BCSB BANKCORP, INC.








         [LOGO]












                                                            2000 ANNUAL REPORT

<PAGE>


BCSB BANKCORP, INC.
--------------------------------------------------------------------------------

     BCSB Bankcorp,  Inc. (the "Company")  serves as the holding company for its
wholly owned  subsidiary,  Baltimore County Savings Bank,  F.S.B.  (the "Bank").
Baltimore  County  Savings Bank,  M.H.C.  (the "MHC"),  a federal mutual holding
company,  owns 63.77% of the Company's outstanding common stock. The Company has
no  significant  assets other than its  investment  in the Bank.  The Company is
primarily  engaged in the business of directing,  planning and  coordinating the
business activities of the Bank.

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

MARKET INFORMATION
--------------------------------------------------------------------------------

         The Company's common stock began trading under the symbol "BCSB" on the
Nasdaq  National  Market System on July 9, 1998.  There are currently  5,887,072
shares of the common stock outstanding and approximately 1,153 holders of record
of the  common  stock.  Following  are the high and low bid  prices,  by  fiscal
quarter,  as reported on the Nasdaq  National  Market  System during the periods
indicated, as well as dividends paid on the common stock during each quarter.

                                High     Low       Dividends Per Share
                                ----     ---       -------------------
Fiscal 2000
-----------
First quarter..................$ 7.50   $6.375          $  .125
Second quarter.................  7.25    5.6562            .125
Third quarter..................  6.75    6.00              .125
Fourth quarter *...............  6.625   5.935             .125

Fiscal 1999
-----------
First quarter..................$10.375  $7.750          $    --
Second quarter.................  9.625   7.875               --
Third quarter..................  9.375   8.125             .125
Fourth quarter.................  8.563   6.310             .125
 -----------
 * As of December 11, 2000

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

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

<PAGE>



                        [BCSB BANKCORP, INC. LETTERHEAD]


To our Depositors, Shareholders and Friends:

     In this,  our third  annual  report,  we are  beginning  to see some of the
results of the plans we started 2 1/2years  ago.  With three new offices  during
the  year  and  enhancements  to our  financial  products,  continued  with  the
improvements  in the prior year, your bank can  successfully  compete in today's
financial market place.


     November  saw the  opening of the Essex  office.  In  January,  White Marsh
opened for business. It was followed with the Hickory office in April. The Essex
drive-in became operational in November,  2000 and we expect our Carney location
to begin operations in early 2001.


     During the year we introduced an overdraft  line of credit loan product and
started on-line banking through the bank's improved web site. We also have added
home improvement loans to our available consumer loan portfolio.

     The result of this is that BCSB is a "full service  community bank". I know
of no other bank our size that offers a similar range of financial  products for
consumers.  Our growth is evidence of the  acceptance of BCSB in the  community.
Our five new offices are exceeding deposit expectations.  Overall, deposits grew
$35,500,000  in the fiscal  year ended  September  30,  2000,  also  better than
expected.

     As we  continue to grow,  our  financial  performance  will  improve.  Like
others,  we suffered with a decreasing net interest  margin in the year. Our net
interest income will increase as we grow, resulting in improved performance.

     Discussion  of this  past  years  operation  follows.  You  will see a good
foundation for growth and prosperity.


                                   Very truly yours,

                                   /s/ Gary C. Loraditch

                                   Gary C. Loraditch
                                   President

<PAGE>


SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
--------------------------------------------------------------------------------

SELECTED CONSOLIDATED FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
                                                                        At September 30,
                                                                  -----------------------------
                                                                    2000               1999
                                                                  --------           ---------
                                                                          (In thousands)

<S>                                                               <C>               <C>
Total assets....................................................  $   325,879       $   298,302
Loans receivable, net...........................................      241,520           215,383
Cash............................................................        6,571             5,977
Interest-bearing deposits in other banks........................        5,256             8,651
Federal funds sold..............................................          455               449

Investment securities:
    Held to maturity............................................       41,158            35,232
Mortgage-backed securities:
    Held to maturity............................................       19,824            23,500
FHLB stock......................................................        1,834             1,650
Deposits........................................................      268,882           233,365
FHLB advances...................................................        9,500            16,000
Stockholders' equity  - substantially restricted................       43,343            45,280

</TABLE>

SELECTED CONSOLIDATED OPERATIONS DATA
<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                                                  -----------------------------
                                                                     2000              1999
                                                                  ----------        ----------
                                                                          (In thousands)

<S>                                                               <C>               <C>
Interest income.................................................  $    21,480       $    19,396
Interest expense................................................       11,757             9,780
                                                                  -----------       -----------
Net interest income before
   provision for loan losses....................................        9,723             9,616
Provision for loan losses.......................................          162               339
                                                                  -----------       -----------
Net interest income.............................................        9,561             9,277
Other income....................................................          530               547
Non-interest expense............................................        8,967             7,482
                                                                  -----------       -----------
Income before income taxes......................................        1,124             2,342
Income tax provision............................................          437               957
                                                                  -----------       -----------
Net Income......................................................  $       687       $     1,384
                                                                  ===========       ===========
</TABLE>

                                       2
<PAGE>

KEY OPERATING RATIOS:
<TABLE>
<CAPTION>
                                                                      At or for the Year
                                                                      Ended September 30,
                                                                  ---------------------------
                                                                     2000             1999
                                                                  ----------       ---------
<S>                                                                    <C>              <C>
PERFORMANCE RATIOS:
   Return on average assets (net income
      divided by average total assets)..........................       .22%             .49%
   Return on average equity (net income
      divided by average equity)................................      1.58             3.03
   Interest rate spread (combined
      weighted average interest rate
      earned less combined weighted
      average interest rate cost)...............................      2.77             2.94
   Net interest margin (net interest
      income divided by average
      interest-earning assets)..................................      3.26             3.51
   Ratio of average interest-earning assets
      to average interest-bearing liabilities...................    112.46           116.05
   Ratio of non-interest expense to
      average total assets......................................      2.86             2.63

ASSET QUALITY RATIOS:
   Nonperforming assets to total assets at
      end of period.............................................       .16              .39
   Nonperforming loans to gross loans at
      end of period.............................................       .15              .46
   Allowance for loan losses to gross loans
      at end of period..........................................       .55              .57
   Allowance for loan losses to nonperforming
      loans at end of period....................................    366.32           124.20
   Provision for loan losses to gross loans ....................       .06              .15
   Net charge-offs to average loans
      outstanding...............................................       .01              .05

CAPITAL RATIOS:
   Equity to total assets at end
      of period.................................................     13.30            15.18
   Average equity to average
      assets....................................................     13.83            16.07

</TABLE>

                                       3
<PAGE>


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


GENERAL

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

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

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

FORWARD-LOOKING STATEMENTS

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

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


ASSET/LIABILITY MANAGEMENT

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

                                       4
<PAGE>

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

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

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

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

MARKET RISK

         Management   measures  the  Bank's  interest  rate  risk  by  computing
estimated  changes  in the net  portfolio  value  ("NPV") of its cash flows from
assets,  liabilities  and  off-balance  sheet  items in the  event of a range of
assumed  changes in market  interest  rates.  NPV represents the market value of
portfolio equity and is the difference between incoming and outgoing  discounted
cash flows from assets and  liabilities,  with  adjustments made for off-balance
sheet items. These computations  estimate the effect on the Bank's NPV of sudden
and  sustained 1% to 3% increases and decreases in market  interest  rates.  The
Bank's  Board of  Directors  has  adopted an  interest  rate risk  policy  which
establishes maximum decreases in the Bank's estimated NPV of 10%, 17% and 23% in
the event of 1%, 2% and 3% increases in market interest rates, respectively, and
of 13%, 25% and 38% in the event of 1%, 2% and 3%  decreases in market  interest
rates, respectively. The following table presents the Bank's projected change in
NPV for the various rate shock levels at September 30, 2000.


                                       5
<PAGE>
<TABLE>
<CAPTION>
                                   Net Portfolio Value                    NPV as % of PV of  Assets
 Change                -------------------------------------------        -------------------------
in Rates               $ Amount        $ Change(1)     % Change(2)        NPV Ratio (3)   Change(4)
--------               --------        -----------     -----------        ------------    ---------
                                                                          (Dollars in thousands)

<S>                    <C>              <C>              <C>               <C>             <C>
  + 300bp              $  22,619        (13,710)         (38)%             7.48%           (377) bp
  + 200bp                 27,096         (9,233)         (25)              8.77            (249) bp
  + 100bp                 31,753         (4,576)         (13)             10.06            (120) bp
      0bp                 36,329                                          11.26
  - 100bp                 39,993          3,663           10              12.16              91  bp
  - 200bp                 42,456          6,127           17              12.72             146  bp
  - 300bp                 44,579          8,250           23              13.17             191  bp
<FN>
---------------
(1)  Represents  the excess  (deficiency)  of the  estimated  NPV  assuming  the
     indicated  change in interest  rates minus the  estimated  NPV  assuming no
     change in interest rates.
(2)  Calculated  as the  amount of change in the  estimated  NPV  divided by the
     estimated NPV assuming no change in interest rates.
(3)  Calculated as the estimated NPV divided by average total assets.
(4)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.

