 million for the year ended September 30, 2000 to $10.3 million for the
year ended September 30, 2001.

     Net  Interest  Income.  Net  interest  income was $9.8 million for the year
ended  September  30,  2001,  as  compared  to $9.6  million  for the year ended
September 30, 2000 representing an increase of $214,000 of 2.2%. The increase in
net  interest  income  primarily  was the result of  increases  in the volume of
interest-earning  assets.  These  increases  allowed  the Company to improve net
interest  income  despite a 18 basis point decrease in the interest rate spread.
The   Company's   ratio  of   average   interest-earning   assets   to   average
interest-bearing liabilities decreased form 112.46% for the year ended September
30, 2000 to 109.7% for the year ended September 30, 2001.

     Interest income increased by $2.9, or 13.4% from $21.4 million for the year
ended September 30, 2000 to $24.3 million for the year ended September 30, 2001.
The  increase  was due  primarily  to an increase in interest and fees on loans,
which  reflected an increase in the average balance of loans from $230.4 million
for the year  ended  September  30,  2000 to $248.0  million  for the year ended
September  30, 2001.  The increase in the average  balance of loans was achieved
primarily  through  increases in  residential  mortgage  loans,  and to a lesser
extent,  automobile  loans. Also contributing to the increase in interest income
was a $295,000,  or 12.0%  increase  in interest  and  dividends  on  investment
securities,  which increased $2.5 million for the year ended September 30, 2000,
to $2.8 million for the year ended  September 30, 2001. The increase in interest
and dividends on investment  securities  was due primarily to an increase in the
average balance in investment securities. Interest on mortgage-backed securities
increased  by  $502,000,  or 34.7%,  from  $1.4  million  for the year  ended on
September 30, 2000 to $1.9 million for the year ended  September 30, 2001 due to
increases in the average balance of mortgage-backed securities.

     Interest  Expense.  Interest expense  increased by $2.4 million,  or 21.2%,
from $11.8  million for the year ended  September 30, 2000, to $14.2 million for
the year ended  September 30, 2001.  This increase was due to an increase in the
average  volume of  deposits,  which  comprised  the  largest  component  of the
Company's  interest  bearing  liabilities.   The  average  balance  of  deposits
increased by $46.4  million,  or 18.5%,  from $251.3  million for the year ended
September 30, 2000, to $297.7 million for the year ended September 30, 2001. The
Company was able to increase its  deposits  through its use of  advertising  and
through its new branch offices.

     Provisions for Loan Losses.  Provisions for loans losses are charged to the
earnings to maintain the total  allowance for loan losses at a level  considered
adequate by management to provide for probable loan losses,  based on prior loss
experience,  volume  and type of  lending  conducted  by the  Company,  industry
standards  and past due  loans in the  Company's  loan  portfolio.  The  Company
established  provisions  for loan losses of $332,000  and $162,000 for the years
ended September 30, 2001 and 2000 respectively. In establishing such provisions,
management  considered the delinquency of its loan portfolio as well as a review
of  classified  assets.  In  addition,  management  considered  the level of the
Company's  non-performing  loans,  which were $289,000 and $383,000 at September
30, 2001 and 2000  respectively  and levels of the  Company's  net  charge-offs,
which totaled $172,000 and $32,000 during the years ended September 30, 2001 and
2000 respectively.

                                       9
<PAGE>

     Other  Income.  Total other income  increased by $207,000,  or 39.1%,  from
$530,000  for the year ended  September  30, 2000 to $737,000 for the year ended
September 30, 2001. This was primarily due to an increase in fees on transaction
accounts.

     Non-Interest  Expenses.  Total  non-interest  expenses  increased  by  $1.3
million,  or 15.2%,  from $9.0 million for the year ended  September 30, 2000 to
$10.3  million  for  the  year  ended   September  30,  2001.  The  increase  in
non-interest  expenses was due to increases in salaries and related  expenses of
$702,000 of 15.0% due to the  recruitment of personnel for the new offices,  and
compensation  expense of $431,000 related to the market value adjustment for the
Rabbi-Trust.  The Company also  experienced  increases of $128,000,  or 12.9% in
occupancy expense, $69,000 or 10.9%, in data processing expense, and $69,000, or
8.6% in property and equipment expense.

     Income Taxes.  The Company  income tax expense was $79,000 and $437,000 for
the  years  ended  September  30,  2001 and  2000  respectively.  The  Company's
effective  tax rate was 43.1% and 38.9% for years ended  September  30, 2001 and
2000 respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has no business  other than that of the Bank and  investing the
net stock  issuance  proceeds  retained  by it.  The Bank is  subject to certain
regulatory limitations with respect to the payment of dividends to the Company.

     At September 30, 2001,  the Bank exceeded all  regulatory  minimum  capital
requirements. For information regarding the Bank's retained earnings as reported
in its financial  statements  at September  30, 2001 to its  tangible,  core and
risk-based   capital   levels  and  compares  such  totals  to  the   regulatory
requirements, see Note 15 of Notes to Consolidated Financial Statements.

     The  Company's  primary  sources of funds are deposits  and  proceeds  from
maturing investment securities and mortgage-backed  securities and principal and
interest  payments on loans.  While  maturities  and scheduled  amortization  of
mortgage-backed  securities and loans are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors.

     The primary investing  activity of the Company are the origination of loans
and the purchase of investment securities and mortgage-backed securities. During
the years  ended  September  30, 2001 and 2000,  the Bank had $95.3  million and
$89.6  million,  respectively,  of loan  originations.  During  the years  ended
September 30, 2001 and 2000, the Company purchased investment  securities in the
amounts of $55.6 million and $7.0  million,  respectively,  and  mortgage-backed
securities in the amounts of $48.6 million and $3.7 million, respectively. Other
investing   activities   include   originations   of  loans  and   purchases  of
mortgage-backed securities. The primary financing activity of the Company is the
attraction of savings deposits.

     The Company has other  sources of  liquidity  if there is a need for funds.
The Bank has the  ability  to  obtain  advances  from  the FHLB of  Atlanta.  In
addition, the Company maintains a portion of its investments in interest-bearing
deposits at other financial institutions that will be available, if needed.

     The Bank's  average daily  liquidity  ratio for the month of September 2001
was approximately 29.7%. Management seeks to maintain a relatively high level of
liquidity in order to retain  flexibility  in terms of investment  opportunities
and deposit pricing.  Because liquid assets generally provide for lower rates of
return,  the Bank's relatively high liquidity will, to a certain extent,  result
in lower rates of return on assets.

     The  Company's  most liquid assets are cash,  interest-bearing  deposits in
other  banks and  federal  funds  sold,  which  are  short-term,  highly  liquid
investments with original  maturities of less than three months that are readily
convertible  to known amounts of cash.  The levels of these assets are dependent
on the Company's operating,  financing and investing activities during any given
period.  At September 30, 2001, cash,  interest-bearing  deposits in other banks
and  federal   funds  sold  totaled  $4.1   million,   $8.0  million  and  $3.3,
respectively.

                                       10
<PAGE>

     The Company  anticipates  that it will have  sufficient  funds available to
meet its current  commitments.  Certificates  of deposit  which are scheduled to
mature in less than one year at September 30, 2001 totaled $148.7 million. Based
on past  experience,  management  believes  that a  significant  portion of such
deposits will remain with the Bank. The Bank is a party to financial instruments
with  off-balance-sheet  risk made in the normal  course of business to meet the
financing  needs of its  customers.  These  financial  instruments  are  standby
letters of credit,  lines of credit and  commitments  to fund mortgage loans and
involve  to  varying  degrees  elements  of credit  risk in excess of the amount
recognized in the statement of financial position. The contract amounts of those
instruments  express  the  extent of  involvement  the Bank has in this class of
financial  instruments  and represents  the Bank's  exposure to credit loss from
nonperformance by the other party.

     On August 26, 1999 the  Company  commenced  a stock  repurchase  program to
acquire up to 320,124  shares (which  included  91,464 shares for the Management
Recognition Plan Trust), or approximately 5% of the Company's outstanding shares
of  common  stock  as part  of its  capital  management  strategy.  The  Company
completed the repurchase in May 2000 acquiring 320,124 shares, for which it paid
an aggregate  of $2.5  million.  A second  repurchase  program was  announced on
February 14, 2001. The Company intends, subject to market conditions, to acquire
up to 5% of the outstanding  shares of common stock over the next twelve months.
As of September  30, 2001 an additional  19,750 shares had been  purchased at an
aggregate cost of $165,000.

     In keeping with the  Company's  stated  policy,  quarterly  dividends  were
declared on December 9, 2000,  March 28, June 15, and  September  17, 2001 of 12
1/2(cent) each. In keeping with Federal  regulations,  Baltimore  County Savings
Bank, M.H.C. (the "MHC") applied for, and elected to waive receipt of, dividends
from the Company as to its shares,  which  amounted  to  3,754,960  shares as of
December 28, 2001, or 64.0% of all  outstanding  shares of the Company's  common
stock. The dividends rate is based in part on the Bank's strong capital position
(see Note 15 of Notes to Consolidated  Financial Statements) and the flexibility
of the  mutual  holding  company  structure  whereby  the MHC,  with  regulatory
approval,  has waived  dividends  otherwise  payable to it. This has enabled the
Bank to reward its  public  shareholders  with a strong  dividend  stream  while
retaining sufficient capital to support Company operations,  earnings growth and
the Bank's branch expansion business plan.

     The Bank  generally  requires  collateral  or  other  security  to  support
financial instruments with off-balance-sheet credit risk. At September 30, 2001,
the Bank had commitments  under standby  letters of credit,  lines of credit and
commitments  to  originate  mortgage  loans of $69,000,  $22.8  million and $5.1
million, respectively. See Note 3 of Notes to Consolidated Financial Statements.

IMPACT OF INFLATION AND CHANGING PRICES

     The Consolidated  Financial  Statements and Notes thereto  presented herein
have been prepared in accordance with accounting  principles  generally accepted
in the United  States of America,  which  require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering the change in the relative  purchasing  power of money over time and
due to inflation.  The impact of inflation is reflected in the increased cost of
the  Company's  operations.  Unlike most  industrial  companies,  nearly all the
assets and  liabilities  of the  Company are  monetary  in nature.  As a result,
interest  rates have a greater impact on the Company's  performance  than do the
effects of general levels of inflation.  Interest rates do not necessarily  move
in the same direction or to the same extent as the price of goods and services.

