BCSB BANKCORP, INC.








         [LOGO]












                                                              2002 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 63.9% 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  sixteen  banking
offices serving the Baltimore Metro area. 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  5,874,082
shares of the common stock outstanding and approximately 1,059 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 2002
         -----------
         First quarter.............................  $ 10.250          $  9.251              $ .125
         Second quarter............................    10.549             9.350                .125
         Third quarter.............................    13.450            10.250                .125
         Fourth quarter............................    13.200            11.640                .125

         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
</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............................................14
Corporate Information.........................................Inside Back Cover

<PAGE>

                        [BCSB BANKCORP, INC. LETTERHEAD]



Dear Fellow Stockholders, Depositors and Friends,

     This  past year has been  very  exciting  for us.  Significant  growth  and
opportunities were realized in the acquisition of Heritage Savings Bank. In late
December 2001 we became aware of the possibility of acquiring Heritage.  After a
thorough  review  of  their  financial  condition  and  operations,   the  Board
authorized the purchase  transaction in February 2002.  Regulatory  approval was
obtained and we completed  the  acquisition  on July 24, 2002.  The  acquisition
increased  our assets by 33% at that time.  Overall,  the bank's  assets  exceed
$587,000,000,  a 50%  increase.  There  are  now  16  banking  locations  in the
Baltimore area. The business generated as a result of our increased size will be
beneficial to the future operations of the bank.

     On the pages that  follow,  we report the  operating  results for this past
year. The expansion in prior years is producing  results.  The bank has posted a
significant increase in earnings.  We expect continued  improvement in operating
results.  This will enhance the value of your  investment  and maintain the safe
and sound financial condition we have experienced for many years.

     This past year has seen  adverse  news  concerning  a large  local bank and
other  publicly  traded  companies.  Let me assure you that we have  controls in
place to make certain that all  transactions are prudent for a bank our size and
within the limits of what is allowed.

     The confidence in publicly traded companies has been affected this year for
several  reasons,  all of  which  were  detailed  in  the  press.  Congress  has
legislated  significant  changes  in  public  reporting.  Being  in a  regulated
industry,  we are used to scrutiny of our operations.  While the disclosures are
new, many of the required controls needed for accuracy have been in place at our
bank for some time.

     The Board of  Directors  has always and will  continue to make certain this
company  operates in a safe and sound  manner.  This  protects your deposits and
your  investments.  The result  will be enhanced  stockholder  value and prudent
growth for all of us.

                                    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,
                                                                  ------------------------------
                                                                    2002                  2001
                                                                  --------             ---------
                                                                          (In thousands)
<S>                                                               <C>               <C>
Total assets....................................................  $   587,065       $   390,883
Loans receivable, net...........................................      396,617           268,010
Cash............................................................        6,468             4,056
Interest-bearing deposits in other banks........................       15,808             7,953
Federal funds sold..............................................        3,527             3,313

Investment securities:
    Available for sale..........................................       45,083            23,969
    Held to maturity............................................        4,496            18,494
Mortgage-backed securities:
    Available for sale..........................................       60,411            11,442
    Held to maturity............................................       33,691            41,655
FHLB stock......................................................        3,940             1,834
Deposits........................................................      498,785           325,786
FHLB advances...................................................       26,968            17,800
Trust Preferred Securities......................................       12,500                 -
Stockholders' equity - substantially restricted.................       45,306            42,730
</TABLE>

SELECTED CONSOLIDATED OPERATIONS DATA
<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                                                  ------------------------------
                                                                     2002               2001
                                                                  ----------         ----------
                                                                          (In thousands)
<S>                                                               <C>               <C>
Interest income.................................................  $    28,480       $    24,348
Interest expense................................................       14,946            14,240
                                                                  -----------       -----------
Net interest income before
   provision for loan losses....................................       13,534            10,108
Provision for loan losses.......................................          509               332
                                                                  -----------       -----------
Net interest income.............................................       13,025             9,776
Other income....................................................        1,053               738
Non-interest expense............................................       11,363            10,330
                                                                  -----------       -----------
Income before income taxes......................................        2,715               184
Income tax provision............................................          984                79
                                                                  -----------       -----------
Net income......................................................  $     1,731       $       105
                                                                  ===========       ===========
</TABLE>

                                       2
<PAGE>

KEY OPERATING RATIOS:
<TABLE>
<CAPTION>
                                                                      At or for the Year
                                                                      Ended September 30,
                                                                  -------------------------
                                                                     2002           2001
                                                                    ------         -------
<S>                                                                 <C>             <C>
PERFORMANCE RATIOS:
   Return on average assets (net income
      divided by average total assets)..........................       .37%          .03%
   Return on average equity (net income
      divided by average equity)................................      4.01           .25
   Interest rate spread (combined
      weighted average interest rate
      earned less combined weighted
      average interest rate cost)...............................      2.94          2.58
   Net interest margin (net interest
      income divided by average
      interest-earning assets)..................................      3.15          2.99
   Ratio of average interest-earning assets
      to average interest-bearing liabilities...................    105.92        109.70
   Ratio of non-interest expense to
      average total assets......................................      2.46          2.90
   Dividend payout ratio (dividends declared per share
      divided by net income per share)..........................    161.29      2,500.00

ASSET QUALITY RATIOS:
   Nonperforming assets to total assets at
      end of period.............................................       .28           .08
   Nonperforming loans to gross loans at
      end of period.............................................       .33           .08
   Allowance for loan losses to gross loans
      at end of period..........................................       .55           .55
   Allowance for loan losses to nonperforming
      loans at end of period....................................    158.09        653.97
   Provision for loan losses to gross loans ....................       .12           .12
   Net charge-offs to average loans
      outstanding...............................................       .09           .07

CAPITAL RATIOS:
   Equity to total assets at end of period......................      7.72         10.91
   Average equity to average assets.............................      8.61         12.04
</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.

RECENT ACQUISITION

     On July 24, 2002, the Company and the Bank completed the acquisition of WHG
Bancshares  Corporation  ("WHG  Bancshares")  and its wholly  owned  subsidiary,
Heritage Savings Bank, F.S.B. ("Heritage Bank").  Stockholders of WHG Bancshares
received $14.25 per share in cash for each of the 1,285,050  outstanding  shares
of WHG  Bancshares's  common  stock.  As a result of the merger,  Heritage  Bank
merged into the Bank and its five  locations  became branch offices of the Bank.
The aggregate  purchase price was approximately  $18.3 million.  The transaction
was accounted for using the purchase method.

                                       4
<PAGE>

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 re-pricing 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.

     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 short term (15-years or less) 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.  Beginning in 2002 the Bank implemented a
policy of  selling  fixed  rate  loans  with terms of 15 years or less where the
interest rate risk to the portfolio was  significant  relative to current market
conditions and  historical  analysis.

     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, 2002.  All changes meet the Bank's
policy requirements.

                                       5
<PAGE>
<TABLE>
<CAPTION>
 Change                          Net Portfolio Value                       NPV as % of PV of Assets
                       --------------------------------------------      ----------------------------
in Rates               $ Amount       $ Change (1)     % Change (2)      NPV Ratio (3)     Change (4)
--------               --------       ------------     ------------      -------------     ----------
                                        (Dollars in thousands)
<S>                   <C>             <C>                 <C>               <C>              <C>
  + 300 bp            $  54,540       $(16,304)           (23)%             9.63%            (196) bp
  + 200 bp               47,777        (23,066)           (33)              8.20             (338) bp
  + 100 bp               60,971         (9,873)           (14)             10.19             (140) bp
      0 bp               70,843                                            11.58
  - 100 bp               68,578         (2,265)            (3)             11.06              (53) 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>

***Risk Measures: 200 bp rate shock***
<TABLE>
<CAPTION>
                                                                   At               At
                                                              September 30,     September 30,
                                                                  2002               2001
                                                              ------------      -------------
<S>                                                               <C>               <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets...............      11.58%            11.34 %
Exposure Measure: Post Shock NPV Ratio......................        8.20              7.98
Sensitivity Measure: Change in NPV Ratio....................        338 bp            336 bp
</TABLE>

     The above table  indicates  that at  September  30,  2002,  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  decrease,  but by a much  smaller  amount  then if there were an increase in
interest  rates.  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, 2002, 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, 2002,
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.  Finally,  the ability of many  borrowers to repay
their  adjustable-rate  debt  may  decrease  in the  event of an  interest  rate
increase.

                                       6
<PAGE>

AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  average  balance  sheet and reflects the average  yield on assets and
cost of liabilities for the periods  indicated and the average yields earned and
rates paid.  Such yield and costs are  derived by dividing  income or expense by
the average daily balance of assets or liabilities,  respectively,  for the year
ended  September 30, 2002.  The year ended  September 30, 2001 average  balances
were computed using month-end balances.  Total average assets are computed using
month-end balances.

     The table also presents  information for the periods indicated with respect
to the differences between the average yield earned on  interest-earning  assets
and  average  rate  paid on  interest-bearing  liabilities,  or  "interest  rate
spread," which banks have  traditionally  used as an indicator of profitability.
Another  indicator of net interest income is "net interest margin," which is its
net interest income divided by the average balance of interest-earning assets.
<TABLE>
<CAPTION>
                                                                       Year Ended September 30,
                                            -------------------------------------------------------------------------
                                                           2002                                    2001
                                            --------------------------------        ---------------------------------
                                                                     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).................    $ 295,694      $21,816     7.38%        $ 248,035       $18,938     7.64%
  Mortgage backed securities...........       68,897        3,638     5.28            32,598         1,948     5.98
  Investment securities and FHLB stock.       55,506        2,811     5.06            43,384         2,751     6.34
  Other interest-earning assets........        9,844          215     2.18            13,948           711     5.10
                                           ---------      -------                  ---------      --------
      Total interest-earning assets ...      429,941       28,480     6.62           337,965        24,348     7.20
Non-interest-earning assets............       32,490                                  17,801
                                           ---------                               ---------
      Total assets.....................    $ 462,431                               $ 355,766
                                           =========                               =========

Interest-bearing liabilities:
  Deposits.............................    $ 382,729      $13,984     3.65%        $ 297,732        13,785     4.63
  FHLB advances........................       18,142          773     4.26             8,725           451     5.17
  Trust Preferred Securities...........        3,262          187     5.73                 -             -       -
  Other liabilities....................        1,775            2      .11             1,618             4      .25
                                           ---------      -------                  ---------      --------
      Total interest-bearing
        liabilities....................      405,908       14,946     3.68           308,075        14,240     4.62
                                                          ------      ----                          ------     ----
Non-interest-bearing liabilities.......       13,331                                   4,852
                                           ---------                               ---------
      Total liabilities................      419,239                                 312,927
Stockholders' equity...................       43,192                                  42,839
                                           ---------                               ---------
      Total liabilities and
         stockholders' equiy...........    $462,431                                $355,766
                                           ========                                ========

Net interest income....................                   $13,534                                 $ 10,108
                                                          =======                                 ========

Interest rate spread...................                               2.94%                                    2.58%
                                                                    ======                                   ======

Net interest margin (2)................                               3.15%                                    2.99%
                                                                    ======                                   ======

