SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   -----------
                                   FORM 10-KSB
(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended September 30, 2000
                                       OR

[  ] TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------    ---------

                           Commission File No. 0-24589

                               BCSB BANKCORP, INC.
                 ----------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

           UNITED STATES                                        52-2108333
---------------------------------                         ----------------------
    (STATE OR OTHER JURISDICTION                            (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NO.)

4111 E. JOPPA ROAD, SUITE 300, BALTIMORE, MARYLAND                21236
---------------------------------------------------       ----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (410) 256-5000

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

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

                     Common stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act during the past 12 months (or such
shorter  period that the  registrant  was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

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

For the fiscal year ended  September 30, 2000, the registrant had $21,480,061 in
revenues.

As of December  11,  2000,  the  aggregate  market value of voting stock held by
non-affiliates was approximately $9,937,563 computed by reference to the average
of the high and low sales price on  December  11, 2000 as reported on the Nasdaq
National  Market System.  For purposes of this  calculation,  it is assumed that
directors,  executive  officers  and  beneficial  owners  of more than 5% of the
registrant's outstanding voting stock are affiliates.

Number of shares of Common Stock outstanding as of December 11, 2000: 5,887,072

                       DOCUMENTS INCORPORATED BY REFERENCE

     The following lists the documents incorporated by reference and the Part of
the Form 10-KSB into which the document is incorporated:

     1.   Portions of the  registrant's  Annual Report to  Stockholders  for the
          Fiscal Year ended September 30, 2000.  (Parts II and III)
     2.   Portions of Proxy  Statement for  registrant's  2001 Annual Meeting of
          Stockholders. (Part III)


<PAGE>
                                     PART I
ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

GENERAL

     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 63.77% of the Company's outstanding common
stock.  The  Company's  assets  consist  of its  investment  in the Bank and its
portfolio of  investment  securities.  The Company is  primarily  engaged in the
business of directing,  planning and coordinating the business activities of the
Bank.

     The  Company's  most  significant  asset  is its  investment  in the  Bank.
Accordingly,  the  information  set forth in this  report,  including  financial
statements and related data,  relates primarily to the Bank. In the future,  the
Company may become an operating  company or acquire or organize other  operating
subsidiaries,  including other financial  institutions.  Currently,  the Company
does not maintain  offices separate from those of the Bank or employ any persons
other than its officers who are not separately  compensated for such service. At
September  30,  2000,  the Company  had total  assets of $325.9  million,  total
deposits of $268.9 million and stockholders' equity of $43.3 million.

     The Company's and the Bank's executive offices are located at 4111 E. Joppa
Road,  Suite 300,  Baltimore,  Maryland 21236,  and its main telephone number is
(410) 256-5000.

     Baltimore  County Savings Bank,  F.S.B.  The Bank is a federally  chartered
stock savings bank operating  through ten banking offices serving  Baltimore and
Harford Counties in Maryland. The Bank was chartered by the State of Maryland in
1955 under the name Baltimore  County  Building and Loan  Association.  The Bank
received  federal  insurance  of its  deposit  accounts  in 1985 and  received a
federal  charter in 1987, at which time it adopted its present name of Baltimore
County Savings Bank, F.S.B.

     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 AREA

     The Bank's  market area  consists of the  Baltimore  metropolitan  area. At
September 30, 2000,  management estimates that more than 95% of deposits and 90%
of all lending came from its market area.

     The  economy  of the  Bank's  market  area  is  diversified,  with a mix of
services,   manufacturing,   wholesale/retail   trade,  and  federal  and  local
government.  Once  the  backbone  of the  regional  economy,  the  manufacturing
industry  is  relatively  stable  after  almost  two  decades  of  decline.  The
manufacturing  section of Baltimore County received a further boost with General
Motors completion of its construction of a new Allison Transmission Plant in the
White Marsh growth area.  Baltimore County currently maintains 36 percent of the
regional  manufacturing  base.  Manufacturing in the market area is dominated by
high technology,  particularly within the defense industry.  Similar to national
trends,  most of the job growth in the Bank's  market area has been  realized in
service related industries,  and service jobs account for the largest portion of
the workforce.  Based on the most recent data available,  service jobs accounted
for 32.8% of Baltimore County's employment in 1995 as compared to 30.5% in 1991.
Comparatively, from 1991 to 1995, manufacturing jobs declined from 11.3% to 9.7%
of Baltimore County's labor force.

     Harford County  continued to experience  strong  economic growth during the
recent period,  and continues to be one of Maryland's  fastest growing counties.
Since 1990 private sector  employment has grown by 18.5% with the


                                       2
<PAGE>
largest  growth  occurring  in the  transportation,  communications  and  public
utilities  sector,  69.8%.  While  personal  income grew over the same period by
27.7%,  a rate of growth 6% greater than the  Baltimore  region and 4.5% greater
than the State of Maryland.

     Based on data provided by the Maryland Department of Planning;  Harford and
Baltimore  County  Department  of Planning and Zoning,  the Bank  estimates  the
population of the market area to be 959,265, compared to a population of 874,000
in 1990.  The median  household  income in  Baltimore  and Harford  Counties are
$44,889  and  $48,191,  respectively,  compared  to  $46,618  for the  State  of
Maryland.

LENDING ACTIVITIES

     General.  The  Bank's  gross  loan  portfolio  totaled  $256.6  million  at
September  30,  2000,  representing  78.7% of total  assets  at that  date.  Ath
September 30, 2000, $152.5 million, or 59.4% of the Bank's gross loan portfolio,
consisted of single-family,  residential  mortgage loans. Other loans secured by
real estate  include  construction  loans,  single-family  rental  property  and
commercial real estate loans,  which amounted to $5.9 million,  $5.1 million and
$13.6 million, respectively, or 2.3%, 2.0% and 5.3%, respectively, of the Bank's
gross loan  portfolio at September 30, 2000. The Bank also  originates  consumer
loans, consisting primarily of automobile loans and home equity lines of credit,
which totaled $67.9 million and $8.1 million,  respectively,  or 26.5% and 3.2%,
respectively, of the Bank's gross loan portfolio.


                                       3
<PAGE>



     Loan Portfolio  Composition.  The following  table sets forth selected data
relating to the  composition of the Bank's loan portfolio by type of loan at the
dates indicated.  At September 30, 2000, the Bank had no concentrations of loans
exceeding 10% of gross loans other than as disclosed below.
<TABLE>
<CAPTION>

                                                                   At September 30,
                                            --------------------------------------------------------------------
                                                    2000                  1999                    1998
                                            -------------------   -------------------     -------------------
                                            Amount          %     Amount          %       Amount          %
                                            ------        -----   ------        -----     ------        -----
                                                                 (Dollars in thousands)
<S>                                         <C>          <C>      <C>          <C>        <C>          <C>
(Dollars in thousands)
Real estate loans:
  Single-family residential (1)...........  $ 152,469    59.42%   $ 146,868    65.20%     $ 126,272    66.46%
  Single-family rental property loans.....      5,080     1.98        4,832     2.15          5,253     2.76
  Commercial..............................     13,649     5.32       10,216     4.54          9,497     5.00
  Construction (2)........................      5,905     2.30        5,592     2.48          7,936     4.18
Commercial lines of credit................         44      .02           50      .02             50      .03
Commercial loans secured..................      1,475      .57        1,081      .48             --       --

Consumer loans:
  Automobile..............................     67,852    26.44       46,753    20.75         33,748    17.76
  Home equity lines of credit.............      8,147     3.18        7,963     3.54          6,549     3.45
  Other...................................      1,976      .77        1,908      .84            681      .36
                                            ---------   ------    ---------   ------      ---------   ------
                                              256,597   100.00%     225,263   100.00%       189,986   100.00%
                                                        ======                ======                  ======

Less:
  Undisbursed portion of loans in process.      3,850                 2,579                   2,963
  Deferred loan origination fees..........        214                    80                     278
  Unearned interest.......................      9,610                 5,948                   3,742
  Allowance for loan losses...............      1,403                 1,273                   1,034
                                            ---------             ---------               ---------
    Total.................................  $ 241,520             $ 215,383               $ 181,969
                                            =========             =========               =========
<CAPTION>

                                                           At September 30,
                                                ---------------------------------------
                                                       1997                1996
                                                -----------------    ------------------
                                                Amount        %      Amount        %
                                                ------      -----    ------      -----
                                                        (Dollars in thousands)
<S>                                            <C>          <C>      <C>         <C>
(Dollars in thousands)
Real estate loans:
  Single-family residential (1)...........     $103,677     62.30%   $ 94,275    56.74%
  Single-family rental property loans.....        6,409      3.85       7,065     4.25
  Commercial..............................       10,169      6.11      10,316     6.21
  Construction (2)........................        8,645      5.19      11,427     6.87
Commercial lines of credit................           60       .04         262      .16
Commercial loans secured..................           --        --          --       --

Consumer loans:
  Automobile..............................       32,633     19.61      39,925    24.03
  Home equity lines of credit.............        3,986      2.40       1,855     1.12
  Other...................................          825       .50       1,029      .62
                                               --------    ------    --------   ------
                                                166,404    100.00%    166,154   100.00%
                                                           ======               ======

Less:
  Undisbursed portion of loans in process.        2,807                 5,088
  Deferred loan origination fees..........          567                   823
  Unearned interest.......................        3,376                 4,757
  Allowance for loan losses...............          978                   926
                                               --------              --------
    Total.................................     $158,676              $154,560
                                               ========              ========
<FN>
--------------
(1)      Includes fixed-rate second mortgage loans.
(2)      Includes acquisition and development loans.
</FN>
</TABLE>


                                       4
<PAGE>



         Loan  Maturity  Schedules.  The  following  table  sets  forth  certain
information  at September 30, 2000 regarding the dollar amount of loans maturing
in the Bank's portfolio based on their contractual terms to maturity,  including
scheduled repayments of principal. Demand loans, loans having no stated schedule
of repayments and no stated maturity,  and overdrafts are reported as due in one
year or less.  The table does not include  any  estimate  of  prepayments  which
significantly  shorten  the  average  life of  mortgage  loans and may cause the
Bank's repayment experience to differ from that shown below.
<TABLE>
<CAPTION>

                                                              Due after
                                       Due during             1 through               Due after
                                     the year ending        5 Years After           5 Years After
                                   September 30, 2001    September 30, 2000      September 30, 2000         Total
                                   ------------------    ------------------      ------------------         -----
                                                           (In thousands)
<S>                                   <C>                     <C>                     <C>                 <C>
Real estate loans:
  Single-family residential.........  $     9,086             $    34,657             $   108,726         $  152,469
  Single-family rental property.....          235                     880                   3,965              5,080
  Commercial........................          875                   4,366                   8,408             13,649
  Construction......................        2,353                     359                   3,193              5,905
Commercial lines of credit..........           44                      --                      --                 44
Commercial loans secured............          371                   1,103                       1              1,475

Consumer:
  Automobile........................       16,180                  49,893                   1,779             67,852
  Home equity lines of credit.......          188                     947                   7,012              8,147
  Other.............................          940                     553                     483              1,976
                                      -----------             -----------             -----------         ----------
     Total..........................  $    30,272             $    92,758             $   133,567         $  256,597
                                      ===========             ===========             ===========         ==========
</TABLE>

         The following table sets forth at September 30, 2000, the dollar amount
of all  loans  due  one  year  or more  after  September  30,  2000  which  have
predetermined interest rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                     Predetermined              Floating or
                                                                         Rate                Adjustable Rates
                                                                        ------               ----------------
                                                                                (In thousands)
                  <S>                                                  <C>                       <C>
                  Real estate loans:
                     Single-family residential.......................  $ 141,077                 $   2,306
                     Single-family rental property...................      2,052                     2,793
                     Commercial......................................      9,704                     3,070
                     Construction....................................      3,404                       148
                  Commercial lines of credit.........................         --                        --
                  Commercial loans secured...........................      1,104                        --
                  Consumer:
                     Automobiles.....................................     51,672                        --
                     Home equity lines of credit.....................      7,959                        --
                     Other...........................................      1,036                        --
                                                                       ---------                 ---------
                          Total......................................  $ 218,008                 $   8,317
                                                                       =========                 =========
</TABLE>


         Scheduled  contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less than
their contractual terms because of prepayments. In addition, due-on-sale clauses
on loans generally give the Bank the right to declare a loan immediately due and
payable in the event,  among  other  things,  that the  borrower  sells the real
property subject to the mortgage and the loan is not repaid. The average life of
mortgage  loans tends to increase  when current  mortgage  loan market rates are
substantially  higher than rates on  existing  mortgage  loans and,  conversely,
decrease when current  mortgage loan market rates are  substantially  lower than
rates on existing mortgage loans.

         Originations,  Purchases  and Sales of Loans.  The Bank  generally  has
authority  to  originate  and  purchase  loans  secured by real  estate  located
throughout  the  United  States.   Consistent  with  its  emphasis  on  being  a
community-oriented  financial  institution,  the Bank  concentrates  its lending
activities in its market area.

                                       5
<PAGE>

         The following table sets forth certain  information with respect to the
Bank's loan origination, purchase and sale activity for the periods indicated.
<TABLE>
<CAPTION>
                                                                  Year Ended September 30,
                                                     --------------------------------------------
                                                       2000              1999             1998
                                                     --------          --------         ---------
                                                                     (In thousands)
<S>                                                  <C>               <C>              <C>
Loans originated:
  Real estate loans:
    Single-family residential......................  $  22,703         $  44,283        $  41,729
    Single-family rental property loans............      1,072                --               --
    Commercial.....................................      3,666             2,112              351
    Construction...................................      5,497             6,592            5,512
Commercial loans secured...........................        656             1,137               --
Consumer loans:
    Automobiles....................................     52,648            36,167           21,267
    Home equity lines of credit....................      2,278             7,475            6,766
    Other..........................................      1,076             1,822              478
                                                     ---------         ---------        ---------
       Total loans originated......................  $  89,596         $  99,588        $  76,103
                                                     =========         =========        =========
Loans purchased:
  Real estate loans................................  $     764         $      --        $      --
                                                     ---------         ---------        ---------
Total loans purchased..............................  $     764         $      --        $      --
                                                     =========         =========        =========
Loans sold:
  Whole loans......................................  $   1,085         $      --        $      --
  Participation loans..............................         --                --              133
                                                     ---------         ---------        ---------
       Total loans sold............................  $   1,085         $      --        $     133
                                                     =========         =========        =========
</TABLE>

         The Bank's  loan  originations  are  derived  from a number of sources,
including referrals by realtors or automobile dealers,  depositors and borrowers
and advertising,  as well as walk-in customers. The Bank's solicitation programs
consist  of   advertisements   in  local  media,   in  addition  to   occasional
participation in various community  organizations and events.  Real estate loans
are originated by the Bank's loan personnel.  Automobile loans may be originated
on an  indirect  basis  through  a  limited  number of  approved  dealers,  loan
applications are accepted at the Bank's offices.