IMPACT OF  NEW ACCOUNTING STANDARDS

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statements of Financial  Accounting  Standards  No. 141 "Business  Combinations"
("SFAS 141") and No. 142 " Goodwill and Other  Intangible  Assets"  ("SFAS 142")
which are effective  July 1, 2001 and September 1, 2002,  respectively,  for the
Company.  SFAS 141 requires  that the purchase  method of accounting be used for
all  business  combinations  initiated  after  June 30,  2001.  Under  SFAS 142,
amortization  of  goodwill,   including   goodwill  recorded  in  past  business
combinations,  will discontinue upon adoption of this standard. All goodwill and
intangible  assets  will  be  tested  for  impairment  in  accordance  with  the
provisions of the Statement.

                                       11
<PAGE>

     In August 2001, FASB issued SFAS No. 144 " Accounting for the Impairment or
Disposal of Long-Lived Assets".  This Statement  supersedes SFAS No. 121 and APB
Opinion No. 30. SFAS No. 144 retains the fundamental  provisions of SFAS No. 121
for (a)  recognition  and  measurement of impairment of long-lived  assets to be
held and used and (b)  measurement  of  long-lived  assets to be  disposed of by
sale. SFAS no. 144 also requires reporting of discontinued operations separately
form  continuing  operations  and extends  that  reporting  to a component of an
entity that either has been disposed of or is  classified as held for sale.  The
Statement  also  eliminates  the  exception to  consolidation  for a temporarily
controlled subsidiary.

                                       12
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


To the Stockholders and Board of Directors
BCSB Bankcorp, Inc.
Baltimore, Maryland

     We have audited the consolidated  statements of financial condition of BCSB
Bankcorp,  Inc. and Subsidiaries as of September 30, 2001 and September 30, 2000
and the related consolidated statements of operations,  stockholders' equity and
cash flows for each of the two years in the two year period ended  September 30,
2001. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position  of BCSB
Bankcorp,  Inc.  and  Subsidiaries  as of September  30, 2001 and 2000,  and the
consolidated  results of its  operations  and its cash flows for each of the two
years in the two year period  ended  September  30,  2001,  in  conformity  with
accounting principles generally accepted in the United States of America.



                                           /s/ Anderson Associates, LLP

November 16, 2001
Baltimore, Maryland


                                       F-1
<PAGE>

                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------
<TABLE>
<CAPTION>
                                                                                              September 30,
                                                                                              -------------
                                                                                        2001                 2000
                                                                                        ----                 ----
               Assets
               ------
<S>                                                                                 <C>                 <C>
Cash                                                                                $   4,055,985       $    6,570,657
Interest bearing deposits in other banks                                                7,952,621            5,255,622
Federal funds sold                                                                      3,313,392              455,431
Investment securities, available for sale                                              23,968,640                --
Investment securities, held to maturity (Note 2)                                       18,494,349           41,158,120
Loans receivable, net (Note 3)                                                        268,010,050          241,519,815
Mortgage backed securities, available for sale                                         11,441,785                --
Mortgage backed securities, held to maturity (Note 4)                                  41,655,039           19,824,152
Foreclosed real estate, net (Note 5)                                                       80,569               50,000
Premises and equipment, net (Note 7)                                                    6,974,815            6,709,595
Federal Home Loan Bank of Atlanta stock                                                 1,834,400            1,834,400
Accrued interest receivable - loans                                                       930,784              863,647
                            - investments                                                 609,585              730,607
                            - mortgage backed securities                                  304,094              121,088
Prepaid and deferred income taxes (Note 16)                                               195,544              257,581
Other assets                                                                            1,061,672              528,459
                                                                                     ------------         ------------
Total assets                                                                         $390,883,324         $325,879,174
                                                                                     ============         ============
                 Liabilities and Stockholders' Equity
                 ------------------------------------
Liabilities
-----------
   Deposits (Note 8)                                                                 $325,785,538         $268,881,604
   Federal Home Loan Bank of Atlanta advances (Note 9)                                 17,800,000            9,500,000
   Advance payments by borrowers for
    taxes and insurance                                                                 1,147,121            1,190,057
   Income taxes payable (Note 16)                                                           5,901               25,532
   Payables to disbursing agents                                                          109,259              364,755
   Dividends payable                                                                      264,045              265,954
   Other liabilities                                                                    3,041,070            2,308,455
                                                                                     ------------         ------------
 Total liabilities                                                                    348,152,934          282,536,357

Commitments and contingencies (Notes 3, 7 and 11)

Stockholders' Equity (Notes 12, 13, 14 and 15)
--------------------
 Common stock (Par value $.01 - 13,500,000 authorized,
    5,867,322 and 5,887,072 shares issued and outstanding
    at September 30, 2001 and 2000, respectively)                                          58,673               58,871
   Additional paid-in capital                                                          20,116,467           20,214,611
   Accumulated other comprehensive income (net of tax)                                    281,924                --
   Retained earnings (substantially restricted)                                        24,556,126           25,447,089
                                                                                     ------------         ------------
                                                                                       45,013,190           45,720,571
   Employee Stock Ownership Plan                                                       (1,143,300)          (1,326,228)
   Stock held by Rabbi Trust                                                           (1,139,500)          (1,051,526)
                                                                                     ------------         ------------
Total stockholders' equity                                                             42,730,390           43,342,817
                                                                                     ------------         ------------

Total liabilities and stockholders' equity                                           $390,883,324         $325,879,174
                                                                                     ============         ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
 of these statements.

                                       F-2
<PAGE>
                      BCSB BANKCORP, INC. AND SUBSIDIARIES
                      ------------------------------------
                               Baltimore, Maryland
                               -------------------

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                             For Years Ended
                                                                                               September 30,
                                                                                    ----------------------------------
                                                                                       2001                    2000
                                                                                       ----                    ----
<S>                                                                                   <C>                  <C>
Interest and fees on loans (Note 3)                                                   $18,938,731          $17,153,136
Interest on mortgage backed securities                                                  1,947,638            1,445,783
Interest and dividends on investment securities                                         2,750,922            2,455,989
Other interest income                                                                     711,169              425,153
                                                                                     ------------          -----------
Total interest income                                                                  24,348,460           21,480,061

Interest on deposits (Note 8)                                                          13,785,205           10,866,557
Interest on borrowings - short term                                                       450,399              884,912
Other interest expense                                                                      4,266                5,288
                                                                                     ------------          -----------
Total interest expense                                                                 14,239,870           11,756,757
                                                                                     ------------          -----------
Net interest income                                                                    10,108,590            9,723,304
Provision for losses on loans (Note 3)                                                    332,341              161,646
                                                                                     ------------          -----------

Net interest income after provision for losses on loans                                 9,776,249            9,561,658

Other Income
------------
   Gain (loss) on sale of foreclosed real estate                                           15,751              (39,870)
   Servicing fee income                                                                    14,249                8,040
   Fees and charges on loans                                                              150,467              145,927
   Fees on transaction accounts                                                           322,459              206,495
   Rental income                                                                          106,761              119,763
   Gain from real estate development and joint venture (Note 6)                                --                5,082
   Gain on sale of fixed assets                                                                --                3,475
   Gain (loss) on sale of mortgages                                                        25,220               (3,499)
   Miscellaneous income                                                                   102,672               84,669
                                                                                     ------------          -----------
Net other income                                                                          737,579              530,082

Non-Interest Expenses
---------------------
   Salaries and related expense                                                         5,827,819            4,694,225
   Occupancy expense                                                                    1,120,279              992,248
   Deposit insurance premiums                                                             126,759              143,435
   Data processing expense                                                                701,689              632,667
   Property and equipment expense                                                         876,188              807,164
   Professional fees                                                                      186,964              224,279
   Advertising                                                                            806,020              811,917
   Telephone, postage and office supplies                                                 428,937              445,107
   Other expenses                                                                         255,118              216,312
                                                                                     ------------          -----------
Total non-interest expenses                                                            10,329,773            8,967,354
                                                                                     ------------          -----------

Income before tax provision                                                               184,055            1,124,386
Income tax provision (Note 16)                                                             79,290              437,622
                                                                                     ------------          -----------

Net income                                                                           $    104,765          $   686,764
                                                                                     ============          ===========
Net Income Per Share of Common Stock (Note 1)
   Basic                                                                             $       0.02          $      0.12
   Diluted                                                                           $       0.02          $      0.12
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
 of these statements.

                                       F-3
<PAGE>

                               BCSB BANKCORP, INC.
                               ------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------
                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
                 -----------------------------------------------
<TABLE>
<CAPTION>

                                                                                                                 Employee
                                                                          Additional                              Stock
                                                           Common          Paid-In            Retained          Ownership
                                                            Stock          Capital            Earnings             Plan
                                                           -------        ----------        -----------        -----------
<S>                                                        <C>            <C>               <C>                <C>
Balance - September 30, 1999                               $61,132        $21,918,506       $25,788,692        $(1,509,156)

Compensation under stock based benefit plans                  --               41,574            --                182,928
Acquisition of stock for Rabbi Trust                          --               --                --                 --
Acquisition of stock for Management Retention Plan            --              (37,665)           --                 --
Treasury stock purchase                                     (2,261)        (1,707,804)           --                 --
Cash dividends declared ($.50 per share)                      --               --            (1,028,367)            --
Net income                                                    --               --               686,764             --
                                                           -------        -----------       -----------        -----------

Balance - September 30, 2000                                58,871         20,214,611        25,447,089         (1,326,228)

Compensation under stock based benefit plans                  --               67,103            --                182,928
Acquisition of stock for Rabbi Trust                          --               --                --                 --
Treasury stock purchased                                      (198)          (165,247)           --                 --
Cash dividends declared ($.50 per share)                      --               --              (995,728)            --
Comprehensive income
   Net income for the year ended September 30, 2001                                             104,765
   Net change in unrealized gains on investment
    securities and mortgage backed securities,
    net of tax of $177,385
Comprehensive income
                                                           -------        -----------       -----------        -----------
Balance - September 30, 2001                               $58,673        $20,116,467       $24,556,126        $(1,143,300)
                                                           =======        ===========       ===========        ===========

<CAPTION>
                                                                            Accumulated
                                                                               Other
                                                               Stock        Comprehensive       Total
                                                              Held By        Income, Net    Stockholders'
                                                            Rabbi Trust      of Taxes          Equity
                                                            -----------     -------------   -------------
<S>                                                         <C>             <C>              <C>
Balance - September 30, 1999                                $  (978,715)    $    --          $45,280,459

Compensation under stock based benefit plans                     --              --              224,502
Acquisition of stock for Rabbi Trust                            (72,811)         --              (72,811)
Acquisition of stock for Management Retention Plan               --              --              (37,665)
Treasury stock purchase                                          --              --           (1,710,065)
Cash dividends declared ($.50 per share)                         --              --           (1,028,367)
Net income                                                       --              --              686,764
                                                            -----------      --------        -----------