***Risk Measures: 200 bp rate shock***
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                                                     At             At
                                                                September 30,   September 30,
                                                                    2000           1999
                                                              ----------------  -------------

<S>                                                               <C>               <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets...............      11.26%            12.92%
Exposure Measure: Post Shock NPV Ratio......................       8.77              9.83
Sensitivity Measure: Change in NPV Ratio....................      249 bp            309 bp

</TABLE>

         The above table  indicates  that at September 30, 2000, in the event of
sudden and sustained  increases in prevailing  market interest rates, the Bank's
NPV would be expected to decrease, and that in the event of sudden and sustained
decreases in prevailing  market interest rates, the Bank's NPV would be expected
to  increase.  The Bank's  Board of  Directors  reviews the Bank's NPV  position
quarterly,  and,  if  estimated  changes  in NPV  are  not  within  the  targets
established  by the Board,  the Board may direct  management to adjust its asset
and liability mix to bring interest rate risk within Board approved targets.  At
September 30, 2000, the Bank's estimated  changes in NPV were within the targets
established by the Board of Directors.

         NPV is calculated by the OTS by using information provided by the Bank.
The  calculation  is based on the net  present  value of  discounted  cash flows
utilizing market prepayment assumptions and market rates of interest provided by
Bloomberg  quotations and surveys  performed  during the quarter ended September
30, 2000, with adjustments made to reflect the shift in the Treasury yield curve
between the survey date and the quarter-end date.

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

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



                                       6
<PAGE>
Finally,  the ability of many borrowers to repay their  adjustable-rate debt may
decrease in the event of an interest rate increase.

AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES

         The  following  table sets forth  certain  information  relating to the
Company's average  interest-earning assets and interest-bearing  liabilities and
reflects  the average  yield on assets and average cost of  liabilities  for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or  expense by the  average  monthly  balance  of assets or  liabilities,
respectively,  for the periods  presented.  Average  balances  are derived  from
month-end  balances.  Management  does not  believe  that  the use of  month-end
balances  instead of daily  balances has caused any material  difference  in the
information presented.
<TABLE>
<CAPTION>
                                                                       Year Ended September 30,
                                            -------------------------------------------------------------------------
                                                           2000                                     1999
                                            ---------------------------------       ---------------------------------
                                                                     Average                                  Average
                                            Average                  Yield/         Average                   Yield/
                                            Balance       Interest    Cost          Balance        Interest    Cost
                                            -------       --------   ------         -------        --------   ------
                                                                        (Dollars in thousands)
<S>                                        <C>            <C>         <C>          <C>            <C>          <C>
Interest-earning assets:
  Loans receivable (1).................    $ 230,409      $17,153     7.44%        $ 195,781      $ 14,767     7.54%
  Mortgage backed securities...........       22,107        1,446     6.54            26,711         1,719     6.44
  Investment securities and FHLB stock.       38,619        2,456     6.36            27,202         1,623     5.97
  Other interest-earning assets........        6,837          425     6.22            24,026         1,287     5.36
                                           ---------      -------                  ---------      --------
      Total interest-earning assets ...      297,972       21,480     7.21           273,720        19,396     7.09
Non-interest-earning assets............       15,707                                  10,383
                                           ---------                               ---------
      Total assets.....................    $ 313,679                               $ 284,103
                                           =========                               =========

Interest-bearing liabilities:
  Deposits.............................    $ 251,306      $10,867     4.32         $ 230,546         9,614     4.17
  FHLB advances........................       11,930          885     7.42             3,417           158     4.62
  Other liabilities....................        1,723            5      .29             1,899             8     0.42
                                           ---------      -------                  ---------      --------
      Total interest-bearing
        liabilities....................      264,959       11,757     4.44           235,862         9,780     4.15
                                                          -------   ------                        --------   ------
Non-interest-bearing liabilities.......        4,652                                   2,573
                                           ---------                               ---------
      Total liabilities................      269,611                                 238,435
Stockholders' equity...................       44,068                                  45,668
                                           ---------                               ---------
      Total liabilities and retained
        earnings.......................    $ 313,679                                $284,103
                                           =========                                ========

Net interest income....................                   $ 9,723                                 $  9,616
                                                          =======                                 ========

Interest rate spread...................                               2.77%                                    2.94%
                                                                    ======                                   =======
Net interest margin (2)................                               3.26%                                    3.51%
                                                                    ======                                   =======
Ratio of average interest-earning assets
  to average interest-bearing liabilities                           112.46%                                  116.05%
                                                                    ======                                   ========
<FN>
____________
(1)  Includes nonaccrual loans.
(2)  Represents  net  interest   income  divided  by  the  average   balance  of
     interest-earning assets.
</FN>
</TABLE>



                                       7
<PAGE>

RATE/VOLUME ANALYSIS

         The table below sets forth  certain  information  regarding  changes in
interest income and interest expense of the Bank for the periods indicated.  For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information  is  provided  on changes  attributable  to:  (i)  changes in volume
(changes in volume  multiplied  by old rate);  (ii) changes in rates  (change in
rate  multiplied by old volume);  and (iii) changes in  rate/volume  (changes in
rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
                                                           Year Ended  September  30,
                                                -------------------------------------------------
                                                   2000               vs.                  1999
                                                -------------------------------------------------
                                                               Increase (Decrease)
                                                                     Due to
                                                -------------------------------------------------
                                                                               Rate/
                                                Volume         Rate            Volume       Total
                                                ------         ----            ------       -----
                                                                   (In thousands)
<S>                                            <C>            <C>            <C>         <C>
Interest income:
  Loans receivable..........................   $  2,612       $   (192)      $    (34)   $  2,386
  Mortgage-backed securities................       (296)            28             (5)       (273)
  Investment securities and
      FHLB Stock............................        682            107             45         834
  Other interest-earning assets.............       (921)           206           (148)       (863)
                                               --------       --------       --------    --------
    Total interest-earning assets...........      2,077            149           (142)      2,084

Interest expense:
  Deposits..................................        866            355             32       1,253
  FHLB advances.............................         42            133            702         877
  Other liabilities.........................        (78)          (148)            73        (153)
                                               --------       --------       --------    --------
     Total interest-bearing
       liabilities..........................        830            340            807       1,977
                                               --------       --------       --------    --------

Change in net interest income...............   $  1,247       $   (191)      $   (949)   $    107
                                               ========       ========       ========    ========
</TABLE>

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND 1999

         During the year ended  September  30,  2000,  the  Company  focused its
efforts on  pursuing  its growth  strategy  through  the  addition of new branch
offices.  During the year ended  September  30, 2000,  the Bank opened three new
branch offices in Essex, Hickory and White Marsh. These three additional offices
are in  addition  to the two new  branch  offices  opened  during the year ended
September  30, 1999.  While the  building and opening of new branch  offices has
resulted in additional expense in the short term, management believes that these
branch offices will enhance the profitability and growth of the Company over the
long term.  Based on deposit  growth to date in the new offices,  all will break
even within three years of the date they opened.

         Total assets  increased by $27.6 million,  or 9.3%, from $298.3 million
at September 30, 1999 to $325.9  million at September 30, 2000.  The increase in
assets during fiscal year 2000 was  attributable  to a $26.1 million,  or 12.1%,
increase in loans  receivable,  net from $215.4 million at September 30, 1999 to
$241.5 million at September 30, 2000.

         In  recent  years,  the  Company  has  emphasized  the  origination  of
automobile  loans  because of the higher rates and shorter  terms to maturity of
those loans.  Through these efforts,  the Company increased  automobile loans by
$21.1  million,  or 45.3%,  from $46.8  million at  September  30, 1999 to $67.9
million at  September  30,  2000.  Most of the  remaining  increase  in the loan
portfolio  reflected an increase in  single-family  residential  mortgage loans,
which  increased by $5.6 million,  or 3.8%, from $146.9 at September 30, 1999 to
$152.5 million at September 30, 2000,  reflecting  increased loan demand and the
addition of new customers from the new branch offices.

                                       8
<PAGE>

     The  Company's  loan growth was funded with  deposits,  which  increased by
$35.5  million,  or 15.2%,  from $233.4  million at September 30, 1999 to $268.9
million at  September  30,  2000.  The Bank was able to  increase  its  deposits
through the new branch offices and with increased marketing efforts.  The growth
in deposits enabled the Company to reduce its reliance on Federal Home Loan Bank
advances,  which  decreased by $6.5  million,  or 40.6%,  from $16.0  million at
September 30, 1999 to $9.5 million at September 30, 2000.