Ratio of average interest-earning assets
  to average interest-bearing liabilities                           105.92%                                  109.70%
                                                                    ======                                   ======
<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,
                                                --------------------------------------------------
                                                        2002          vs.               2001
                                                --------------------------------------------------
                                                              Increase (Decrease)
                                                                    Due to
                                                --------------------------------------------------
                                                                                Rate/
                                                Volume         Rate            Volume        Total
                                                ------         ----            ------        -----
                                                                   (In thousands)
<S>                                            <C>            <C>            <C>         <C>
Interest income:
  Loans receivable..........................   $  3,639       $   (638)      $   (123)   $  2,878
  Mortgage-backed securities................      2,169           (227)          (252)      1,690
  Investment securities and
      FHLB Stock............................        769           (554)          (155)         60
  Other interest-earning assets.............       (208)          (408)           120        (496)
                                               --------       --------       --------    --------
    Total interest-earning assets...........      6,369         (1,827)          (410)      4,132

Interest expense:
  Deposits..................................      3,936         (2,907)          (830)        199
  FHLB advances.............................        487            (79)           (86)        322
  Trust Preferred Securities................          0              0            187         187
  Other liabilities.........................          0             (2)             0          (2)
                                               --------       --------       --------    --------
     Total interest-bearing
       liabilities..........................      4,423         (2,988)          (729)        706
                                               --------       --------       --------    --------

Change in net interest income...............   $  1,946       $  1,161       $    319    $  3,426
                                               ========       ========       ========    ========
</TABLE>

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2002 AND 2001

     During the year ended  September 30, 2002, the Company  focused its efforts
on pursuing  its growth  strategy  through  the  acquisition  of WHG  Bancshares
Corporation and its wholly owned  subsidiary,  Heritage Savings Bank F.S.B. This
acquisition  added five  additional  branch offices to Baltimore  County Savings
Bank's branch  network.  WHG  Bancshares  had $157.5  million in assets,  $116.8
million in loans and $118.2 million in deposits at June 30, 2002.

     Total assets increased by $196.2 million,  or 50.2%, from $390.9 million at
September  30, 2001 to $587.1  million at September  30,  2002.  The increase in
assets during fiscal year 2002 was partially attributable to the merger with WHG
Bancshares. The merger increased assets by $157.5 million. Loans receivable, net
increased by $128.6 million, or 48.0%, from $268.0 million at September 30, 2001
to $396.6 million at September 30, 2002, of which $116.8 million was a result of
the merger with WHG Bancshares.  Mortgage backed  securities  increased by $41.0
million,  or 77.2%, from $53.1 million at September 30, 2001 to $94.1 million at
September 30, 2002.  The merger  increased  mortgage-backed  securities by $18.0
million.  There  was also a $7.1  million,  or  16.7%,  increase  in  investment
securities  from  $42.5  million  at  September  30,  2001 to $49.6  million  at
September 30, 2002. The WHG Bancshares  merger caused $766,000 of this increase.
Interest-bearing deposits increased by $7.8 million, or 97.5%, from $8.0 million
at September 30, 2001 to $15.8  million at September  30, 2002.  The merger with
WHG Bancshares increased interest-bearing deposits by $15.8 million, but part of
this increase was offset by calls of investment securities.

                                       8
<PAGE>

     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.
The Company  increased  automobile loans by $20.4 million,  or 28.0%, from $72.8
million at September 30, 2001 to $93.2  million at September  30, 2002.  Most of
the  remaining  increase  in  the  loan  portfolio   reflected  an  increase  in
single-family  residential  mortgage loans, which increased by $55.1 million, or
33.4%,  from $165.0 million at September 30, 2001 to $220.1 million at September
30, 2002,  reflecting  increased  loan demand and the addition of new  customers
from the new branch offices acquired in the WHG Bancshares  merger.  The Company
also placed an emphasis on the origination of commercial real estate loans in an
effort to diversify the loan  portfolio and increase  yield.  Through the merger
and loan  originations  the commercial  real estate loan portfolio  increased by
$43.0  million,  of 286.7%  from $15.1  million at  September  30, 2001 to $58.1
million at September 30, 2002.

     The  Company's  loan growth was funded with  deposits,  which  increased by
$173.0  million,  or 53.1%,  from $325.8 million at September 30, 2001 to $498.8
million at September 30, 2002. The Bank increased it deposits as a result of the
merger by $118.2 million, and through increased marketing efforts.

     Stockholders' equity increased by $2.6 million, or 6.1%, from $42.7 million
at September 30, 2001 to $45.3  million at September 30, 2002.  The increase was
the result of a $1.2 million reclassification of the Rabbi-Trust obligation, and
net income offset by dividends paid. The Company  established the Rabbi-Trust to
hold shares of Company Common Stock in connection with the Company's  obligation
to pay deferred  compensation  under the Directors'  Retirement  Plan. The Rabbi
Trust was reclassified as an equity account following stockholder approval on an
amendment to the  Directors'  Retirement  Plan  requiring  that  obligations  to
participants be settled with shares of Common Stock.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001

     Net Income:  Net income  increased by $1.6  million,  from $105,000 for the
year ended  September 30, 2001 to $1.7 million for the year ended  September 30,
2002. The increase was due primarily to a $3.4 million, or 33.7% increase in net
interest income which was partially offset by a $1.0 million,  or 10.0% increase
in non-interest expenses and a $905,000 increase in the income tax provision.

     Net Interest Income: Net interest income increased by $3.4 million or 33.7%
from $10.1  million for the year ended  September  30, 2001 to $13.5 million for
the year ended September 30, 2002. 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 58 basis
point decrease in the yield on  interest-earning  assets. The Company's ratio of
average   interest-earning  assets  to  average   interest-bearing   liabilities
decreased  from 109.7% for the year ended  September  30, 2001 to 105.9% for the
year ended  September  30,  2002.  The Company was able to increase the interest
rate spread from 2.58% at September 30, 2001, to 2.94% at September 30, 2002 due
to declining interest rates and the re-pricing of deposits.

     Interest income increased by $4.2 million, or 17.3%, from $24.3 million for
the year ended  September 30, 2001 to $28.5 million for the year ended September
30, 2002. This increase was due primarily to an increase in interest and fees on
loans,  which  reflected an increase in the average balance of loans from $248.0
million at  September  30, 2001 to $295.7  million at September  30,  2002.  The
increase  in the  average  balance  of  loans  was  achieved  primarily  through
increases in residential mortgage loans,  commercial loans and automobile loans.
Also contributing to the increase in interest income was $1.7 million,  or 86.8%
increase in interest on mortgage backed  securities,  which increased  primarily
due to an increase in the average  balance of mortgage  backed  securities  from
$32.6  million at September  30, 2001 to $68.9  million at  September  30, 2002.
Dividends on  investment  securities  also  increased  $61,000,  or 2.2%.  These
increases helped to offset the decrease of $496,000,  or 69.8% in other interest
income. Other interest income primarily decreased due to a decrease of 292 basis
points in the average yield on interest-bearing deposits and Federal funds sold,
and  a  decrease  of  $4.1  million,   or  29.5%  in  the  average   balance  of
interest-bearing deposits and Federal funds sold from $13.9 million at September
30, 2001 to $9.8 million at September 30, 2002.

     Interest  Expense:  Interest  expense  increased by $706,000 or 5.0%,  from
$14.2  million for the year ended  September  30, 2001 to $14.9  million for the
year ended  September  30,  2002.  This  increase  was due to an increase in the
average  volume of deposits,  which are the largest  component of the  Company's
interest-bearing liabilities. The

                                       9
<PAGE>

average balance of deposits  increased by $85.0 million,  or 28.5%,  from $297.7
million at  September  30, 2001 to $382.7  million at September  30,  2002.  The
Company was able to increase its deposits through its use of advertising and the
acquisition of WHG  Bancshares.  The increase in interest  expense was partially
offset by a decrease of 98 basis  points in the average  yield paid on deposits,
from 4.63% for the year  ended  September  30,  2001 to 3.65% for the year ended
September 30, 2002. Also contributing to the increase in interest expense was an
increase  in  interest  paid on FHLB  advances  of  $324,000,  from  $450,000 at
September  30,  2001 to  $774,000 at  September  30,  2002.  This  increase  was
partially  due to an  increase in the  average  volume of FHLB  advances of $9.4
million,  or 107.9% from $8.7 million at September  30, 2001 to $18.1 million at
September 30, 2002.  The WHG Bancshares  merger  resulted in an increase in FHLB
advances of $19.2 million.  This increase was partially  offset by a decrease of
91 basis points in the average yield,  from 5.17% at September 30, 2001 to 4.26%
at September 30, 2002. Also contributing to the increase in interest expense was
interest on the Trust Preferred Securities which was $187,000 for the year ended
September 30, 2002, compared to $0 for the year ended September 30, 2001.

     Provision for Loan Losses: The Company's  significant  accounting  policies
are set forth in Note 1 of Notes to Consolidated Financial Statements.  Of these
significant  accounting policies, the Company considers its policy regarding the
allowance for loan losses to be its most critical accounting policy,  because it
requires  management's  most  subjective  and complex  judgments.  In  addition,
changes in economic  conditions  can have a significant  impact on the allowance
for loan  losses and  therefore  the  provision  for loan  losses and results of
operations.  The Company has developed  appropriate  policies and procedures for
assessing the adequacy of the allowance for loan losses,  recognizing  that this
process  requires a number of assumptions and estimates with respect to its loan
portfolio.  The  Company's  assessments  may be  impacted  in future  periods by
changes in economic conditions,  the impact of regulatory examinations,  and the
discovery  of  information  with  respect  to  borrowers  that is not  known  to
management at the time of the issuance of the consolidated financial statements.

     Provisions  for loan  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 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
$509,000  and  $332,000  for the  years  ended  September  30,  2002  and  2001,
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  $1,391,000 and $239,000 at September 30, 2002 and September 30, 2001
respectively.

     Other  Income:  Total other income  increased by $316,000,  or 42.8%,  from
$738,000  for the year ended  September  30,  2001 to $1.1  million for the year
ended September 30, 2002. This increase was primarily due to the gain on sale of
loans  which  increased  $205,000,  or 820.0%  from,  $25,000 for the year ended
September 30, 2001 to $230,000 for the year ended  September 30, 2002.  The gain
on sale of loans was achieved through the Company's implementation of a strategy
to sell long-term low rate loans to Fannie Mae in an effort to mitigate interest
rate risk.  These  gains may not be  achieved  to the same  degree in the future
should market conditions change.