Balance - September 30, 2000                                 (1,051,526)         --           43,342,817

Compensation under stock based benefit plans                     --              --              250,031
Acquisition of stock for Rabbi Trust                            (87,974)         --              (87,974)
Treasury stock purchased                                         --              --             (165,445)
Cash dividends declared ($.50 per share)                         --              --             (995,728)
Comprehensive income
   Net income for the year ended September 30, 2001
   Net change in unrealized gains on investment
    securities and mortgage backed securities,
    net of tax of $177,385                                                    281,924
Comprehensive income                                                                             386,689
                                                            -----------      --------        -----------
Balance - September 30, 2001                                $(1,139,500)     $281,924        $42,730,390
                                                            ===========      ========        ===========

</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       F-4
<PAGE>

                      BCSB BANKCORP, INC. AND SUBSIDIARIES
                      ------------------------------------
                               Baltimore, Maryland
                               -------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                       For Years Ended
                                                                                           September 30,
                                                                                    ----------------------------------
                                                                                       2001                 2000
                                                                                       ----                 ----
<S>                                                                                 <C>                  <C>
Operating Activities
--------------------
     Net income                                                                     $     104,765        $     686,764
     Adjustments to Reconcile Net Income to Net
      Cash Provided by Operating Activities
     -----------------------------------------------
         Accretion and amortization of discount
          on investments, net                                                               2,778                 (134)
         Dividends on investment securities                                              (250,539)                  --
         Proceeds from loans sold                                                       2,855,346            1,081,495
         (Gain) loss on loans sold                                                        (25,220)               3,499
         Loan fees and costs deferred, net                                                 22,860              280,422
         Amortization of deferred loan fees and costs                                     (94,973)            (156,310)
         Provision for losses on loans                                                    332,341              161,646
         Non-cash compensation under Stock-Based
          Benefit Plan                                                                    250,031              224,502
         Amortization of premium on mortgage backed
          securities                                                                       97,854               35,686
         (Gain) loss on sale of foreclosed real estate                                    (15,751)              39,870
         Gain from real estate development and joint venture                                   --               (5,082)
         Provision for depreciation                                                       749,061              638,266
         Gain on sale of fixed assets                                                          --               (3,475)
         Increase in accrued interest receivable on loans                                 (67,137)             (29,223)
         Decrease (increase) in accrued interest receivable
          on investments                                                                  121,022              (94,850)
         (Increase) decrease in accrued interest receivable
           on mortgage backed securities                                                 (183,006)              18,917
         Decrease (increase) in prepaid income taxes                                      140,398              (79,841)
         (Increase) decrease in deferred income tax assets                               (255,747)             183,471
         (Increase) decrease in other assets                                             (533,213)              18,712
         Decrease in accrued interest payable on deposits                                (357,978)            (202,850)
         Decrease in income taxes payable                                                 (19,631)             (35,138)
         Increase in other liabilities and payables
          to disbursing agents                                                            477,119              473,944
                                                                                     ------------         ------------
              Net cash provided by operating activities                                 3,350,380            3,240,291
</TABLE>


                                       F-5
<PAGE>
                      BCSB BANKCORP, INC. AND SUBSIDIARIES
                      ------------------------------------
                               Baltimore, Maryland
                               -------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                             For Years Ended
                                                                                               September 30,
                                                                                     ---------------------------------
                                                                                         2001                 2000
                                                                                         ----                 ----
<S>                                                                                 <C>                   <C>
Cash Flows from Investing Activities
------------------------------------
     Proceeds from maturing interest bearing deposits                               $   2,759,000         $  3,569,000
     Purchase of interest bearing deposits                                               (792,000)              --
     Purchase of investment securities - available for sale                           (24,493,199)              --
     Proceeds from maturities of investment securities -
      available for sale                                                                1,155,656               --
     Purchases of investment securities - held to
      maturity                                                                        (31,140,000)          (6,975,680)
     Proceeds from maturities of investment securities -
      held to maturity                                                                 53,800,000            1,050,000
     Longer term loans originated                                                     (42,828,341)         (32,937,959)
     Principal collected on longer term loans                                          21,432,869           24,254,128
     Net increase in short-term loans                                                  (7,879,826)         (18,077,072)
     Loans purchased                                                                     (414,712)            (763,619)
     Principal collected on mortgage backed securities -
      available for sale                                                                  871,005               --
     Purchase of mortgage backed securities -
      available for sale                                                              (12,233,045)              --
     Purchase of mortgage backed securities - held to maturity                        (36,353,304)          (3,685,094)
     Principal collected on mortgage backed securities                                 14,424,563            7,325,050
     Proceeds from sales of foreclosed real estate                                         94,603               16,263
     Net investment and loans to joint ventures                                           --                    10,369
     Investment in premises and equipment                                              (1,014,281)          (2,498,265)
     Purchase of Federal Home Loan Bank of Atlanta stock                                  --                  (184,100)
                                                                                    -------------         ------------
              Net cash used by investing activities                                   (62,611,012)         (28,896,979)

Cash Flows from Financing Activities
------------------------------------
     Net increase in demand deposits, money market,
      passbook accounts and advances by borrowers
      for taxes and insurance                                                           6,457,281            1,656,256
     Net increase in certificates of deposit                                           50,761,695           34,151,720
     Increases in Federal Home Loan Bank of Atlanta
      advances                                                                         16,400,000           10,500,000
     Repayment of Federal Home Loan Bank of
      Atlanta advances                                                                 (8,100,000)         (17,000,000)
     Decrease in dividends payable                                                         (1,909)             (28,843)
     Acquisition of stock for Rabbi Trust                                                 (87,974)             (72,811)
     Acquisition of stock for Management Retention Plan                                    --                  (37,665)
     Treasury stock purchase                                                             (165,445)          (1,710,065)
     Dividends on stock                                                                  (995,728)          (1,028,367)
                                                                                    -------------         ------------
              Net cash provided by financing activities                                64,267,920           26,430,225
                                                                                    -------------         ------------
</TABLE>

                                      F-6
<PAGE>

                      BCSB BANKCORP, INC. AND SUBSIDIARIES
                      ------------------------------------
                               Baltimore, Maryland
                               -------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                            For Years Ended
                                                                                               September 30,
                                                                                     ---------------------------------
                                                                                         2001                 2000
                                                                                         ----                 ----
<S>                                                                                  <C>                 <C>
Increase in cash and cash equivalents                                                 $ 5,007,288          $   773,537
Cash and cash equivalents at beginning of period                                        7,961,710            7,188,173
                                                                                      -----------          -----------
Cash and cash equivalents at end of period                                            $12,968,998          $ 7,961,710
                                                                                      ===========          ===========
The following is a summary of cash and cash equivalents:
     Cash                                                                             $ 4,055,985          $ 6,570,657
     Interest bearing deposits in other banks                                           7,952,621            5,255,622
     Federal funds sold                                                                 3,313,392              455,431
                                                                                      -----------          -----------
     Balance of cash items reflected on Statement of
      Financial Condition                                                              15,321,998           12,281,710

         Less - certificate of deposit with a maturity
                     of more than three months                                          2,353,000            4,320,000
                                                                                      -----------          -----------

Cash and cash equivalents reflected on the
  Statement of Cash Flows                                                             $12,968,998          $ 7,961,710
                                                                                      ===========          ===========
Supplemental Disclosures of Cash Flows Information:
   Cash paid during the period for:

      Interest                                                                        $14,575,316          $12,059,372
                                                                                      ===========          ===========

      Income taxes                                                                    $   122,866          $   390,908
                                                                                      ===========          ===========

   Transfer from loans to real estate acquired
     through foreclosure                                                              $   109,421          $        --
                                                                                      ===========          ===========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.



                                      F-7
<PAGE>
                               BCSB BANKCORP, INC.
                               ------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


Note 1 - Summary of Significant Accounting Policies
         ------------------------------------------

          A.   Principles of Consolidation - BCSB Bankcorp, Inc. (the "Company")
               owns 100% of Baltimore County Savings Bank,  F.S.B. (the "Bank").
               The Bank owns 100% of Baltimore  County Service  Corporation  and
               Ebenezer  Road,  Inc.  The  accompanying  consolidated  financial
               statements   include  the  accounts  and  transactions  of  these
               companies on a consolidated basis since date of acquisition.  All
               intercompany   transactions   have   been   eliminated   in   the
               consolidated  financial  statements.  Ebenezer  Road,  Inc. sells
               insurance  products.  Baltimore  County Service  Corporation  has
               invested  in several  joint  ventures  formed for the  purpose of
               developing real estate. These investments have been accounted for
               on the equity  method and  separate  summary  statements  are not
               presented  since the data  contained  therein is not  material in
               relation to the consolidated financial statements.

          B.   Business - The  Company's  primary  purpose is  ownership  of the
               Bank. The Bank's primary  business  activity is the acceptance of
               deposits  from the general  public in their market area and using
               the proceeds for investments and loan  originations.  The Bank is
               subject to competition  from other  financial  institutions.  The
               Bank is subject to the  regulations of certain  federal  agencies
               and  undergoes   periodic   examinations   by  those   regulatory
               authorities.

          C.   Basis of  Financial  Statement  Presentation  - The  consolidated
               financial  statements  have  been  prepared  in  conformity  with
               accounting  principles generally accepted in the United States of
               America.  In preparing  the financial  statements,  management is
               required  to make  estimates  and  assumptions  that  affect  the
               reported  amounts of assets and liabilities as of the date of the
               statement  of financial  condition  and revenues and expenses for
               the period.  Actual results could differ significantly from those
               estimates.  Material estimates that are particularly  susceptible
               to   significant   change   in  the   near-term   relate  to  the
               determination  of the allowance for loan losses and the valuation
               of foreclosed real estate and real estate development.

          D.   Federal  Funds - Federal  funds  sold are  carried  at cost which
               approximates market.

          E.   Investments   and   Mortgage   Backed   Securities  -  Investment
               securities in equity mutual funds,  certain  federal agency notes
               and  mortgage  backed  securities  may be held for an  indefinite
               period of time. However,  management may sell them in response to
               changes  in  interest   rates  or  other  similar   factors  and,
               accordingly,   carries  them  at  fair  value.  Other  investment
               securities  consisting  of  federal  agency  notes  and bonds and
               mortgage backed  securities are carried at cost, since management
               has  the  ability  and   intention  to  hold  them  to  maturity.
               Amortization of related premiums and discounts are computed using
               the level yield method over the life of the  security.  Gains and
               losses on all  investments  and mortgage  backed  securities  are
               determined using the specific identification method.