     Stockholders' equity decreased by $1.9 million, or 4.3%, from $45.3 million
at  September  30, 1999 to $43.3  million at  September  30, 2000 as the Company
repurchased  226,090 shares of its Common Stock during the year ended  September
30, 2000 at a cost of $1.7 million.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999

     Net Income.  Net income decreased by $698,000,  or 50.4%, from $1.4 million
for the year ended  September 30, 1999 to $687,000 for the year ended  September
30, 2000. Although net interest income increased by $107,800, or 1.1%, from $9.6
million for the year ended September 30, 1999 to $9.7 million for the year ended
September 30, 2000,  non-interest  expenses increased by $1.5 million,  or 2.0%,
from $7.5 million for the year ended  September 30, 1999 to $9.0 million for the
year ended September 30, 2000.

     Net  Interest  Income.  Net  interest  income was $9.6 million for the year
ended  September  30,  1999,  as  compared  to $9.7  million  for the year ended
September 30, 2000,  representing an increase of $107,000, or 1.1%. The increase
in net interest  income  primarily  was the result of increases in the volume of
interest-earning  assets  and  interest-bearing  liabilities.   These  increases
allowed  the  Company to improve net  interest  income  despite a 17 basis point
decrease  in  the  interest  rate  spread.   The  Company's   ratio  of  average
interest-earning assets to average  interest-bearing  liabilities decreased from
116.05%  for the year ended  September  30,  1999 to 112.46%  for the year ended
September 30, 2000, as the Company spent $1.7 million to repurchase Common Stock
during year ended September 30, 2000.

     Interest  income  increased by $2.1,  or 10.7%,  from $19.4 million for the
year ended  September 30, 1999 to $21.5 million for the year ended September 30,
2000.  The  increase  was due  primarily  to an increase in interest and fees on
loans,  which  reflected an increase in the average balance of loans from $195.8
million for the year ended  September  30,  1999 to $230.4  million for the year
ended  September  30,  2000.  The  increase in the average  balance of loans was
achieved  primarily  through  increases  in  automobile  loans,  and to a lesser
extent,  residential  mortgage  loans.  Also  contributing  to the  increase  in
interest income was a $833,000,  or 51.3%, increase in interest and dividends on
investment  securities,  which  increased  from $1.7  million for the year ended
September 30, 1999 to $2.5 million for the year ended  September  30, 2000.  The
increase in interest and dividends on investment securities reflected a 39 basis
point  increase  in the  average  yield,  as well as an  increase in the average
balance  in  investment  securities.   Interest  on  mortgage-backed  securities
decreased  by  $273,000,  or 15.9%,  from  $1.7  million  for the year  ended on
September 30, 1999 to $1.4 million for the year ended  September 30, 2000 due to
decreases in the average  balance of  mortgage-backed  securities as the Company
deployed assets into loans.

     Interest  Expense.  Interest expense  increased by $2.0 million,  or 20.2%,
from $9.8 million for the year ended September 30, 1999 to $11.8 million for the
year ended  September  30,  2000.  This  increase  was due to an increase in the
average  volume of  deposits,  which  comprised  the  largest  component  of the
Company's  interest-bearing   liabilities.   The  average  balance  of  deposits
increased  by $20.8  million,  9.0%,  from  $230.5  million  for the year  ended
September 30, 1999 to $251.3 million for the year ended  September 30, 2000. The
Company was able to increase its deposits  through its  advertising  and through
its new branch offices.

     Provisions  for Loan  Losses.  Provisions  for loan  losses are  charged to
earnings to maintain the total  allowance for loan losses at a level  considered
adequate by management to provide for probable loan losses,  based on prior loss
experience,  volume  and type of  lending  conducted  by the  Company,  industry
standards  and past due  loans in the  Company's  loan  portfolio.  The  Company
established  provisions  for loan losses of $162,000  and $339,000 for the years
ended  September  30,  2000  and  1999,   respectively.   In  establishing  such
provisions, management considered the lower delinquency on its loan portfolio as
well as the  increased  volume of  automobile  loans.  In  addition,  management
considered the level of Company's  non-performing loans, which were $383,000 and
$1.0 million at  September  30, 2000 and 1999,  respectively,  and levels of the
Company's net  charge-offs,  which totaled $32,000 and $100,000 during the years
ended September 30, 2000 and 1999, respectively.


                                       9
<PAGE>

     Other  Income.  Total other  income  decreased  by $17,000,  or 3.1%,  from
$547,000  for the year ended  September  30, 1999 to $530,000 for the year ended
September 30, 2000. While the Company was able to increase the fees it earned on
transaction  accounts,  this was offset by a loss on the sale of foreclosed real
estate of $40,000 incurred during the year ended September 30, 2000.

     Non-interest  Expenses.  Total  non-interest  expenses  increased  by  $1.5
million,  or 19.8%,  from $7.5 million for the year ended  September 30, 1999 to
$9.0 million for the year ended  September  30,  2000.  Much of the increase was
attributable  to the opening of new branch offices,  as the Company  experienced
increases of $673,000, or 16.7%, in salaries and related expenses,  $287,000, or
40.7%, in occupancy expense, $127,000, or 25.0%, in data processing expense, and
$191,000,  or 30.9%, in property and equipment expense. In addition,  during the
year ended September 30, 2000, the Company increased its advertising  expense by
$320,000, or 65.2%, in an effort to increase market share and to promote its new
branch offices.

     Income Taxes.  The Company income tax expense was $437,000 and $957,000 for
the years  ended  September  30,  2000 and  1999,  respectively.  The  Company's
effective  tax rate was 38.9% and 40.9% for years ended  September  30, 2000 and
1999, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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

     At September 30, 2000,  the Bank exceeded all  regulatory  minimum  capital
requirements. For information regarding the Bank's retained earnings as reported
in its financial  statements  at September  30, 2000 to its  tangible,  core and
risk-based   capital   levels  and  compares  such  totals  to  the   regulatory
requirements, see Note 15 of Notes to Consolidated Financial Statements.

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

     The primary investing  activity of the Company are the origination of loans
and the purchase of investment securities and mortgage-backed securities. During
the years  ended  September  30, 2000 and 1999,  the Bank had $89.6  million and
$99.6  million,  respectively,  of loan  originations.  During  the years  ended
September 30, 2000 and 1999, the Company purchased investment  securities in the
amounts of $7.0 million and $33.0  million,  respectively,  and  mortgage-backed
securities in the amounts of $3.7 million and $3.0 million, respectively.  Other
investing   activities   include   originations   of  loans  and   purchases  of
mortgage-backed securities. The primary financing activity of the Company is the
attraction of savings deposits.

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

     The Bank is required to maintain minimum levels of liquid assets as defined
by OTS regulations.  This requirement,  which may be changed at the direction of
the OTS depending upon economic  conditions  and deposit flows,  is based upon a
percentage of deposits and short-term borrowings.  The required minimum ratio is
currently  4.0%.  The  Bank's  average  daily  liquidity  ratio for the month of
September 2000 was  approximately  27.9%,  which exceeded the required level for
such period.  Management  seeks to maintain a relatively high level of liquidity
in order to retain flexibility in terms of investment  opportunities and deposit
pricing.  Because liquid assets generally provide for lower rates of return, the
Bank's  relatively  high liquidity  will, to a certain  extent,  result in lower
rates of return on assets.


                                       10
<PAGE>

     The  Company's  most liquid assets are cash,  interest-bearing  deposits in
other  banks and  federal  funds  sold,  which  are  short-term,  highly  liquid
investments with original  maturities of less than three months that are readily
convertible  to known amounts of cash.  The levels of these assets are dependent
on the Company's operating,  financing and investing activities during any given
period.  At September 30, 2000, cash,  interest-bearing  deposits in other banks
and  federal  funds sold  totaled  $6.6  million,  $5.3  million  and  $455,000,
respectively.

     The Company  anticipates  that it will have  sufficient  funds available to
meet its current  commitments.  Certificates  of deposit  which are scheduled to
mature in less than one year at September 30, 2000 totaled $100.1 million. Based
on past  experience,  management  believes  that a  significant  portion of such
deposits will remain with the Bank. The Bank is a party to financial instruments
with  off-balance-sheet  risk made in the normal  course of business to meet the
financing  needs of its  customers.  These  financial  instruments  are  standby
letters of credit,  lines of credit and  commitments  to fund mortgage loans and
involve  to  varying  degrees  elements  of credit  risk in excess of the amount
recognized in the statement of financial position. The contract amounts of those
instruments  express  the  extent of  involvement  the Bank has in this class of
financial  instruments  and represents  the Bank's  exposure to credit loss from
nonperformance by the other party.