     Non-Interest  Expense:   Total  non-interest  expenses  increased  by  $1.1
million,  or 10.7%,  from $10.3 million for the year ended September 30, 2001 to
$11.4  million  for  the  year  ended   September  30,  2002.  The  increase  in
non-interest  expenses was due to increases in salaries and related  expenses of
$278,000,  or 4.8%,  which was  offset in part by a  reduction  of  $170,000  of
compensation  expense for the  directors  retirement  plan due to the decline of
value  of the  shares  held in the  Rabbi-Trust.  The  Company  established  the
Rabbi-Trust  to hold  shares of  Company  Common  Stock in  connection  with the
Company's   obligation  to  pay  deferred   compensation  under  the  Directors'
Retirement Plan. The related deferred compensation  obligation was classified as
a liability and adjusted with a corresponding charge (or credit) to compensation
cost by multiplying  the number of shares owned by the Rabbi Trust by the change
in the fair market value of each share, to reflect changes of the amount owed to
the directors.  No adjustments to compensation  expense for the Rabbi Trust will
be  required  for  future  periods  as a result of  stockholder  approval  of an
amendment  to  the  Directors'   Retirement  Plan.  See  Note  12  of  Notes  to
Consolidated  Financial  Statements.  The Company also experienced  increases of
$131,000,  or 11.7%, in occupancy expense,  $256,000 or 36.5% in data processing
expense,  $77,000,  or 8.8% in property plant and equipment expense and $253,000
or 99.2% in other expenses.  These increases were partially offset by a decrease
of $43,000 or 5.3% in  advertising  expenses.  During the quarter ended December
31, 2001,  the Company wrote off,  against a previously  established  allowance,
$51,000 of EPIC loans included in foreclosed real estate. EPIC loans represented
the balance

                                       10
<PAGE>

due on an investment in a pool of mortgages which was foreclosed by the trustees
for the holders of the security interest due to nonperformance. An allowance for
losses was established  based upon the original  foreclosure and analysis of the
collectibility  of the  loans  granted  to  the  purchasers  of  the  foreclosed
property.

     Income Taxes: The Company's income tax expense was $984,000 and $79,000 for
the years ended  September  30, 2002 and September  30, 2001  respectively.  The
Company's  effective tax rate was 36.2% and 43.1% for the years ended  September
30, 2002 and 2001 respectively.  The reduction in the effective tax rate for the
year  ended  September  30,  2002 was due to an  increase  in state  tax  exempt
securities.

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, 2002,  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, 2002 to its  tangible,  core and
risk-based   capital   levels  and  compares  such  totals  to  the   regulatory
requirements, see Note 16 of Notes to Consolidated Financial Statements.

     On June 27, 2002, the Company established a trust subsidiary (the "Trust"),
which issued and sold to private  investors 12,500 securities with a liquidation
amount  of  $1,000  per  security,  for a total of $12.5  million  of  preferred
securities.  The Company  funded the Trust with $387,000 in exchange for 100% of
the  Trust's  common  securities.   The  Trust  used  the  proceeds  from  these
transactions to purchase  $12,887,000 of floating rate  subordinated  debentures
from the Company. The Company makes periodic interest payments on the debentures
to the  Trust,  and the  Trust in turn  makes  interest  payments  on the  trust
preferred securities to the private investors.

     The trust preferred securities and subordinated debentures are due June 30,
2032.  The rate is 3.65% per annum  over the  three-month  LIBOR rate and resets
quarterly.  The rate at September  30, 2002 was 5.51%.  The junior  subordinated
debentures are the sole assets of the Trust. The  subordinated  debt securities,
unsecured,  rank  junior and are  subordinate  in right of payment of all senior
debt of the  Company,  and the Company  has  guaranteed  repayment  on the trust
preferred  securities  issued by the Trust.  The Company used the proceeds  from
these  transactions  to increase the capital of the Bank.  The $12.5  million of
subordinated debt securities are includable as part of Tier 1 regulatory capital
for the Bank.  Based on the current  interest rate of 5.425%,  the Company would
have an annual expense of $688,000 related to the trust preferred securities.

     Payments  to be made by the Trust on the  trust  preferred  securities  are
dependent on payments that the Company has undertaken to make,  particularly the
payment to be made by the Company on the debentures.  Distributions on the trust
preferred securities are payable quarterly at a rate of 3.65% per annum over the
three-month  LIBOR  rate.  The  distributions  are funded by  interest  payments
received on the  debentures  and are  subject to  deferral  for up to five years
under certain  conditions.  Distributions are included in interest expense.  The
Company may redeem the debentures, in whole or in part, at par at any time after
June 30, 2007, or under certain conditions in whole but not in part, at any time
at a  redemption  price equal to 103% of the  principal  amount plus any accrued
unpaid interest.

     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, 2002 and 2001,  the Bank had $129.2  million and
$95.3  million,  respectively,  of loan  originations.  During  the years  ended
September 30, 2002 and 2001, the Company purchased investment  securities in the
amounts of $72.8 million and $55.6 million,  respectively,  and  mortgage-backed
securities  in the  amounts of $52.8  million and $48.6  million,  respectively.
Other

                                       11
<PAGE>

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 2002
was approximately 23.3%. 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, 2002, cash,  interest-bearing  deposits in other banks
and federal  funds sold totaled $6.5  million,  $15.8  million and $3.5 million,
respectively.

     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, 2002 totaled $209.2 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.  The Bank generally  requires  collateral or
other security to support financial  instruments with  off-balance-sheet  credit
risk. At September 30, 2002, the Bank had  commitments  under standby letters of
credit, lines of credit and commitments to originate mortgage loans of $431,000,
$20.8  million  and  $12.9  million,  respectively.  See  Note  3  of  Notes  to
Consolidated Financial Statements.

     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. As of September  30, 2002 an  additional  740 shares had been
purchased at an aggregate cost of $9,376.

     In keeping with the  Company's  stated  policy,  quarterly  dividends  were
declared on December 28, 2001,  March 27, June 27, and  September 26, 2002 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 10, 2002, or 63.9% of all  outstanding  shares of the Company's  common
stock.  The dividend rate is based in part on the Bank's strong capital position
(see Note 16 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.

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

                                       12
<PAGE>

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 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.

     In April 2002, FASB issued SFAS 145,  "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This
Statement  requires,  among  other  things,  that  gains and losses on the early
extinguishment  of debt be  classified  as  extraordinary  only if they meet the
criteria for  extraordinary  treatment set forth in Accounting  Principles Board
Opinion No. 30. The provisions of this Statement  related to  classification  of
gains and losses on the early  extinguishment  of debt are  effective for fiscal
years beginning after May 15, 2002. The adoption of SFAS No. 145 will not have a
material impact on the consolidated financial statements.

     In June 2002, FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities."  This  Statement  requires  recording  costs
associated with exit or disposal activities at their fair value when a liability
has been incurred. Under previous guidance, certain exit costs were accrued upon
management's  commitment  to an exit plan,  which is generally  before an actual
liability has been incurred.  The provisions of this Statement are effective for
exit or disposal activities that are initiated after December 31, 2002.

     In  October  2002,  FASB  issued  SFAS No.  147,  "Acquisitions  of Certain
Financial  Institutions" an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation  No.  9.  The  provision  of this  Statement  requires  long-term
customer  relationship  intangible  assets  of  financial  institutions  such as
depositor - and borrower - relationship  intangible assets and credit cardholder
intangible   assets  to  be   subject  to  the  same   undiscounted   cash  flow
recoverability  test and impairment loss recognition and measurement  provisions
that Statement 144 requires for other long-lived assets that are held and used.


                                       13
<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, 2002 and September 30, 2001
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,
2002. 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, 2002 and 2001,  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,  2002,  in  conformity  with
accounting principles generally accepted in the United States of America.


                          /s/ Anderson Associates, LLP


December 16, 2002
Baltimore, Maryland


                                       14
<PAGE>



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

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------
                               September 30, 2002
                               ------------------
<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                       ---------------------------------------
                                                                            2002                  2001
                                                                       --------------          ---------------
               Assets
               ------
<S>                                                                    <C>                     <C>
Cash                                                                   $    6,467,598          $    4,055,985
Interest bearing deposits in other banks                                   15,808,342               7,952,621
Federal funds sold                                                          3,527,387               3,313,392
Investment securities, available for sale (Note 2)                         45,083,287              23,968,640
Investment securities, held to maturity (Note 2)                            4,495,986              18,494,349
Loans receivable, net (Note 3)                                            396,616,729             268,010,050
Mortgage backed securities, available for sale (Note 4)                    60,411,132              11,441,785
Mortgage backed securities, held to maturity (Note 4)                      33,691,430              41,655,039
Foreclosed real estate, net (Note 5)                                               --                  80,569
Premises and equipment, net (Note 6)                                        8,630,812               6,974,815
Federal Home Loan Bank of Atlanta stock, at cost                            3,939,700               1,834,400
Accrued interest receivable  - loans                                        1,421,418                 930,784
                             - investments                                    294,897                 609,585
                             - mortgage backed securities                     474,143                 304,094
Prepaid and deferred income taxes (Note 17)                                 1,268,370                 195,544
Goodwill                                                                    2,294,327                      --
Core deposit intangible (Note7)                                               542,000                      --
Other assets                                                                2,097,791               1,061,672
                                                                       --------------          --------------
Total assets                                                           $  587,065,349          $  390,883,324
                                                                       ==============          ==============

                 Liabilities and Stockholders' Equity
Liabilities
   Checks outstanding in excess of bank balance                        $      390,799          $           --
   Deposits (Note 8)                                                      498,785,268             325,785,538
   Federal Home Loan Bank of Atlanta advances (Note 9)                     26,968,099              17,800,000
   Trust Preferred Securities (Note 10)                                    12,500,000                      --
   Advance payments by borrowers for taxes and insurance                    1,194,371               1,147,121
   Income taxes payable (Note 17)                                              58,226                   5,901
   Payables to disbursing agents                                              221,345                 109,259
   Dividends payable                                                          264,891                 264,045
   Other liabilities                                                        1,376,787               3,041,070
                                                                       --------------          --------------
Total liabilities                                                         541,759,786             348,152,934

Commitments and contingencies (Notes 3, 6, 9, 10, 11, 12 and 13)

Stockholders' Equity (Notes 12, 13, 14, 15 and 16)
 Common stock (par value $.01 - 13,500,000 authorized,
    5,874,082 and 5,867,322 shares issued and outstanding
    at September 30, 2002 and 2001, respectively)                              58,741                  58,673
   Additional paid-in capital                                              20,302,518              20,116,467
   Obligation under Rabbi Trust                                             1,156,870                      --
   Retained earnings (substantially restricted)                            25,279,752              24,556,126
   Accumulated other comprehensive income (net of taxes)                      664,554                 281,924
                                                                       --------------          --------------
                                                                           47,462,435              45,013,190
   Employee Stock Ownership Plan                                             (960,372)             (1,143,300)
   Stock held by Rabbi Trust                                               (1,196,500)             (1,139,500)
                                                                       --------------          --------------
Total stockholders' equity                                                 45,305,563              42,730,390
                                                                       --------------          --------------
Total liabilities and stockholders' equity                             $  587,065,349          $  390,883,324
                                                                       ==============          ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       15
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                 For Years Ended
                                                                                   September 30,
                                                                       -----------------------------------
                                                                              2002                 2001
                                                                       --------------       --------------

<S>                                                                    <C>                  <C>
Interest and fees on loans (Note 3)                                    $   21,815,907       $   18,938,731
Interest on mortgage backed securities                                      3,637,876            1,947,638
Interest and dividends on investment securities                             2,811,536            2,750,922
Other interest income                                                         214,952              711,169
                                                                       --------------       --------------
Total interest income                                                      28,480,271           24,348,460