                                       F-8
<PAGE>

BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------

          F.   Loans   Receivable  -  Loans  receivable  are  stated  at  unpaid
               principal balances, less undisbursed portion of loans in process,
               unearned  interest on consumer loans,  deferred loan  origination
               fees and the allowance for loan losses,  since management has the
               ability and intention to hold them to maturity.

               The Bank services loans for others and pays the  participant  its
               share of the Bank's  collections,  net of a stipulated  servicing
               fee. Loan  servicing  fees are credited to income when earned and
               servicing costs are charged to expense as incurred.

               Unearned  interest on consumer  loans is amortized to income over
               the terms of the related loans on the level yield method.

          G.   Allowance  for Loan  Losses - An  allowance  for loan  losses  is
               provided  through  charges to income in an amount that management
               believes will be adequate to absorb losses on existing loans that
               may   become   uncollectible,   based  on   evaluations   of  the
               collectibility  of loans and  prior  loan  loss  experience.  The
               evaluations  take into  consideration  such factors as changes in
               the nature and volume of the loan  portfolio,  overall  portfolio
               quality,  review of specific  problem loans, and current economic
               conditions  that  may  affect  the  borrowers'  ability  to  pay.
               Management   believes  the  allowance  for  losses  on  loans  is
               adequate. While management uses available information to estimate
               losses  on  loans,  future  additions  to the  allowances  may be
               necessary based on changes in economic  conditions,  particularly
               in  the  State  of  Maryland.  In  addition,  various  regulatory
               agencies,  as an  integral  part of  their  examination  process,
               periodically  review the Bank's  allowances  for losses on loans.
               Such agencies may require the Bank to recognize  additions to the
               allowances based on their judgments about  information  available
               to them at the time of their examination.

               Accrual of interest  is  discontinued  on a loan when  management
               believes,  after considering economic and business conditions and
               collection  efforts,  that the borrower's  financial condition is
               such that  collection  of interest is doubtful or when payment of
               principal and interest has become ninety days past due unless the
               obligation is well secured and in the process of collection. When
               a payment is received on a loan on non-accrual status, the amount
               received is  allocated to  principal  and interest in  accordance
               with the contractual terms of the loan.

                                      F-9
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------

          G.   Loan origination  fees and certain direct loan origination  costs
               are  deferred  and  recognized  by the  interest  method over the
               contractual life of the related loan as an adjustment of yield.

          H.   Foreclosed Real Estate - Real estate acquired through foreclosure
               is  recorded  at the  lower  of cost or  fair  value.  Management
               periodically  evaluates the  recoverability of the carrying value
               of the real estate acquired through  foreclosure  using estimates
               as described above in Allowance for Loan Losses.  In the event of
               a subsequent decline, management provides an additional allowance
               to reduce real estate  acquired  through  foreclosure to its fair
               value less  estimated  disposal  cost.  Costs relating to holding
               such real estate are charged against income in the current period
               while  costs   relating  to   improving   such  real  estate  are
               capitalized until a saleable condition is reached.

          I.   Investment in Real Estate Development and Loans to Joint Ventures
               - Land  development  costs not in excess of net realizable  value
               are  capitalized and charged to expense as revenue is recognized.
               Revenues  are  recognized  when  a  sale  has  been  consummated.
               Indirect  costs  and  administrative   expenses  are  charged  as
               incurred  to  periodic  income  and  are  not  allocated  to land
               development   costs.  The  Bank  capitalizes   interest  on  land
               development  projects  in  accordance  with  Statement  34 of the
               Financial Accounting Standards Board. No interest was capitalized
               for the years ended September 30, 2001 and 2000.

          J.   Premises and  Equipment - Premises and  equipment are recorded at
               cost. Depreciation is computed on the straight-line method, based
               on the useful lives of the respective assets.

          K.   Income Taxes - Deferred income taxes are recognized for temporary
               differences  between the financial reporting basis and income tax
               basis of  assets  and  liabilities  based on  enacted  tax  rates
               expected  to be in  effect  when such  amounts  are  realized  or
               settled.  Deferred tax assets are  recognized  only to the extent
               that is more likely than not that such  amounts  will be realized
               based on  consideration  of  available  evidence.  The  effect on
               deferred tax assets and  liabilities  of a change in tax rates is
               recognized  in income in the period that  includes the  enactment
               date.


                                      F-10
<PAGE>

BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------

          L.   Earnings  Per  Share - The Bank  computes  earnings  per share in
               accordance with Statement of Financial  Accounting  Standards No.
               128.  This  Statement  requires  dual  presentation  of basic and
               diluted earnings per share ("EPS") with a  reconciliation  of the
               numerator  and  denominator  of the EPS  computations.  Basic per
               share amounts are based on the weighted  average shares of common
               stock   outstanding.   Diluted  earnings  per  share  assume  the
               conversion,  exercise or issuance of all  potential  common stock
               instruments such as options, warrants and convertible securities,
               unless the effect is to reduce a loss or  increase  earnings  per
               share. No adjustments  were made to net income  (numerator).  The
               basic and diluted  weighted  average shares  outstanding  for the
               years ended September 30, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                                                                          2001
                                                                       ------------------------------------------
                                                                          Income          Shares        Per Share
                                                                       (Numerator)    (Denominator)      Amount
                                                                       -----------    -------------     ---------
                <S>                                                     <C>             <C>              <C>
                Basic EPS
                ---------
                   Income available to share holders                    $104,765        5,555,939        $ 0.02
                                                                                                         ======
                Diluted EPS
                -----------
                   Effect of dilutive shares                                 --           120,635
                                                                        --------       ----------
                   Income available to shareholders
                    plus assumed conversions                            $104,765        5,676,574        $ 0.02
                                                                        ========       ==========        ======
<CAPTION>


                                                                                                2000
                                                                       ------------------------------------------
                <S>                                                     <C>             <C>              <C>
                Basic EPS
                ---------
                   Income available to share holders                    $686,764        5,637,180        $ 0.12
                                                                                                         ======
                Diluted EPS
                -----------
                   Effect of dilutive shares                                 --           106,612
                                                                        --------       ----------
                   Income available to shareholders
                    plus assumed conversions                            $686,764        5,743,792        $ 0.12
                                                                        ========       ==========        ======
</TABLE>

                                      F-11
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 1 - Summary of Significant Accounting Policies - Continued
         ------------------------------------------

          M.   Statement of Cash Flows - In the  statement  of cash flows,  cash
               and equivalents  include cash,  Federal Home Loan Bank of Atlanta
               overnight deposits, federal funds and certificates of deposit and
               Federal Home Loan Bank of Atlanta time  deposits with an original
               maturity date less than ninety days.

          N.   Employee  Stock  Ownership  Plan -The  Company  accounts  for its
               Employee  Stock   Ownership  Plan  ("ESOP")  in  accordance  with
               Statement of Position 93-6 of the Accounting  Standards  Division
               of the American Institute of Certified Public  Accountants.  (See
               Note 12)

          O.   All advertising costs are expensed as incurred.

          P.   Reclassification  and  Restatement - Certain prior years' amounts
               have been reclassified to conform to the current year's method of
               presentation.

Note 2 - Investment Securities
         ---------------------

               The  amortized cost and fair values of investment  securities are
          as follows as of September 30, 2001 and 2000.
<TABLE>
<CAPTION>
                                                                       Gross       Gross
                                                     Amortized       Unrealized   Unrealized     Fair
                                                        Cost           Gains       Losses       Value
                                                     -----------      --------   ----------     -----
<S>                                                  <C>              <C>         <C>         <C>
    Available for Sale:

    September 30, 2001
      U.S. Government and Agency
       Obligations, available for sale               $14,404,373      $352,368    $    --     $14,756,741
      Equity investments in Mutual
       Funds, available for sale                       9,184,703        27,196         --       9,211,899
                                                     -----------      --------    -------     -----------
                                                     $23,589,076      $379,564    $    --     $23,968,640
                                                     ===========      ========    =======     ===========
    Held to Maturity:

    September 30, 2001
      U.S. Government and Agency
       Obligations, held to maturity                 $18,494,349      $237,718    $    --     $18,732,067
                                                     ===========      ========    =======     ===========
</TABLE>


                                      F-12
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 2 - Investment Securities - Continued
         ---------------------
<TABLE>
<CAPTION>
                                                                       Gross       Gross
                                                     Amortized       Unrealized   Unrealized     Fair
                                                        Cost           Gains       Losses       Value
                                                     -----------      --------   ----------     -----
<S>                                                  <C>              <C>         <C>          <C>
           Held to Maturity:

           September 30, 2000
             U.S. Government and
              Agency Obligations,
              held to maturity                       $41,158,120     $14,008     $815,838      $40,356,290
                                                     ===========     =======     ========      ===========
</TABLE>

     The following is a summary of investment securities:
<TABLE>
<CAPTION>
                                                                                   September 30, 2001
                                                                            -------------------------------------
                                                                             Amortized                 Fair
                                                                               Cost                    Value
                                                                             ---------               ---------
           <S>                                                               <C>                     <C>
           Available for Sale:

           U.S. Government and Agency Obligations
           --------------------------------------
              Due within 12 months                                           $         --            $        --
              Due beyond 12 months but
                within five years                                                 999,471              1,038,531
              Due beyond five years but
                within ten years                                               11,493,914             11,784,749
              Due beyond ten years                                              1,910,988              1,933,461
              Equity investments in mutual funds                                9,184,703              9,211,899
                                                                             ------------            -----------

                                                                             $$23,589,076            $23,968,640
                                                                             ============            ===========
</TABLE>

                                      F-13
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 2 - Investment Securities - Continued
         ---------------------
<TABLE>
<CAPTION>
                                                September 30, 2001         September 30, 2000
                                            ----------------------       ----------------------
                                              Amortized      Fair         Amortized       Fair
                                                Cost         Value           Cost         Value
                                            -----------      -----       -----------      -----
<S>                                         <C>           <C>           <C>           <C>
Held to Maturity:

U.S. Government and Agency Obligations
--------------------------------------
  Due within 12 months                      $        --   $        --   $   750,000   $   747,669
  Due beyond 12 months but
   within five years                          4,498,680     4,563,455    28,636,269    28,122,424
  Due beyond five years but
   within ten years                          12,496,110    12,653,535    11,021,851    10,786,979
  Due beyond ten years                        1,499,599     1,515,077       750,000       699,218
                                            -----------   -----------   -----------   -----------

                                            $18,494,349   $18,732,067   $41,158,120   $40,356,290
                                            ===========   ===========   ===========   ===========
</TABLE>

               Proceeds  from  maturities and  redemptions of available for sale
          securities  during the year ended September 30, 2001 were  $1,155,656.
          There  were no  gross  gains or  losses  realized  for the year  ended
          September 30, 2001.