     On August 26, 1999 the  Company  commenced  a stock  repurchase  program to
acquire up to 320,124  shares (which  included  91,464 shares for the Management
Recognition Plan Trust), or approximately 5% of the Company's outstanding shares
of  common  stock  as part  of its  capital  management  strategy.  The  Company
completed the repurchase in May 2000 acquiring 320,124 shares, for which it paid
an aggregate of $2.5 million.

     In keeping with the  Company's  stated  policy,  quarterly  dividends  were
declared  on April 7, July 7, and  October 11,  2000 of 12  1/2(cent)  each.  In
keeping with Federal  regulations,  Baltimore County Savings Bank,  M.H.C.  (the
"MHC") applied for, and elected to waive receipt of,  dividends from the Company
as to its shares, which amounted to 3,754,960 shares as of December 22, 2000, or
63.77% of all outstanding  shares of the Company's  common stock.  The dividends
rate is based in part on the Bank's strong  capital  position (see foot note 15)
and the  flexibility of the mutual holding  company  structure  whereby the MHC,
with regulatory approval, has waived dividends otherwise payable to it. This has
enabled the Bank to reward its public shareholders with a strong dividend stream
while  retaining  sufficient  capital to support  Company  operations,  earnings
growth and the Bank's branch expansion business plan.

     The Bank  generally  requires  collateral  or  other  security  to  support
financial instruments with off-balance-sheet credit risk. At September 30, 2000,
the Bank had commitments  under standby  letters of credit,  lines of credit and
commitments  to originate  mortgage  loans of $219,000,  $20.1  million and $1.1
million, respectively. See Note 3 of Notes to Consolidated Financial Statements.

IMPACT OF INFLATION AND CHANGING PRICES

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

IMPACT OF NEW ACCOUNTING STANDARDS

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities" was issued in June, 1998. This Statement standardizes the accounting
for derivative  instruments including certain derivative instruments embedded in
other contracts,  by requiring that an entity recognize these items as assets or
liabilities  in the  statement  of  financial  position and measure them at fair
value. This Statement generally provides for matching the timing of gain or loss
recognition on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are  attributable to the hedged
risk or the earnings effect of the hedged forecasted transaction.



                                       11
<PAGE>

The  Statement,  which is effective for all fiscal  quarters of all fiscal years
beginning after June 15, 2000, will not affect the Company's  financial position
or its results of operations.

     Statement of Position  ("SOP")  98.5,  "Reporting  on the Costs of Start-Up
Activities."  This  Statement  provides  guidance on the financial  reporting of
start-up cost and  organization  cost. It requires costs of start-up  activities
and  organization  cost to be expensed as incurred.  The "SOP" also requires the
initial  application  to be  reported  as a  cumulative  effect  of a change  in
accounting  principle.  This "SOP" which is effective for fiscal years beginning
after  December  15, 1998 will not affect the  Company's  financial  position or
results of operations.


                                       12
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------

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

         We have audited the consolidated  statements of financial  condition of
BCSB Bankcorp,  Inc. and Subsidiaries as of September 30, 2000 and September 30,
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the two years in the two year period ended  September
30, 2000. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.
         We conducted our audits in accordance with generally  accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.
         In our opinion, the consolidated financial statements referred to above
present  fairly,  in all  material  respects,  the  financial  position  of BCSB
Bankcorp,  Inc.  and  Subsidiaries  as of September  30, 2000 and 1999,  and the
consolidated  results of its  operations  and its cash flows for each of the two
years in the two year period  ended  September  30,  2000,  in  conformity  with
generally accepted accounting principles.




/s/ Anderson Associates, LLP



November 28, 2000
Baltimore, Maryland
                                       F-1

<PAGE>

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

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------

<TABLE>
<CAPTION>
                                                                                              September 30,
                                                                                              -------------
                                                                                        2000                 1999
                                                                                        ----                 ----
               Assets
               ------
<S>                                                                                <C>                  <C>
Cash                                                                               $    6,570,657       $    5,976,961
Interest bearing deposits in other banks                                                5,255,622            8,651,267
Federal funds sold                                                                        455,431              448,945
Investment securities, held to maturity (Note 2)                                       41,158,120           35,232,306
Loans receivable, net (Note 3)                                                        241,519,815          215,383,087
Mortgage backed securities, held to maturity (Note 4)                                  19,824,152           23,499,794
Foreclosed real estate, net (Note 5)                                                       50,000               89,091
Investment in real estate development and
 loans to joint ventures (Note 6)                                                           --                   5,287
Premises and equipment, net (Note 7)                                                    6,709,595            4,846,121
Federal Home Loan Bank of Atlanta stock                                                 1,834,400            1,650,300
Accrued interest receivable - loans                                                       863,647              834,424
                            - investments                                                 730,607              635,757
                            - mortgage backed securities                                  121,088              140,005
Prepaid and deferred income taxes (Note 16)                                               257,581              361,211
Other assets                                                                              528,459              547,171
                                                                                      -----------          -----------

Total assets                                                                         $325,879,174         $298,301,727
                                                                                      ===========          ===========
                 Liabilities and Stockholders' Equity
                 ------------------------------------
Liabilities
-----------
   Deposits (Note 8)                                                                 $268,881,604         $233,364,564
   Federal Home Loan Bank of Atlanta advances (Note 9)                                  9,500,000           16,000,000
   Advance payments by borrowers for
    taxes and insurance                                                                 1,190,057            1,101,971
   Income taxes payable (Note 16)                                                          25,532               60,670
   Payables to disbursing agents                                                          364,755              163,923
   Dividends payable                                                                      265,954              294,797
   Other liabilities                                                                    2,308,455            2,035,343
                                                                                      -----------          -----------
Total liabilities                                                                     282,536,357          253,021,268

Commitments and contingencies (Notes 3, 7 and 11)

Stockholders' Equity  (Notes 12, 13, 14 and 15)
--------------------
   Common  stock (Par value $.01 - 13,500,000 authorized,
    5,887,072 and 6,113,162 shares issued and outstanding
    at September 30, 2000 and 1999, respectively)                                          58,871               61,132
   Additional paid-in capital                                                          20,214,611           21,918,506
   Retained earnings (substantially restricted)                                        25,447,089           25,788,692
                                                                                      -----------          -----------
                                                                                       45,720,571           47,768,330
   Employee Stock Ownership Plan                                                       (1,326,228)          (1,509,156)
   Stock held by Rabbi Trust                                                           (1,051,526)            (978,715)
                                                                                      -----------          -----------
Total stockholders' equity                                                             43,342,817           45,280,459
                                                                                      -----------          -----------
Total liabilities and stockholders' equity                                           $325,879,174         $298,301,727
                                                                                      ===========          ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
 of these statements.

                                       F-2
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                            For Years Ended
                                                                                              September 30,
                                                                                    ----------------------------------
                                                                                         2000                  1999
                                                                                         ----                  ----
<S>                                                                                   <C>                  <C>
Interest and fees on loans (Note 3)                                                   $17,153,136          $14,766,745
Interest on mortgage backed securities                                                  1,445,783            1,718,785
Interest and dividends on investment securities                                         2,455,989            1,622,897
Other interest income                                                                     425,153            1,287,340
                                                                                     ------------          -----------
Total interest income                                                                  21,480,061           19,395,767

Interest on deposits (Note 8)                                                          10,866,557            9,614,116
Interest on borrowings - short term                                                       884,912              157,944
Other interest expense                                                                      5,288                7,753
                                                                                     ------------          -----------
Total interest expense                                                                 11,756,757            9,779,813
                                                                                     ------------          -----------
Net interest income                                                                     9,723,304            9,615,954
Provision for losses on loans (Note 3)                                                    161,646              339,251
                                                                                     ------------          -----------

Net interest income after provision for losses on loans                                 9,561,658            9,276,703

Other Income
------------
   (Loss) gain on sale of foreclosed real estate                                          (39,870)              17,437
   Servicing fee income                                                                     8,040                8,223
   Fees and charges on loans                                                              145,927              149,494
   Fees on transaction accounts                                                           206,495              173,419
   Rental income                                                                          119,763              113,253
   Gain from real estate development and joint venture                                      5,082                5,352
   Gain on sale of fixed assets                                                             3,475                 --
   Loss on sale of mortgages                                                               (3,499)                --
   Miscellaneous income                                                                    84,669               79,885
                                                                                     ------------          -----------
Net other income                                                                          530,082              547,063

Non-Interest Expenses
---------------------
   Salaries and related expense                                                         4,694,225            4,020,761
   Occupancy expense                                                                      992,248              705,016
   Deposit insurance premiums                                                             143,435              184,498
   Data processing expense                                                                632,667              505,928
   Property and equipment expense                                                         807,164              616,613
   Professional fees                                                                      224,279              263,048
   Advertising                                                                            811,917              491,937
   Telephone, postage and office supplies                                                 445,107              350,156
   Amortization of excess of cost over fair value of net assets acquired                    --                  24,497
   Other expenses                                                                         216,312              319,456
                                                                                     ------------          -----------
Total non-interest expenses                                                             8,967,354            7,481,910
                                                                                     ------------          -----------
Income before tax provision                                                             1,124,386            2,341,856
Income tax provision (Note 16)                                                            437,622              957,467
                                                                                     ------------          -----------