         Loan Underwriting  Policies.  The Bank's lending activities are subject
to the Bank's  written,  non-discriminatory  underwriting  standards and to loan
origination  procedures  prescribed  by the Bank's  Board of  Directors  and its
management.  Detailed loan applications are obtained to determine the borrower's
ability  to repay,  and the more  significant  items on these  applications  are
verified   through  the  use  of  credit  reports,   financial   statements  and
confirmations.  Real estate  loans up to  $400,000,  as well as all requests for
lines of credit up to $25,000,  may be  approved  by the Bank's Loan  Committee,
which  consists of the Bank's  President,  Senior Vice  President of Lending and
Vice  President and  Treasurer  and meets  weekly.  All loans in excess of these
amounts must be approved by the full Board of Directors.  Individual officers of
the Bank have  been  granted  authority  by the Board of  Directors  to  approve
consumer loans up to varying  specified dollar amounts,  depending upon the type
of loan.  Automobile  loans are  approved  by the  Bank's  car loan  manager  or
assistant  manager  and  reviewed by the Bank's Vice  President  who  supervises
lending operations.

         Applications  for   single-family   real  estate  loans  generally  are
underwritten and closed in accordance with the standards of FHLMC and FNMA. Upon
receipt of a loan application from a prospective  borrower,  a credit report and
verifications  are ordered to verify specific  information  relating to the loan
applicant's employment,  income and credit standing. If a proposed loan is to be
secured  by a  mortgage  on real  estate,  an  appraisal  of the real  estate is
undertaken  by an  appraiser  approved by the Bank and  licensed by the State of
Maryland.  In the case of single-family  residential mortgage loans, except when
the Bank becomes aware of a particular risk of environmental contamination,  the
Bank generally does not obtain a formal  environmental report on the real estate
at the time a loan is made.  A formal  environmental  report may be  required in
connection  with  commercial  real estate loans,  and the Bank obtains a Phase I
environmental  study in connection  with its  underwriting  of  acquisition  and
development loans.

                                       6
<PAGE>

         It is the Bank's policy to record a lien on the real estate  securing a
loan and to obtain title insurance or an attorney's  certification which ensures
that the  property  is free of  prior  encumbrances  and  other  possible  title
defects.  Borrowers must also obtain hazard insurance  policies prior to closing
and, when the property is in a flood plain as  designated  by Federal  Emergency
Management Agency, pay flood insurance policy premiums.

         With respect to  single-family  residential  mortgage  loans,  the Bank
makes a loan commitment of between 30 and 60 days for each loan approved. If the
borrower  desires a longer  commitment,  the commitment may be extended for good
cause and upon  written  approval.  No fees are charged in  connection  with the
issuance of a commitment letter. The interest rate is guaranteed until closing.

         The Bank is permitted to lend up to 95% of the lesser of the  appraised
value or the  purchase  price of the real  property  securing a  mortgage  loan.
However,  if the amount of a residential  loan originated or refinanced  exceeds
80% of the  appraised  value,  the Bank's policy is to obtain  private  mortgage
insurance at the  borrower's  expense on the principal  amount of the loan.  The
Bank  will  make a  single-family  residential  mortgage  loan  with up to a 95%
loan-to-value ratio if the required private mortgage insurance is obtained.  The
Bank generally limits the loan-to-value ratio on commercial real estate mortgage
loans to 75%, although the  loan-to-value  ratio on commercial real estate loans
in  limited  circumstances  has  been  as  high  as 80%.  The  Bank  limits  the
loan-to-value  ratio on single-family  rental property loans to 80%. Home equity
loans are made in amounts which, when added to any senior  indebtedness,  do not
exceed 80% of the value of the property.

         Under  applicable  law,  with  certain  limited  exceptions,  loans and
extensions of credit by a savings  institution  to a person  outstanding  at one
time shall not exceed 15% of the institution's  unimpaired  capital and surplus.
Loans and  extensions of credit fully secured by readily  marketable  collateral
may comprise an additional  10% of unimpaired  capital and surplus.  Under these
limits,  the  Bank's  loans to one  borrower  were  limited  to $4.8  million at
September 30, 2000. Applicable law additionally  authorizes savings institutions
to make  loans to one  borrower,  for any  purpose,  in an amount  not to exceed
$500,000  or in an amount  not to exceed  the  lesser of  $30,000,000  or 30% of
unimpaired capital and surplus to develop residential housing, provided: (i) the
purchase price of each single-family dwelling in the development does not exceed
$500,000; (ii) the savings institution is and continues to be in compliance with
its fully phased-in regulatory capital requirements; (iii) the loans comply with
applicable loan-to-value  requirements;  (iv) the aggregate amount of loans made
under this authority does not exceed 150% of unimpaired capital and surplus; and
(v) the  Director of OTS, by order,  permits  the savings  institution  to avail
itself of this higher  limit.  At September  30,  2000,  the Bank had no lending
relationships  in excess of the  loans-to-one-borrower  limit.  At September 30,
2000,  the  Bank's  largest  loan  customer  was  a  $2.5  million  relationship
consisting  of a commercial  real estate  loan, a small  acquisition/development
loan and a $1.3 million participation acquisition/development loan. This loan is
part of a $7.3  million  loan.  The loan was made to  acquire  and  develop  318
building  lots which will be sold to builders who will  construct  single-family
residences.  The borrower has a $518,000 commercial loan secured by real estate.
At September 30, 2000, the loans were current and performing in accordance  with
their terms.

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

         Single-Family  Residential Real Estate Lending.  The Bank  historically
has been and continues to be an originator of  single-family,  residential  real
estate  loans  in  its  market  area.  At  September  30,  2000,  single-family,
residential  mortgage loans,  excluding  single-family rental property loans and
home equity loans,  totaled  $152.5  million,  or 59.4% of the Bank's gross loan
portfolio.

         The Bank originates  fixed-rate mortgage loans at competitive  interest
rates.  At  September  30,  2000,  the Bank had  $150.1  million  of  fixed-rate
single-family   mortgage   loans,   which   amounted  to  98.4%  of  the  Bank's
single-family  mortgage loans. The Bank emphasizes the origination of fixed-rate
single-family  residential mortgage loans with maturities of 15 years or less by
offering  more  competitive  rates on these  loans as  compared  to the rates it
offers on fixed-rate mortgage loans with terms in excess of 15 years.

                                       7
<PAGE>

         The  Bank  also  offers  adjustable-rate,   single-family   residential
mortgage loans.  As of September 30, 2000,  $2.4 million,  or 1.6% of the Bank's
single-family  mortgage loans carried  adjustable rates. After the initial term,
the rate adjustments on the Bank's  adjustable-rate  loans are indexed to a rate
which  adjusts  annually  based  upon  changes  in an index  based on the weekly
average  yield on U.S.  Treasury  securities  adjusted to a constant  comparable
maturity of one year,  as made  available  by the  Federal  Reserve  Board.  The
interest rates on most of the Bank's adjustable-rate mortgage loans are adjusted
once a year, and the Bank offers loans that have an initial adjustment period of
one, three or five years.  The maximum  adjustment is 2% per  adjustment  period
with a maximum  aggregate  adjustment of 6% over the life of the loan.  The Bank
offers adjustable-rate mortgage loans that provide for initial rates of interest
below the rates that would prevail when the index used for repricing is applied,
i.e., "teaser" rates. All of the Bank's  adjustable-rate  loans require that any
payment adjustment resulting from a change in the interest rate be sufficient to
result in full  amortization  of the loan by the end of the loan term and, thus,
do not permit any of the increased  payment to be added to the principal  amount
of the loan, known as "negative amortization."

         The retention of  adjustable-rate  loans in the Bank's  portfolio helps
reduce the Bank's  exposure to increases in prevailing  market  interest  rates.
However,   there  are  unquantifiable  credit  risks  resulting  from  potential
increases  in  costs  to   borrowers  in  the  event  of  upward   repricing  of
adjustable-rate  loans.  It is possible that during  periods of rising  interest
rates,  the  risk of  default  on  adjustable-rate  loans  may  increase  due to
increases in interest  costs to  borrowers.  Further,  although  adjustable-rate
loans allow the Bank to increase the sensitivity of its interest-earning  assets
to changes in interest rates, the extent of this interest sensitivity is limited
by the initial  fixed-rate  period before the first  adjustment and the lifetime
interest rate  adjustment  limitations.  Accordingly,  there can be no assurance
that yields on the Bank's  adjustable-rate loans will fully adjust to compensate
for  increases  in the  Bank's  cost of funds.  Finally,  adjustable-rate  loans
increase the Bank's  exposure to decreases in prevailing  market interest rates,
although decreases in the Bank's cost of funds tend to offset this effect.

         Single-family Rental Property Loans. The Bank also offers single-family
residential  mortgage loans secured by properties  that are not  owner-occupied,
although it has significantly  reduced the originations of such loans during the
past five years. As of September 30, 2000,  single-family  rental property loans
totaled $5.0 million, or 2.0%, of the Bank's gross loan portfolio.  Originations
of  single-family  rental  property  loans were $1.0 million,  $0 and $0 for the
years ended  September  30,  2000,  1999 and 1998,  respectively.  Single-family
residential mortgage loans secured by nonowner-occupied properties are made on a
fixed-rate or an  adjustable-rate  basis and carry interest rates generally from
 .5%  to  1.0%  above  the  rates   charged  on   comparable   loans  secured  by
owner-occupied properties. The maximum term on such loans is 30 years.

         Construction  Lending. A substantial portion of the Bank's construction
loans are  originated  for the  construction  of  owner-occupied,  single-family
dwellings in the Bank's primary market area. Residential  construction loans are
offered primarily to individuals  building their primary or secondary residence,
as well as to  selected  local  developers  to  build  single-family  dwellings.
Generally,  loans to  owner/occupants  for the  construction of  owner-occupied,
single-family  residential  properties  are  originated in  connection  with the
permanent loan on the property and have a construction  term of up to 12 months.
Such loans are offered on a fixed-rate or adjustable-rate  basis. Interest rates
on residential construction loans made to the owner/occupant have interest rates
during the  construction  period  equal to the same rate on the  permanent  loan
selected by the customer.  Interest rates on residential  construction  loans to
builders  are set at the  prime  rate  plus a margin  of  between  .5% and 1.5%.
Interest rates on commercial construction loans are based on the prime rate plus
a  negotiated  margin  of  between  .5%  and  1.5%  and  adjust  monthly,   with
construction  terms  generally not  exceeding 18 months.  Advances are made on a
percentage of completion basis. At September 30, 2000, $5.9 million, or 2.3%, of
the Bank's gross loan portfolio consisted of construction  loans,  virtually all
of which was secured by single-family residences.

         Prior to making a commitment to fund a loan,  the Bank requires both an
appraisal of the property by appraisers approved by the Board of Directors and a
study of projected  construction  costs. The Bank also reviews and inspects each
project at the commencement of construction and as needed prior to disbursements
during the term of the construction loan.

         The Bank's  originations of construction  loans have declined in recent
years.  Recent  consolidation  within the building  industry and the  increasing
presence in the Bank's market of large  builders that are not locally based have
limited the Bank's  ability to compete  for some loans to  builders  because the
Bank's  loans-to-one-borrower


                                       8
<PAGE>
limitation  limits  its  ability to meet the  volume  requirements  of the large
builders. The Bank's construction loans totaled $5.9 million, $5.6 million, $7.9
million,  $8.6 million and $11.4 million at September 30, 2000, 1999, 1998, 1997
and 1996,  respectively,  and construction  loan originations were $5.5 million,
$1.2 million and $1.6 million  during the years ended  September 30, 2000,  1999
and 1998, respectively.

         On occasion,  the Bank makes acquisition and development loans to local
developers  to acquire and develop land for sale to builders who will  construct
single-family   residences.   Acquisition  and  development   loans,  which  are
considered by the Bank to be construction loans, are made at a rate that adjusts
monthly,  based on the prime rate plus a negotiated  margin,  for terms of up to
three  years.  Interest  only is paid  during  the  term  of the  loan,  and the
principal  balance  of the  loan is paid  down as  developed  lots  are  sold to
builders.  Generally,  in connection with acquisition and development loans, the
Bank  issues a letter of credit to secure the  developer's  obligation  to local
governments  to complete  certain work.  If the developer  fails to complete the
required  work,  the Bank would be required to fund the cost of  completing  the
work up to the amount of the letter of credit.  Letters of credit  generate  fee
income for the Bank but create  additional risk. At September 30, 2000, the Bank
had nine such  facilities  outstanding  totaling  $219,000.  All acquisition and
development loans were performing in accordance with their terms at such date.

         Construction  financing  generally  is  considered  to involve a higher
degree of risk of loss than  long-term  financing  on  improved,  occupied  real
estate.  Risk of loss on a  construction  loan is  dependent  largely  upon  the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  or  development  and the estimated  cost  (including  interest) of
construction. During the construction phase, a number of factors could result in
delays and cost  overruns.  If the estimate of  construction  costs proves to be
inaccurate and the borrower is unable to meet the Bank's requirements of putting
up additional  funds to cover extra costs or change  orders,  then the Bank will
demand  that  the  loan be paid off and,  if  necessary,  institute  foreclosure
proceedings,  or  refinance  the loan.  If the  estimate  of value  proves to be
inaccurate, the Bank may be confronted, at or prior to the maturity of the loan,
with  collateral  having a value which is insufficient to assure full repayment.
The Bank has sought to minimize  this risk by limiting  construction  lending to
qualified  borrowers  (i.e.,  borrowers who satisfy all credit  requirements and
whose loans satisfy all other  underwriting  standards  which would apply to the
Bank's permanent mortgage loan financing for the subject property) in the Bank's
market area. On loans to builders,  the Bank works only with  selected  builders
with whom it has experience and carefully monitors the  creditworthiness  of the
builders.

         Commercial Real Estate Lending.  The Bank's commercial real estate loan
portfolio  includes loans to finance the acquisition of small office  buildings,
churches, medical condominiums,  small shopping centers and small commercial and
industrial  buildings.  Such loans  generally  range in size from $100,000 to $2
million,  with the  largest  having an  outstanding  principal  balance  of $1.5
million at September 30, 2000. At September 30, 2000, the Bank had $13.6 million
of commercial real estate loans, which amounted to 5.3% of the Bank's gross loan
portfolio.  Commercial  real estate  loans are  originated  on a  fixed-rate  or
adjustable-rate basis with terms of up to 25 years at a rate that is at least 1%
above the rate charged by the Bank on single-family  residential  mortgage loans
having comparable terms and interest rate adjustment periods.

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

         Commercial Lines of Credit.  On a limited basis and as an accommodation
to its customers, the Bank offers lines of credit to small businesses.  Loans in
amounts of up to $25,000 are made on an unsecured  basis at an  adjustable  rate
equal to the prime rate plus a margin of 2%. Up to an additional  $25,000 may be
loaned,  provided



                                       9
<PAGE>

the additional amount is secured.  The secured portion of the loan is made at an
adjustable  rate equal to the prime rate plus a margin of 1%. At  September  30,
2000, the Bank had $44,000 of outstanding loans and commitments.

         The Bank provides  commercial lines of credit to businesses  within the
Bank's  market  area.  These  loans are secured by  business  assets,  including
equipment,  automobiles and consumer  leases.  Generally,  all loans are further
personally  guaranteed by the owners of the business.  The commercial lines have
adjustable  interest  rates tied to the prime rate and are offered at rates from
prime plus 1% to prime plus 3 1/2%. As of September 30, 2000,  the Bank had $1.5
million of such loans outstanding.