Interest on deposits (Note 8)                                              13,983,646           13,785,205
Interest on borrowings - short term                                           118,824              132,499
Interest on borrowings - long term                                            654,684              317,900
Other interest expense                                                        189,111                4,266
                                                                       --------------       --------------
Total interest expense                                                     14,946,265           14,239,870
                                                                       --------------       --------------

Net interest income                                                        13,534,006           10,108,590
Provision for losses on loans (Note 3)                                        509,290              332,341
                                                                       --------------       --------------

Net interest income after provision for losses on loans                    13,024,716            9,776,249

Other Income
------------
   Gain (loss) on sale of foreclosed real estate                               (5,569)              15,751
   Gain on sale of loans                                                      229,906               25,220
   Servicing fee income                                                        12,576               14,249
   Fees and charges on loans                                                  177,463              150,467
   Fees on transaction accounts                                               413,328              322,459
   Rental income                                                               98,839              106,761
   Gain from sale of investments                                               91,837                   --
   Gain from sale of mortgage backed securities                                 2,221                   --
   Loss on disposal of fixed assets                                           (14,090)                  --
   Miscellaneous income                                                        46,969              102,672
                                                                        -------------       --------------
Net other income                                                            1,053,480              737,579

Non-Interest Expenses
---------------------
   Salaries and related expense                                             6,106,076            5,827,819
   Occupancy expense                                                        1,250,776            1,120,279
   Deposit insurance premiums                                                 167,997              126,759
   Data processing expense                                                    957,860              701,689
   Property and equipment expense                                             952,882              876,188
   Professional fees                                                          199,494              186,964
   Advertising                                                                762,864              806,020
   Telephone, postage and office supplies                                     457,565              428,937
   Other expenses                                                             507,732              255,118
                                                                       --------------       --------------
Total non-interest expenses                                                11,363,246           10,329,773
                                                                       --------------       --------------

Income before tax provision                                                 2,714,950              184,055
Income tax provision (Note 17)                                                983,976               79,290
                                                                       --------------       --------------
Net income                                                             $    1,730,974       $      104,765
                                                                       ==============       ==============

Net Income Per Share of Common Stock (Note 1)
   Basic                                                               $         0.31       $         0.02
                                                                       ==============       ==============

   Diluted                                                             $         0.30       $         0.02
                                                                       ==============       ==============
</TABLE>

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

                                       16
<PAGE>

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

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
<TABLE>
<CAPTION>

                                                                           Additional       Obligation
                                                           Common            Paid-In           Under        Retained
                                                            Stock            Capital        Rabbi Trust     Earnings
                                                            -----            -------        -----------     ----------
<S>                                                       <C>              <C>            <C>
Balance - October 1, 2000                                 $ 58,871         $20,214,611    $           --    $25,447,089


Compensation under stock based benefit plans                    --              67,103                --             --
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

Compensation under stock based benefit plans                    --             135,495                --             --
Exercised options                                               75              59,925                --             --
Rabbi Trust Liability                                                               --         1,156,870             --
Acquisition of stock for Rabbi Trust                            --                  --                --             --
Treasury stock purchased                                        (7)             (9,369)               --             --
Cash dividends declared ($.50 per share)                        --                  --                --      (1,007,348)
Comprehensive income
   Net income for the year ended September 30, 2002             --                  --                --       1,730,974
   Net change in unrealized gains on investment
     securities and mortgage backed securities,
     net of tax of $274,929                                     --                  --                --              --
   Reclassification adjustment for gains included in net
     income on available for sale securities, net of tax
     of $34,180                                                 --                  --                --              --
Comprehensive income                                            --                  --                --              --
                                                          --------         -----------    --------------     -----------
Balance - September 30, 2002                              $ 58,741         $20,302,518    $    1,156,870     $25,279,752
                                                          ========         ===========    ==============     ===========

                                                            Accumulated
                                                                Other         Employee
                                                            Comprehensive       Stock            Stock           Total
                                                             Income, Net      Ownership         Held By      Stockholders'
                                                              of Taxes          Plan          Rabbi Trust       Equity
                                                              --------          ----          -----------       ------

Balance - October 1, 2000                                   $        --    $  (1,326,228)    $ (1,051,526)  $  43,342,817

Compensation under stock based benefit plans                         --          182,928               --         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                                    281,924       (1,143,300)      (1,139,500)     42,730,390

Compensation under stock based benefit plans                         --          182,928               --         318,423
Exercised options                                                    --               --               --          60,000
Rabbi Trust Liability                                                --               --               --       1,156,870
Acquisition of stock for Rabbi Trust                                 --               --          (57,000)        (57,000)
Treasury stock purchased                                             --               --               --          (9,376)
Cash dividends declared ($.50 per share)                             --               --               --      (1,007,348)
Comprehensive income
   Net income for the year ended September 30, 2002                  --               --               --              --
   Net change in unrealized gains on investment
     securities and mortgage backed securities,
     net of tax of $274,929                                     442,508               --               --              --
   Reclassification adjustment for gains included in net
     income on available for sale securities, net of tax
     of $34,180                                                 (59,878)              --               --              --
Comprehensive income                                                 --               --               --       2,113,604
                                                            -----------    -------------     ------------   -------------
Balance - September 30, 2002                                $   664,554    $    (960,372)    $ (1,196,500)  $  45,305,563
                                                            ===========    =============     ============   =============
</TABLE>

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

                                       17
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                For Years Ended
                                                                                  September 30,
                                                                       -------------------------------------
                                                                            2002                   2001
                                                                       --------------          --------------
<S>                                                                    <C>                     <C>
Operating Activities
--------------------
     Net income                                                        $    1,730,974          $      104,765
     Adjustments to Reconcile Net Income to Net
      Cash Provided by Operating Activities
     ------------------------------------------
         Accretion and amortization of discount
           on investments, net                                                (15,643)                  2,778
         Dividends on investment securities                                  (931,495)               (250,539)
         Gain on sale of investments                                          (91,837)                     --
         Loans originated for sale                                        (10,182,800)             (2,880,566)
         Proceeds from loans sold                                          10,412,706               2,855,346
         (Gain) on loans sold                                                (229,906)                (25,220)
         Loan fees and costs deferred, net                                    166,414                  22,860
         Amortization of deferred loan fees, net                             (237,860)                (94,973)
         Provision for losses on loans                                        509,290                 332,341
         Non-cash compensation under Stock-Based
          Benefit Plan                                                        318,423                 250,031
         Amortization of premium on mortgage backed
          securities                                                          274,382                  97,854
         Amortization of Purchase Premiums and
          Discounts, net                                                     (151,710)                     --
         Gain on sale of mortgage backed securities                            (2,221)                     --
         Provision for depreciation                                           816,086                 749,061
         Loss on disposal of fixed assets                                      14,090                      --
         Loss (gain) on sale of real estate owned                               5,569                 (15,751)
         Increase in accrued interest receivable on loans                     (26,981)                (67,137)
         Decrease in accrued interest receivable on investments               323,314                 121,022
         Increase in accrued interest receivable
           on mortgage backed securities                                      (84,272)               (183,006)
         Decrease (increase) in prepaid and deferred income taxes              81,275                (115,349)
         Increase in other assets                                            (860,459)               (533,213)
         Decrease in accrued interest payable on deposits                    (417,893)               (357,978)
         Increase (decrease) in income taxes payable                           52,325                 (19,631)
         (Decrease) increase in other liabilities and payables
          to disbursing agents                                               (754,265)                477,119
                                                                       --------------          --------------
              Net cash provided by operating activities                       717,506                 469,814
</TABLE>

                                       18
<PAGE>


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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                For Years Ended
                                                                                 September 30,
                                                                       --------------------------------------
                                                                              2002                   2001
                                                                       --------------          --------------
<S>                                                                    <C>                     <C>
Cash Flows from Investing Activities
------------------------------------
     Proceeds from maturing interest bearing deposits                  $    2,253,000          $    2,759,000
     Purchase of interest bearing deposits                                         --                (792,000)
     Purchase of WHG Corporation, net of cash acquired                     (4,318,428)                     --
     Purchases of investment securities - available for sale              (70,344,403)            (24,493,199)
     Proceeds from maturities of investment securities -
       available for sale                                                  16,612,000               1,155,656
     Proceeds from sale of investment securities - available for sale      34,360,997                      --
     Purchases of investment securities - held to maturity                 (2,495,937)            (31,140,000)
     Proceeds from maturities of investment securities -
      held to maturity                                                     16,500,000              53,800,000
     Longer term loans originated                                         (53,326,464)            (39,947,775)
     Principal collected on longer term loans                              82,877,756              21,432,869
     Net increase in short-term loans                                     (42,277,864)             (7,879,826)
     Loans purchased                                                               --                (414,712)
     Purchase of mortgage backed securities - available for sale          (45,235,370)            (12,233,045)
     Principal collected on mortgage backed securities -
      available for sale                                                   11,908,292                 871,005
     Proceeds from sale of mortgage backed securities -
      available for sale                                                    2,934,451                      --
     Purchase of mortgage backed securities - held to maturity             (7,589,623)            (36,353,304)
     Principal collected on mortgage backed securities -
       held to maturity                                                    15,387,327              14,424,563
     Proceeds from sales of foreclosed real estate                             75,000                  94,603
     Investment in premises and equipment                                    (515,050)             (1,014,281)
     Purchase of Federal Home Loan Bank of Atlanta stock                     (655,300)                     --
                                                                       --------------          --------------
              Net cash used by investing activities                       (43,849,616)            (59,730,446)

Cash Flows from Financing Activities
------------------------------------
     Checks written in excess of Bank Balance                                 390,799                      --
     Net increase in demand deposits, money market,
      passbook accounts and advances by borrowers
      for taxes and insurance                                              22,734,854               6,457,281
     Net increase in certificates of deposit                               32,553,664              50,761,695
     Increases in Federal Home Loan Bank of Atlanta advances                6,900,000              16,400,000
     Repayment of Federal Home Loan Bank of Atlanta advances              (18,200,000)             (8,100,000)
     Acquisition of stock for Rabbi Trust                                     (57,000)                (87,974)
     Increase of Trust Preferred Securities                                12,500,000                      --
     Treasury stock purchase                                                   (9,376)               (165,445)
     Exercised Stock Options                                                   60,000                      --
     Increase (decrease) in dividends payable                                     846                  (1,909)
     Dividends on stock                                                    (1,007,348)               (995,728)
                                                                       --------------          --------------
              Net cash provided by financing activities                    55,866,439              64,267,920
                                                                       --------------          --------------
</TABLE>

                                       19
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                  For Years Ended
                                                                                   September 30,
                                                                       --------------------------------------
                                                                            2002                    2001
                                                                       --------------          --------------
<S>                                                                    <C>                     <C>
Increase in cash and cash equivalents                                  $   12,734,329          $    5,007,288
Cash and cash equivalents at beginning of period                           12,968,998               7,961,710
                                                                       --------------          --------------
Cash and cash equivalents at end of period                             $   25,703,327          $   12,968,998

The following is a summary of cash and cash equivalents:
-------------------------------------------------------
     Cash                                                              $    6,467,598          $    4,055,985
     Interest bearing deposits in other banks                              15,808,342               7,952,621
     Federal funds sold                                                     3,527,387               3,313,392
                                                                       --------------          --------------
     Balance of cash items reflected on Statement of
      Financial Condition                                                  25,803,327              15,321,998

         Less - certificate of deposit with a maturity
                     of more than three months                                100,000               2,353,000
                                                                       --------------          --------------

Cash and cash equivalents reflected on the
  Statement of Cash Flows                                              $   25,703,327          $   12,968,998
                                                                       ==============          ==============

Supplemental Disclosures of Cash Flows Information:
--------------------------------------------------
   Cash paid during the period for:

      Interest                                                         $   15,223,526          $   14,575,316
                                                                       ==============          ==============
      Income taxes                                                     $      990,000          $      122,866
                                                                       ==============          ==============

   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.