Net income                                                                           $    686,764          $ 1,384,389
                                                                                     ============          ===========
Net Income Per Share of Common Stock (Note 1)
   Basic                                                                             $       0.12          $      0.24
   Diluted                                                                           $       0.12          $      0.23

</TABLE>

The accompanying notes to consolidated financial statements are an integral part
 of these statements.
                                       F-3

<PAGE>


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

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------
                 FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
                 -----------------------------------------------

<TABLE>
<CAPTION>
                                                                                    Employee
                                                    Additional                        Stock          Stock            Total
                                       Common        Paid-In        Retained        Ownership        Held By      Stockholders'
                                       Stock         Capital        Earnings         Plan           Rabbi Trust      Equity
                                     ----------    ------------     ---------       ---------       -----------   -------------

<S>                                    <C>        <C>             <C>             <C>             <C>             <C>
Balance - September 30, 1998           $61,166    $ 22,645,088    $ 25,221,308    $ (1,829,280)   $   (955,234)   $ 45,143,048

Compensation under stock based
   benefit plans                          --           (20,640)           --           320,124            --           299,484
Acquisition of stock for Rabbi Trust      --              --              --              --           (81,211)        (81,211)
Adjust market value of Rabbi Trust
  shares to cost                          --              --              --              --            57,730          57,730
Refund of duplicate payment from
  reorganization                          --            55,000            --              --              --            55,000
Acquisition of stock for Management
  Retention Plan                          --          (732,073)           --              --              --          (732,073)
Treasury stock purchase                    (34)        (28,869)           --              --              --           (28,903)
Cash dividends declared
  ($.365 per share)                       --              --          (817,005)           --              --          (817,005)
Net income                                --              --         1,384,389            --              --         1,384,389
                                       -------    ------------    ------------    ------------    ------------    ------------

Balance - September 30, 1999            61,132      21,918,506      25,788,506      (1,509,156)       (978,715)     45,280,459

Compensation under stock based
  benefit plans                           --            41,574            --           182,928            --           224,502
Acquisition of stock for
  Rabbi Trust                             --              --              --              --           (72,811)        (72,811)
Acquisition of stock for
   Management Retention Plan              --           (37,665)           --              --              --           (37,665)
Treasury stock purchase                 (2,261)     (1,707,804)           --              --              --        (1,710,065)
Cash dividends declared
  ($.50 per share)                        --              --        (1,028,367)           --              --        (1,028,367)
Net income                                --              --           686,764            --              --           686,764
                                       -------    ------------    ------------    ------------    ------------    ------------

Balance - September 30, 2000           $58,871    $ 20,214,611    $ 25,447,089    $ (1,326,228)   $ (1,051,526)   $ 43,342,817
                                       =======    ============    ============    ============    ============    ============

</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                      F-4

<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                             For Years Ended
                                                                                               September 30,
                                                                                    ----------------------------------
                                                                                       2000                 1999
                                                                                       ----                 ----
<S>                                                                                 <C>                   <C>
Operating Activities
--------------------
     Net income                                                                     $     686,764         $  1,384,389
     Adjustments to Reconcile Net Income to Net
      Cash Provided by Operating Activities
      -------------------------------------
         Accretion of discount on investments                                                (134)                (254)
         Proceeds from loans sold                                                       1,081,495                 --
         Loss on loans sold                                                                 3,499                 --
         Loan fees and costs deferred, net                                                280,422              (87,312)
         Amortization of deferred loan fees and costs                                    (156,310)            (180,770)
         Provision for losses on loans                                                    161,646              339,251
         Non-cash compensation under Stock-Based
          Benefit Plan                                                                    224,502              299,484
         Amortization of premium on mortgage backed
          securities                                                                       35,686               41,459
         Loss (gain) on sale of foreclosed real estate                                     39,870              (17,437)
         Gain from real estate development and joint venture                               (5,082)              (5,352)
         Provision for depreciation                                                       638,266              405,309
         Gain on sale of fixed assets                                                      (3,475)                --
         Increase in accrued interest receivable on loans                                 (29,223)            (109,359)
         Increase in accrued interest receivable on investments                           (94,850)            (107,526)
         Decrease in accrued interest receivable on
           mortgage backed securities                                                      18,917               56,131
         (Increase) decrease in prepaid income taxes                                      (79,841)              12,839
         Decrease (increase) in deferred income tax assets                                183,471             (342,109)
         Amortization of excess of cost over fair value of
          net assets acquired                                                               --                  24,497
         Decrease (increase) in other assets                                               18,712              (20,438)
         (Decrease) increase in accrued interest payable
          on deposits                                                                    (202,850)              39,604
         Decrease in income taxes payable                                                 (35,138)                (122)
         Increase in other liabilities and payables
          to disbursing agents                                                            473,944              361,907
                                                                                     ------------          -----------
              Net cash provided by operating activities                                 3,240,291            2,094,191

</TABLE>
                                       F-5
<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                            For Years Ended
                                                                                              September 30,
                                                                                     ---------------------------------
                                                                                         2000                 1999
                                                                                         ----                 ----
<S>                                                                                  <C>                  <C>
Cash Flows from Investing Activities
------------------------------------
     Proceeds from maturing interest bearing deposits                                $  3,569,000         $  2,045,000
     Purchase of interest bearing deposits                                                 --               (8,002,000)
     Purchases of investment securities - held to
      maturity                                                                         (6,975,680)         (32,981,229)
     Proceeds from maturities of investment securities -
      held to maturity                                                                  1,050,000           10,360,000
     Longer term loans originated                                                     (32,937,959)         (52,987,170)
     Principal collected on longer term loans                                          24,254,128           33,913,036
     Net increase in short-term loans                                                 (18,077,072)         (14,521,057)
     Loans purchased                                                                     (763,619)              --
     Principal collected on mortgage backed securities                                  7,325,050           13,664,157
     Purchase of mortgage backed securities                                            (3,685,094)          (3,007,566)
     Proceeds from sales of foreclosed real estate                                         16,263              409,197
     Net investment and loans to joint ventures                                            10,369                8,260
     Investment in premises and equipment                                              (2,498,265)          (2,262,872)
     Purchase of Federal Home Loan Bank of Atlanta stock                                 (184,100)            (138,400)
                                                                                     ------------         ------------
         Net cash used by investing activities                                        (28,896,979)         (53,500,644)

Cash Flows from Financing Activities
------------------------------------
     Net increase in demand deposits, money market,
      passbook accounts and advances by borrowers
      for taxes and insurance                                                           1,656,256            4,937,630
     Net increase in certificates of deposit                                           34,151,720            7,834,180
     Increases in Federal Home Loan Bank of Atlanta
      advances                                                                         10,500,000           16,000,000
     Repayment of Federal Home Loan Bank of
      Atlanta advances                                                                (17,000,000)              --
     (Decrease) increase in dividends payable                                             (28,843)             294,797
     Acquisition of stock for Rabbi Trust                                                 (72,811)             (81,211)
     Change in market value of Rabbi Trust stock                                            --                  57,730
     Refund of stock offering expense                                                       --                  55,000
     Acquisition of stock for Management Retention Plan                                   (37,665)            (732,073)
     Treasury stock purchase                                                           (1,710,065)             (28,903)
     Dividends on stock                                                                (1,028,367)            (817,005)
                                                                                     ------------         ------------
              Net cash provided by financing activities                                26,430,225           27,520,145
                                                                                     ------------         ------------
</TABLE>



                                       F-6

<PAGE>

                      BCSB BANKCORP, INC. AND SUBSIDIARIES
                      ------------------------------------
                               Baltimore, Maryland
                               -------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

<TABLE>
<CAPTION>
                                                                                            For Years Ended
                                                                                               September 30,
                                                                                    -----------------------------------
                                                                                         2000                 1999
                                                                                         ----                 ----
<S>                                                                                 <C>                   <C>
Increase (decrease) in cash and cash equivalents                                     $    773,537         $(23,886,308)
Cash and cash equivalents at beginning of period                                        7,188,173           31,074,481
                                                                                      -----------          -----------
Cash and cash equivalents at end of period                                           $  7,961,710         $  7,188,173
                                                                                      ===========          ===========
The following is a summary of cash and cash equivalents:
     Cash                                                                            $  6,570,657         $  5,976,961
     Interest bearing deposits in other banks                                           5,255,622            8,651,267
     Federal funds sold                                                                   455,431              448,945
                                                                                      -----------          -----------
     Balance of cash items reflected on Statement of
      Financial Condition                                                              12,281,710           15,077,173