         Consumer  Lending.  The  consumer  loans  currently  in the Bank's loan
portfolio  consist of  automobile  loans,  home equity lines of credit and loans
secured by savings deposit.

         Automobile  loans totaled $67.8 million,  or 26.4%, of the Bank's gross
loan portfolio,  at September 30, 2000. Automobile loans are secured by both new
and used cars and,  depending on the  creditworthiness  of the borrower,  may be
made for up to 90% of the "sticker price" or purchase price, whichever is lower,
or,  with  respect  to used  automobiles,  the loan  values  as  published  by a
wholesale value listing  utilized by the automobile  industry.  Automobile loans
are made directly to the  borrower-owner  or indirectly,  where the financing is
arranged by the car dealer.  Management of the Bank estimates that approximately
80% of  automobile  loans are  originated on an indirect  basis through  various
dealerships  located in its  market  area.  Automobile  loans  originated  on an
indirect  basis are  considered to entail  greater  credit risk than  automobile
loans  originated on a direct basis.  New and relatively new cars (less than two
years old or 20,000 miles or less) are financed for a period  generally of up to
five years,  while used cars are financed  for a period  generally of up to four
years, or less, depending on the age of the car. Collision insurance is required
for all automobile loans. The Bank also maintains a blanket collision  insurance
policy that  provides  insurance  for any borrower  who allows his  insurance to
lapse. Any expense under the blanket  insurance policy of covering a borrower is
billed to the borrower.

         The Bank recently has begun placing greater emphasis on the origination
of second  mortgage  loans and home equity lines of credit.  As of September 30,
2000,  home equity lines of credit totaled $8.1 million,  or 3.2%, of the Bank's
gross loan  portfolio.  Second  mortgage  loans are made at fixed  rates and for
terms of up to 15 years and totaled $21.2 million,  or 8.3%, of the Bank's gross
loans at September 30, 2000.

         The  Bank's  home  equity  lines of credit  currently  have  adjustable
interest  rates tied to the prime rate and are offered  anywhere  from as low as
the prime rate less .25% up to the prime rate.  The interest rate may not adjust
to a rate  higher  than 18%.  The home equity  lines of credit  require  monthly
payments  until  the loan is paid in full,  with a loan  term not to  exceed  20
years. The minimum monthly payment is 1.5% of the outstanding principal balance.
Home equity lines of credit are secured by subordinate liens against residential
real  property.  The Bank  requires  that fire and  extended  coverage  casualty
insurance (and, if appropriate,  flood  insurance) be maintained in an amount at
least sufficient to cover its loan.

         The Bank makes savings  account loans for up to 90% of the  depositor's
savings account balance.  The interest rate is normally 2.0% above the rate paid
on a passbook savings account,  and the account must be pledged as collateral to
secure the loan.  Interest  generally is billed on a monthly basis. At September
30, 2000,  savings  account loans  accounts  totaled  $593,000,  or 0.2%, of the
Bank's gross loan portfolio.

         As part of the  Bank's  loan  strategy,  the Bank has  diversified  its
lending  portfolio to afford the Bank the  opportunity to earn higher yields and
to provide a fuller range of banking  services.  These  products have  generally
been in the consumer area and include  surgical loans,  boat loans and loans for
the  purchase of  recreational  vehicles.  Such loans  totaled  $1.3  million at
September 30, 2000.

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


                                       10
<PAGE>

events  such as job loss,  divorce,  illness or  personal  bankruptcy.  Indirect
automobile  lending  generally is considered to entail  greater risk than direct
automobile  lending due to the higher  down  payments  generally  made by direct
borrowers and the level of sophistication of the borrowers.

         Loan Fees and Servicing. The Bank receives fees in connection with late
payments  and for  miscellaneous  services  related to its loans.  The Bank also
charges fees in connection with loan  originations  typically from 0 to 3 points
(one point being equal to 1% of the loan amount) on  residential  mortgage  loan
originations.  The Bank generally does not service loans for others,  except for
participation loans originated and sold by the Bank with servicing retained, and
earns minimal income from this activity.

         Nonperforming Loans and Other Problem Assets. It is management's policy
to continually  monitor its loan  portfolio to anticipate and address  potential
and actual delinquencies. When a borrower fails to make a payment on a loan, the
Bank takes immediate  steps to have the delinquency  cured and the loan restored
to current  status.  Loans  which are past due 15 days incur a late fee of 5% of
principal  and  interest  due. As a matter of policy,  the Bank will send a late
notice to the borrower  after the loan has been past due 15 days and again after
30 days. If payment is not promptly  received,  the borrower is contacted again,
and efforts are made to formulate an affirmative  plan to cure the  delinquency.
Generally,  after  any  loan  is  delinquent  90  days  or  more,  formal  legal
proceedings  are  commenced to collect  amounts  owed. In the case of automobile
loans,  late  notices  are sent  after  loans are ten days  delinquent,  and the
collateral  is  seized  after a loan is  delinquent  60 days.  Repossessed  cars
subsequently are sold at auction.

         Loans  generally  are placed on  nonaccrual  status if the loan becomes
past due more than 90 days,  except in instances where in management's  judgment
there  is no doubt as to full  collectibility  of  principal  and  interest,  or
management  concludes  that  payment in full is not likely.  Consumer  loans are
generally  charged off, or any expected loss is reserved for,  after they become
more than 120 days past due.  All other loans are  charged  off when  management
concludes  that  they  are  uncollectible.  See  Note 1 of  Notes  to  Financial
Statements.

         Real  estate  acquired  by the  Bank  as a  result  of  foreclosure  is
classified as real estate acquired through  foreclosure until such time as it is
sold. When such property is acquired,  it is initially  recorded at the lower of
cost or estimated fair value and subsequently at the lower of book value or fair
value less estimated  costs to sell.  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.  Any required  write-down of the loan to its fair value less  estimated
selling costs upon foreclosure is charged against the allowance for loan losses.
See Note 1 of Notes to Financial Statements.


                                       11
<PAGE>
         The following table sets forth  information  with respect to the Bank's
nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                          At September 30,
                                                    ---------------------------------------------------------------
                                                     2000          1999          1998         1997           1996
                                                    ------        ------        ------       ------         -------
                                                                             (In thousands)
<S>                                                 <C>           <C>           <C>          <C>          <C>
Loans accounted for on  a nonaccrual basis: (1)
  Real estate:
    Single-family residential....................   $    383      $     840     $    769     $  1,757     $   2,056
    Single-family rental property................         --             --           --           --            --
    Commercial...................................         --            185          150           86           231
    Construction.................................         --             --          193           --            --
  Commercial lines of credit.....................         --             --           --           --            --
  Commercial loans secured.......................         --             --           --           --            --
  Consumer.......................................         --             --           --           --            --
                                                    --------      ---------     --------     --------     ---------
    Total........................................   $    383      $   1,025     $  1,112     $  1,843     $   2,287
                                                    ========      =========     ========     ========     =========

Accruing loans which are contractually past due
  90 days or more:
  Real estate:
    Single-family residential....................   $     --      $      --     $     --     $     --     $      --
    Single-family rental property................         --             --           --           --            --
    Commercial...................................         --             --           --           --            --
    Construction.................................         --             --           --           --            --
  Commercial lines of credit.....................         --             --           --           --            --
  Commercial loans secured.......................         --             --           --           --            --
  Consumer.......................................         --             --           --           --            --
                                                    --------      ---------     --------     --------     ---------
    Total........................................   $     --      $      --     $     --     $     --     $      --
                                                    ========      =========     ========     ========     =========
    Total non-performing loans...................   $    383      $   1,025     $  1,112     $  1,843     $   2,287
                                                    ========      =========     ========     ========     =========

Percentage of gross loans........................       .15%            .45%        0.59%        1.11%         1.38%
                                                    =======       =========     ========     ========     =========
Percentage of total assets.......................       .12%            .34%        0.41%        0.73%         0.88%
                                                    =======       =========     ========     ========     =========
Other non-performing assets (2)..................   $    126      $     132     $    441     $     61     $     489
                                                    ========      =========     ========     ========     =========
Loans modified in troubled debt  restructuring...   $     --      $      --     $     --     $     --     $      --
                                                    ========      =========     ========     ========     =========
<FN>
_______________
(1)      Non-accrual   status  denotes  loans  on  which,   in  the  opinion  of
         management, the collection of additional interest is unlikely. Payments
         received on a non-accrual  loan are either  applied to the  outstanding
         principal  balance  or  recorded  as  interest  income,   depending  on
         management's assessment of the collectibility of the loan.
(2)      Other nonperforming  assets include the Bank's inventory of repossessed
         cars,  and at September  30, 1996,  real estate  developed and held for
         sale.
</FN>
</TABLE>

         During the year ended  September  30, 2000,  gross  interest  income of
$31,000,  would have been recorded on loans accounted for on a nonaccrual  basis
if the loans  had been  current  throughout  the year.  Interest  on such  loans
included in income during the year ended September 30, 2000 amounted to $29,000.

         At September 30, 2000,  the Bank had no loans which were not classified
as  non-accrual,  90 days past due or restructured  but where known  information
about possible  credit problems of borrowers  caused  management to have serious
concerns  as to the  ability  of the  borrowers  to  comply  with  present  loan
repayment terms and may result in disclosure as nonaccrual,  90 days past due or
restructured.

         At September 30, 2000, nonaccrual loans consisted of five single-family
residential mortgage loans aggregating $383,000.

         Real estate acquired through  foreclosure is initially  recorded at the
lower of cost or  estimated  fair  value and  subsequently  at the lower of book
value or fair value less estimated  costs to sell.  Fair value is defined as the
amount  in cash or  cash-equivalent  value  of other  consideration  that a real
estate  parcel  would  yield in a current  sale  between  a willing  buyer and a
willing seller, as measured by market transactions.  If a market does not exist,
fair value of the


                                       12
<PAGE>

item is estimated based on selling prices of similar items in active markets or,
if there are no active markets for similar  items,  by discounting a forecast of
expected cash flows at a rate commensurate with the risk involved. Fair value is
generally  determined through an appraisal at the time of foreclosure.  The Bank
records a  valuation  allowance  for  estimated  selling  costs of the  property
immediately after foreclosure.  Subsequent to foreclosure,  real estate acquired
through foreclosure is periodically evaluated by management and an allowance for
loss is established if the estimated fair value of the property,  less estimated
costs to sell,  declines.  At September  30, 2000,  the Bank had $50,000 in real
estate owned, which consisted of two single-family  building lots. The Bank also
had $459,000 of other nonperforming assets, which consisted of non-accrual loans
and the Bank's inventory of repossessed cars.

         Federal  regulations  require  savings  institutions  to classify their
assets on the basis of quality on a regular  basis.  An asset meeting one of the
classification  definitions  set forth  below may be  classified  and still be a
performing loan. An asset is classified as substandard if it is determined to be
inadequately  protected by the current retained  earnings and paying capacity of
the obligor or of the  collateral  pledged,  if any. An asset is  classified  as
doubtful if full collection is highly  questionable  or improbable.  An asset is
classified as loss if it is considered uncollectible, even if a partial recovery
could be expected  in the future.  The  regulations  also  provide for a special
mention designation, described as assets which do not currently expose a savings
institution  to a  sufficient  degree of risk to warrant  classification  but do
possess credit deficiencies or potential weaknesses deserving management's close
attention.  Such assets designated as special mention may include  nonperforming
loans consistent with the above definition.  Assets classified as substandard or
doubtful require a savings  institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish a specific allowance for loss in the amount of the portion
of the asset classified loss, or charge off such amount.  Federal  examiners may
disagree with a savings institution's classifications.  If a savings institution
does not agree with an examiner's classification of an asset, it may appeal this
determination  to the OTS  Regional  Director.  The Bank  regularly  reviews its
assets   to   determine   whether   any   assets   require   classification   or
re-classification.  At  September  30,  2000,  the  Bank  had  $2.0  million  in
classified  assets  consisting  of $1.1 million in assets  classified as special
mention,  $856,000 in assets classified as substandard,  no assets classified as
doubtful and no assets  classified as loss.  Special mention assets consisted of
eleven  single-family  residential  mortgage  loans 60 to 89 days  delinquent at
September  30,  2000,  and  substandard  assets  consisted  of the  $383,000  in
nonaccrual loans described above.

         Allowance for Loan Losses.  In originating  loans,  the Bank recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things,  the type of loan being made,  the  creditworthiness  of the
borrower over the term of the loan, general economic conditions and, in the case
of a secured loan, the quality of the security for the loan. It is  management's
policy to maintain an adequate  allowance  for loan losses based on, among other
things,  the  Bank's  and  the  industry's   historical  loan  loss  experience,
evaluation of economic  conditions,  regular reviews of  delinquencies  and loan
portfolio quality and evolving standards imposed by federal bank examiners.  The
Bank  increases its allowance  for loan losses by charging  provisions  for loan
losses against the Bank's income.

         Management  will continue to actively  monitor the Bank's asset quality
and allowance for loan losses.  Management  will charge off loans and properties
acquired in settlement of loans against the  allowances for losses on such loans
and such properties when  appropriate and will provide  specific loss allowances
when  necessary.  Although  management  believes  it uses the  best  information
available to make  determinations  with respect to the allowances for losses and
believes such  allowances are adequate,  future  adjustments may be necessary if
economic  conditions differ  substantially  from the economic  conditions in the
assumptions used in making the initial determinations.

         The Bank's  methodology for  establishing the allowance for loan losses
takes into consideration probable losses that have been identified in connection
with specific  assets as well as losses that have not been identified but can be
expected to occur.  Management conducts regular reviews of the Bank's assets and
evaluates  the  need to  establish  allowances  on the  basis  of  this  review.
Allowances are established by the Board of Directors on a monthly basis based on
an  assessment  of risk in the  Bank's  assets  taking  into  consideration  the
composition and quality of the portfolio, delinquency trends, current charge-off
and loss experience,  loan concentrations,  the state of the real estate market,
regulatory reviews conducted in the regulatory  examination process and economic
conditions  generally.  Additional  provisions  for  losses on loans are made in
order to bring the allowance to a level deemed adequate.  Specific reserves will
be  provided  for  individual  assets,  or  portions  of assets,  when  ultimate
collection is considered

                                       13
<PAGE>
improbable by management  based on the current  payment status of the assets and
the  fair  value  of  the  security.   At  the  date  of  foreclosure  or  other
repossession,  the Bank would  transfer the property to real estate  acquired in
settlement of loans  initially at the lower of cost or estimated  fair value and
subsequently  at the lower of book value or fair value  less  estimated  selling
costs.  Any portion of the outstanding loan balance in excess of fair value less
estimated  selling  costs would be charged off  against the  allowance  for loan
losses. If, upon ultimate disposition of the property, net sales proceeds exceed
the net carrying  value of the property,  a gain on sale of real estate would be
recorded.