               Proceeds  from  maturities  of held to maturity  securities  were
          $53,800,000  and $1,050,000 for the years ended September 30, 2001 and
          2000,  respectively.  There were no gross gains or losses realized for
          the years ended September 30, 2001 and 2000.


                                      F-14
<PAGE>

BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 3 - Loans Receivable
         ----------------

               Loans  receivable  at September  30, 2001 and 2000 consist of the
          following:
<TABLE>
<CAPTION>
                                                                                            September 30,
                                                                                ----------------------------------
                                                                                    2001                  2000
                                                                                    ----                  ----
              <S>                                                               <C>                   <C>
              Single-family residential mortgages                               $165,028,058          $152,469,353
              Single-family rental property loans                                  7,580,775             5,079,532
              Commercial real estate loans                                        15,068,080            13,648,781
              Construction loans                                                   8,708,710             5,905,435
              Commercial loans secured                                             2,587,966             1,474,545
              Commercial lease loans                                               1,308,097                    --
              Commercial lines of credit                                             400,620                44,000
              Automobile loans                                                    72,821,631            67,851,872
              Home equity loans                                                    8,934,728             8,146,879
              Other consumer loans                                                 2,394,511             1,976,802
                                                                                ------------          ------------
                                                                                 284,833,176           256,597,199

                   Less - undisbursed portion of loans in process                  4,433,734             3,849,592
                            - unearned interest                                   10,683,706             9,610,077
                            - deferred loan origination fees and costs               142,691               214,804
                            - allowance for loan losses                            1,562,995             1,402,911
                                                                                ------------          ------------

                                                                                $268,010,050          $241,519,815
                                                                                ============          ============
</TABLE>

                   The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
                                                                                            September 30,
                                                                                -------------------------------
                                                                                    2001                2000
                                                                                    ----                ----
              <S>                                                               <C>                  <C>
              Balance - beginning of year                                       $1,402,911           $1,272,731
              Provision for losses on loans                                        332,341              161,646
              Charge-offs                                                         (344,014)            (208,019)
              Recoveries                                                           171,757              176,553
                                                                                ----------           ----------

              Balance - end of year                                             $1,562,995           $1,402,911
                                                                                ==========           ==========
</TABLE>


                                      F-15
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 3 - Loans Receivable - Continued
         ----------------

               Residential  lending is generally considered to involve less risk
          than other  forms of lending,  although  payment  experience  on these
          loans is dependent to some extent on economic and market conditions in
          the  Bank's  lending  area.   Multifamily   residential,   commercial,
          construction and other loan repayments are generally  dependent on the
          operations of the related properties or the financial condition of its
          borrower or  guarantor.  Accordingly,  repayment  of such loans can be
          more  susceptible to adverse  conditions in the real estate market and
          the regional economy.

               A significant portion of the Bank's loans receivable are mortgage
          loans secured by  residential  and commercial  real estate  properties
          located  in the State of  Maryland.  Loans  are  extended  only  after
          evaluation  by management  of  customers'  creditworthiness  and other
          relevant factors on a case-by-case  basis. The Bank generally does not
          lend more than 90% of the  appraised  value of a property and requires
          private mortgage insurance on residential mortgages with loan-to-value
          ratios in excess  of 80%.  In  addition,  the Bank  generally  obtains
          personal  guarantees  of repayment  from  borrowers  and/or others for
          multifamily   residential,   commercial  and  construction  loans  and
          disburses the proceeds of construction  and similar loans only as work
          progresses on the related  projects.  Automobile  loans are secured by
          vehicles and home equity loans are secured by subordinated real estate
          properties.  Repayments of automobile  loans and home equity loans are
          expected primarily from the cash flows of the borrowers.

               Non-accrual  loans for which  interest has been  reduced  totaled
          approximately  $238,942 and  $382,539 at September  30, 2001 and 2000,
          respectively.  There were no impaired loans as defined by SFAS No. 114
          at  September  30,  2001  and  2000.  There  was  no  interest  income
          recognized on impaired  loans during these  periods.  The Bank was not
          committed to fund additional amounts on these loans.

               Interest  income that would have been recorded under the original
          terms of non-accrual  loans and the interest  actually  recognized for
          the years ended September 30, are summarized below:
<TABLE>
<CAPTION>
                                                                        September 30,
                                                                    ---------------------
                                                                     2001          2000
                                                                     ----          ----
           <S>                                                      <C>           <C>
           Interest income that would have been recognized          $20,415       $31,327
           Interest income recognized                                 9,591        28,593
                                                                    -------       -------

              Interest income not recognized                        $10,824       $ 2,734
                                                                    =======       =======
</TABLE>

                                      F-16
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 3 - Loans Receivable - Continued
         ----------------

               The  following  table set forth the  amount and  activity  of the
          loans  outstanding to officers and directors at September 30, 2001 and
          2000.
<TABLE>
<CAPTION>
                                                                        September 30,
                                                                    -----------------------
                                                                     2001            2000
                                                                     ----            ----
              <S>                                                    <C>          <C>
              Beginning balance                                      $350,828     $ 416,202
              New loans                                               402,278       110,886
              Loan repayments                                         (52,020)     (176,260)
                                                                     --------     ---------

              Ending balance                                         $701,086     $ 350,828
                                                                     ========     =========
</TABLE>

               The  Bank  services  loans for  others.  The amount of such loans
          serviced at September 30, 2001 and 2000 was $4,980,011 and $2,906,435,
          respectively.  At  September  30, 2001 and 2000,  the balance of loans
          sold by the Bank with  recourse  amounted  to $363,493  and  $428,645,
          respectively.

               Custodial  escrow  balances  maintained  in  connection  with the
          foregoing loan  servicings were  approximately  $41,718 and $35,909 at
          September 30, 2001 and 2000, respectively.

               The   Bank   is   a   party   to   financial   instruments   with
          off-balance-sheet  risk made in the normal  course of business to meet
          the financing needs of its customers.  These financial instruments are
          standby  letters of credit,  lines of credit and  commitments  to fund
          mortgage loans and involve to varying degrees  elements of credit risk
          in excess of the  amount  recognized  in the  statement  of  financial
          position. The contract amounts of those instruments express the extent
          of involvement the Bank has in this class of financial instruments and
          represents the Bank's exposure to credit loss from  nonperformance  by
          the other party.

               Unless noted otherwise,  the Bank does not require  collateral or
          other security to support financial instruments with off-balance-sheet
          credit risk.
<TABLE>
<CAPTION>
                                                                                     Contract Amount At
           Financial Instruments Whose Contract                        ---------------------------------------------
             Amounts Represent Credit Risk                             September 30, 2001         September 30, 2000
           -----------------------------------------                   ------------------         ------------------
              <S>                                                        <C>                      <C>
              Standby letters of credit                                  $    68,681              $   219,300
              Commercial lines of credit                                 $ 1,030,000              $    50,000
              Home equity lines of credit                                $21,748,800              $20,076,800
              Mortgage loan commitments, fixed rate                      $ 4,844,900              $ 1,005,100
              Mortgage loan commitments, variable rate                   $   251,000              $   100,000
</TABLE>

                                      F-17
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 3 - Loans Receivable - Continued
         ---------------

              Standby  letters of credit are conditional  commitments  issued by
          the Bank  guaranteeing  performance  by a customer  to a third  party.
          Those  guarantees are issued  primarily to support  private  borrowing
          arrangements,  generally limited to real estate  transactions.  Unless
          otherwise noted, the standby letters of credit are not collateralized.
          The credit risk involved in issuing  letters of credit is  essentially
          the same as that involved in extending loan facilities to customers.

               Home  equity and commercial  lines of credit are loan commitments
          to individuals and companies and have fixed  expiration  dates as long
          as there is no violation of any condition established in the contract.
          The Bank evaluates each customer's credit worthiness on a case-by-case
          basis.

               Rates  on mortgage loan  commitments  for fixed rate loans ranged
          from  6.25% to 7.75% and  7.375% to 9.00% at  September  31,  2001 and
          2000,  respectively.  Rates on mortgage loan  commitments for variable
          rate loans  ranged  from .25% under  prime to prime at  September  30,
          2001.

               No amount was  recognized in the statement of financial  position
          at September  30, 2001 and 2000,  as liability for credit loss nor was
          any  liability  recognized  for fees  received for standby  letters of
          credit.

               The Bank grants loans to customers, substantially all of whom are
          residents of the Metropolitan Baltimore and Harford County areas.

Note 4 - Mortgage Backed Securities
         --------------------------

              The  amortized cost and fair values of mortgage backed  securities
          are as follows as of September 30, 2001 and 2000:
<TABLE>
<CAPTION>
                                                                         Gross            Gross
                                                    Amortized          Unrealized       Unrealized           Fair
                                                       Cost              Gains            Losses             Value
                                                    ---------          ----------       -----------          -----
              <S>                                   <C>                  <C>              <C>                <C>
              Available for Sale:

              September 30, 2001
              ------------------
                 FNMA certificates                  $ 9,767,737         $  83,518      $  (2,130)         $ 9,849,125
                 FHLMC participating
                  certificates                        1,594,303                --         (1,643)           1,592,660
                                                    -----------         ---------      ---------          -----------
                                                    $11,362,040         $  83,518      $  (3,773)         $11,441,785
                                                    ===========         =========      =========          ===========
</TABLE>

                                      F-18
<PAGE>

BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 4 - Mortgage Backed Securities - Continued
         --------------------------
<TABLE>
<CAPTION>
                                                                         Gross            Gross
                                                    Amortized          Unrealized       Unrealized           Fair
                                                       Cost              Gains            Losses             Value
                                                    ---------          ----------       -----------          -----
              <S>                                   <C>                  <C>              <C>                <C>
              Held to Maturity:

              September 30, 2001
              ------------------
                 GNMA certificates                  $  6,692,193          $181,561      $        --         $  6,873,754
                 FNMA certificates                    20,698,414           360,497          (25,447)          21,033,464
                 FHLMC participating
                   certificates                       14,264,432           341,876           (8,716)          14,597,592
                                                    ------------          --------      -----------          -----------
                                                    $ 41,655,039          $883,934      $   (34,163)         $42,504,810
                                                    ============          ========      ===========          ===========
              September 30, 2000
              ------------------
                 GNMA certificates                  $  2,513,241          $ 11,873      $    25,753          $ 2,499,361
                 FNMA certificates                    11,763,732             7,247           97,501           11,673,478
                 FHLMC participating
                   certificates                        5,547,179            31,911           46,534            5,532,556
                                                    ------------          --------      -----------          -----------
                                                    $ 19,824,152          $ 51,031      $   169,788          $19,705,395
                                                    ============          ========      ===========          ===========
</TABLE>

               No gains or losses were realized during the years ended September
          30, 2001 and 2000, respectively.