                                       20
<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 BCSB Bankcorp  Capital Trust I and 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.

          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.   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.


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

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

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

          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.

          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.   Loan  Servicing  - The  cost  of  mortgage  servicing  rights  is
               amortized in proportion to, and over the period of, estimated net
               servicing  revenues.  Impairment of mortgage  servicing rights is
               assessed based on the fair value of those rights. Fair values are
               estimated by  calculating  the net present values of the interest
               payments over the life of the loans.  Impairment is determined on
               a loan by loan basis.  The amount of  impairment  recognized,  if
               any, is the amount by which the  capitalized  mortgage  servicing
               rights for a loan exceed its fair value.

          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.

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

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


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

          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.

          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, 2002 and 2001 are as follows:
<TABLE>
<CAPTION>
                                                                                 2002
                                                              -------------------------------------------
                                                                 Income          Shares        Per Share
                                                              (Numerator)     (Denominator)      Amount
                                                              -----------     -------------    ----------
<S>                                                           <C>                <C>             <C>
                Basic EPS
                ---------
                   Income available to share holders          $  1,730,974       5,646,894       $   0.31
                                                                                                 ========
                Diluted EPS
                -----------
                   Effect of dilutive shares                            --          69,106
                                                              ------------    ------------
                    Income available to shareholders
                     plus assumed conversions                 $  1,730,974       5,716,000       $   0.30
                                                              ============    ============       ========
<CAPTION>
                                                                                 2001
                                                              -------------------------------------------
<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
                                                              ============    ============       ========
</TABLE>

          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)

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

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


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

          O.   All advertising costs are expensed as incurred.

          P.   Merger  Agreement - On July 24,  2002,  the Company  acquired WHG
               Bancshares Corporation,  the holding company for Heritage Savings
               Bank, a federally  chartered savings bank. Holders of outstanding
               shares of WHG Bancshares received $14.25 in cash.

               The  combination  was accounted for under the purchase  method of
               accounting,  and  accordingly,  the net assets  were  recorded at
               their estimated fair values at the date of acquisition,  July 24,
               2002.  The Company  recorded net premiums of $2,779,968 on assets
               and  $2,981,701  on  liabilities.  A core deposit  intangible  of
               $630,000 was also recorded.  Fair value adjustments on the assets
               and liabilities  purchased are being amortized over the estimated
               lives of the related  assets and  liabilities.  The net effect of
               the  amortization  of  premiums  on net income  before  taxes for
               fiscal 2002 was $151,710.  The excess of purchase  price over the
               estimated  fair value of the  underlying net assets of $2,294,327
               was  allocated  to  goodwill.   Goodwill  will  be  assessed  for
               impairment on an annual basis.

               The  following   unaudited  pro  forma   condensed   consolidated
               financial  information  reflects the results of operations of the
               Company for the years ended September 30, 2002 and 2001 as if the
               transaction   had  occurred  at  the   beginning  of  the  period
               presented. These pro forma results are not necessarily indicative
               of what the Company's  results of operations  would have been had
               the  acquisition  actually  taken place at the  beginning of each
               period presented.
<TABLE>
<CAPTION>
                                            Year Ended September 30,
                                           -------------------------
                                               2002          2001
                                           -----------   -----------

            <S>                            <C>           <C>
            Net interest income            $16,825,132   $14,377,234
            Net income                       2,954,550     1,202,004
            Diluted net income per share          0.52          0.21
</TABLE>

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

          R.   Core Deposit  Intangible - The Company  recognized a core deposit
               intangible  as  described  above as a result of the merger.  This
               deposit base is assumed to decay over time as funds are withdrawn
               by customers.  In this regard the Company utilizes an approximate
               nine  year  life.  Amortization  is  calculated  using  algebraic
               formulas  taking into  account  current  portfolio  costs and the
               current short term LIBOR rate.

                                       24
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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


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

                The amortized cost and fair values of investment  securities are
          as follows as of September 30, 2002 and 2001.
<TABLE>
<CAPTION>

                                                                          Gross          Gross
                                                    Amortized          Unrealized      Unrealized       Fair
                                                       Cost               Gains         Losses         Value
                                                  -------------      -------------    ------------   --------------
<S>                                               <C>                <C>              <C>            <C>
    Available for Sale:

    September 30, 2002
      U.S. Government and Agency
       Obligations, available for sale            $  19,084,503      $     295,706    $    (20,224)  $   19,359,985
      Equity investments in Mutual
       Funds, available for sale                     25,675,170             48,132              --       25,723,302
                                                  -------------      -------------    ------------   --------------
                                                  $  44,759,673      $     343,848    $    (20,224)  $   45,083,287
                                                  =============      =============    ============   ==============

    Held to Maturity:

    September 30, 2002
      U.S. Government and Agency
       Obligations, held to maturity              $   4,495,986      $     125,346    $         --   $    4,621,332
                                                  =============      =============    ============   ==============


                                                                          Gross          Gross
                                                    Amortized          Unrealized      Unrealized       Fair
                                                       Cost               Gains         Losses         Value
                                                  -------------      -------------    ------------   --------------
    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>

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

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


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

                The following is a summary of investment securities:
<TABLE>
<CAPTION>
                                                           September 30, 2002               September 30, 2001
                                                     ----------------------------       --------------------------
                                                       Amortized            Fair          Amortized          Fair
                                                          Cost             Value             Cost            Value
                                                     -------------         -----        -----------          -----
<S>                                                  <C>               <C>              <C>              <C>
       Available for Sale:

       U.S. Government and Agency Obligations
       --------------------------------------
          Due within 12 months                       $          --     $          --    $          --    $           --
          Due beyond 12 months but
           within five years                             3,599,390         3,675,198          999,471         1,038,531
          Due beyond five years but
           within ten years                             12,986,568        13,138,433       11,493,914        11,784,749
          Due beyond ten years                           2,498,545         2,546,354        1,910,988         1,933,461
          Equity investments in
            mutual funds                                25,675,170        25,723,302        9,184,703         9,211,899
                                                     -------------     -------------    -------------    --------------

                                                     $  44,759,673     $  45,083,287    $  23,589,076    $   23,968,640
                                                     =============     =============    =============    ==============
<CAPTION>
                                                           September 30, 2002                 September 30, 2001
                                                     ----------------------------       -------------------------------
                                                       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                       $          --     $          --    $          --    $           --
          Due beyond 12 months but
           within five years                             3,499,062         3,608,673        4,498,680         4,563,455
          Due beyond five years but
           within ten years                                996,924         1,012,659       12,496,110        12,653,535
          Due beyond ten years                                  --                --        1,499,599         1,515,077
                                                     -------------     -------------    -------------    --------------

                                                     $   4,495,986     $   4,621,332    $  18,494,389    $   18,732,067
                                                     =============     =============    =============    ==============
</TABLE>


                 Proceeds  from  maturities  and  sales  of  available  for sale
          securities  during the year ended September 30, 2002 were $50,972,997.
          Net gains  amounted to $91,837 for the year ended  September 30, 2002.
          This consisted of gross gains of $115,207 and gross losses of $23,370.

                 Proceeds  from  maturities  and  sales  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
          $16,500,000 and $53,800,000 for the years ended September 30, 2002 and
          2001,  respectively.  There were no gross gains or losses realized for
          the years ended September 30, 2002 and 2001.

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

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

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

               Loans  receivable  at September  30, 2002 and 2001 consist of the
          following:
<TABLE>
<CAPTION>
                                                                                    September 30,
                                                                       --------------------------------------
                                                                            2002                    2001
                                                                       --------------          --------------
              <S>                                                      <C>                     <C>
              Single-family residential mortgages                      $  221,062,154          $  165,028,058
              Single-family rental property loans                           8,306,509               7,580,775
              Commercial real estate loans                                 57,356,553              15,068,080
              Construction loans                                           11,733,663               8,708,710
              Commercial loans secured                                      1,595,117               2,587,966
              Commercial lease loans                                        1,170,210               1,308,097
              Commercial lines of credit                                    4,207,625                 400,620
              Automobile loans                                             93,160,735              72,821,631
              Home equity loans                                            13,864,092               8,934,728
              Other consumer loans                                          3,896,598               2,394,511
                                                                       --------------          --------------
                                                                          416,353,256             284,833,176

                    Add    - Purchase Accounting Premiums, net              1,990,236                      --
                    Less   - undisbursed portion of loans in process       (4,902,134)             (4,433,734)
                           - unearned interest                            (13,964,290)            (10,683,706)
                           - deferred loan origination fees and costs        (660,891)               (142,691)
                           - allowance for loan losses                     (2,199,448)             (1,562,995)
                                                                       --------------          --------------

                                                                       $  396,616,729          $  268,010,050
                                                                       ==============          ==============
</TABLE>

               The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>

                                                                                   September 30,
                                                                       --------------------------------------
                                                                              2002                    2001
                                                                       --------------          --------------

              <S>                                                      <C>                     <C>
              Balance - beginning of year                              $    1,562,995          $    1,402,911
              Provision for losses on loans                                   509,290                 332,341
              Allowance assumed in acquisition                                386,594                      --
              Charge-offs                                                    (688,742)               (344,014)
              Recoveries                                                      429,311                 171,757
                                                                       --------------          --------------

              Balance - end of year                                    $    2,199,448          $    1,562,995
                                                                       ==============          ==============
</TABLE>


               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.

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

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


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

               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  $1,390,585 and $238,942 at September 30, 2002 and 2001,
          respectively.  There were no impaired loans as defined by SFAS No. 114
          at  September  30,  2002  and  2001.  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,
                                                                       -----------------------------------
                                                                            2002                   2001
                                                                       ----------              -----------
              <S>                                                      <C>                     <C>
              Interest income that would have been recognized          $    33,122             $    20,415
              Interest income recognized                                     8,483                   9,591
                                                                       -----------             -----------

                 Interest income not recognized                        $    24,639             $    10,824
                                                                       ===========             ===========
</TABLE>

               The  following  table set forth the  amount and  activity  of the
          loans  outstanding to officers and directors at September 30, 2002 and
          2001.
<TABLE>
<CAPTION>
                                                                                   September 30,
                                                                       -----------------------------------
                                                                            2002                    2001
                                                                       -----------             -----------
              <S>                                                      <C>                     <C>
              Beginning balance                                        $   701,086             $   350,828
              New loans                                                    329,482                 402,278
              Loan repayments                                             (103,822)                (52,020)
                                                                       -----------             -----------

              Ending balance                                           $   926,746             $   701,086
                                                                       ===========             ===========
</TABLE>

               The  Bank  services  loans for  others.  The amount of such loans
          serviced  at  September  30,  2002  and  2001  was   $12,306,345   and
          $4,980,011,  respectively. At September 30, 2002 and 2001, the balance
          of loans  sold by the Bank with  recourse  amounted  to  $275,996  and
          $363,493, respectively.