         The following table sets forth an analysis of the Bank's  allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                      Year Ended September 30,
                                                    ---------------------------------------------------------------
                                                     2000          1999          1998         1997         1996
                                                    ------        ------        ------       ------       ------
                                                                             (In thousands)

<S>                                                 <C>           <C>           <C>          <C>          <C>
Balance at beginning of period...................   $  1,273      $   1,034     $    978     $    926     $     788
                                                    --------      ---------     --------     --------     ---------

Loans charged-off:
  Real estate mortgage:
    Single-family residential....................          7             --           --           --            --
    Multi-family residential.....................         --             --           --           --            --
    Commercial...................................         --             --           --           --            (4)
    Construction.................................         --            (15)          --           --            --
  Commercial loans secured.......................         --             --           --           --            --
  Consumer.......................................        201           (217)        (278)        (392)         (394)
                                                    --------      ---------     --------     --------     ---------
Total charge-offs................................        208           (232)        (278)        (392)         (398)

Recoveries:
  Real estate mortgage:
    Single-family residential....................         --             --           --           --            --
    Multi-family residential.....................         --             --           --           --            --
    Commercial...................................         --             --           --           --            --
    Construction.................................         --             --           --           --            --
  Commercial loans secured.......................         --             --           --           --            --
  Consumer.......................................        176            132          215          158           102
                                                    --------      ---------     --------     --------     ---------
Total recoveries.................................        176            132          215          158           102
Net loans charged off............................        (32)          (100)         (63)        (234)         (296)
Provision for (reduction of) loan  losses........        162            339          119          286           434
                                                    --------      ---------     --------     --------     ---------
Balance at end of period.........................   $  1,403      $   1,273     $  1,034     $    978     $     926
                                                    ========      =========     ========     ========     =========

Ratio of net charge-offs to average
  loans outstanding during the period............        .01%          0.05%       (0.04)%       (.15)%        (.20)%
                                                    ========     ==========     ========     ========     =========
</TABLE>


                                       14
<PAGE>
         The  following  table  allocates  the allowance for loan losses by loan
category  at the  dates  indicated.  The  allocation  of the  allowance  to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
                                                                    At September 30,
                                          -------------------------------------------------------------------------
                                                  2000                    1999                       1998
                                          ---------------------     --------------------       -------------------
                                                    Percent of                Percent of               Percent of
                                                    Loans in                  Loans in                 Loans in
                                                    Category to               Category to              Category to
                                          Amount    Total Loans     Amount    Total Loans    Amount    Total Loans
                                          ------    -----------     ------    ------------   ------    -----------
                                                                            (Dollars in thousands)
<S>                                       <C>           <C>         <C>           <C>        <C>           <C>
Real estate:
  Single-family residential.............  $     421     59.42%      $     452     65.20%     $    413      66.46%
  Single-family rental property.........         10      1.98              10      2.15            10       2.76
  Commercial............................        136      5.32             118      4.54           124       5.00
  Construction..........................         70      2.30              75      2.48            78       4.18
Commercial lines of credit..............         --       .02              --       .02            --        .03
Commercial loans secured................         --       .57              --       .48            --         --
Consumer................................        766     30.39             618     25.13           409      21.57
                                          ---------    ------       ---------   -------      --------    -------
    Total allowance for loan losses.....  $   1,403    100.00%      $   1,273    100.00%     $  1,034     100.00%
                                          =========    ======       =========    ======      ========     ======
<CAPTION>
                                                              At September 30,
                                              ---------------------------------------------------
                                                     1997                          1996
                                              -------------------        -----------------------
                                                       Percent of                   Percent of
                                                        Loans in                     Loans in
                                                       Category to                  Category to
                                              Amount   Total Loans        Amount     Total Loans
                                              ------   -----------        ------    ------------
                                                             (Dollars in thousands)
<S>                                          <C>           <C>          <C>            <C>
Real estate:
  Single-family residential.............     $     432     62.30%       $    276       56.74%
  Single-family rental property.........            13      3.85               4        4.25
  Commercial............................            79      6.11             120        6.21
  Construction..........................            28      5.19              36        6.87
Commercial lines of credit..............            --       .04              --         .16
Commercial loans secured................            --        --              --          --
Consumer................................           426     22.51             490       25.77
                                             ---------    ------        --------      ------
    Total allowance for loan losses.....     $     978    100.00%       $    926      100.00%
                                             =========    ======        ========      ======
</TABLE>


                                       15
<PAGE>
INVESTMENT ACTIVITIES

         General.  The  Bank is  permitted  under  federal  law to make  certain
investments,  including  investments  in  securities  issued by various  federal
agencies and state and municipal  governments,  deposits at the FHLB of Atlanta,
certificates  of deposit in federally  insured  institutions,  certain  bankers'
acceptances  and  federal  funds.  It  may  also  invest,   subject  to  certain
limitations,  in  commercial  paper rated in one of the two  highest  investment
rating categories of a nationally  recognized credit rating agency,  and certain
other types of corporate debt securities and mutual funds.  Federal  regulations
require the Bank to maintain an investment in FHLB stock and a minimum amount of
liquid assets which may be invested in cash and specified securities.  From time
to time, the OTS adjusts the percentage of liquid assets which savings banks are
required to maintain.  See " -- Regulation -- Depository  Institution Regulation
-- Liquidity Requirements."

         The Bank makes  investments  in order to maintain  the levels of liquid
assets required by regulatory  authorities  and manage cash flow,  diversify its
assets,  obtain yield and to satisfy  certain  requirements  for  favorable  tax
treatment.   The  investment   activities  of  the  Bank  consist  primarily  of
investments  in  mortgage-backed  securities  and other  investment  securities,
consisting  primarily of securities issued or guaranteed by the U.S.  government
or agencies thereof.  Typical  investments  include  federally  sponsored agency
mortgage  pass-through  and  federally  sponsored  agency  and  mortgage-related
securities.  Investment and aggregate investment  limitations and credit quality
parameters of each class of investment are  prescribed in the Bank's  investment
policy.  The Bank  performs  analyses on  mortgage-related  securities  prior to
purchase and on an ongoing  basis to determine the impact on earnings and market
value under various  interest rate and prepayment  conditions.  Under the Bank's
current  investment  policy,   securities  purchases  are  made  by  the  Bank's
President.  The Bank's  President and Treasurer  have limited  authority to sell
investment securities and purchase comparable investment securities with similar
characteristics. The Board of Directors reviews all securities transactions on a
monthly basis.

         Securities  designated as "held to maturity" are those assets which the
Bank  has  the  ability  and  intent  to  hold to  maturity.  Upon  acquisition,
securities  are  classified  as to the Bank's  intent,  and a sale would only be
effected  due  to  deteriorating   investment  quality.  The  held  to  maturity
investment  portfolio  is not used for  speculative  purposes  and is carried at
amortized  cost. In the event the Bank sells  securities from this portfolio for
other  than  credit  quality  reasons,  all  securities  within  the  investment
portfolio with matching  characteristics may be reclassified as assets available
for sale.  Securities  designated as "available for sale" are those assets which
the Bank may not hold to  maturity  and thus are  carried  at market  value with
unrealized gains or losses, net of tax effect,  recognized in retained earnings.
All of the Bank's  securities at September  30, 2000 were  designated as held to
maturity.

         Mortgage-Backed  and  Related  Securities.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family  or multi-family
mortgages,  the  principal  and  interest  payments on which are passed from the
mortgage  originators  through   intermediaries  that  pool  and  repackage  the
participation  interest in the form of securities to investors such as the Bank.
Such intermediaries may include quasi-governmental  agencies such as FHLMC, FNMA
and GNMA which  guarantee  the payment of principal  and interest to  investors.
Mortgage-backed  securities  generally increase the quality of the Bank's assets
by virtue of the  guarantees  that back them,  are more liquid  than  individual
mortgage loans and may be used to collateralize  borrowings or other obligations
of the Bank.

         Mortgage-related  securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest  rates  that  are  within  a range  and have  similar  maturities.  The
underlying   pool  of  mortgages  can  be  composed  of  either   fixed-rate  or
adjustable-rate  mortgage  loans.   Mortgage-backed   securities  generally  are
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages, i.e., fixed-rate or adjustable-rate,  as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security is equal to the life of the underlying mortgages.

         The actual maturity of a mortgage-backed  security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of the
underlying  mortgages may shorten the life of the investment,  thereby adversely
affecting   its  yield  to  maturity  and  the  related   market  value  of  the
mortgage-backed  security.  The yield is based upon the interest  income and the
amortization  of the  premium  or  accretion  of  the  discount  related  to the
mortgage-backed security.  Premiums and discounts on mortgage-backed  securities
are amortized or accredited  over the estimated term of the  securities  using a
level  yield  method.   The  prepayment   assumptions   used  to  determine



                                       16
<PAGE>
the amortization period for premiums and discounts can significantly  affect the
yield of the  mortgage-backed  security,  and  these  assumptions  are  reviewed
periodically  to reflect the actual  prepayment.  The actual  prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon  rate,  the  age of  the  mortgages,  the  geographical  location  of the
underlying  real estate  collateralizing  the  mortgages  and general  levels of
market  interest  rates.  The  difference  between  the  interest  rates  on the
underlying  mortgages and the prevailing mortgage interest rates is an important
determinant  in the rate of  prepayments.  During  periods of  falling  mortgage
interest rates, prepayments generally increase, and, conversely,  during periods
of rising mortgage interest rates, prepayments generally decrease. If the coupon
rate of the underlying  mortgage  significantly  exceeds the  prevailing  market
interest rates offered for mortgage loans,  refinancing  generally increases and
accelerates the prepayment of the underlying mortgages. Prepayment experience is
more difficult to estimate for adjustable-rate mortgage-backed securities.

         Mortgage-related  securities,  which  include  collateralized  mortgage
obligations  ("CMOs"),  are typically issued by a special purpose entity,  which
may be organized in a variety of legal forms,  such as a trust, a corporation or
a partnership. The entity aggregates pools of pass-through securities, which are
used to collateralize the mortgage-related  securities.  Once combined, the cash
flows can be divided into  "tranches"  or "classes"  of  individual  securities,
thereby  creating  more  predictable  average  lives for each  security than the
underlying pass-through pools.  Accordingly,  under this security structure, all
principal   paydowns  from  the  various  mortgage  pools  are  allocated  to  a
mortgage-related  securities' class or classes structured to have priority until
it has been paid off. These securities generally have fixed interest rates, and,
as a result,  changes in interest rates  generally would affect the market value
and possibly the prepayment rates of such securities.

         Some mortgage-related  securities instruments are like traditional debt
instruments  due to their stated  principal  amounts and  traditionally  defined
interest rate terms.  Purchasers of certain  other  mortgage-related  securities
instruments  are  entitled to the excess,  if any, of the  issuer's  cash flows.
These mortgage-related securities instruments may include instruments designated
as residual  interest and are riskier in that they could result in the loss of a
portion of the original investment.  Cash flows from residual interests are very
sensitive to prepayments and, thus, contain a high degree of interest rate risk.
The Bank does not purchase residual interests in mortgage-related securities.

         The Bank's  mortgage-backed  securities portfolio consists primarily of
seasoned fixed-rate mortgage-backed  securities. The Bank makes such investments
in order to manage cash flow, diversify assets, obtain yield, to satisfy certain
requirements  for favorable  tax  treatment and to satisfy the qualified  thrift
lender test. See "Regulation -- Depository  Institution  Regulation -- Qualified
Thrift Lender Test."

         At September  30, 2000,  mortgage-backed  securities  with an amortized
cost of $19.8  million were  classified  as held to maturity.  At September  30,
2000,  the Bank's  mortgage-backed  securities  had a weighted  average yield of
7.0%.

         At September 30, 2000,  the Bank did not have any CMOs,  and the Bank's
investment  policy does not permit  investments in individual  issues of CMOs or
Real Estate Mortgage Investment Conduits ("REMICs").



                                       17
<PAGE>

         The  following  table  sets  forth  the  carrying  value of the  Bank's
investments at the dates indicated.
<TABLE>
<CAPTION>
                                                                              At September 30,
                                                               -------------------------------------
                                                                 2000           1999          1998
                                                               --------      ----------    ---------
                                                                          (In thousands)
<S>                                                           <C>            <C>           <C>
Securities held to maturity:
   U.S. government and agency
       securities...........................................  $  41,158      $ 35,232      $  12,611
   Mortgage-backed securities...............................     19,824        23,500         34,198
   FHLB stock...............................................      1,834         1,650          1,512
                                                              ---------      --------      ---------

      Total.................................................  $  62,816      $ 60,382      $  48,321
                                                              =========      ========      =========
</TABLE>

                                       18
<PAGE>
         The following table sets forth information in the scheduled maturities,
amortized  cost,  market  values and  average  yields for the Bank's  investment
portfolio at September 30, 2000.
<TABLE>
<CAPTION>
                                    One Year or Less        One to Five Years      Five to Ten Years       More than Ten Years
                                    -------------------    --------------------    --------------------    -------------------
                                    Carrying    Average    Carrying     Average    Carrying     Average    Carrying    Average
                                      Value      Yield       Value       Yield      Value        Yield       Value      Yield
                                    --------    -------    --------     -------    --------     -------    --------    -------
                                                                        (Dollars in thousands)
<S>                                 <C>          <C>       <C>          <C>        <C>           <C>       <C>            <C>
Securities held to maturity:
   U.S. government and  agency
      obligations.................  $    750     5.18%     $  28,636    6.16%      $  11,022     6.82%     $     750      6.89%
   Mortgage-backed securities.....     4,551     6.34          7,171    6.09           1,661     7.63          6,441      7.44
   FHLB stock.....................        --      --              --     --               --      --           1,834      7.70
                                    --------               ---------               ---------               ---------
      Total.......................  $  5,301               $  35,807               $  12,683               $   9,025
                                    ========               =========               =========               =========
<CAPTION>
                                     Total Investment Portfolio
                                    ------------------------------
                                    Carrying    Market     Average
                                     Value      Value       Yield
                                    --------    ------     -------
                                        (Dollars in thousands)
<S>                                   <C>         <C>        <C>
Securities held to maturity:
   U.S. government and  agency
      obligations.................    $41,158     $40,356    6.33%
   Mortgage-backed securities.....     19,824      19,705    7.00
   FHLB stock.....................      1,834       1,834
                                      -------     -------
      Total.......................    $62,816     $61,895
                                      =======     =======
</TABLE>


                                       19
<PAGE>


DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

         General.  Deposits  are the  primary  source  of the  Bank's  funds for
lending,  investment activities and general operational purposes. In addition to
deposits,  the Bank derives funds from loan  principal and interest  repayments,
maturities of investment securities and mortgage-backed  securities and interest
payments  thereon.  Although loan  repayments are a relatively  stable source of
funds,  deposit  inflows and outflows are  significantly  influenced  by general
interest  rates  and  money  market  conditions.  Borrowings  may be  used  on a
short-term  basis to compensate for reductions in the  availability of funds, or
on a longer term basis for general operational purposes.  The Bank has access to
borrow from the FHLB of Atlanta.

         Deposits. The Bank attracts deposits principally from within its market
area by offering a variety of deposit instruments,  including checking accounts,
money market  accounts,  statement  and passbook  savings  accounts,  Individual
Retirement  Accounts,  and  certificates of deposit which range in maturity from
seven days to five years.  Deposit terms vary  according to the minimum  balance
required,  the length of time the funds must remain on deposit and the  interest
rate.  Maturities,  terms, service fees and withdrawal penalties for its deposit
accounts are established by the Bank on a periodic  basis.  The Bank reviews its
deposit mix and pricing on a weekly basis. In determining the characteristics of
its  deposit  accounts,  the Bank  considers  the  rates  offered  by  competing
institutions,  lending  and  liquidity  requirements,  growth  goals and federal
regulations.  Management  believes it prices its  deposits  comparably  to rates
offered by its competitors. The Bank does not accept brokered deposits.