         Less - certificate of deposit with a maturity
                     of more than three months                                          4,320,000            7,889,000
                                                                                      -----------          -----------

Cash and cash equivalents reflected on the
  Statement of Cash Flows                                                            $  7,961,710         $  7,188,173
                                                                                      ===========          ===========

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

      Interest                                                                       $ 12,059,372         $  9,407,893
                                                                                      ===========          ===========

      Income taxes                                                                   $    390,908         $  1,284,280
                                                                                      ===========          ===========

   Transfer from loans to real estate acquired
     through foreclosure                                                             $    --              $    110,161
                                                                                      ===========          ===========
</TABLE>

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



                                       F-7
<PAGE>

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

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



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

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

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

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

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

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


                                       F-8
<PAGE>

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

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


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

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

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

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

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

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







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

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


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

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

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

          I.   Investment in Real Estate Development and Loans to Joint Ventures
               - Land  development  costs not in excess of net realizable  value
               are  capitalized and charged to expense as revenue is recognized.
               Revenues  are  recognized  when  a  sale  has  been  consummated.
               Indirect  costs  and  administrative   expenses  are  charged  as
               incurred  to  periodic  income  and  are  not  allocated  to land
               development   costs.  The  Bank  capitalizes   interest  on  land
               development  projects  in  accordance  with  Statement  34 of the
               Financial Accounting Standards Board. No interest was capitalized
               for the years ended September 30, 2000 and 1999.

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

          K.   Intangible  Assets  Acquired,   Net  -  On  September  16,  1994,
               Baltimore County Savings Bank, F.S.B.  purchased the deposits and
               certain assets from the Resolution Trust Corporation, receiver of
               Second National Federal Savings Association.  The Bank classified
               as an  intangible  asset the fair  market  value  assigned to the
               capacity of existing savings accounts acquired to generate future
               earnings  ("the Core Deposit  Value").  The core deposit value of
               $133,572 is being amortized on a  straight-line  method over five
               years, the estimated life of the core deposit value.  Accumulated
               amortization was $133,572 at September 30, 2000 and 1999.






                                      F-10
<PAGE>
BCSB BANKCORP, INC. AND SUBSIDIARIES
------------------------------------
Baltimore, Maryland
-------------------

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

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

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

          M.   Earnings Per Share - As required,  The Bank adopted  Statement of
               Financial  Accounting  Standards  No.  128  during the year ended
               September 30, 1999. This Statement  requires dual presentation of
               basic   and   diluted   earnings   per  share   ("ESP")   with  a
               reconciliation  of the  numerator  and  denominator  of  the  EPS
               computations.  Basic per share  amounts are based on the weighted
               average shares of common stock outstanding.  Diluted earnings per
               share  assume  the  conversion,   exercise  or  issuance  of  all
               potential common stock instruments such as options,  warrants and
               convertible securities,  unless the effect is to reduce a loss or
               increase  earnings  per share.  No  adjustments  were made to net
               income (numerator). The basic and diluted weighted average shares
               outstanding  for the years ended  September 30, 2000 and 1999 are
               as follows:
<TABLE>
<CAPTION>
                                                                                                    2000
                                                                       ------------------------------------------------------
                                                                          Income              Shares           Per Share
                                                                       (Numerator)        (Denominator)         Amount
                                                                       -----------        -------------        --------------
                <S>                                                          <C>                   <C>           <C>
                Basic EPS
                ---------
                   Income available to share holders                         $686,764              5,637,180     $ 0.12
                                                                                                                 ======
                Diluted EPS
                -----------
                   Effect of dilutive shares                                    --                   106,612
                                                                             --------             ----------
                   Income available to shareholders
                    plus assumed conversions                                 $686,764              5,743,792     $ 0.12
                                                                             ========             ==========     ======
<CAPTION>

                                                                                                    1999
                                                                       ------------------------------------------------------
                <S>                                                          <C>                   <C>           <C>
                Basic EPS
                ---------
                   Income available to share holders                       $1,384,389              5,859,344     $ 0.24
                                                                                                                 ======
                Diluted EPS
                -----------
                   Effect of dilutive shares                                    --                    89,803
                                                                           ----------             ----------
                   Income available to shareholders
                    plus assumed conversions                               $1,384,389              5,949,147     $ 0.23
                                                                           ==========             ==========     ======
</TABLE>


                                      F-11


<PAGE>

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

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


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

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

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

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

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

               The  amortized cost and fair values of investment  securities are
          as follows as of September 30, 2000 and 1999.
<TABLE>
<CAPTION>
                                                                            Gross            Gross
                                                       Amortized          Unrealized       Unrealized            Fair
                                                          Cost              Gains            Losses              Value
                                                       ---------          ----------       ----------            -----
<S>                                                  <C>                  <C>             <C>                 <C>
    Held to Maturity:

    September 30, 2000
      U.S. Government and Agency
       Obligations, held to maturity                 $41,158,120          $ 14,008        $   815,838         $40,356,290
                                                     ===========          ========        ===========         ===========
    September 30, 1999
      U.S. Government and Agency
       Obligations, held to maturity                 $35,232,306          $  --           $1,014,635         $34,217,671
                                                     ===========          ========        ===========         ===========
</TABLE>

                                      F-12


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

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

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

               The following is a summary of investment securities:
<TABLE>
<CAPTION>
                                                         September 30, 2000                 September 30, 1999
                                                    --------------------------         ------------------------------
                                                      Amortized           Fair            Amortized           Fair
                                                        Cost             Value               Cost            Value
                                                    -------------        -----          -------------        -----
<S>                                                  <C>                <C>               <C>             <C>
     Held to Maturity:

     U.S. Government and Agency Obligations
     --------------------------------------
      Due within 12 months                           $   750,000        $   747,669       $   500,000     $   498,594
      Due beyond 12 months but
       within five years                              28,636,269         28,122,424        21,985,811      21,460,136
      Due beyond five years but
       within ten years                               11,021,851         10,786,979        11,996,495      11,542,144
      Due beyond ten years                               750,000            699,218           750,000         716,797
                                                     -----------        -----------       -----------     -----------
                                                     $41,158,120        $40,356,290       $35,232,306     $34,217,671
                                                     ===========        ===========       ===========     ===========
</TABLE>

               Proceeds  from  maturities  of held to maturity  securities  were
          $1,050,000 and  $10,360,000 for the years ended September 30, 2000 and
          1999,  respectively.  There were no gross gains or losses realized for
          the years ended September 30, 2000 and 1999.

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

               Loans  receivable  at September  30, 2000 and 1999 consist of the
          following:
<TABLE>
<CAPTION>
                                                                                               September 30,
                                                                                     ----------------------------------
                                                                                         2000                  1999
                                                                                         ----                  ----
              <S>                                                                    <C>                   <C>
              Single-family residential mortgages                                    $152,469,353          $146,867,904
              Single-family rental property loans                                       5,079,532             4,831,931
              Commercial real estate loans                                             13,648,781            10,215,951
              Construction loans                                                        5,905,435             5,592,033
              Commercial loans secured                                                  1,474,545             1,081,205
              Commercial lines of credit                                                   44,000                50,000
              Automobile loans                                                         67,851,872            46,753,355
              Home equity loans                                                         8,146,879             7,963,402
              Other consumer loans                                                      1,976,802             1,907,405
                                                                                     ------------          ------------
                                                                                      256,597,199           225,263,186

                   Less - undisbursed portion of loans in process                       3,849,592             2,579,374
                        - unearned interest                                             9,610,077             5,948,416
                        - deferred loan origination fees and costs                        214,804                79,578
                        - allowance for loan losses                                     1,402,911             1,272,731
                                                                                     ------------          ------------
                                                                                     $241,519,815          $215,383,087
                                                                                     ============          ============
</TABLE>

                                      F-13

<PAGE>

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

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


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

               The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
                                                                                             September 30,
                                                                                       -------------------------------
                                                                                          2000                 1999
                                                                                          ----                 ----
              <S>                                                                      <C>                  <C>
              Balance - beginning of year                                              $1,272,731           $1,033,907
              Provision for losses on loans                                               161,646              339,251
              Charge-offs                                                                (208,019)            (231,991)
              Recoveries                                                                  176,553              131,564
                                                                                       ----------           ----------
              Balance - end of year                                                    $1,402,911           $1,272,731
                                                                                       ==========           ==========
</TABLE>

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

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

                   Non-accrual loans for which interest has been reduced totaled
              approximately  $382,539 and  $1,025,577  at September 30, 2000 and
              1999,  respectively.  There were no  impaired  loans as defined by
              SFAS No. 114 at September 30, 2000 and 1999. There was no interest
              income recognized on impaired loans during these periods. The Bank
              was not committed to fund additional amounts on these loans.