               Custodial  escrow  balances  maintained  in  connection  with the
          foregoing loan  servicings were  approximately  $73,843 and $41,718 at
          September 30, 2002 and 2001, respectively.

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

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


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

               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, 2002        September 30, 2001
           -----------------------------------------                   ------------------        ------------------
              <S>                                                        <C>                       <C>
              Standby letters of credit                                  $     430,537             $      68,681
              Commercial lines of credit                                 $   4,645,461             $   1,030,000
              Home equity lines of credit                                $  16,163,331             $  21,748,800
              Loan commitments, fixed rate                               $  10,101,613             $   4,844,900
              Loan commitments, variable rate                            $   2,755,000             $     251,000
</TABLE>

               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 5.38% to 7.25% and 6.25% to 7.00% at September 30, 2002 and 2001,
          respectively.  There were no mortgage  loan  commitments  for variable
          rate  loans  at  September  30,  2002.   Rates  on  home  equity  loan
          commitments for fixed rate loans ranged from 5.5% to 6.5% and 6.75% to
          7.75% at  September  30,  2002 and 2001,  respectively.  Rates on home
          equity  loan  commitments  for  variable  rate  loans were at prime at
          September 30, 2002.

               Rates on commercial loan  commitments for fixed rate loans ranged
          from 7.0% to 8.5% at September  30,  2002.  Rates on  commercial  loan
          commitments  for  variable  rate loans ranged from 0.50% over prime to
          2.0% over prime at September 30, 2002.

               No amount was  recognized in the statement of financial  position
          at September  30, 2002 and 2001,  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.

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

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

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

               The  amortized cost and fair values of mortgage backed securities
          are as follows as of September 30, 2002 and 2001:
<TABLE>
<CAPTION>
                                                                         Gross           Gross
                                                   Amortized          Unrealized       Unrealized         Fair
                                                      Cost               Gains           Losses          Value
                                                   ---------          ----------       ----------        -----
<S>                                               <C>                <C>              <C>            <C>
    Available for Sale:

    September 30, 2002
    ------------------
       GNMA certificates                          $  28,191,758      $     264,472    $     (1,436)  $   28,454,794
       FNMA certificates                          $  19,015,492      $     258,358    $     (3,141)  $   19,270,709
       FHLMC participating certificates              12,448,442            237,187              --       12,685,629
                                                  -------------      -------------    ------------   --------------
                                                  $  59,655,692      $     760,017    $     (4,577)  $   60,411,132
                                                  =============      =============    ============   ==============
    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
                                                  =============      =============    ============   ==============

    Held to Maturity:

    September 30, 2002
    ------------------
       GNMA certificates                          $  11,067,019      $     562,778    $     (6,758)  $   11,623,039
       FNMA certificates                             12,555,877            366,135          (5,866)      12,916,146
       FHLMC participating certificates              10,068,534            402,058              --       10,470,592
                                                  -------------      -------------    ------------   --------------
                                                  $  33,691,430      $   1,330,971    $    (12,624)  $   35,009,777
                                                  =============      =============    ============   ==============

    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
                                                  =============      =============    ============   ==============
</TABLE>

               Proceeds  from  sales  of  available  for  sale  mortgage  backed
          securities  during the year ended September 30, 2002 were  $2,934,451.
          Net gains  amounted to $2,221 for the year ended  September  30, 2002.
          This consisted of gross gains of $3,921 and gross losses of $1,700. No
          gains or losses  were  realized  during the year ended  September  30,
          2001.

                                       30
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

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

               Foreclosed  real  estate  at  September  30,  2002  and  2001  is
          summarized by major classification as follows:
<TABLE>
<CAPTION>
                                                                                September 30,
                                                                       -----------------------------
                                                                            2002               2001
                                                                       -----------        ----------
              <S>                                                      <C>                <C>
              EPIC loans                                               $        --        $   50,822
              Residential real estate                                           --            80,569
              Allowance for losses                                              --           (50,822)
                                                                       -----------        ----------
                                                                       $        --        $   80,569
                                                                       ===========        ==========
</TABLE>

               The allowance for losses on foreclosed real estate was $50,822 at
          September 30, 2001.  There was no provision for loan losses during the
          years ended September 30, 2002 and 2001.

Note 6 - Premises and Equipment
         ----------------------

               Premises  and  equipment  at  September  30,  2002  and  2001 are
          summarized by major classification as follows:
<TABLE>
<CAPTION>
                                                                        September 30,
                                                              -------------------------------
                                                                    2002             2001            Life
                                                                    ----             ----            ----
              <S>                                             <C>               <C>                 <C>
              Office building                                 $   5,859,884     $   4,569,884       50 Years
              Leasehold improvements                              1,123,517           660,563     7-31 Years
              Furniture, fixtures and equipment                   5,526,688         6,237,430       10 Years
                                                              -------------     -------------
                                                                 12,510,089        11,467,877
                   Accumulated depreciation                       3,879,277         4,493,062
                                                              -------------     -------------
                                                              $   8,630,812     $   6,974,815
                                                              =============     =============
</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, 2002 and 2001 was $649,691 and  $641,512,  respectively.
          At September 30, 2002, minimum rental commitments under noncancellable
          leases are as follows:

                   Years Ended September 30,                    Amount
                   -------------------------                ------------
                          2003                              $    742,594
                          2004                                   762,940
                          2005                                   782,289
                          2006                                   746,845
                          2007                                   708,535
                       After 2007                              3,936,361
                                                            ------------

                                                            $  7,679,564
                                                            ============

                                       31
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 7 - Core Deposit Intangible
         -----------------------
                                                                As of
                                                             September 30,
                                                                 2002
                                                             ------------

             Core Deposit Intangible                          $630,000
             Accumulated Amortization                           88,000
                                                              --------
             Net balance                                      $542,000
                                                              ========

             Aggregate Amortization Expense
             ------------------------------

                  For the year ended September 30, 2002       $ 88,000

             Estimated Amortization Expense
             ------------------------------

                  For the year ended September 30, 2003       $120,000
                  For the year ended September 30, 2004         59,000
                  For the year ended September 30, 2005         62,000
                  For the year ended September 30, 2006         57,000
                  For the year ended September 30, 2007         59,000

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

              Deposits are summarized as follows at September 30, 2002 and 2001:
<TABLE>
<CAPTION>
                                                                 2002                             2001
                                                   -------------------------          --------------------------
                                                        Amount          %                  Amount          %
                                                        ------          -                  ------          -
<S>                                                <C>                  <C>           <C>                  <C>
       Type of Account
       ---------------
          Deposits
          --------
             NOW                                   $    31,849,467      6.39%         $    22,116,378      6.79%
             Non-interest bearing NOW                   13,977,091      2.80               11,922,207      3.66
             Money market                               18,909,446      3.79                6,654,056      2.04
             Passbook savings                           92,301,331     18.50               60,943,874     18.71
             Certificates                              340,269,314     68.22              223,944,072     68.74
             Purchase Accounting
                 Premiums, net                           1,391,921       .28                       --        --
                                                   ---------------    ------          ---------------    ------
                                                       498,698,570     99.98              325,580,587     99.94
             Accrued interest payable                       86,698       .02                  204,951       .06
                                                   ---------------    ------          ---------------    -----
                                                   $   498,785,268    100.00%         $   325,785,538    100.00%
                                                   ===============    ======          ===============    ======
</TABLE>

               The  aggregate  amount of jumbo  certificates  of deposit  with a
          minimum  denomination  of $100,000 was  approximately  $73,742,000 and
          $46,272,000 at September 30, 2002 and 2001, respectively.  Deposits in
          excess  of  $100,000  are  not  insured  by  the  Savings  Association
          Insurance Fund.

                                       32
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

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

               At  September 30, 2002,  scheduled  maturities of certificates of
          deposit are as follows:

                         2003                        $  209,151,012
                         2004                            51,810,291
                         2005                            44,941,309
                         2006                            13,584,870
                         2007                            20,780,782
                         2008 and thereafter                  1,050
                                                     --------------
                                                     $  340,269,314
                                                     ==============

               Interest  expense on deposits for the years ended  September  30,
          2002 and 2001 is as follows:
<TABLE>
<CAPTION>

                                                2002                2001
                                                ----                ----
              <S>                        <C>                <C>
              NOW                        $     434,916      $      339,812
              Money market                     172,697             176,425
              Passbooks savings              2,275,939           1,486,437
              Certificates                  11,100,094          11,782,531
                                         -------------      --------------
                                         $  13,983,646      $   13,785,205
                                         =============      ==============
</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>
                                                           2002                               2001
                                           --------------------------------       ------------------------------
                   Due                          Rate             Total                Rate            Total
                   ---                          ----             -----                ----            -----
<S>                                        <C>     <C>        <C>                 <C>     <C>      <C>
             Less than one year            2.17% - 6.41%      $   4,500,000       3.76% - 4.22%    $   8,800,000
             One to two years              5.00% - 7.48%          2,250,000       3.70% - 6.41%        7,000,000
             Beyond two years              4.89% - 6.60%         19,000,000       6.60% - 7.48%        2,000,000
                                                              -------------                        -------------
             Total borrowings                                 $  25,750,000                        $  17,800,000
                                                              =============                        =============
</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 - Trust Preferred Securities
          --------------------------

                  Company-obligated   preferred   securities  ("trust  preferred
          securities") consist of 12,500 securities with a liquidation amount of
          $1,000 per security.  The trust  preferred  securities  were issued in
          June 2002 by a statutory business trust; BCSB Bankcorp Capital Trust I
          ("the Trust").  The Trust is a wholly owned subsidiary of the Company.
          The Trust  used the  proceeds  of the trust  preferred  securities  to
          purchase at par  $12,887,000  of adjustable  rate junior  subordinated
          debentures  of the  Company  that are due June 30,  2032.  The rate is
          3.65% per annum over the three-month  LIBOR rate and resets quarterly.
          The rate at  September  30, 2002 was 5.425%.  The junior  subordinated
          debentures are the sole assets of the Trust.

                                       33
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 10 - Trust Preferred Securities - Continued
          --------------------------

                 Payments  to be  made  by  the  Trust  on the  trust  preferred
          securities  are dependent on payments that the Company has  undertaken
          to make,  particularly  the  payment to be made by the  Company on the
          debentures.  Considered  together,  the  obligations  of  the  Company
          constitute  a  full  and   unconditional   guarantee  of  the  Trust's
          obligations under the trust preferred securities.