         The Bank  attempts to compete for deposits with other  institutions  in
its market area by offering  competitively  priced deposit  instruments that are
tailored  to the needs of its  customers.  Additionally,  the Bank seeks to meet
customers'  needs by providing  convenient  customer  service to the  community,
efficient staff and convenient hours of service. Substantially all of the Bank's
depositors are Maryland residents. To provide additional  convenience,  the Bank
participates  in the STAR Automated  Teller Machine ("ATM") network at locations
throughout  the  mid-Atlantic  and the South  and the  CIRRUS  Automated  Teller
Machine  network at  locations  throughout  the  United  States,  through  which
customers can gain access to their  accounts at any time. The Bank currently has
ATM machines in all of its ten offices.  In addition,  during  fiscal 1999,  the
Bank expanded its ATM network by installing ATMs at three community  colleges in
Baltimore  County.  During fiscal year 2000, the Bank introduced  Remote Banking
which is an  Internet  based  banking  system  to  provide  additional  customer
convenience.


                                       20
<PAGE>
         Savings  deposits in the Bank at September 30, 2000 were represented by
the various types of savings programs described below.

<TABLE>
<CAPTION>

Interest       Minimum                                                    Minimum      Balances     Percentage of
  Rate           Term                     Category                         Amount    (In thousands) Total Savings
--------       -------                    --------                        --------   -------------- -------------
<S>            <C>                  <C>                                   <C>          <C>                  <C>
                                    Demand deposits:
1.21%          None                   NOW and Super NOW accounts          $     250    $   30,525           11.35%
2.95           None                   Money market                              250         7,333            2.73
                                                                                       ----------           -----
                                           Total demand deposits                           37,858           14.08
                                    Passbook savings deposits:
2.95           None                   Regular passbook                           25        34,063           12.67
3.38           None                   Money market passbook                  10,000        23,216            8.63
                                                                                       ----------           -----
                                           Total passbook savings deposits                 57,279           21.30

                                    Certificates of Deposit
                                    -----------------------

4.51            3 months or less    Fixed-term, fixed-rate                    1,000        15,895            5.91
5.72            6 months            Fixed-term, fixed-rate                    1,000        10,625            3.95
5.84           12 months            Fixed-term, fixed-rate                      100        45,006           16.74
5.66           18 months            Fixed-term, fixed-rate                      100         6,249            2.32
6.25           24 months            Fixed-term, fixed-rate                      100        30,744           11.43
5.92           30 months            Fixed-term, fixed-rate                      100         3,298            1.23
6.08           36 months            Fixed-term, fixed-rate                      100         9,868            3.67
5.41           42 months            Fixed-term, fixed-rate                      100            42             .02
6.34           48 months            Fixed-term, fixed-rate                      100         1,516             .56
6.48           60 months            Fixed-term, fixed-rate                      100        25,981            9.66
6.20           $100,000 and over    Fixed-term, fixed-rate                      N/A        23,958            8.91
                                                                                       ----------           -----
                                       Total certificates of deposit                   $  173,182           64.41

                                        Accrued interest payable                              563             .21
                                                                                       ----------          ------
                                                Total deposits                         $  268,882          100.00%
                                                                                       ==========          ======
<FN>
---------------
*       Represents weighted average interest rate.
</FN>
</TABLE>

                                       21
<PAGE>

         The following  table sets forth the change in dollar amount of deposits
in the  various  types  of  accounts  offered  by the  Bank  between  the  dates
indicated.
<TABLE>
<CAPTION>

                                    Balance at                         Balance at                         Balance at
                                    September      % of     Increase   September     % of      Increase   September     % of
                                    30, 2000     Deposits  (Decrease)  30, 1999     Deposits  (Decrease)  30, 1998    Deposits
                                    ----------   --------  ----------  ----------   --------  ----------  ----------  --------
                                                                       (Dollars in thousands)

<S>                                <C>             <C>   <C>          <C>             <C>      <C>         <C>           <C>
NOW............................... $  30,525       11.35%  $  3,841    $  26,684      11.44%   $  1,341    $  25,343     11.48%
Money market deposit..............     7,333        2.73     (1,198)       8,531       3.66        (197)       8,728      3.95
Passbook savings deposits.........    57,279       21.30     (1,075)      58,354      25.00       3,542       54,812     24.82
Certificates of deposit...........   149,224       55.50     25,444      123,780      53.04       5,022      118,758     53.79
Certificates of deposit $100,000
   and over.......................    23,958        8.91      8,707       15,251       6.54       2,813       12,438      5.63
Accrued interests payable.........       563         .21       (202)         765        .32          39          726       .33
                                   ---------      ------    -------    ---------     ------    --------    ---------    ------
                                   $ 268,882      100.00%   $35,517    $ 233,365     100.00%   $ 12,560    $ 220,805    100.00%
                                   =========      ======    =======    =========     ======    ========    =========    ======

</TABLE>

                                       22
<PAGE>


     The following  tables set forth the average  balances and average  interest
rates based on month-end  balances for various types of deposits as of the dates
indicated.
<TABLE>
<CAPTION>
                                                    Year Ended September 30,
                                 -----------------------------------------------------------------
                                        2000                   1999                 1998
                                 ---------------------  --------------------   -------------------
                                 Average     Average    Average     Average    Average     Average
                                 Balance      Rate (1)  Balance      Rate      Balance        Rate
                                 -------     ---------  -------   ----------   -------     -------
                                                        (Dollars in thousands)

<S>                              <C>           <C>      <C>            <C>     <C>            <C>
NOW...........................   $  21,917     2.06%    $   20,391     1.80%   $   25,192     1.59%
Money market deposits.........       8,115     3.03          8,938     3.03         9,360     3.35
Passbook savings deposits.....      58,378     3.40         56,583     3.26        57,383     3.79
Non-interest-bearing demand
   deposits...................       8,043       --          6,317       --         6,581       --
Certificates of deposit.......     154,859     5.31        138,316     5.16       129,840     5.50
                                 ---------              ----------             ----------
    Total.....................   $ 251,312       --     $  230,546     4.17    $  224,356     4.32
                                 =========              ==========             ==========
<FN>
--------
(1)  Annualized.
</FN>
</TABLE>

         The following table sets forth the time deposits in the Bank classified
by rates at the dates indicated.
<TABLE>
<CAPTION>


                                                                         At September 30,
                                                               --------------------------------------
                                                                 2000         1999          1998
                                                                ------       ------        -------
                                                                         (In thousands)

<S>                                                           <C>            <C>           <C>
 3.76 -  6%.................................................   $  93,428     $ 125,790     $ 116,691
 6.01 -  8%.................................................      79,754        13,101        14,376
 8.01 - 10%.................................................          --           140           129
                                                               ---------     ---------     ---------
                                                               $ 173,182     $ 139,031     $ 131,196
                                                               =========     =========     =========
</TABLE>

         The  following  table  sets forth the  amount  and  maturities  of time
deposits at September 30, 2000.
<TABLE>
<CAPTION>
                                                                 Amount Due
                                  --------------------------------------------------------------------------
                                  Less Than                                        After
Rate                              One Year        1-2 Years        2-3 Years       3 Years           Total
----                              --------        ---------        ---------       -------         -------
                                                                    (In thousands)

<S>                                <C>             <C>            <C>              <C>           <C>
 3.76 -  6%....................    $  77,445       $  10,686      $   2,189        $  3,108      $   93,428
 6.01 -  8%....................       22,675          25,674         10,029          21,376          79,754
                                   ---------       ---------      ---------        --------      ----------
                                   $ 100,120       $  36,360      $  12,218        $ 24,484      $  173,182
                                   =========       =========      =========        ========      ==========
</TABLE>


                                       23
<PAGE>

         The following table indicates the amount of the Bank's  certificates of
deposit of $100,000 or more by time remaining until maturity as of September 30,
2000. At such date, such deposits  represented 8.91% of total deposits and had a
weighted average rate of 6.20%.

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

        Three months or less.........................  $   5,895
        Over three through six months................      2,838
        Over six through 12 months...................      3,623
        Over 12 months...............................     11,602
                                                       ---------
              Total..................................  $  23,958
                                                       =========




         The following  table sets forth the savings  activities of the Bank for
the periods indicated.
<TABLE>
<CAPTION>

                                                                       Year Ended September 30,
                                                               -----------------------------------------
                                                                  1999          1998          1997
                                                               ----------    ----------    -----------
                                                                          (In thousands)
<S>                                                           <C>           <C>            <C>
Deposits....................................................  $  593,370    $  494,431     $  462,996
Deposits sold...............................................          --            --         (6,166)
Withdrawals.................................................    (568,720)     (491,795)      (470,538)
                                                              ----------    ----------     ----------
Net increase (decrease) before interest  credited...........      24,650         2,946        (13,708)
Interest credited...........................................      10,867         9,614          9,857
                                                              ----------    ----------     ----------
    Net increase (decrease) in savings  deposits............  $   35,517    $   12,560     $   (3,851)
                                                              ==========    ==========     ==========
</TABLE>


         In the  unlikely  event  the  Bank is  liquidated,  depositors  will be
entitled to full payment of their  deposit  accounts  prior to any payment being
made to the sole stockholder of the Bank.

         Borrowings.  Savings deposits historically have been the primary source
of funds for the Bank's lending,  investments and general operating  activities.
The Bank is  authorized,  however,  to use advances  from the FHLB of Atlanta to
supplement  its  supply  of  lendable  funds  and  to  meet  deposit  withdrawal
requirements.  The FHLB of Atlanta functions as a central reserve bank providing
credit for savings institutions and certain other member financial institutions.
As a member of the FHLB System, the Bank is required to own stock in the FHLB of
Atlanta  and is  authorized  to apply for  advances.  Advances  are  pursuant to
several different programs, each of which has its own interest rate and range of
maturities.  The Bank has a Blanket  Agreement  for advances with the FHLB under
which the Bank may borrow up to 25% of assets  subject to normal  collateral and
underwriting requirements.  Advances from the FHLB of Atlanta are secured by the
Bank's stock in the FHLB of Atlanta and other eligible assets.  During the years
ended  September 30, 1998 and 1997,  the Bank had no borrowings  other than FHLB
advances.  At September 30, 2000, the Bank had $9.5 million in outstanding  FHLB
advances.

SUBSIDIARY ACTIVITIES

         As a federally  chartered savings bank, the Bank is permitted to invest
an  amount  equal  to 2% of its  assets  in  subsidiaries,  with  an  additional
investment of 1% of assets where such  investment  serves  primarily  community,
inner-city and community  development  purposes.  Under such limitations,  as of
September 30, 2000, the Bank was authorized to invest up to  approximately  $8.9
million in the stock of or loans to  subsidiaries,  including the  additional



                                       24
<PAGE>
1% investment  for community  inner-city  and  community  development  purposes.
Institutions  meeting their applicable minimum  regulatory capital  requirements
may invest up to 50% of their  regulatory  capital in conforming  first mortgage
loans to subsidiaries in which they own 10% or more of the capital stock.

         The Bank has two  subsidiary  service  corporations,  Baltimore  County
Service Corp. ("BCSC") and Ebenezer Road, Inc. ("Ebenezer Road").  Further, BCSC
has a wholly owned subsidiary,  Route 543,  Incorporated ("Route 543"). BCSC was
formed in the mid 1970's for the purpose of  participating in joint ventures for
the  development  of real estate.  The last  development  project was  completed
during the year ended  September  30,  1996,  and at September  30,  2000,  BCSC
conducted immaterial  activities.  Route 543 currently is inactive. At September
30, 2000, BCSC had  substantially  no assets or liabilities,  except that it may
receive a refund,  that would not  exceed  $13,000,  of amounts  owed to it by a
utility company in connection with a development project completed approximately
ten years  ago.  The Bank does not  intend to conduct  real  estate  development
activities  in the  future.  Ebenezer  Road is an  insurance  agency  that sells
primarily  vendor's  single interest  insurance on automobile  loans, as well as
mortgage life  insurance and annuity  products.  The fees from the activities of
its subsidiaries were immaterial during the year ended September 30, 2000.

COMPETITION

         The Bank faces strong  competition  both in originating real estate and
consumer loans and in attracting deposits. The Bank competes for real estate and
other loans  principally on the basis of interest  rates,  the types of loans it
originates,  the  deposit  products  it offers and the  quality of  services  it
provides to  borrowers.  The Bank also competes by offering  products  which are
tailored to the local  community.  Its  competition in  originating  real estate
loans comes  primarily  from other savings  institutions,  commercial  banks and
mortgage bankers.  Commercial banks, credit unions and finance companies provide
vigorous  competition in consumer lending.  Competition may increase as a result
of the continuing  reduction of  restrictions  on the  interstate  operations of
financial institutions.

         The Bank attracts its deposits  through its offices  primarily from the
local  community.  Consequently,  competition  for deposits is principally  from
other savings  institutions,  commercial banks, credit unions and brokers in the
local  community.  The Bank  competes for deposits and loans by offering what it
believes to be a variety of deposit  accounts at competitive  rates,  convenient
business hours, a commitment to outstanding  customer service and a well-trained
staff.  The Bank  believes  it has  developed  strong  relationships  with local
realtors and the community in general.

         Management  considers its market area for gathering deposits and making
loans to be Baltimore County and Harford County in Maryland.  The Bank estimates
that it competes  with  numerous  banks and savings  and loan  associations  for
deposits and loans. Based on data provided by a private marketing firm, the Bank
estimates that at September 30, 2000, it had  approximately 20% of deposits held
by all banks and savings  institutions  in each of Baltimore  County and Harford
County.

EMPLOYEES

         As of  September  30,  2000,  the  Company  had  108  full-time  and 17
part-time  employees,  none of whom were represented by a collective  bargaining
agreement.  Management  considers the Bank's relationships with its employees to
be good.

DEPOSITORY INSTITUTION REGULATION

         General.  The Bank is a federally chartered savings  institution,  is a
member of the FHLB of Atlanta and its  deposits  are insured by the FDIC through
the SAIF. As a federal  savings  institution,  the Bank is subject to regulation
and  supervision by the OTS and the FDIC and to OTS  regulations  governing such
matters  as  capital  standards,  mergers,   establishment  of  branch  offices,
subsidiary investments and activities and general investment authority.  The OTS
periodically   examines  the  Bank  for  compliance   with  various   regulatory
requirements and for safe and sound operations.  The FDIC also has the authority
to conduct special  examinations of the Bank because its deposits are insured by
the SAIF.  The Bank must file reports with the OTS describing its activities and
financial


                                       25
<PAGE>

condition and must obtain the approval of the OTS prior to entering into certain
transactions,   such  as  mergers  with  or  acquisitions  of  other  depository
institutions.