Note 5 - Foreclosed Real Estate
         ----------------------

               Foreclosed  real  estate  at  September  30,  2001  and  2000  is
          summarized by major classification as follows:
<TABLE>
<CAPTION>
                                                                        September 30,
                                                                 --------------------------
                                                                   2001              2000
                                                                   ----              ----
              <S>                                                <C>                <C>
              EPIC loans                                         $50,822            $50,822
              Residential real estate                             80,569             50,000
              Allowance for losses                               (50,822)           (50,822)
                                                                 -------            -------
                                                                 $80,569            $50,000
                                                                 =======            =======
</TABLE>
               The  allowance for losses on foreclosed real estate is $50,822 at
          September  30, 2001 and 2000.  There was no provision  for loan losses
          during the years ended September 30, 2001 and 2000.

                                      F-19
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

Note 6 - Investment in Real Estate Development and Loans to Joint Ventures
         -----------------------------------------------------------------

               The  subsidiary  is a party  to a joint  venture  formed  for the
          purpose of developing lots for resale.  The  subsidiary's  interest in
          the profits or losses of the joint  venture is 20%. The joint  venture
          closed during the year ended September 30, 2000.

               During  the period ended  September  30,  2000,  the Bank made no
          acquisition,  development and construction  loans to the joint venture
          mentioned above. There was no provision for or allowance for losses on
          loans to the joint venture during the year ended September 30, 2000.

               Gain from real estate development and joint ventures consisted of
          a cash payment of $5,082.

Note 7 - Premises and Equipment
         ----------------------

               Premises  and  equipment  at  September  30,  2001  and  2000 are
          summarized by major classification as follows:
<TABLE>
<CAPTION>
                                                                                   September 30,
                                                                            -------------------------------
                                                                                2001               2000        Life
                                                                                ----               ----        ----
           <S>                                                              <C>                  <C>             <C>
           Office building                                                  $  4,569,884         $ 4,476,470     50 Years
           Leasehold improvements                                                660,563             282,127   7-31 Years
           Furniture, fixtures and equipment                                   6,237,430           5,695,079     10 Years
                                                                            ------------         -----------
                                                                              11,467,877          10,453,676
                   Accumulated depreciation                                    4,493,062           3,744,081
                                                                            ------------         -----------
                                                                            $  6,974,815         $ 6,709,595
                                                                            ============         ===========
</TABLE>
               The Bank has entered into long-term  leases for the land on which
          the main  office is located and the  premises  of its branch  offices.
          Rental expense under long-term leases for property for the years ended
          September 30, 2001 and 2000 was $641,512 and  $535,106,  respectively.
          At September 30, 2001, minimum rental commitments under noncancellable
          leases are as follows:

                   Years Ended September 30,                      Amount
                   -------------------------                     ------
                          2002                                 $  649,563
                          2003                                    635,989
                          2004                                    561,708
                          2005                                    568,618
                       After 2005                               3,758,141
                                                               ----------
                                                               $6,174,019
                                                               ==========
                                      F-20
<PAGE>

BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 8 - Deposits
         --------

               Deposits  are  summarized  as follows at  September  30, 2001 and
          2000:
<TABLE>
<CAPTION>
                                                                    2001                             2000
                                                         ------------------------        --------------------------
                                                            Amount          %              Amount             %
                                                            ------         ----            ------            ---
       <S>                                               <C>                <C>           <C>                 <C>
       Type of Account
           Deposits
           --------
             NOW                                         $ 22,116,378       6.79%         $ 20,106,386        7.48%
             Non-interest bearing NOW                      11,922,207       3.66            10,418,364        3.87
             Money market                                   6,654,056       2.04             7,333,022        2.73
             Passbook savings                              60,943,874      18.71            57,278,818       21.30
             Certificates                                 223,944,072      68.74           173,182,377       64.41
                                                         ------------     ------          ------------     -------
                                                          325,580,587      99.94           268,318,967       99.79
             Accrued interest payable                         204,951        .06               562,637         .21
                                                         ------------     ------          ------------      ------
                                                         $325,785,538     100.00%         $268,881,604      100.00%
                                                         ============     ======          ============      ======
</TABLE>

               The  aggregate  amount of jumbo  certificates  of deposit  with a
          minimum  denomination  of $100,000 was  approximately  $46,272,000 and
          $23,958,000 at September 30, 2001 and 2000, respectively.  Deposits in
          excess  of  $100,000  are  not  insured  by  the  Savings  Association
          Insurance Fund.

               At  September 30, 2001,  scheduled  maturities of certificates of
          deposit are as follows:

                    2002                                   $148,717,829
                    2003                                     34,254,848
                    2004                                      8,122,574
                    2005                                     24,724,677
                    2006 and thereafter                       8,124,144
                                                           ------------
                                                           $223,944,072
                                                           ============

                                      F-21
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

Note 8 - Deposits - Continued
         --------

               Interest  expense on deposits for the years ended  September  30,
          2001 and 2000 is as follows:
<TABLE>
<CAPTION>
                                                  2001                  2000
                                                  ----                  ----
<S>                                             <C>                  <C>
NOW                                             $   339,812          $   450,413
Money market                                        176,425              246,132
Passbooks savings                                 1,486,437            1,984,232
Certificates                                     11,782,531            8,185,780
                                                -----------          -----------
                                                $13,785,205          $10,866,557
                                                ===========          ===========
</TABLE>

Note 9 - Federal Home Loan Bank of Atlanta Advances
         ------------------------------------------

               The  Bank has the  following  outstanding  Federal Home Loan Bank
          advances as of September 30:
<TABLE>
<CAPTION>
                                                       2001                           2000
                                           -----------------------------    ---------------------------
                   Due                          Rate           Total           Rate           Total
                   ---                          ----           -----           ----           -----
             <S>                           <C>              <C>             <C>            <C>
             Less than one year            3.76% - 4.22%    $  8,800,000    5.86% - 6.74%  $  6,500,000
             One to two years              3.70% - 6.41%       7,000,000    6.41% - 7.48%     3,000,000
             Beyond two years              6.60% - 7.48%       2,000,000                             --
                                                             -----------                   ------------
             Total borrowings                                $17,800,000                   $  9,500,000
                                                             ===========                   ============
</TABLE>

              The  Bank has a line of credit with the Federal  Home Loan Bank of
          Atlanta  equal  to 11% of the  Bank's  assets,  secured  by a  blanket
          floating  lien on  mortgage  loans  receivable.  The  line  of  credit
          requires no compensating balances.

Note 10- Pension Plan
         ------------

               The Bank has a  noncontributory,  defined  contribution,  pension
          plan covering substantially all employees. It is a money purchase plan
          with  contributions made each year for every participant in accordance
          with actuarial recommended formula. There is no past service liability
          or unfunded value of vested benefits as of December 20, 2000, the date
          of latest available annual review and valuation of the plan.

               The  expense  for the  pension  plan  amounted  to  $267,800  and
          $221,912   for  the  years   ended   September   30,  2001  and  2000,
          respectively.

                                      F-22
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 11- Directors Retirement Plan
         -------------------------

              The  Directors  Retirement  Plan consists of a Rabbi Trust that is
          invested  primarily in the Company's stock.  Compensation  expense was
          increased  by  $431,827  for  the  year  ended   September  30,  2001,
          principally because of the increase in the value of shares held in the
          Rabbi Trust.  Compensation expense was reduced by $75,099 for the year
          ended September 30, 2000, principally because of a decline in value of
          shares held in the Rabbi Trust.

Note 12- Common Stock
         ------------

               In 1998, the Bank reorganized  from a federally  chartered mutual
          savings   bank  to  a  federally   chartered   stock   savings   bank.
          Simultaneously,  the Bank  consummated  the formation of a new holding
          company,  BCSB Bankcorp,  Inc. Also  simultaneously,  a mutual holding
          company  was  formed,   Baltimore  County  Savings  Bank,   M.H.C.  In
          connection  with the  reorganization,  the  Company  issued  6,116,562
          shares of its  common  stock.  A  majority  of that  stock  (3,754,960
          shares)  was issued to  Baltimore  County  Savings  Bank,  M.H.C.  The
          remainder was issued to the general public. Also, the Bank established
          the  Baltimore  County  Savings  Bank,  F.S.B.  Foundation  through  a
          contribution of 75,000 shares of its common stock.

               At the same time as the  reorganization,  the Bank established an
          Employee Stock  Ownership Plan ("ESOP") for its employees.  On July 8,
          1998 the ESOP acquired 182,928 shares of the Company's common stock in
          connection with the Bank's  Reorganization to a mutual holding company
          form of  organization.  The ESOP holds the common stock in a trust for
          allocation among participating employees, in trust or allocated to the
          participants' accounts and an annual contribution from the Bank to the
          ESOP and earnings thereon.

               All  employees  of the Bank who attain the age of 18 and complete
          one year of service with the Bank will be eligible to  participate  in
          the ESOP.  Participants  must be employed at least 500 hours in a plan
          year in order to  receive an  allocation.  Each  participant's  vested
          interest  under  the ESOP is  determined  according  to the  following
          schedule:  0% for less than 2 years of service with the Company or the
          Bank, 20% for 2 years of service,  40% for 3 years of service, 60% for
          4 years of service,  80% for 5 years of service,  and 100% for 6 years
          of service.  For vesting  purposes,  a year of service  means any plan
          year in which an  employee  completes  at least 1,000 hours of service
          (whether  before or after the ESOP's January 1, 1998 effective  date).
          Vesting accelerates to 100% upon a participant's attainment of age 65,
          death or disability.


                                      F-23
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 12- Common Stock - Continued
         ------------

               The ESOP will be funded by contributions made by the Bank in cash
          or common  stock and  dividends  on the shares held in the Trust.  The
          Bank will recognize  compensation  expense as shares are committed for
          release from  collateral at their current  market price.  Dividends on
          allocated shares are recorded as a reduction of retained  earnings and
          dividends  on  unallocated  shares are  recorded as a reduction of the
          debt service. The compensation costs for the years ended September 30,
          2001 and 2000 were $159,858 and $138,724, respectively.