                 Distributions  on the trust  preferred  securities  are payable
          quarterly  at a rate of 3.65% per  annum  over the  three-month  LIBOR
          rate. The  distributions  are funded by interest  payments received on
          the  debentures and are subject to deferral for up to five years under
          certain  conditions.  Distributions  are included in interest expense.
          The Company may redeem the debentures,  in whole or in part, at par at
          any time after June 30, 2007, or under certain conditions in whole but
          not in part,  at any time at a  redemption  price equal to 103% of the
          principal amount plus any accrued unpaid interest.

Note 11 - Pension Plan
          ------------

                The Bank had 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 31, 2001, the date
          of latest available annual review and valuation of the plan.

                 The  expense  for the pension  plan  amounted  to $257,635  and
          $267,800   for  the  years   ended   September   30,  2002  and  2001,
          respectively.

Note 12- Directors Retirement Plan
         -------------------------

                The Director's  Retirement  Plan consisted of a Rabbi Trust that
          was invested  primarily in the Company's  stock.  The related deferred
          compensation  obligation was classified as a liability adjusted with a
          corresponding  charge (or credit) to compensation costs by multiplying
          the  number of shares  owned by the Rabbi  Trust by the  change in the
          fair  market of each share,  to reflect  changes of the amount owed to
          the  Directors.  The plan was amended in fiscal 2002. The amended plan
          divided  the then  existing  Plan into two  plans.  Under one plan the
          directors  are  credited  with a  specific  number  of  shares  of the
          Company's stock, and will be paid out by delivering only Company stock
          to the  participants.  Under the other plan directors  compensation is
          invested  primarily in one-year  certificates  of deposit.  Due to the
          change,  any increase or decrease in the market value of shares in the
          Plan  will no  longer  be  recognized  as  compensation  expense  or a
          reduction of compensation  expense, in addition the obligation related
          to the  stock  plan  is now  included  in the  equity  section  of the
          statement of financial condition.  Compensation expense was reduced by
          $170,315 for the year ended September 30, 2002, principally because of
          a decline in value of shares  held in the Rabbi Trust up to the change
          in the plan.  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.

                                       34
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 13- 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.

                 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,
          2002 and 2001 were $211,228 and $159,858, respectively.

               The ESOP shares were as follows as of September 30:
<TABLE>
<CAPTION>
                                                 2002         2001
                                                 ----         ----

            <S>                                 <C>          <C>
            Shares released and allocated       86,893       68,599
            Unearned shares                     96,037      114,331
                                            ----------   ----------
                                               182,930      182,930
                                            ==========   ==========

            Fair value of unearned shares   $1,200,463   $1,171,893
                                            ==========   ==========
</TABLE>

                                       35
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 14- 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.  During  the year  ended  September  30,  2002 the Bank
          awarded an  additional  25,750  shares,  and  intends  to reserve  the
          remaining 20,114 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 effective  date of the MRP award.  As of September
          30, 2002,  34,200  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  in the amount of the fair  market  value of the
          Common  Stock at the date of the  grant is  recognized  on a  pro-rata
          basis over the years during which the shares are earned.  Compensation
          expense of $98,224 and $89,780 was recognized for the MRP for the year
          ended September 30, 2002 and 2001, respectively.

Note 15- 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.  An additional  74,500  options were granted during the
          year ended September 30, 2002. No options were granted during the year
          ended September 30, 2001.

               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 October 1, 2000 and
                 September 30, 2001                               80,000              $ 8.00

             Options exercised                                    (7,500)               8.00

             Granted                                               74,500              11.375
                                                                ---------             ------

             Outstanding at September 30, 2002                    147,000            $  9.71

             Exercisable at September 30, 2001                     40,000            $  8.00
                                                                =========

             Exercisable at September 30, 2002                     52,500            $  8.00
                                                                =========
</TABLE>
               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%. The estimated fair value of each option granted was $1.62.

                                       36
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 15- Stock Option Plan - Continued
         -----------------

               The  Company  estimated  the grant date fair value of each option
          awarded in fiscal 2002 using the  Black-Scholes  Option-Pricing  model
          with the  following  relevant  assumptions:  dividend  yield of 4.08%,
          risk-free  interest rate of 4.49% and expected lives of 10 years.  The
          assumption  for expected  volatility  was 32.63%.  The estimated  fair
          value of each option granted was $2.80.

               Had 2002 and 2001 compensation cost been determined including the
          weighted-average  estimate of fair value of each option  granted,  the
          Company's net income would be reduced to proforma amount of $1,711,087
          and $84,880,  respectively.  Proforma earnings, basic and diluted, per
          share  would  have  been  $.30 in  fiscal  2002  and  $.02  and  $.01,
          respectively, in fiscal 2001.

Note 16- 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, 2002, that the Bank meets all
          capital adequacy requirements to which it is subject.

                As of September 30, 2002, 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.


                                       37
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 16- 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 Under
                                                                            For Capital        Prompt Corrective
                                                     Actual               Adequacy Purposes    Action Provisions
                                               --------------------      ------------------    -----------------
                                               Amount         Ratio       Amount      Ratio    Amount      Ratio
                                               ------         -----      -------      -----    -------     -----
       <S>                                    <C>               <C>      <C>            <C>    <C>
       September 30, 2002
       ------------------
       Tangible (1)                          $  46,635,461     8.09%    $ 8,650,374    1.5%   $   N/A       N/A %
       Tier I capital (2)                       46,635,461    13.77          N/A       N/A     20,323,889    6.0
       Core (1)                                 46,635,461     8.09      23,067,663    4.0     28,834,579    5.0
       Risk-weighted (2)                        48,761,922    14.40      27,098,519    8.0     33,873,148   10.0

       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
<FN>

       (1)  To adjusted total assets.
       (2)  To risk-weighted assets.
</FN>
</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, 2002, 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.

                 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 17- Income Taxes
         ------------

               The current tax provision consists of the following for the years
          ended September 30, 2002 and 2001:
<TABLE>
<CAPTION>
                                              2002           2001
                                              ----           ----
            <S>                          <C>            <C>
            Current expense              $ 1,026,926    $   335,037
            Deferred (benefit) expense       (42,950)      (255,747)
                                         -----------    -----------
               Total tax expense         $   983,976    $    79,290
                                         ===========    ===========
</TABLE>

                                       38
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 17- Income Taxes - Continued
         ------------

               The  tax  effects  to  temporary  differences  that  give rise to
          significant  portions  of the  deferred  tax assets and  deferred  tax
          liabilities at September 30, 2002 and 2001 are as follows:
<TABLE>
<CAPTION>
                                                                            2002              2001
                                                                            ----              ----
              <S>                                                      <C>                <C>
              Deferred Tax Assets:
                Charitable deduction carryforward                      $         --       $      42,765
                ESOP and MRP                                                 44,338              39,515
                Market value change in Rabbi Trust assets                        --              45,845
                Deferred compensation                                        87,564                  --
                Allowance for loan losses                                   700,124             603,628
                Allowance for uncollected interest                            5,477              24,307
                Deferred loan fees                                          207,115                  --
                                                                       ------------       -------------
                      Total gross deferred tax assets                     1,044,618             756,060

             Deferred Tax Liabilities:
                Federal Home Loan Bank of Atlanta
                    stock dividends                                    $   (208,892)      $    (151,928)
                   Depreciation                                            (286,579)           (257,515)
                   Bad debt deduction in excess of
                    base year reserves                                           --             (76,162)
                Unrealized holding gains                                   (415,083)           (177,385)
                Market value change in Rabbi Trust assets                   (19,544)                 --
                Purchase Accounting Premiums, net                           (16,183)                 --
                                                                       ------------       -------------
                         Total gross deferred tax liabilities              (946,281)           (662,990)
                                                                       ------------       -------------
                Net Deferred Tax Assets                                $     98,337       $      93,070
                                                                       ============       =============
</TABLE>

               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,
                                                            ----------------------------------------------------------
                                                                      2002                                 2001
                                                            ----------------------            ------------------------
                                                                           Percent                             Percent
                                                                          of Pretax                           of Pretax
                                                            Amount          Income            Amount           Income
                                                            ------        ---------           ------          --------
              <S>                                           <C>            <C>               <C>                <C>
              Statutory federal income tax rate             $   923,083    34.00%            $    62,579        34.00%
              Increases Resulting From
              ------------------------
                 State income tax net of
                  federal income tax benefit                     56,768     2.09                   7,187         3.90
                 Other                                            4,125     0.15                   9,524         5.17
                                                            -----------  -------             -----------      -------
                                                            $   983,976    36.24%            $    79,290        43.07%
                                                            ===========    =====             ===========        =====
</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.

                                       39
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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


Note 17- Income Taxes - Continued
         ------------

               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
          $6,249,261  with an income tax effect of  approximately  $2,413,997 at
          September  30,  2002.  This bad debt reserve  would become  taxable if
          certain conditions are met by the Bank.

Note 18- 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.

               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.
          Preferred  Trust  Securities 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 fair  value of  Federal  Home Loan Bank  advances  is
          estimated  using  rates  currently  offered  on  advances  of  similar
          remaining maturities.

               The estimated fair values of the Bank's financial instruments are
          as follows:
<TABLE>
<CAPTION>
                                                          September 30, 2002               September 30, 2001
                                                     --------------------------     ---------------------------
                                                     Carrying        Estimated      Carrying         Estimated
                                                      Amount         Fair Value      Amount          Fair Value
                                                     --------        ----------     --------         ----------
                                                                     (Amounts in Thousands)
<S>                                                  <C>             <C>            <C>              <C>
    Financial Assets
    ----------------
    Cash                                             $    6,468      $   6,468      $      4,056     $     4,056
    Interest bearing deposits in other banks             15,808         15,808             7,953           7,953
    Federal funds sold                                    3,527          3,527             3,313           3,313
    Investment securities - available for sale           45,083         45,083            23,969          23,969
    Investment securities - held to maturity              4,496          4,621            18,494          18,732

    Loans Receivable
    ----------------
        Mortgage loans                               $  325,264      $ 339,983      $    191,050     $   201,186
        Share loans                                       1,332          1,332               875             875
        Consumer loans                                   71,353         71,353            76,085          75,013
    Mortgage backed securities - available for sale      60,411         60,411            11,442          11,442
    Mortgage backed securities - held
     to maturity                                         33,691         35,010            41,655          42,505
    Federal Home Loan Bank of Atlanta stock               3,940          3,940             1,834           1,834
</TABLE>

                                       40
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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


Note 18- Disclosures About Fair Value of Financial Instruments - Continued
         -----------------------------------------------------
<TABLE>
<CAPTION>
                                                          September 30, 2002            September 30, 2001
                                                     ----------------------------   ----------------------------
                                                     Carrying        Estimated      Carrying         Estimated
                                                      Amount         Fair Value      Amount          Fair Value
                                                     --------        ----------     --------         ----------
                                                                     (Amounts in Thousands)
<S>                                                  <C>             <C>            <C>              <C>
    Financial Liabilities
    ---------------------
    Deposits                                         $  498,785      $ 500,902      $    325,786     $   329,065
    Federal Home Loan Bank of Atlanta
      advances                                           26,968         26,982            17,800          17,800
    Mortgage loan commitments                                --         12,857                --           5,096
    Trust Preferred securities                           12,500         12,500                --              --