         Regulatory  Capital  Requirements.  Under the OTS's regulatory  capital
requirements,  savings  associations must maintain  "tangible"  capital equal to
1.5% of adjusted total assets, "core" capital equal to at least 4.0% or 3.0% (if
the  institution is rated  composite 1 CAMELS under the OTS  examination  rating
system) of adjusted  total assets and "total"  capital (a  combination of "core"
and "supplementary" capital) equal to 8.0% of risk-weighted assets. In addition,
the OTS has adopted  regulations  which impose certain  restrictions  on savings
associations that have a total risk-based  capital ratio that is less than 8.0%,
a ratio of Tier 1 capital to  risk-weighted  assets of less than 4.0% or a ratio
of Tier 1 capital  to  adjusted  total  assets of less than 4.0% (or 3.0% if the
institution  is  rated  composite  1 CAMELS  under  the OTS  examination  rating
system).  For  purposes  of  these  regulations,  Tier 1  capital  has the  same
definitions as core capital. See "--Prompt Corrective Regulatory Action."

         Core  capital  is  defined as common  stockholders'  equity  (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
minority  interests in the equity accounts of fully  consolidated  subsidiaries,
certain   nonwithdrawable   accounts  and  pledged   deposits  and   "qualifying
supervisory  goodwill."  Core capital is generally  reduced by the amount of the
savings  association's  intangible  assets for which no market  exists.  Limited
exceptions  to the  deduction of  intangible  assets are provided for  purchased
mortgage servicing rights and qualifying supervisory goodwill.  Tangible capital
is given the same  definition  as core capital but does not include an exception
for  qualifying  supervisory  goodwill  and is  reduced by the amount of all the
savings  association's  intangible  assets  with  only a limited  exception  for
purchased mortgage servicing rights.  Both core and tangible capital are further
reduced  by  an  amount  equal  to  a  savings  institution's  debt  and  equity
investments in  subsidiaries  engaged in activities not  permissible to national
banks (other than  subsidiaries  engaged in  activities  undertaken as agent for
customers  or  in  mortgage   banking   activities  and  subsidiary   depository
institutions  or their  holding  companies).  Investments  in and  extensions of
credit to such subsidiaries are required to be fully netted against tangible and
core capital. At September 30, 2000, the Bank had no such investments.

         Adjusted  total  assets  are a savings  association's  total  assets as
determined under generally accepted accounting  principles  increased by certain
goodwill  amounts  and by a pro rated  portion of the  assets of  unconsolidated
includable  subsidiaries  in which  the  savings  association  holds a  minority
interest.  Adjusted  total  assets are reduced by the amount of assets that have
been deducted from capital, the portion of savings association's  investments in
unconsolidated  includable  subsidiaries,  and,  for purpose of the core capital
requirement,  qualifying supervisory goodwill. At September 30, 2000, the Bank's
adjusted  total  assets  for the  purposes  of the  core  and  tangible  capital
requirements were approximately $319.0 million.

         In determining  compliance with the risk-based capital  requirement,  a
savings  association  is allowed to include both core capital and  supplementary
capital  in its total  capital  provided  the  amount of  supplementary  capital
included does not exceed the savings  association's core capital.  Supplementary
capital is defined to include certain  preferred  stock issues,  nonwithdrawable
accounts  and  pledged  deposits  that do not qualify as core  capital,  certain
approved subordinated debt, certain other capital instruments,  a portion of the
savings  association's general loss allowances and up to 45% of unrealized gains
on equity  securities.  Total core and supplementary  capital are reduced by the
amount of capital instruments held by other depository  institutions pursuant to
reciprocal  arrangements,  all  equity  investments  and  that  portion  of  the
institution's land loans and non-residential construction loans in excess of 80%
loan-to-value  ratio.  As of September 30, 2000, the Bank had no high ratio land
or  non-residential  construction  loans and no equity investments for which OTS
regulations require a deduction from total capital.

         The risk-based  capital  requirement is measured against  risk-weighted
assets  which  equal the sum of each asset and the  credit-equivalent  amount of
each  off-balance  sheet item after being multiplied by an assigned risk weight.
Under the OTS risk-weighting system, one-to-four family first mortgages not more
than 90 days past due with  loan-to-value  ratios  under 80% and average  annual
occupancy  rates  of  at  least  80%  and  certain   qualifying  loans  for  the
construction of  one-to-four-family  residences  pre-sold to home purchasers are
assigned a risk weight of 50%. Consumer and residential  construction  loans are
assigned a risk  weight of 100%.  Mortgage-backed  securities  issued,  or fully
guaranteed  as to principal and interest by the FNMA or FHLMC are assigned a 20%
risk weight.  Cash and U.S.  Government  securities backed by the full faith and
credit of the U.S.  Government  (such as  mortgage-backed  securities  issued by
GNMA) are given a 0% risk weight.

                                       26
<PAGE>

         For  information  with  respect  to  the  Bank's  compliance  with  its
regulatory  capital  requirements at September 30, 2000, see Note 15 of Notes to
Consolidated Financial Statements.

         The  risk-based  capital  requirements  of the OTS  also  require  that
savings  institutions  with more than a "normal"  level of interest rate risk to
maintain additional total capital. A savings institution's interest rate risk is
measured in terms of the sensitivity of its "net portfolio  value" to changes in
interest rates. Net portfolio value is defined,  generally, as the present value
of expected cash inflows from existing  assets and  off-balance  sheet contracts
less the present value of expected cash  outflows from existing  liabilities.  A
savings institution is considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio  value after an immediate 200 basis
point increase or decrease in market  interest rates  (whichever  results in the
greater  decline)  is less than two percent of the  current  estimated  economic
value of its assets.  A savings  institution with a greater than normal interest
rate risk will be  required  to deduct  from  total  capital,  for  purposes  of
calculating its risk-based  capital  requirement,  an amount (the "interest rate
risk  component")  equal to one-half the  difference  between the  institution's
measured  interest  rate  risk and the  normal  level  of  interest  rate  risk,
multiplied by the economic value of its total assets.

         The OTS  calculates  the  sensitivity  of a savings  institution's  net
portfolio  value based on data submitted by the institution in a schedule to its
quarterly  Thrift  Financial Report and using the interest rate risk measurement
model  adopted by the OTS. The amount of the interest  rate risk  component,  if
any, to be deducted from a savings  institution's  total capital is based on the
institution's  Thrift  Financial  Report  filed two  quarters  earlier.  Savings
institutions  with less than $300  million  in assets and a  risk-based  capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their  Thrift  Financial  Reports.  However,  the OTS  requires  any exempt
savings  institution  that it determines  may have a high level of interest rate
risk exposure to file such  schedule on a quarterly  basis and may be subject to
an additional capital  requirement based upon its level of interest rate risk as
compared to its peers.  The Bank is exempt from  filing the  interest  rate risk
schedule  with its Thrift  Financial  Reports and the OTS has not required it to
file such a schedule. The interest rate risk rule did not have a material effect
on the Bank's risk-based capital at September 30, 2000.

         In addition to requiring  generally  applicable  capital  standards for
savings  institutions,  the OTS is  authorized to establish the minimum level of
capital  for  a  savings  institution  at  such  amount  or  at  such  ratio  of
capital-to-assets  as the OTS determines to be necessary or appropriate for such
institution in light of the particular  circumstances of the  institution.  Such
circumstances  would  include a high degree of  exposure to interest  rate risk,
concentration  of credit risk and certain  risks  arising  from  non-traditional
activity.  The OTS may treat the failure of any savings  institution to maintain
capital at or above such level as an unsafe or unsound  practice and may issue a
directive  requiring any savings  institution which fails to maintain capital at
or above the  minimum  level  required by the OTS to submit and adhere to a plan
for increasing  capital.  Such an order may be enforced in the same manner as an
order issued by the FDIC.

         Liquidity  Requirements.  The Bank  generally  is  required to maintain
average daily balances of liquid assets (generally, cash, certain time deposits,
bankers'  acceptances,   highly  rated  corporate  debt  and  commercial  paper,
securities of certain  mutual funds,  and  specified  United States  government,
state  or  federal  agency  obligations)  equal  to 4% of its  net  withdrawable
accounts plus short-term  borrowings either at the end of the preceding calendar
quarter or on an average daily basis during the preceding quarter. The Bank also
is  required  to  maintain  sufficient  liquidity  to ensure  its safe and sound
operation.  Monetary  penalties  may be imposed  for  failure to meet  liquidity
requirements.  The average  daily balance of liquid assets ratio of the Bank for
September 2000 was 27.9%.

         Qualified Thrift Lender Test. A savings  institution that does not meet
the Qualified  Thrift Lender  ("QTL") test must either convert to a bank charter
or comply with the following restrictions on its operations: (i) the institution
may not  engage in any new  activity  or make any new  investment,  directly  or
indirectly,  unless  such  activity  or  investment  is  permissible  for both a
national  bank and a  savings  institution;  (ii) the  branching  powers  of the
institution  shall  be  restricted  to  those  of a  national  bank;  (iii)  the
institution shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the institution  shall be subject to the rules regarding
payment of dividends by a national bank. In addition,  any company that controls
a  savings  institution  that  fails to  qualify  as a QTL will be  required  to
register  as, and to be deemed,  a bank  holding  company  subject to all of the
provisions  of the Bank  Holding  Company  Act of 1956  (the  "BHCA")  and other
statutes  applicable  to bank holding  companies.  Upon the  expiration of three
years  from the date the  institution  ceases  to be a QTL,  it must  cease  any


                                       27
<PAGE>
activity and not retain any investment not permissible for a national bank and a
savings institution and immediately repay any outstanding FHLB advances (subject
to safety and soundness considerations).

         To meet the QTL test, an institution's  "Qualified Thrift  Investments"
must total at least 65% of "portfolio assets." Under OTS regulations,  portfolio
assets are defined as total assets less intangibles,  property used by a savings
institution in its business and liquidity investments in an amount not exceeding
20% of  assets.  Qualified  Thrift  Investments  consist  of (i)  loans,  equity
positions  or  securities  related  to  domestic,  residential  real  estate  or
manufactured  housing,  (ii) 50% of the dollar  amount of  residential  mortgage
loans  subject to sale under certain  conditions,  and (iii) stock in an FHLB or
the FHLMC or FNMA.  In  addition,  subject to a 20% of portfolio  assets  limit,
savings  institutions are able to treat as Qualified Thrift  Investments 200% of
their   investments  in  loans  to  finance   "starter   homes"  and  loans  for
construction,  development  or  improvement  of housing  and  community  service
facilities or for financing small businesses in  "credit-needy"  areas. In order
to maintain QTL status,  the savings  institution must maintain a weekly average
percentage of Qualified Thrift Investments to portfolio assets equal to 65% on a
monthly average basis in nine out of 12 months. A savings institution that fails
to maintain QTL status will be permitted to requalify  once, and if it fails the
QTL test a second time, it will become  immediately  subject to all penalties as
if all time limits on such penalties had expired.

         At September 30, 2000,  the percentage of the Bank's  portfolio  assets
invested  in  Qualified  Thrift  Investments  was in  excess  of the  percentage
required to qualify the Bank under the QTL test.

         Dividend   Limitations.   Under  the  OTS  prompt   corrective   action
regulations,  the Bank would be prohibited from making any capital distributions
if, after making the distribution, it would have: (i) a total risk-based capital
ratio of less than 8.0%;  (ii) a Tier 1  risk-based  capital  ratio of less than
4.0%; or (iii) a Tier 1 leverage ratio of less than 4.0%. See "Prompt Corrective
Regulatory  Action." The OTS, after  consultation  with the FDIC,  however,  may
permit an otherwise  prohibited  stock repurchase if made in connection with the
issuance of additional  shares in an equivalent  amount and the repurchase  will
reduce  the  institution's   financial  obligations  or  otherwise  improve  the
institution's  financial  condition.  Under  OTS  regulations,  the  Bank is not
permitted to pay dividends on its capital stock if its regulatory  capital would
thereby be reduced  below the amount then required for the  liquidation  account
established for the benefit of certain depositors of the Bank at the time of its
conversion to stock form.

         Savings  institutions  must submit  notice to the OTS prior to making a
capital  distribution  if (a)  they  would  not be  well-capitalized  after  the
distribution,  (b) the distribution would result in the retirement of any of the
institution's  common  or  preferred  stock or debt  counted  as its  regulatory
capital,  or (c) the institution is a subsidiary of a holding company. A savings
institution  must make  application to the OTS to pay a capital  distribution if
(x)  the  institution  would  not  be  adequately   capitalized   following  the
distribution,  (y) the institution's  total  distributions for the calendar year
exceeds the  institution's net income for the calendar year to date plus its net
income (less distributions) for the preceding two years, or (z) the distribution
would  otherwise  violate  applicable  law or regulation or an agreement with or
condition imposed by the OTS.

         In addition to the foregoing,  earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other  distributions to the Company without payment
of taxes at the then  current  tax rate by the Bank on the  amount  of  earnings
removed from the reserves for such  distributions.  See  "Taxation." The Company
intends to make full use of this  favorable tax  treatment  afforded to the Bank
and the Company and does not  contemplate  use of any  earnings of the Bank in a
manner  which would limit  either  institution's  bad debt  deduction  or create
federal tax liabilities.

         Deposit  Insurance.  FDCIA  required the FDIC to establish a risk-based
assessment  system for insured  depository  associations that takes into account
the risks attributable to different  categories and concentrations of assets and
liabilities.  Under the rule,  the FDIC assigns an  association  to one of three
capital  categories   consisting  of  (i)  well  capitalized,   (ii)  adequately
capitalized,   or  (iii)   undercapitalized,   and  one  of  three   supervisory
subcategories.  The supervisory  subgroup to which an association is assigned is
based on a  supervisory  evaluation  provided  to the FDIC by the  association's
primary  federal  regulator  and  information  which the FDIC  determines  to be
relevant  to the  association's  financial  condition  and the risk posed to the
deposit insurance funds (which may include, if applicable,  information provided
by the association's state supervisor). An association's assessment rate depends
on the capital category and supervisory category to which it is assigned.  There
are nine assessment risk classifications  (i.e.,  combinations of capital groups
and  supervisory  subgroups) to which  different  assessment  rates are applied.


                                       28
<PAGE>
Assessment  rates range from zero basis points for an association in the highest
category  (i.e.,  well-capitalized  and  healthy)  to 27  basis  points  for  an
association in the lowest  category (i.e.,  undercapitalized  and of substantial
supervisory concern.)

     Federal  Home Loan Bank  System.  The Bank is a member of the FHLB  System,
which consists of 12 district Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB").  The Federal Home Loan
Banks provide a central credit facility primarily for member institutions.  As a
member of the FHLB of  Atlanta,  the Bank is required to acquire and hold shares
of capital stock in the FHLB of Atlanta in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase  contracts,
and similar  obligations  at the beginning of each year, or 1/20 of its advances
(borrowings)  from the FHLB of Atlanta,  whichever  is greater.  The Bank was in
compliance  with this  requirement  with  investment in FHLB of Atlanta stock at
September 30, 2000, of $1.8 million.  The FHLB of Atlanta serves as a reserve or
central bank for its member  institutions  within its assigned  district.  It is
funded primarily from proceeds derived from the sale of consolidated obligations
of the FHLB System.  It offers  advances to members in accordance  with policies
and procedures established by the FHFB and the Board of Directors of the FHLB of
Atlanta.  Long-term advances may only be made for the purpose of providing funds
for  residential  housing  finance.  At September  30,  2000,  the Bank had $9.5
million in advances outstanding from the FHLB of Atlanta.