               The ESOP shares were as follows as of September 30:
<TABLE>
<CAPTION>

                                                              2001         2000
                                                              ----         ----
                         <S>                             <C>          <C>
                         Shares released and allocated       68,599       50,306
                         Unearned shares                    114,331      132,624
                                                         ----------   ----------
                                                            182,930      182,930
                                                         ==========   ==========

                         Fair value of unearned shares   $1,171,893   $  820,611
                                                         ==========   ==========
</TABLE>

               All ESOP shares contain a "Put Option" which requires the Company
          to  repurchase  the share at the then fair market value subject to the
          availability of retained  earnings.  The "Put Option" may be exercised
          within 60 days of  distribution of the shares and then again within 60
          days after the fair market value  determination  date of the next plan
          year. The current fair market value of shares that have been allocated
          contain a "Put Option" of $703,140.

Note 13- Management Recognition Plan
         ---------------------------

               On July 15, 1999, the Bank  established a Management  Recognition
          Plan  ("MRP") to retain  personnel  of  experience  and ability in key
          positions of  responsibility.  Members of the Board of  Directors  and
          certain executive  officers may be awarded a total of 91,464 shares of
          stock,  which will be held in a separate  trust that  manages the MRP.
          The Bank  funded the MRP during the year ended  September  30, 1999 by
          purchasing  87,000  shares of common stock in the open market.  During
          the year ended  September 30, 2000,  the  remaining  4,464 shares were
          purchased. The Bank initially awarded an aggregate of 45,600 shares of
          common stock and intends to reserve the  remaining  45,864  shares for
          possible future awards.  Shares awarded to the participants in the MRP
          vest at a rate of 25% per year on each anniversary of the



                                      F-24
<PAGE>

BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 13- Management Recognition Plan - Continued
         ---------------------------

          effective  date of the MRP. As of September  30, 2001,  22,800  shares
          have vested. If a participant  terminates employment for reasons other
          than  death,  disability,  change in control or  retirement  he or she
          forfeits  all  rights to  unvested  shares.  Compensation  expense  of
          $89,780  and  $89,775  was  recognized  for the MRP for the year ended
          September 30, 2001 and 2000, respectively.

Note 14- Stock Option Plan
         -----------------

               The  Company has a Stock Option Plan (the "Plan") whereby 228,660
          shares of common stock have been reserved for issuance under the Plan.
          Options  granted under the Plan may be Incentive  Stock Options within
          the meaning of Section  422 of the  Internal  Revenue  Code of 1986 as
          amended or  Non-Incentive  Stock Options.  Options are  exercisable in
          four annual  installments  at the market  price of common stock at the
          date of grant. The Options must be exercised within ten years from the
          date of grant. No options were granted during the year ended September
          30, 2001 and 2000.

               The  following table  summarizes the status of and changes in the
          Company's stock option plan during the past two years.
<TABLE>
<CAPTION>
                                                               Weighted Average
                                                    Shares     Exercise Price
                                                    ------     --------------

         <S>                                        <C>           <C>
         Outstanding at September 30, 1999          80,000        $8.00
         Granted                                      --
                                                    -----
         Outstanding at September 30, 2000          80,000        $8.00
                                                    =====

         Exercisable at September 30, 2000          20,000        $8.00
                                                    =====

         Exercisable at September 30, 2001          40,000        $8.00
                                                    =====
</TABLE>

                                      F-25
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

Note 14- Stock Option Plan - Continued
         -----------------

               SFAS No. 123, "Accounting for Stock-Based Compensation", requires
          the Company to make certain disclosures as if the fair value method of
          accounting had been applied to the Company's  stock option grants made
          subsequent to 1994. Accordingly,  the Company estimated the grant date
          fair  value  of  each   option   awarded  in  fiscal  1999  using  the
          Black-Scholes   Option-Pricing   model  with  the  following  relevant
          assumptions: dividend yield of 6.25%, risk-free interest rate of 5.72%
          and expected lives of 10 years. The assumption for expected volatility
          was  31.55%.  Had 2001  and 2000  compensation  cost  been  determined
          including the  weighted-average  estimate of fair value of each option
          granted  of $1.62,  the  Company's  net  income  would be  reduced  to
          proforma  amount  of  $84,880  and  $666,877,  respectively.  Proforma
          earnings,  basic and diluted, per share would have been $.02 and $.01,
          respectively, in fiscal 2001 and $.12 in fiscal 2000.

Note 15- Retained Earnings
         -----------------

               The Bank is subject to various  regulatory  capital  requirements
          administered by the federal banking agencies.  Failure to meet minimum
          capital  requirements  can initiate  certain  mandatory,  and possible
          additional   discretionary,   actions  by  the  regulators   that,  if
          undertaken,  could  have  a  direct  material  effect  on  the  Bank's
          financial  statements.  Under  capital  adequacy  guidelines  and  the
          regulatory  framework for prompt corrective action, the Bank must meet
          specific capital guidelines that involve quantitative  measures of the
          Bank's assets,  liabilities,  and certain  off-balance  sheet items as
          calculated under regulatory accounting  practices.  The Bank's capital
          amounts and classifications are also subject to qualitative  judgments
          by  the  regulators  about  components,  risk  weightings,  and  other
          factors.

               Quantitative measures established by regulation to ensure capital
          adequacy  require the Bank to maintain minimum amounts and ratios (set
          forth in the table  below) of total and Tier I capital  (as defined in
          the regulations) and risk-weighted assets (as defined),  and of Tier I
          capital  (as  defined)  to  average  assets (as  defined).  Management
          believes,  as of September  30, 2001,  that the Bank meets all capital
          adequacy requirements to which it is subject.

               As of September 30, 2001, the most recent  notification  from the
          Office of Thrift Supervision  categorized the Bank as well capitalized
          under the regulatory  framework for prompt  corrective  action.  To be
          categorized as well  capitalized the Bank must maintain  minimum total
          risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
          in  the  table.   There  are  no   conditions  or  events  since  that
          notification   that  management   believes  have  changed  the  Bank's
          category.  The  Bank's  actual  capital  amounts  and  ratios are also
          presented in the table.

                                      F-26
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

Note 15- Retained Earnings - Continued
         -----------------

               The following table presents the Bank's capital position based on
          the  September  30  financial   statements  and  the  current  capital
          requirements.
<TABLE>
<CAPTION>
                                                                                         To Be Well Capitalized
                                                                   For Capital            Under Prompt Corrective
                                         Actual                  Adequacy Purposes          Action Provisions
                                 -----------------------        --------------------    --------------------------
                                 Actual          % of           Required       % of       Required         % of
                                 Amount           Assets         Amount       Assets      Amount           Assets
                                 ------           ------        --------      ------      --------         ------
       <S>                       <C>               <C>          <C>            <C>        <C>              <C>
       September 30, 2001
       ------------------
       Tangible (1)              $31,703,963       8.3%         $ 5,760,957    1.5%       $   N/A           N/A %
       Tier I capital (2)         31,703,963      14.1              N/A        N/A         13,457,700       6.0
       Core (1)                   31,703,963       8.3           15,362,551    4.0         19,203,189       5.0
       Risk-weighted (2)          33,266,957      14.8           17,943,600    8.0         22,429,500      10.0

       September 30, 2000
       ------------------
       Tangible (1)              $33,822,029      10.6%         $ 4,782,513    1.5%       $   N/A           N/A%
       Tier I capital (2)         33,822,029      16.8              N/A        N/A         12,098,760       6.0
       Core (1)                   33,822,029      10.6           12,753,367    4.0         15,941,709       5.0
       Risk-weighted (2)          35,224,940      17.5           16,131,680    8.0         20,164,600      10.0

              (1)  To adjusted total assets.
              (2)  To risk-weighted assets.
</TABLE>

               The OTS has adopted an interest rate risk component of regulatory
          capital  requirements  effective  January 1, 1994.  The rule  requires
          additional  capital to be maintained if the Bank's  interest rate risk
          exposure,  measured by the  decline in the market  value of the Bank's
          net portfolio  value,  exceeds 2% of assets as a result of a 200 basis
          point shift in interest  rates.  As of September 30, 2001, the Bank is
          not subject to the interest rate risk requirement.

               OTS  regulations limit the payment of dividends and other capital
          distributions  by the Bank. The Bank is able to pay dividends during a
          calendar year without regulatory approval to the extent of the greater
          of (i) an amount  which will  reduce by one-half  its surplus  capital
          ratio at the beginning of the year plus all its net income  determined
          on the basis of  generally  accepted  accounting  principles  for that
          calendar  year or (ii) 75% of net  income  for the last four  calendar
          quarters.

                                      F-27
<PAGE>
BCSB BANKCORP, INC.
------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 15- Retained Earnings - Continued
         ----------------

               The Bank is  restricted  in paying  dividends on its stock to the
          greater of the restrictions  described in the preceding paragraph,  or
          an amount that would reduce its retained earnings below its regulatory
          capital requirement or the accumulated bad debt deduction.

Note 16- Income Taxes
         ------------

              The current tax provision  consists of the following for the years
          ended September 30, 2001 and 2000:
<TABLE>
<CAPTION>
                                                           2001           2000
                                                           ----           ----
              <S>                                        <C>            <C>
              Current expense                            $335,037       $254,151
              Deferred (benefit) expense                 (255,747)       183,471
                                                         --------       --------
                 Total tax expense                       $ 79,290       $437,622
                                                         ========       ========
</TABLE>
               The  tax  effects  to  temporary  differences  that  give rise to
          significant  portions  of the  deferred  tax assets and  deferred  tax
          liabilities at September 30, 2001 and 2000 are as follows:
<TABLE>
<CAPTION>
                                                                    2001                 2000
                                                                    ----                 ----
              <S>                                                <C>                  <C>
              Deferred Tax Assets:
                Charitable deduction carryforward                $  42,765            $  60,173
                ESOP and MRP                                        39,515               39,515
                Market value change in Rabbi Trust assets           45,845                   --
                Allowance for loan losses                          603,628              541,803
                Allowance for uncollected interest                  24,307               24,307
                                                                  --------            ---------
                    Total gross deferred tax assets                756,060              665,798

              Deferred Tax Liabilities:
                Federal Home Loan Bank of Atlanta
                 stock dividends                                 $(151,928)           $(151,928)
                Depreciation                                      (257,515)            (201,809)
                Bad debt deduction in excess of
                 base year reserves                                (76,162)            (152,323)
                Unrealized holding gains                          (177,385)                  --
                Market value change in Rabbi Trust assets               --             (145,029)
                                                                 ---------            ---------
                       Total gross deferred tax liabilities       (662,990)            (651,089)
                                                                 ---------            ---------
              Net Deferred Tax Assets                            $  93,070            $  14,709
                                                                 =========            =========
</TABLE>

                                      F-28
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 16- Income Taxes - Continued
         ------------

               The amount computed by applying the statutory  federal income tax
          rate to income before taxes and extraordinary item is greater than the
          taxes provided for the following reasons:
<TABLE>
<CAPTION>
                                                                       For the Years Ended September 30,
                                                            -----------------------------------------------------------
                                                                      2001                              2000
                                                            -----------------------             -----------------------
                                                                           Percent                            Percent
                                                                          of Pretax                           of Pretax
                                                            Amount          Income              Amount         Income
                                                            ------        ---------             ------        ---------
              <S>                                           <C>             <C>                <C>              <C>
              Statutory federal income tax rate             $  62,579       34.00%             $382,291         34.00%
              Increases (Decreases)
               Resulting From
              --------------------------
                 State income tax net of
                  federal income tax benefit                    7,187        3.90                52,906          4.70
                 Other                                          9,524        5.17                 2,425           .22
                                                            ---------       -----              --------         ------
                                                            $  79,290       43.07%             $437,622         38.92%
                                                            =========       ======             ========         ======
</TABLE>

               The Company and its subsidiaries  file a consolidated  income tax
          return on a fiscal year basis.  The returns  have been  audited by the
          Internal Revenue Service through the year ended September 30, 1994.