</TABLE>

Note 19- Condensed Financial Information (Parent Company Only)
         -------------------------------

              Information  as to the  financial  position of BCSB Bankcorp as of
          September  30, and the  results of  operations  and cash flows for the
          years ended September 30 are summarized below.
<TABLE>
<CAPTION>
                                                                         September 30,           September 30,
                                                                              2002                    2001
                                                                       ---------------         ---------------
Statement of Financial Condition
<S>                                                                    <C>                     <C>
               Assets
               ------

Cash                                                                   $      115,162          $    1,406,140
Interest bearing deposits in other banks                                    1,182,507               2,651,101
Investment securities - available for sale                                  3,115,576                      --
Investment securities, held to maturity                                     3,495,986               4,999,777
Employee Stock Ownership Plan loan                                          1,097,568               1,280,496
Accrued interest receivable                                                    75,645                 147,873
Investment in Subsidiary                                                   47,775,863              32,551,747
Prepaid income taxes                                                           25,359                      --
Other assets                                                                  488,871                 110,396
                                                                       --------------          --------------
Total assets                                                           $   57,372,537          $   43,147,530
                                                                       ==============          ==============

             Liabilities and Stockholders' Equity

Liabilities
   Long-Term Sub-debentures                                                12,887,000                      --
   Accrued taxes payable                                                       54,135                   1,809
   Dividends payable                                                          264,891                 264,045
   Other liabilities                                                           17,818                 151,286
                                                                       --------------          --------------
                                                                           13,223,844                 417,140
                                                                       ==============          ==============
Stockholders' Equity
   Common Stock (5,874,082 and 5,867,322 shares issued
        And outstanding, respectively)                                         58,741                  58,673
   Paid-in Capital                                                         20,302,518              20,116,467
   Retained earnings (substantially restricted)                            25,279,752              24,556,126
                                                                       --------------          --------------
                                                                           45,641,011              44,731,266
   Employee Stock Ownership Plan                                             (960,372)             (1,143,300)
   Stock held by Rabbi Trust                                               (1,196,500)             (1,139,500)
   Accumulated other comprehensive income (net of tax)                        664,554                 281,924
                                                                       --------------          --------------
Total stockholders' equity                                                 44,148,693              42,730,390
                                                                       --------------          --------------
Total liabilities and stockholders' equity                             $   57,372,537          $   43,147,530
                                                                       ==============          ==============
</TABLE>

                                       41
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 19- Condensed Financial Information (Parent Company Only) - Continued
         -------------------------------
<TABLE>
<CAPTION>
                                                                          September 30,          September 30,
                                                                              2002                    2001
                                                                       ------------------      ---------------
<S>                                                                    <C>                     <C>
Statements of Operations
   Interest and fees on loans                                                  70,333                  50,452
   Interest and dividends on investment securities                            287,635                 309,121
   Other interest income                                                       33,179                 147,701
                                                                       --------------          --------------

Total interest income                                                         391,147                 507,274
   Interest on borrowings                                                     187,380                      --
                                                                       --------------          --------------

Net interest income                                                           203,767                 507,274

Non interest expense
   Professional fees                                                           74,654                  71,806
   Other expenses                                                              88,647                  65,200
                                                                       --------------          --------------

Total non-interest expense                                                    163,301                 137,006
                                                                       --------------          --------------

Net income before tax provision                                                40,466                 370,268

Income tax provision                                                           15,628                 142,997
Income before equity in net income of subsidiary                               24,838                 227,271
Equity in net income of subsidiary                                          1,706,136                (122,506)
                                                                       --------------          --------------

Net income                                                                  1,730,974                 104,765
                                                                       ==============          ==============

Statement of Cash Flows

Net income                                                                  1,730,974                 104,765
Adjustments to reconcile Net Income to Net Cash Provided
   By Operating Activities
   Accretion of discount on investments                                          (272)                 (1,502)
   Equity in net (income) loss of subsidiary                               (1,706,136)                122,505
   Decrease in accrued interest receivable                                     72,228                  84,512
   Increase in prepaid taxes                                                  (25,359)                     --
   Increase in receivable from subsidiary                                     (93,697)                     --
   Increase in other assets                                                  (378,475)                (34,448)
   Increase (decrease) in income taxes payable                                 50,911                 (21,644)
   Decrease in other liabilities                                             (133,468)               (111,455)
   Noncash compensation under stock-based benefit plan                        101,920                  83,025
                                                                       --------------          --------------
         Net cash (used by) provided by operating activities                 (381,374)                225,758
</TABLE>

                                       42
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 19- Condensed Financial Information (Parent Company Only) - Continued
         -------------------------------
<TABLE>
<CAPTION>
                                                                        September 30,           September 30,
                                                                            2002                    2001
                                                                       --------------          --------------
<S>                                                                       <C>
Cash Flows from Investing Activities
   Additional investment in subsidiaries                                  (12,887,000)                     --
   Proceeds from maturing interest bearing deposits                           495,000                      --
   Purchase of interest bearing deposits                                           --                (495,000)
   Proceeds from maturities of investment securities -
         held to maturity                                                   4,000,000               6,250,000
   Proceeds from sale of investment securities -
         Available for sale                                                   819,936                      --
   Purchase of investment securities - available for sale                  (3,929,247)                     --
   Purchase of investment securities - held to maturity                    (2,495,937)             (4,000,000)
   Principal collected on longer term loans                                   182,928                 182,928
                                                                       --------------          --------------
         Net cash (used by) provided by investing activities              (13,814,320)              1,937,928

Cash Flows from Financing Activities
   Increase in Long-Term Sub-debentures                                    12,887,000                      --
   Stock repurchase                                                            (9,376)               (165,445)
   Exercised options                                                           60,000                      --
   Dividends on stock                                                      (1,007,348)               (995,728)
   Increase (decrease) in dividends payable                                       846                  (1,909)
                                                                       --------------          --------------
         Net cash provided (used by) financing activities                  11,931,122              (1,163,082)

(Decrease) increase in cash and cash equivalents                           (2,264,572)              1,000,604
Cash and cash equivalents at beginning of period                            3,562,241               2,561,637
                                                                       --------------          --------------
Cash and cash equivalents at end of period                                  1,297,669               3,562,241
                                                                       ==============          ==============

The following is a summary of cash and cash equivalents
   Cash                                                                       115,162               1,406,140
   Interest bearing deposits in other banks                                 1,182,507               2,651,101
                                                                       --------------          --------------

   Balance of cash items reflected on Statement of Financial
        Condition                                                           1,297,669               4,057,241
         Less - certificates of deposit with an original
                    Maturity of more than three months                             --                 495,000
                                                                       --------------          --------------

Cash and cash equivalents reflected on the Statement of Cash Flows          1,297,669               3,562,241
                                                                       ==============          ==============
</TABLE>

                                       43
<PAGE>
                               BCSB BANKCORP, INC.
                               -------------------
                                AND SUBSIDIARIES
                                ----------------
                               Baltimore, Maryland
                               -------------------

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

Note 20- Recent Accounting Pronouncements
         --------------------------------

               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.

               In April  2002,  FASB  issued  SFAS  145,   "Rescission  of  FASB
          Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and
          Technical  Corrections." This Statement requires,  among other things,
          that  gains  and  losses  on  the  early  extinguishment  of  debt  be
          classified  as  extraordinary  only  if they  meet  the  criteria  for
          extraordinary  treatment  set  forth in  Accounting  Principles  Board
          Opinion  No.  30.  The  provisions  of  this   Statement   related  to
          classification of gains and losses on the early extinguishment of debt
          are  effective  for fiscal years  beginning  after May 15,  2002.  The
          adoption  of SFAS  No.  145 will not  have a  material  impact  on the
          consolidated financial statements.

               In  June 2002,  FASB issued SFAS No. 146,  "Accounting  for Costs
          Associated with Exit or Disposal  Activities." This Statement requires
          recording costs  associated with exit or disposal  activities at their
          fair  value  when  a  liability  has  been  incurred.  Under  previous
          guidance, certain exit costs were accrued upon management's commitment
          to an exit plan,  which is generally  before an actual  liability  has
          been incurred. The provisions of this Statement are effective for exit
          or disposal activities that are initiated after December 31, 2002.

               In  October  2002,  FASB issued SFAS No.  147,  "Acquisitions  of
          Certain Financial Institutions" an amendment of FASB Statements No. 72
          and 144 and FASB Interpretation No. 9. The provision of this Statement
          requires   long-term  customer   relationship   intangible  assets  of
          financial institutions such as depositor - and borrower - relationship
          intangible  assets  and  credit  cardholder  intangible  assets  to be
          subject to the same  undiscounted  cash flow  recoverability  test and
          impairment loss recognition and measurement  provisions that Statement
          144 requires for other long-lived assets that are held and used.

                                       44
<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 Builder
                                         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

                                         MICHAEL J. KLEIN                         WILLIAM J. KAPPAUF
                                         Vice President, Klein's                  Director of Cash Management for
                                          Super Markets                           Baltimore Gas & Electric Co.
                                                                                  Baltimore, Maryland


                               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

1505 York Road                                8767 K Philadelphia Road                4228 Harford Road
Lutherville, Maryland 21093                   Baltimore, Maryland 21237               Baltimore, Maryland 21214

2101 Gwynn Oak Road                           9416 Baltimore National Pike
Baltimore, Maryland 21207                     Ellicott City, Maryland 21042
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                              CORPORATE INFORMATION


<S>                                      <C>                                       <C>
INDEPENDENT CERTIFIED PUBLIC             SPECIAL COUNSEL                           ANNUAL REPORT ON FORM 10-KSB
ACCOUNTANTS                              Stradley Ronon Stevens & Young, LLP
Anderson Associates, LLP                 1220 19th Street, N.W., Suite 600         A COPY OF THE COMPANY'S ANNUAL
7621 Fitch Lane                          Washington, D.C.  20036                   REPORT ON FORM 10-KSB FOR THE
Baltimore, Maryland 21236                                                          FISCAL YEAR ENDED SEPTEMBER 30,
                                         Annual Meeting                            2002 AS FILED WITH THE SECURITIES
General Counsel                          The 2003 Annual Meeting of Stockholders   AND EXCHANGE COMMISSION, WILL BE
Moore, Carney, Ryan & Lattanzi, LLC      will be held on February 12, 2003 at      FURNISHED WITHOUT CHARGE TO
4111 E. Joppa Road, Suite 201            4:00 p.m. at the Bank's Perry Hall        STOCKHOLDERS AS OF THE RECORD DATE
Baltimore, Maryland 21236                office located at 4208 Ebenezer Road,     FOR THE 2003 ANNUAL MEETING UPON
                                         Baltimore, Maryland                       WRITTEN REQUEST TO CORPORATE
TRANSFER AGENT AND REGISTRAR                                                       SECRETARY, BCSB BANKCORP, INC.,
American Stock and Transfer Co.                                                    4111 E. JOPPA ROAD, SUITE 300,
6201 15th  Avenue                                                                  BALTIMORE, MARYLAND  21236.
Brooklyn, New York  11212
</TABLE>