     Federal  Reserve  System.  Pursuant to regulations  of the Federal  Reserve
Board,  all  FDIC-insured  depository  institutions  must maintain average daily
reserves equal to 3% on transaction accounts of up to $42.8 million, plus 10% on
the  amount  over $42.8  million.  These  reserve  requirements  are  subject to
adjustment  by the Federal  Reserve  Board.  Because  required  reserves must be
maintained in the form of vault cash or in a non-interest  bearing  account at a
Federal  Reserve Bank,  the effect of the reserve  requirement  is to reduce the
amount of the institution's  interest-earning  assets. As of September 30, 2000,
the Bank met its reserve requirements.

     Prompt  Corrective  Regulatory  Action.  Under FDICIA,  the federal banking
regulators  are  required  to  take  prompt  corrective  action  if  an  insured
depository  institution  fails to satisfy certain minimum capital  requirements,
including a leverage  limit,  a risk-based  capital  requirement,  and any other
measure deemed  appropriate by the federal banking  regulators for measuring the
capital  adequacy  of  an  insured  depository  institution.  All  institutions,
regardless  of their  capital  levels,  are  restricted  from making any capital
distribution or paying any management fees if the institution  would  thereafter
fail to satisfy  the  minimum  levels for any of its  capital  requirements.  An
institution  that  fails to meet the  minimum  level  for any  relevant  capital
measure (an  "undercapitalized  institution")  may be: (i) subject to  increased
monitoring by the appropriate federal banking regulator; (ii) required to submit
an acceptable  capital  restoration  plan within 45 days; (iii) subject to asset
growth  limits;  and (iv)  required  to obtain  prior  regulatory  approval  for
acquisitions,  branching and new lines of  businesses.  The capital  restoration
plan must  include a guarantee  by the  institution's  holding  company that the
institution  will comply with the plan until it has been adequately  capitalized
on average for four consecutive quarters,  under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the  institution  into capital  compliance  as of the date it
failed  to  comply  with  its  capital   restoration   plan.  A   "significantly
undercapitalized"  institution, as well as any undercapitalized institution that
does not  submit an  acceptable  capital  restoration  plan,  may be  subject to
regulatory demands for recapitalization,  broader application of restrictions on
transactions  with  affiliates,  limitations on interest rates paid on deposits,
asset  growth  and other  activities,  possible  replacement  of  directors  and
officers,  and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution may also be
required  to divest the  institution  or the  institution  could be  required to
divest   subsidiaries.   The  senior  executive   officers  of  a  significantly
undercapitalized   institution   may  not  receive   bonuses  or   increases  in
compensation  without prior  approval and the  institution  is  prohibited  from
making  payments of principal  or interest on its  subordinated  debt.  In their
discretion,  the  federal  banking  regulators  may also  impose  the  foregoing
sanctions on an  undercapitalized  institution if the regulators  determine that
such actions are  necessary  to carry out the purposes of the prompt  corrective
provisions.  If an institution's ratio of tangible capital to total assets falls
below the  "critical  capital  level"  established  by the  appropriate  federal
banking  regulator,  the  institution  will be  subject  to  conservatorship  or
receivership within specified time periods.

     Under  the  implementing  regulations,   the  federal  banking  regulators,
including the OTS,  generally  measure an institution's  capital adequacy on the
basis of its total  risk-based  capital ratio (the ratio of its total capital to
risk-weighted  assets),  Tier 1 risk-based  capital ratio (the ratio of its core
capital to risk-weighted assets) and leverage


                                       29
<PAGE>
ratio (the ratio of its core capital to adjusted  total  assets).  The following
table shows the capital ratios required for the various prompt corrective action
categories.
<TABLE>
<CAPTION>
                                                     Adequately                                     Significantly
                           Well Capitalized          Capitalized         Undercapitalized        Undercapitalized
                           ----------------          -----------         ----------------        ----------------
<S>                        <C>                       <C>                           <C>                     <C>
Total risk-based
    capital ratio          10.0% or more             8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio           6.0% or more             4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio              5.0% or more             4.0% or more *      Less than 4.0% *        Less than 3.0%
<FN>
-----------
*  3.0% if institution has a composite 1 CAMELS rating.
</FN>
</TABLE>

A "critically undercapitalized" savings institution is defined as an institution
that  has a ratio of  "tangible  equity"  to total  assets  of less  than  2.0%.
Tangible equity is defined as core capital plus cumulative  perpetual  preferred
stock  (and  related  surplus)  less  all  intangibles   other  than  qualifying
supervisory  goodwill and certain purchased  mortgage  servicing rights. The OTS
may reclassify a well capitalized savings institution as adequately  capitalized
and may require an adequately  capitalized  or  undercapitalized  institution to
comply with the supervisory actions applicable to institutions in the next lower
capital  category  (but  may not  reclassify  a  significantly  undercapitalized
institution as critically  undercapitalized) if the OTS determines, after notice
and an opportunity for a hearing,  that the savings  institution is in an unsafe
or unsound  condition or that the  institution  has received and not corrected a
less-than-satisfactory rating for any CAMELS rating category.

     Safety and  Soundness  Standards.  Under  FDICIA,  as amended by the Riegle
Community  Development and Regulatory  Improvement Act of 1994 (the "CDRI Act"),
each  Federal  banking  agency was required to  establish  safety and  soundness
standards for  institutions  under its authority.  On July 10, 1995, the Federal
banking   agencies,   including  the  OTS,   released   Interagency   Guidelines
Establishing  Standards  for Safety and  Soundness  and  published  a final rule
establishing  deadlines  for  submission  and  review  of safety  and  soundness
compliance  plans.  The  guidelines  require  savings  institutions  to maintain
internal  controls and  information  systems and internal audit systems that are
appropriate for the size,  nature and scope of the institution's  business.  The
guidelines also establish certain basic standards for loan documentation, credit
underwriting,  interest rate risk  exposure,  and asset growth.  The  guidelines
further provide that savings  institutions should maintain safeguards to prevent
the payment of compensation,  fees and benefits that are excessive or that could
lead to material  financial  loss, and should take into account  factors such as
comparable  compensation  practices  at  comparable  institutions.  If  the  OTS
determines  that a savings  institution is not in compliance with the safety and
soundness  guidelines,  it may require the  institution  to submit an acceptable
plan to achieve  compliance  with the  guidelines.  A savings  institution  must
submit an acceptable  compliance  plan to the OTS within 30 days of receipt of a
request for such a plan.  Failure to submit or implement a  compliance  plan may
subject the institution to regulatory sanctions. Under the guidelines, a savings
institution  should maintain systems,  commensurate with its size and the nature
and  scope  of  its   operations,   to  identify   problem  assets  and  prevent
deterioration  in those assets as well as to evaluate  and monitor  earnings and
ensure that earnings are sufficient to maintain  adequate  capital and reserves.
Management believes that these regulatory standards do not materially affect the
Bank's operations.

     Lending Limits.  Savings institutions  generally are subject to the lending
limits  applicable  to national  banks.  With certain  limited  exceptions,  the
maximum  amount that a savings  institution  or a national  bank may lend to any
borrower  outstanding  at one time and not fully secured by collateral  having a
market  value at least  equal to the amount of the loan or  extension  of credit
(including certain related entities of the borrower) outstanding at one time and
not fully  secured by  collateral  having a market  value at least  equal to the
amount of the loan or extension  of credit may not exceed 15% of the  unimpaired
capital and surplus of the  institution.  Loans and  extensions  of credit fully
secured by readily  marketable  collateral  may  comprise an  additional  10% of
unimpaired capital and surplus. Savings institutions are additionally authorized
to make loans to one borrower,  for any purpose:  (i) in an amount not to exceed
$500,000,  or (ii) by order of the  Director  of OTS, in an amount not to exceed
the lesser of  $30,000,000  or 30% of unimpaired  capital and surplus to develop
residential  housing,  provided:  (a) the purchase  price of each  single-family
dwelling  in  the  development  does  not  exceed  $500,000;   (b)  the  savings
institution  is and  continues  to be in  compliance  with its  fully  phased-in
capital requirements; (c) the loans comply with applicable loan-to-value


                                       30
<PAGE>
requirements,  and; (d) the aggregate  amount of loans made under this authority
does not exceed  150% of  unimpaired  capital  and  surplus,  or (iii)  loans to
finance the sale of real property  acquired in satisfaction of debts  previously
contracted in good faith, not to exceed 50% of unimpaired capital and surplus of
the institution.

         At  September  30,  2000,  the maximum  amount that the Bank could have
loaned to any one borrower without prior OTS approval was $4.8 million.  At such
date, the largest aggregate amount of loans that the Bank had outstanding to any
one borrower was $2.5 million.

         Uniform Lending Standards. Under OTS regulations,  savings institutions
must adopt and maintain written policies that establish  appropriate  limits and
standards  for  extensions  of credit that are secured by liens or  interests in
real estate or are made for the purpose of financing  permanent  improvements to
real estate.  These  policies  must  establish  loan  portfolio  diversification
standards, prudent underwriting standards,  including loan-to-value limits, that
are clear and  measurable,  loan  administration  procedures and  documentation,
approval and  reporting  requirements.  The real estate  lending  policies  must
reflect  consideration  of the  Interagency  Guidelines  for Real Estate Lending
Policies (the  "Interagency  Guidelines")  that have been adopted by the federal
bank regulators.

         The Interagency  Guidelines,  among other things,  call upon depository
institutions to establish  internal  loan-to-value  limits for real estate loans
that are not in  excess  of the  following  supervisory  limits:  (i) for  loans
secured by raw land, the supervisory  loan-to-value limit is 65% of the value of
the collateral;  (ii) for land development loans (i.e., loans for the purpose of
improving  unimproved  property  prior  to  the  erection  of  structures),  the
supervisory  limit is 75%; (iii) for loans for the  construction  of commercial,
multifamily or other nonresidential property, the supervisory limit is 80%; (iv)
for loans for the construction of one-to-four family properties, the supervisory
limit is 85%;  and (v) for  loans  secured  by other  improved  property  (e.g.,
farmland,  completed  commercial  property and other  income-producing  property
including  non-owner-occupied,  one-to-four family property),  the limit is 85%.
Although  no  supervisory   loan-to-value   limit  has  been   established   for
owner-occupied,  one-to-four  family  and home  equity  loans,  the  Interagency
Guidelines  state that for any such loan with a loan-to-value  ratio that equals
or exceeds 90% at origination,  an institution should require appropriate credit
enhancement  in the form of either  mortgage  insurance  or  readily  marketable
collateral.

         The  Interagency  Guidelines  state  that  it  may  be  appropriate  in
individual  cases to originate or purchase  loans with  loan-to-value  ratios in
excess of the supervisory loan-to-value limits, based on the support provided by
other credit factors. The aggregate amount of loans in excess of the supervisory
loan-to-value limits,  however,  should not exceed 100% of total capital and the
total of such loans secured by commercial,  agricultural,  multifamily and other
non-one-to-four  family  residential  properties  should not exceed 30% of total
capital. The supervisory loan-to-value limits do not apply to certain categories
of loans  including  loans insured or guaranteed by the U.S.  government and its
agencies or by  financially  capable  state,  local or municipal  governments or
agencies, loans backed by the full faith and credit of a state government, loans
that are to be sold promptly after origination without recourse to a financially
responsible  party, loans that are renewed,  refinanced or restructured  without
the advancement of new funds, loans that are renewed, refinanced or restructured
in connection with a workout,  loans to facilitate sales of real estate acquired
by the  institution  in the  ordinary  course of  collecting  a debt  previously
contracted and loans where the real estate is not the primary collateral.

         Management believes that the Bank's current lending policies conform to
the Interagency Guidelines.

         Transactions with Related Parties.  Generally,  transactions  between a
savings  bank  or its  subsidiaries  and its  affiliates  must  be on  terms  as
favorable to the Bank as transactions with non-affiliates.  In addition, certain
of these  transactions  are  restricted to a percentage  of the Bank's  capital.
Affiliates of the Bank include the Company,  the MHC and any company which would
be under common control with the Bank.

         The Bank's authority to extend credit to executive  officers,  trustees
and 10%  shareholders,  as well as  entities  under  such  persons  control  are
currently  governed by Sections  22(g) and 22(h) of the Federal  Reserve Act and
Regulation O promulgated by the Federal Reserve Board. Among other things, these
regulations  require  such  loans to be made on terms  substantially  similar to
those offered to unaffiliated  individuals,  place limits on the amount of loans
the  Bank  may make to such  persons  based,  in  part,  on the  Bank's  capital
position, and require certain approval procedures to be followed.

                                       31
<PAGE>

     Financial  Modernization  Legislation.  On  November  12,  1999,  President
Clinton  signed  legislation  which  could  have a  far-reaching  impact  on the
financial services  industry.  The  Gramm-Leach-Bliley  ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding  companies  and national  banks to engage in a variety of new  financial
activities.  Among the new  activities  that will be  permitted  to bank holding
companies are  securities  and  insurance  brokerage,  securities  underwriting,
insurance  underwriting  and merchant  banking.  The Federal  Reserve Board,  in
consultation  with  the  Secretary  of  the  Treasury,  may  approve  additional
financial activities.  The G-L-B Act, however,  prohibits future acquisitions of
existing unitary savings and loan holding companies,  like the Company, by firms
which are engaged in commercial activities and limits the permissible activities
of unitary holding companies formed after May 4, 1999.

     The G-L-B Act imposes  new  requirements  on  financial  institutions  with
respect to customer  privacy.  The G-L-B Act generally  prohibits  disclosure of
customer  information  to  non-affiliated  third parties unless the customer has
been given the  opportunity  to object and has not objected to such  disclosure.
Financial  institutions  are further required to disclose their privacy policies
to customers  annually.  Financial  institutions,  however,  will be required to
comply  with state law if it is more  protective  of customer  privacy  than the
G-L-B Act.  The G-L-B Act directs the federal  banking  agencies,  the  National
Credit Union Administration,  the Secretary of the Treasury,  the Securities and
Exchange  Commission and the Federal Trade Commission,  after  consultation with
the National Association of Insurance Commissioners,  to promulgate implementing
regulations  within six months of enactment.  The privacy provisions will become
effective in November 2000, with full compliance required by July 1, 2001.

     The G-L-B Act contains significant  revisions to the FHLB System. The G-L-B
Act imposes new capital  requirements  on the FHLBs and authorizes them to issue
two classes of stock with differing dividend rates and redemption  requirements.
The G-L-B Act deletes the current requirement that the FHLBs annually contribute
$300 million to pay interest on certain government obligations in favor of a 20%
of net  earnings  formula.  The G-L-B Act expands the  permissible  uses of FHLB
advances by community  financial  institutions (under $500 million in assets) to
include   funding   loans  to  small   businesses,   small   farms   and   small
agri-businesses.  The G-L-B  Act  makes  membership  in the FHLB  voluntary  for
federal savings associations.

     The  G-L-B  Act  contains  a  variety  of  other  provisions   including  a
prohibition  against ATM surcharges  unless the customer has first been provided
notice of the  imposition  and  amount of the fee.  The  G-L-B Act  reduces  the
frequency of Community  Reinvestment Act  examinations for smaller  institutions
and imposes certain reporting requirements on depository  institutions that make
payments  to   non-governmental   entities  in  connection  with  the  Community
Reinvestment  Act.  The  G-L-B  Act  eliminates  the SAIF  special  reserve  and
authorizes a federal  savings  association  that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

     The  Company  is  unable  to  predict  the  impact  of the G-L-B Act on its
operations  at this time.  Although the G-L-B Act reduces the range of companies
with which may acquire  control of the Company,  it may facilitate  affiliations
with companies in the financial services industry.