                                      F-14
<PAGE>

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

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

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

               Interest  income that would have been recorded under the original
          terms of non-accrual  loans and the interest  actually  recognized for
          the years ended September 30, are summarized below:
<TABLE>
<CAPTION>
                                                                                                 September 30,
                                                                                         -----------------------------
                                                                                           2000                 1999
                                                                                           ----                 ----

              <S>                                                                         <C>                  <C>
              Interest income that would have been recognized                             $31,327              $44,279
              Interest income recognized                                                   28,593               34,102
                                                                                           ------               ------
                 Interest income not recognized                                           $ 2,734              $10,177
                                                                                           ======               ======
</TABLE>

               The  following  table set forth the  amount and  activity  of the
          loans  outstanding to officers and directors at September 30, 2000 and
          1999.
<TABLE>
<CAPTION>
                                                                                                 September 30,
                                                                                         -----------------------------
                                                                                           2000                 1999
                                                                                           ----                 ----

              <S>                                                                         <C>                  <C>
              Beginning balance                                                          $416,202             $318,411
              New loans                                                                    39,132              208,268
              Loan repayments                                                            (176,260)            (110,477)
                                                                                          -------              -------
              Ending balance                                                             $279,074             $416,202
                                                                                          =======              =======
</TABLE>

                   The Bank services loans for others.  The amount of such loans
              serviced  at  September  30,  2000  and 1999  was  $2,906,435  and
              $2,829,212,  respectively.  At  September  30, 2000 and 1999,  the
              balance  of  loans  sold by the Bank  with  recourse  amounted  to
              $428,645 and $662,424, respectively.

                   Custodial  escrow balances  maintained in connection with the
              foregoing loan servicings were  approximately  $35,909 and $35,199
              at September 30, 2000 and 1999, respectively.

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



                                      F-15

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

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

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

               Unless noted otherwise,  the Bank does not require  collateral or
          other security to support financial instruments with off-balance-sheet
          credit risk.
<TABLE>
<CAPTION>
                                                                                  Contract Amount At
            Financial Instruments Whose Contract                     -----------------------------------------------
             Amounts Represent Credit Risk                             September 30, 2000          September 30, 1999
           -----------------------------------------                   ------------------          -------------------

              <S>                                                         <C>                        <C>
              Standby letters of credit                                   $   219,300                $ 1,131,200
              Lines of credit                                             $20,126,800                $19,252,900
              Mortgage loan commitments, fixed rate                       $ 1,005,100                $ 3,463,600
              Mortgage loan commitments, variable rate                    $   100,000                $   200,000
</TABLE>

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

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

                   Rates on  mortgage  loan  commitments  for fixed  rate  loans
              ranged  from  7.375% to 9.0% and 6.5% to 7.875% at  September  31,
              2000 and 1999,  respectively.  Rates on mortgage loan  commitments
              for  variable  rate loans ranged from .25% under prime to prime at
              September 30, 2000.

                   No  amount  was  recognized  in the  statement  of  financial
              position at September  30, 2000 and 1999,  as liability for credit
              loss  nor was any  liability  recognized  for  fees  received  for
              standby letters of credit.

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


                                      F-16


<PAGE>

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

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

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

               The  amortized cost and fair values of mortgage backed securities
          are as follows as of September 30, 2000 and 1999:

              Held to Maturity:
<TABLE>
<CAPTION>
                                                                           Gross            Gross
                                                     Amortized           Unrealized       Unrealized           Fair
                                                       Cost                Gains            Losses             Value
                                                     ---------           ----------       ----------           -----
<S>                                                 <C>                    <C>            <C>               <C>
              September 30, 2000
              ------------------
                 GNMA certificates                   $ 2,513,241           $11,873         $ 25,753          $ 2,499,361
                 FNMA certificates                    11,763,732             7,247           97,501           11,673,478
                 FHLMC participating
                       certificates                    5,547,179            31,911           46,534            5,532,556
                                                     -----------           -------         --------          -----------
                                                     $19,824,152           $51,031         $169,788          $19,705,395
                                                     ===========           =======         ========          ===========

              September 30, 1999
              ------------------
                 GNMA certificates                   $ 1,263,787           $ 5,015         $  4,283          $ 1,264,519
                 FNMA certificates                    15,482,015            23,016          131,568           15,373,463
                 FHLMC participating
                  certificates                         6,753,992            70,724           66,983            6,757,733
                                                     -----------           -------         --------          -----------
                                                     $23,499,794           $98,755         $202,834          $23,395,715
                                                     ===========           =======         ========          ===========
</TABLE>

                 No gains  or  losses  were  realized  during  the  years  ended
          September 30, 2000 and 1999, respectively.

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

                Foreclosed  real estate  at  September  30,  2000  and  1999  is
          summarized by major classification as follows:
<TABLE>
<CAPTION>
                                                                                             September 30,
                                                                                          --------------------------
                                                                                            2000              1999
                                                                                            ----              ----

              <S>                                                                         <C>               <C>
              EPIC loans                                                                  $50,822           $50,822
              Residential real estate                                                      50,000            89,091
              Allowance for losses                                                        (50,822)          (50,822)
                                                                                          -------           -------
                                                                                          $50,000           $89,091
                                                                                          =======           =======
</TABLE>


                                      F-17

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

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


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

               The  following  is a  summary  of the  allowances  for  losses on
          foreclosed real estate:
<TABLE>
<CAPTION>
                                                                                              September 30,
                                                                                       ---------------------------
                                                                                         2000             1999
                                                                                         ----             ----

              <S>                                                                       <C>              <C>
              Balance - beginning of year                                               $50,822          $89,151
              Provision for losses                                                         --               --
              Charge-offs                                                                  --            (38,329)
                                                                                        -------          -------
              Balance - end of year                                                     $50,822          $50,822
                                                                                        =======          =======
</TABLE>
Note 6 -  Investment in Real Estate Development and Loans to Joint Ventures
          -----------------------------------------------------------------

               The  subsidiary  is a party  to a joint  venture  formed  for the
          purpose of developing lots for resale.  The  subsidiary's  interest in
          the profits or losses of the joint  venture is 20%. The joint  venture
          closed  during the year ended  September  30, 2000.  The  subsidiary's
          equity in the joint  venture was $5,287 at the period ended  September
          30, 1999.

               During  the periods ended  September 30, 2000 and 1999,  the Bank
          made no acquisition,  development and construction  loans to the joint
          venture  mentioned above.  There was no provision for or allowance for
          losses on loans to the joint venture during the years ended  September
          30, 2000 and 1999.

               Gain from real estate development and joint ventures consisted of
          a cash payment of $5,352.

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

               Premises  and  equipment  at  September  30,  2000  and  1999 are
          summarized by major classification as follows:
<TABLE>
<CAPTION>

                                                                                   September 30,
                                                                            -----------------------------
                                                                                2000               1999         Life
                                                                                ----               ----         ----
            <S>                                                               <C>              <C>             <C>
           Office building                                                   $ 4,476,470      $3,400,332        50 Years
           Leasehold improvements                                                282,127         169,995      7-31 Years
           Furniture, fixtures and equipment                                   5,695,079       4,381,608        10 Years
                                                                             -----------      ----------
                                                                              10,453,676       7,951,935
                   Accumulated depreciation                                    3,744,081       3,105,814
                                                                             -----------      ----------
                                                                             $ 6,709,595      $4,846,121
                                                                             ===========      ==========
</TABLE>



                                      F-18

<PAGE>

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

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

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

               The Bank has entered into long-term  leases for the land on which
          the main  office is located and the  premises  of its branch  offices.
          Rental expense under long-term leases for property for the years ended
          September 30, 2000 and 1999 was $535,106 and  $381,254,  respectively.
          At September 30, 2000, minimum rental commitments under noncancellable
          leases are as follows:

                   Years Ended September 30,                Amount
                   -------------------------                ------
                          2001                            $  587,750
                          2002                               595,801
                          2003                               572,745
                          2004                               515,912
                       After 2004                          4,028,867
                                                          ----------
                                                          $6,301,075
                                                          ==========
Note 8 - Deposits
         --------

               Deposits  are  summarized  as follows at  September  30, 2000 and
          1999:
<TABLE>
<CAPTION>
                                                                    2000                                 1999
                                                      --------------------------------   ---------------------------------
                                                        Amount              %                  Amount                %
                                                        ------            -----                ------              -----
       <S>                                            <C>                  <C>                <C>                  <C>
       Type of Account
       ---------------
          Deposits
          --------
             NOW                                      $  20,106,386        7.48%              $ 19,743,190         8.46%
             Non-interest bearing NOW                    10,418,364        3.87                  6,940,410         2.97
             Money market                                 7,333,022        2.73                  8,530,901         3.66
             Passbook savings                            57,278,818       21.30                 58,353,919        25.00
             Certificates                               173,182,377       64.41                139,030,657        59.58
                                                       ------------      ------               -------------      ------
                                                        268,318,967       99.79                232,599,077        99.67
             Accrued interest payable                       562,637         .21                    765,487          .33
                                                       ------------      ------               -----------        ------
                                                       $268,881,604      100.00%              $233,364,564       100.00%
                                                       ============      ======               ============       ======
</TABLE>

                   The aggregate amount of jumbo  certificates of deposit with a
              minimum denomination of $100,000 was approximately $23,957,925 and
              $15,134,298 at September 30, 2000 and 1999, respectively. Deposits
              in excess of $100,000  are not insured by the Savings  Association
              Insurance Fund.