               Qualified  thrift  lenders  such as the Bank are not  required to
          provide  a  deferred  tax  liability  for bad  debt  reserves  for tax
          purposes  that arose in fiscal  years  beginning  before  December 31,
          1987.  Such bad debt  reserve for the Bank  amounted to  approximately
          $4,227,000  with an income tax effect of  approximately  $1,633,000 at
          September  30,  2001.  This bad debt reserve  would become  taxable if
          certain conditions are met by the Bank.

Note 17- Disclosures About Fair Value of Financial Instruments
         -----------------------------------------------------

               The estimated fair values of the Bank's financial instruments are
          summarized  below.  The fair values of a significant  portion of these
          financial  instruments  are  estimates  derived  using  present  value
          techniques prescribed by the FASB and may not be indicative of the net
          realizable or liquidation  values.  Also, the calculation of estimated
          fair values is based on market  conditions at a specific point in time
          and may not reflect current or future fair values.

                                      F-29
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 17- Disclosures About Fair Value of Financial Instruments - Continued
         -----------------------------------------------------

               The  carrying  amount is a reasonable  estimate of fair value for
          cash, federal funds and interest-bearing deposits in other banks. Fair
          value is based upon market  prices  quoted by dealers  for  investment
          securities  and mortgage  backed  securities.  The carrying  amount of
          Federal Home Loan Bank of Atlanta  stock is a  reasonable  estimate of
          fair value.  Loans  receivable were discounted using a single discount
          rate, comparing the current rates at which similar loans would be made
          to borrowers  with similar  credit  ratings and for the same remaining
          maturities.  These  rates were used for each  aggregated  category  of
          loans as  reported  on the  Office  of  Thrift  Supervision  Quarterly
          Report. The fair value of demand deposits,  savings accounts and money
          market deposits is the amount payable on demand at the reporting date.
          Federal Home Loan Bank  advances are  considered  to be at fair value.
          The fair value of fixed-maturity  certificates of deposit is estimated
          using the rates  currently  offered on deposits  of similar  remaining
          maturities.

               The estimated fair values of the Bank's financial instruments are
          as follows:
<TABLE>
<CAPTION>
                                                                September 30, 2001               September 30, 2000
                                                              -------------------------       ------------------------
                                                              Carrying       Estimated        Carrying       Estimated
                                                               Amount        Fair Value        Amount        Fair Value
                                                              --------       ----------       --------       ----------
                                                                             (Amounts in Thousands)
    <S>                                                        <C>            <C>             <C>             <C>
    Financial Assets
    ----------------
    Cash                                                       $    4,056     $    4,056      $    6,571      $    6,571
    Interest bearing deposits in other banks                        7,953          7,953           5,256           5,256
    Federal funds sold                                              3,313          3,313             455             455
    Investment securities - available for sale                     23,969         23,969              --              --
    Investment securities - held to maturity                       18,494         18,732          41,158          40,356

    Loans Receivable
    ----------------
        Mortgage loans                                           $191,050       $201,186          $172,328        $169,902
        Share loans                                                   875            875               593             593
        Consumer loans                                             76,085         75,013            68,599          67,808
    Mortgage backed securities - available
     for sale                                                      11,442         11,442                --              --
    Mortgage backed securities - held
     to maturity                                                   41,655         42,505            19,824          19,705
    Federal Home Loan Bank of Atlanta stock                         1,834          1,834             1,834           1,834
</TABLE>

                                      F-30
<PAGE>

BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------


Note 17- Disclosures About Fair Value of Financial Instruments - Continued
         -----------------------------------------------------
<TABLE>
<CAPTION>
                                                                September 30, 2001              September 30, 2000
                                                              -------------------------     -------------------------
                                                              Carrying       Estimated      Carrying       Estimated
                                                               Amount        Fair Value      Amount        Fair Value
                                                              --------       ----------     --------       ----------
                                                                             (Amounts in Thousands)
<S>                                                            <C>           <C>             <C>             <C>
    Financial Liabilities
    ---------------------
    Deposits                                                   $325,786      $329,065        $268,882        $269,049
    Federal Home Loan Bank of Atlanta
      advances                                                   17,800        17,800           9,500           9,500
    Mortgage loan commitments                                        --         5,096              --           1,105
</TABLE>

Note 18- Recent Accounting Pronouncements
         --------------------------------

               In June 2001, the Financial  Accounting  Standards Board ("FASB")
          issued Statements of Financial  Accounting Standards No. 141 "Business
          Combinations"  ("SFAS 141") and No. 142 "Goodwill and Other Intangible
          Assets" (SFAS 142") which are effective  July 1, 2001 and September 1,
          2002,  respectively,  for the  Company.  SFAS  141  requires  that the
          purchase  method of accounting  be used for all business  combinations
          initiated  after  June 30,  2001.  Under  SFAS  142,  amortization  of
          goodwill,  including goodwill recorded in past business  combinations,
          will  discontinue  upon  adoption of this  standard.  All goodwill and
          intangible assets will be tested for impairment in accordance with the
          provisions of the Statement.

               In  August  2001,  FASB issued SFAS No. 144  "Accounting  for the
          Impairment  or  Disposal  of  Long-Lived   Assets".   This   Statement
          supersedes  SFAS No. 121 and APB  Opinion No. 30. SFAS No. 144 retains
          the  fundamental  provisions of SFAS No. 121 for (a)  recognition  and
          measurement of impairment of long-lived assets to be held and used and
          (b)  measurement of long-lived  assets to be disposed of by sale. SFAS
          No. 144 also requires reporting of discontinued  operations separately
          from  continuing  operations and extends that reporting to a component
          of an entity that either has been disposed of or is classified as held
          for sale. The Statement also eliminates the exception to consolidation
          for a temporarily controlled subsidiary.

                                      F-31
<PAGE>
<TABLE>
<CAPTION>
                                              BOARD OF DIRECTORS

<S>                                      <C>                                      <C>
HENRY V. KAHL                            GARY C. LORADITCH                        JOHN J. PANZER, JR.
Chairman of the Board                    President and Chief Executive Officer    Self Employed
                                         of the Company and the Bank
H. ADRIAN COX
Vice Chairman of the Board               WILLIAM M. LOUGHRAN                      P. LOUIS ROHE, JR.
Insurance Agent for Rohe and Rohe        Senior Vice President of the Company     Retired
Associates, Baltimore, Maryland          and the Bank

FRANK W. DUNTON                          MICHAEL J. KLEIN
Retired                                  Vice President, Klein's
                                         Super Markets

                                        EXECUTIVE OFFICERS

GARY C. LORADITCH                       WILLIAM M. LOUGHRAN              BONNIE M. KLEIN
President and Chief Executive Officer   Senior Vice President            Vice President and Treasurer

DAVID M. MEADOWS                        RONALD J. WARD                   KELLIE T. RYCHWALSKI
Vice President, Secretary and General   Vice President                   Vice President
Counsel

                                            OFFICE LOCATIONS

4111 E. Joppa Road, Suite 300               4208 Ebenezer Road                     563 Bel Air Plaza
Baltimore, Maryland  21236                  Perry Hall, Maryland 21128             Bel Air, Maryland 21014

1736 Merritt Blvd.                          2165 York Road                         712 N. Rolling Road
Dundalk, Maryland 21222                     Timmonium, Maryland 21093              Catonsville, Maryland 21228

515 Eastern Avenue                          5340 Campbell Boulevard                2128 N. Fountain Green Road
Baltimore, Maryland  21221                  Baltimore, Maryland 21236              Bel Air, Maryland  21015

2105 Rock Spring Road                       402 Constant Friendship Boulevard      9613 Harford Road
Forest Hill, Maryland 21050                 Abingdon, Maryland 21009               Baltimore, MD 21234

                                      CORPORATE INFORMATION
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS                               SPECIAL COUNSEL                          ANNUAL REPORT ON FORM 10-KSB
Anderson Associates, LLP                  Stradley Ronon Stevens & Young, LLP
7621 Fitch Lane                           1220 19th Street, N.W., Suite 700        A COPY OF THE COMPANY'S ANNUAL
Baltimore, Maryland 21236                 Washington, D.C.  20036                  REPORT ON FORM 10-KSB FOR THE
                                                                                   FISCAL YEAR ENDED SEPTEMBER 30,
GENERAL COUNSEL                           ANNUAL MEETING                           2001 AS FILED WITH THE SECURITIES
Moore, Carney, Ryan & Lattanzi, LLC       The 2001 Annual Meeting of               AND EXCHANGE COMMISSION, WILL BE
4111 E. Joppa Road, Suite 201             Stockholders will be held on February    FURNISHED WITHOUT CHARGE TO
Baltimore, Maryland 21236                 13, 2002 at 4 :00 p.m. at the Bank's     STOCKHOLDERS AS OF THE RECORD
                                          Perry Hall office located at 4208        DATE FOR THE 2002 ANNUAL MEETING
TRANSFER AGENT AND REGISTRAR              Ebenezer Road, Baltimore, Maryland       UPON WRITTEN REQUEST TO CORPORATE
American Stock and Transfer Co.                                                    SECRETARY, BCSB BANKCORP, INC.,
6201 15th  Avenue                                                                  4111 E. JOPPA ROAD, SUITE 300,
Brooklyn, New York  11212                                                          BALTIMORE, MARYLAND  21236
</TABLE>