REGULATION OF THE COMPANY

     The Company is a savings  and loan  holding  company  within the meaning of
Section 10 of the HOLA and, as such,  the Company is subject to OTS  regulation,
examination  and  supervision.  In  addition,  because the Bank's  deposits  are
insured  by the SAIF  maintained  by the FDIC,  the Bank is  subject  to certain
restrictions in dealing with the Company and with other persons  affiliated with
the Bank.

     As a condition to OTS approval of the Bank's reorganization into the mutual
holding  company  structure,  the  Company  must  operate  under the  activities
restrictions applicable to multiple savings and loan holding companies. The HOLA
limits the  activities  of a multiple  savings and loan holding  company and its
non-insured  institution   subsidiaries  primarily  to  activities  specifically
permissible  by statute for multiple  savings and loan holding  companies and to
activities of bank holding  companies which the Federal Reserve Board has deemed
permissible by regulation under Section 4(c)(8) of the Bank Holding Company Act,
as amended the  ("BHCA"),  subject to prior  approval  of the OTS,  and to other
activities  authorized by OTS  regulation.  In addition,  under the terms of the
Company's federal stock charter,  the purpose of the Company is to pursue any or
all of the lawful objectives of a federal mutual holding company.


                                       32
<PAGE>

         The Company is  permitted  to,  among other  things:  (i) invest in the
stock of a savings  institution;  (ii) acquire a mutual institution  through the
merger of such institution into a savings institution  subsidiary of such mutual
holding  company  or an  interim  savings  institution  of such  mutual  holding
company;  (iii) merge with or acquire  another  mutual holding  company,  one of
whose  subsidiaries  is a  savings  institution;  (iv)  acquire  non-controlling
amounts of the stock of savings  institutions  and savings  institution  holding
companies,  subject to certain  restrictions;  (v) invest in a  corporation  the
capital stock of which is available for purchase by a savings  institution under
Federal  law or  under  the  law of  any  state  where  the  subsidiary  savings
institution  or  institutions  have their home offices;  (vi) furnish or perform
management services for a savings institution  subsidiary of such company;  (vi)
hold,  manage, or liquidate assets owned or acquired from a savings  institution
subsidiary of such company; (viii) hold or manage properties used or occupied by
a savings institution  subsidiary of such company;  and (ix) acting as a trustee
under deed or trust.

         The HOLA  prohibits a savings  and loan  holding  company,  such as the
Company,  directly or indirectly,  from (1) acquiring  control (as defined) of a
savings institution (or holding company thereof) without prior OTS approval, (2)
acquiring more than 5% of the voting shares of a savings institution (or holding
company  thereof)  which is not a  subsidiary,  subject to  certain  exceptions,
without prior OTS approval,  or (3) acquiring  through merger,  consolidation or
purchase of assets,  another savings institution (or holding company thereof) or
acquiring all or substbantially all of the assets,  another savings  institution
(or holding  company  thereof)  without  prior OTS  approval,  or (4)  acquiring
control of an uninsured institution.  A savings and loan holding company may not
acquire as a separate  subsidiary a savings  institution which has its principal
offices  outside of the state  where the  principal  offices  of its  subsidiary
institution is located, except (i) in the case of certain emergency acquisitions
approved by the FDIC, (ii) if the holding  company  controlled (as defined) such
savings  institution  as of March 5,  1987,  (iii) when the laws of the state in
which the savings institution to be acquired is located  specifically  authorize
such an  acquisition.  No  director  or  officer of a savings  and loan  holding
company or person owning or controlling more than 25% of such holding  company's
voting shares may, except with the prior approval of the OTS, acquire control of
any savings institution which is not a subsidiary of such holding company.

TAXATION

         General.   The  Company  and  the  Bank,   together   with  the  Bank's
subsidiaries,  file a  consolidated  federal income tax return based on a fiscal
year ending September 30. Consolidated returns have the effect of deferring gain
or loss on intercompany  transactions and allowing companies included within the
consolidated return to offset income against losses under certain circumstances.

         Federal  Income  Taxation.  Thrift  institutions  are  subject  to  the
provisions of the Internal  Revenue Code of 1986, as amended (the "Code") in the
same general manner as other  corporations.  However,  institutions  such as the
Bank which met certain definitional tests and other conditions prescribed by the
Code benefited from certain favorable provisions regarding their deductions from
taxable income for annual  additions to their bad debt reserve.  For purposes of
the bad debt reserve  deduction,  loans were  separated  into  "qualifying  real
property  loans," which generally are loans secured by interests in certain real
property,  and  nonqualifying  loans,  which are all other  loans.  The bad debt
reserve  deduction with respect to nonqualifying  loans was based on actual loss
experience,  however,  the amount of the bad debt reserve deduction with respect
to  qualifying  real property  loans could be based upon actual loss  experience
(the "experience  method") or a percentage of taxable income determined  without
regard  to  such  deduction  (the   "percentage  of  taxable  income   method").
Legislation  recently signed by the President repealed the percentage of taxable
income method of calculating  the bad debt reserve.  The Bank  historically  has
elected to use the percentage method.

         Earnings  appropriated to an institution's bad debt reserve and claimed
as a tax deduction  were not available for the payment of cash  dividends or for
distribution to  shareholders  (including  distributions  made on dissolution or
liquidation),  unless such amount was included in taxable income, along with the
amount deemed necessary to pay the resulting federal income tax.

         Beginning  with the first  taxable year  beginning  after  December 31,
1995,  savings  institutions,  such as the  Bank,  will be  treated  the same as
commercial banks.  Associations with $500 million or more in assets will only be
able to take a tax deduction when a loan is actually  charged off.  Associations
with less than $500 million in assets will still be permitted to make deductible
bad debt additions to reserves, but only using the experience method.

                                       33
<PAGE>

         The Bank's tax returns were last  audited for the year ended  September
30, 1994.

         Under  provisions  of the Revenue  Reconciliation  Act of 1993 ("RRA"),
enacted on August 10, 1993, the maximum  federal  corporate  income tax rate was
increased  from 34% to 35% for  taxable  income  over $10.0  million,  with a 3%
surtax imposed on taxable income over $15.0  million.  Also under  provisions of
RRA, a separate depreciation  calculation requirement has been eliminated in the
determination   of  adjusted   current  earnings  for  purposes  of  determining
alternative  minimum  taxable  income,  rules  relating to payment of  estimated
corporate income taxes were revised, and certain acquired intangible assets such
as goodwill and customer-based  intangibles were allowed a 15-year  amortization
period.  Beginning  with tax years ending on or after January 1, 1993,  RRA also
provides  that  securities  dealers  must  use  mark-to-market   accounting  and
generally reflect changes in value during the year or upon sale as taxable gains
or losses. The IRS has indicated that financial institutions which originate and
sell loans will be subject to the rule.

         State Income  Taxation.  The State of Maryland imposes an income tax of
approximately 7% on income measured  substantially the same as federally taxable
income.  In addition,  Maryland  imposes a franchise tax, at a rate of 0.013% of
the total  withdrawal  value of the deposits that a savings and loan association
holds in Maryland at December 31 each year.

         For additional  information regarding taxation, see Note 16 of Notes to
Financial Statements.

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

         The  following  table sets forth the  location  and certain  additional
information regarding the Bank's offices at September 30, 2000.
<TABLE>
<CAPTION>
                                                                     Book Value at      Approximate      Deposits at
                         Year       Owned or       Expiration Date   September 30,        Square       September 30,
                        Opened       Leased        (If Leased) (1)       2000             Footage           2000
                        ------       ------        ---------------      ------            -------          ------
                                                                                                        (Deposits in
                                                                                                         thousands)
<S>                      <C>               <C>            <C>        <C>                  <C>           <C>
MAIN OFFICE:
     Perry Hall          1955       Leased (2)   November 2003       $   272,420          8,000         $   110,572

BRANCH OFFICES:
     Bel Air             1975       Leased       June 2008                    --          2,000              31,614
     Dundalk (3)         1976       Leased       June 2001                    --          1,700              37,344
     Timonium            1978       Leased       July 2003                    --          1,250              41,532
     Catonsville         1981       Leased       February 2001                --          1,750              25,204
     Abingdon            1999       Leased (2)   July 2019               486,750          1,800               4,062
     Forest Hill         1999       Leased (2)   July 2019               423,231          1,800               6,393
     Essex               1999 (4)   Leased       November 2004                --          3,200               5,199
     Hickory             2000 (5)   Leased (2)   January 2020            486,030          1,800               1,603
     White Marsh         2000 (6)   Leased (2)   January 2015            545,365          1,800               5,359

FUTURE SITES:
     Carney              2001       Leased                                    --

ADMINISTRATIVE OFFICE:
     4111 E. Joppa Road  1994       Owned                              1,345,275         18,000                  --
     Warehouse           1998       Leased       September 2002               --          4,800                  --


                                       34
<PAGE>
<FN>
---------------
(1)      All leases  have at least one five-year renewal option.
(2)      Building is owned, but land is leased.
(3)      The Bank also is leasing a kiosk and drive-in ATM facility at this location.
(4)      Branch opened in November 1999.
(5)      Branch opened in April 2000
(6)      Branch opened in January 2000.
</FN>
</TABLE>

         The book value of the  Bank's  investment  in  premises  and  equipment
totaled  $6.7 million at  September  30, 2000.  See Note 7 of Notes to Financial
Statements.

ITEM 3. LEGAL PROCEEDINGS.
-------------------------

         From time to time,  the MHC, the Company  and/or the Bank is a party to
various legal proceedings incident to its business. At September 30, 2000, there
were no legal proceedings to which the MHC, the Company or the Bank was a party,
or to which any of their property was subject, which were expected by management
to result in a material  loss to the MHC, the Company or the Bank.  There are no
pending regulatory  proceedings to which the MHC, the Company, the Bank or their
subsidiaries is a party or to which any of their properties is subject which are
currently expected to result in a material loss.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
-----------------------------------------------------------

         Not applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

         The  information   contained  under  the  sections   captioned  "Market
Information" in the Company's  Annual Report to Stockholders for the Fiscal Year
Ended  September  30, 2000 (the "Annual  Report")  filed as Exhibit 13 hereto is
incorporated herein by reference.

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

         The  information  contained  in  the  section  captioned  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  on
pages 4 through 12 in the Annual Report is incorporated herein by reference.

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

         The Consolidated Financial Statements,  Notes to Consolidated Financial
Statements,  Independent  Auditors' Report and Selected  Consolidated  Financial
Data  in the  Annual  Report,  which  are  listed  under  Item  13  herein,  are
incorporated herein by reference.

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

         Not applicable.

                                       35
<PAGE>


                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------

         For  information  concerning  the  Board  of  Directors  and  executive
officers of the Company,  the information  contained under the section captioned
"Proposal  I -- Election of  Directors"  in the  Company's  Proxy  Statement  is
incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The  information  contained  under the  sections  captioned  "Proposal I --
Election of Directors -- Executive Compensation," " -- Director Compensation,"
" --  Employment  Agreements"  in the Proxy  Statement is  incorporated  herein
by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders thereof" in the Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the  sections  captioned  "Security  Ownership of
                  Management" in the Proxy Statement.

         (c)      Changes in Control

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

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section  captioned  "Proposal I -- Election of Directors --  Transactions
with Management" in the Proxy Statement.

ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K.
-----------------------------------------------

     (a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
         ----------------------------------------------
     (1) Financial Statements.  The following  consolidated financial statements
are incorporated by reference from Item 7 hereof (see Exhibit 13):

                    Independent Auditors' Report
                    Consolidated   Statement  of   Financial   Condition  as  of
                    September 30, 2000 and 1999
                    Consolidated  Statements of  Operations  for the Years Ended
                    September 30, 2000 and 1999
                    Consolidated  Statements of Retained  Earnings for the Years
                    Ended September 30, 2000 and 1999
                    Consolidated  Statements  of Cash Flows for the Years  Ended
                    September 30, 2000 and 1999
                    Notes to Consolidated Financial Statements

                                       36
<PAGE>

     (2)  Exhibits.  The  following is a list of exhibits  filed as part of this
Annual Report on Form 10-KSB and is also the Exhibit Index.

      No.         Description
      ---         -----------

*      3.1        Charter of BCSB Bankcorp, Inc.
*      3.2        Bylaws of BCSB Bankcorp, Inc.
**     4          Form   of   Common
                  Stock Certificate of BCSB Bankcorp, Inc.
***   10.1        BCSB Bankcorp, Inc. 1999 Stock Option Plan
***   10.2        BCSB Bankcorp, Inc. Management Recognition Plan and Trust
                     Agreement
*     10.3        Amended and Restated Form of  Change-in-Control  Severance
                     Agreements  between  Baltimore County
                  Savings Bank, F.S.B. and Michael J. Dietz, Gary C. Loraditch
                     and William M. Loughran
*     10.4        Baltimore County Savings Bank, F.S.B. Deferred Compensation
                     Plan
*     10.5        Baltimore County Savings Bank, F.S.B. Incentive Compensation
                     Plan
      13          2000 Annual Report to Stockholders
      21          Subsidiaries of the Registrant
      23          Consent of Anderson Associates, LLP
      27          Financial Data Schedule
[FN]
__________
*    Incorporated herein by reference from the Company's  Registration Statement
     on Form SB-2 (File No. 333-44831).
**   Incorporated herein by reference from the Company's  Registration Statement
     on Form 8-A (File No. 0-24589).
***  Incorporated  herein by reference from the Company's  Annual Report on Form
     10-K for the year ended September 30, 2000 (File No. 0-24589).

</FN>


     (b) REPORTS ON FORM 8-K.   None.
         -------------------


<PAGE>
                          SIGNATURES

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

                                      BCSB BANKCORP, INC.


December 28, 2000                     By: /s/ Gary C. Loraditch
                                          ---------------------------------
                                          Gary C. Loraditch
                                          President and Chief Executive Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.


/s/ Gary C. Loraditch                                          December 28, 2000
------------------------------------------------
Gary C. Loraditch
President, Chief Executive Officer  and Director
(Principal Executive Officer)

/s/ Bonnie M. Klein                                            December 28, 2000
------------------------------------------------
Bonnie M. Klein
Vice President and Treasurer
(Principal Financial and Accounting Officer)

/s/ Henry V. Kahl                                              December 28, 2000
------------------------------------------------
Henry V. Kahl
Chairman of the Board

/s/ H. Adrian Cox                                              December 28, 2000
------------------------------------------------
H. Adrian Cox
Vice Chairman of the Board


/s/ Frank W. Dunton                                            December 28, 2000
------------------------------------------------
Frank W. Dunton
Director

/s/ William M. Loughran                                        December 28, 2000
------------------------------------------------
William M. Loughran
Vice President and Director

/s/ John J. Panzer, Jr.                                        December 28, 2000
------------------------------------------------
John J. Panzer, Jr.
Director


/s/ P. Louis Rohe, Jr.                                         December 28, 2000
------------------------------------------------
P. Louis Rohe, Jr.
Director