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

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

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

               At  September 30, 2000,  scheduled  maturities of certificates of
          deposit are as follows:

                2001                                     $100,119,936
                2002                                       36,359,623
                2003                                       12,218,360
                2004                                        4,153,408
                2005 and thereafter                        20,331,050
                                                         ------------
                                                         $173,182,377
                                                         ============

               Interest  expense on deposits for the years ended  September  30,
          2000 and 1999 is as follows:
<TABLE>
<CAPTION>
                                                           2000           1999
                                                           ----           ----

              <S>                                      <C>           <C>
              NOW                                      $   450,413   $   367,157
              Money market                                 246,132       270,672
              Passbooks savings                          1,984,232     1,846,252
              Certificates                               8,185,780     7,130,035
                                                       -----------   -----------
                                                       $10,866,557   $ 9,614,116
                                                       ===========   ===========
</TABLE>
Note 9 -  Federal Home Loan Bank of Atlanta Advances
          ------------------------------------------

               The  Bank has the  following  outstanding  Federal Home Loan Bank
          advances as of September 30:
<TABLE>
<CAPTION>
                                                          2000                               1999
                                           -------------------------------       -------------------------------
                   Due                         Rate                Total             Rate              Total
                   ---                         ----                -----             ----              -----
             <S>                           <C>                  <C>              <C>                <C>
             Less than one year            5.86% - 6.74%        $6,500,000       5.44% - 6.26%      $13,500,000
             One to two years              6.41% - 7.48%         3,000,000       5.86% - 6.13%        2,500,000
                                                                ----------                          -----------
             Total borrowings                                   $9,500,000                          $16,000,000
                                                                ==========                          ===========
</TABLE>




                                      F-20

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

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

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

               The Bank has a noncontributory,  defined  contribution,  pension
          plan covering substantially all employees. It is a money purchase plan
          with  contributions made each year for every participant in accordance
          with actuarial recommended formula. There is no past service liability
          or unfunded value of vested benefits as of December 31, 1999, the date
          of latest available annual review and valuation of the plan.

               The  expense  for the  pension  plan  amounted  to  $221,912  and
          $213,057   for  the  years   ended   September   30,  2000  and  1999,
          respectively.

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

               The  Directors  Retirement Plan consists of a Rabbi Trust that is
          invested  primarily in the Company's stock.  Compensation  expense was
          reduced by $75,099 and $269,323 for the years ended September 30, 2000
          and 1999,  respectively,  principally because of a decline in value of
          shares held in the Rabbi Trust.

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

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

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


                                     F-21

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

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

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

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

               The ESOP will be funded by contributions made by the Bank in cash
          or common  stock and  dividends  on the shares held in the Trust.  The
          Bank will recognize  compensation  expense as shares are committed for
          release from  collateral at their current  market price.  Dividends on
          allocated shares are recorded as a reduction of retained  earnings and
          dividends  on  unallocated  shares are  recorded as a reduction of the
          debt service. The compensation costs for the years ended September 30,
          2000 and 1999 were $138,724 and $262,800, respectively.

                The ESOP shares were as follows as of September 30:
<TABLE>
<CAPTION>
                                                                                        2000               1999
                                                                                        ----               ----
             <S>                                                                         <C>               <C>
             Shares released and allocated                                               50,306            32,013
             Unearned shares                                                            132,624           150,917
                                                                                       --------        ----------
                                                                                        182,930           182,930
                                                                                       ========        ==========
             Fair value of unearned shares                                             $820,611        $1,037,554
                                                                                       ========        ==========
</TABLE>

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

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

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

               On July 15, 1999, the Bank  established a Management  Recognition
          Plan  ("MRP") to retain  personnel  of  experience  and ability in key
          positions of  responsibility.  Members of the Board of  Directors  and
          certain executive  officers may be awarded a total of 91,464 shares of
          stock,  which will be held in a separate  trust that  manages the MRP.
          The Bank  funded the MRP during the year ended  September  30, 1999 by
          purchasing  87,000  shares of common stock in the open market.  During
          the year ended  September 30, 2000,  the  remaining  4,464 shares were
          purchased. The Bank initially awarded an aggregate of 45,600 shares of
          common stock and intends to reserve the  remaining  45,864  shares for
          possible future awards.  Shares awarded to the participants in the MRP
          vest at a rate of 25% per year on each  anniversary  of the  effective
          date of the MRP. As of September 30, 2000,  11,400 shares have vested.
          If a participant  terminates  employment for reasons other than death,
          disability,  change in control or  retirement  he or she  forfeits all
          rights to unvested shares. Compensation expense of $89,775 and $22,444
          was recognized  for the MRP for the year ended  September 30, 2000 and
          1999, respectively.

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

               The  Company has a Stock Option Plan (the "Plan") whereby 228,660
          shares of common stock have been reserved for issuance under the Plan.
          Options  granted under the Plan may be Incentive  Stock Options within
          the meaning of Section  422 of the  Internal  Revenue  Code of 1986 as
          amended or  Non-Incentive  Stock Options.  Options are  exercisable in
          four annual  installments  at the market  price of common stock at the
          date of grant. The Options must be exercised within ten years from the
          date of grant.  During the year ended  September 30, 1999, the Company
          granted options to purchase 80,000 shares at a weighted  average price
          of $8.00 per share.  No  options  were  granted  during the year ended
          September 30, 2000.

               The  following table  summarizes the status of and changes in the
          Company's stock option plan during the past two years.
<TABLE>
<CAPTION>
                                                                                                   Weighted Average
                                                                                   Shares           Exercise Price
                                                                                   ------         -------------------
             <S>                                                                      <C>              <C>
             Outstanding at September 30, 1998                                          --               --
             Granted                                                                  80,000           $8.00
                                                                                      ------

             Outstanding at September 30, 1999                                        80,000           $8.00
             Granted                                                                    --
                                                                                      ------
             Outstanding at September 30, 2000                                        80,000           $8.00
                                                                                      ======
             Exercisable at September 30, 2000                                        20,000           $8.00
                                                                                      ======
</TABLE>

                                      F-23

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

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

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

               SFAS No. 123, "Accounting for Stock-Based Compensation", requires
          the Company to make certain disclosures as if the fair value method of
          accounting had been applied to the Company's  stock option grants made
          subsequent to 1994. Accordingly,  the Company estimated the grant date
          fair  value  of  each   option   awarded  in  fiscal  1999  using  the
          Black-Scholes   Option-Pricing   model  with  the  following  relevant
          assumptions: dividend yield of 6.25%, risk-free interest rate of 5.72%
          and expected lives of 10 years. The assumption for expected volatility
          was  31.55%.  Had 2000  and 1999  compensation  cost  been  determined
          including the  weighted-average  estimate of fair value of each option
          granted  of $1.62,  the  Company's  net  income  would be  reduced  to
          proforma  amount of $666,877 and  $1,379,418,  respectively.  Proforma
          earnings,  basic and diluted, per share would have been $.12 in fiscal
          2000 and $.24 and $.23, respectively, in fiscal 1999.

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

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

               Quantitative measures established by regulation to ensure capital
          adequacy  require the Bank to maintain minimum amounts and ratios (set
          forth in the table  below) of total and Tier I capital  (as defined in
          the regulations) and risk-weighted assets (as defined),  and of Tier I
          capital  (as  defined)  to  average  assets (as  defined).  Management
          believes,  as of September  30, 2000,  that the Bank meets all capital
          adequacy requirements to which it is subject.

               As of September 30, 2000, the most recent  notification  from the
          Office of Thrift Supervision  categorized the Bank as well capitalized
          under the regulatory  framework for prompt  corrective  action.  To be
          categorized as well  capitalized the Bank must maintain  minimum total
          risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
          in  the  table.   There  are  no   conditions  or  events  since  that
          notification   that  management   believes  have  changed  the  Bank's
          category.  The  Bank's  actual  capital  amounts  and  ratios are also
          presented in the table.


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

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

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

               The following table presents the Bank's capital position based on
          the  September  30  financial   statements  and  the  current  capital
          requirements.
<TABLE>
<CAPTION>
                                                                                                    To Be Well Capitalized
                                                                       For Capital                  Under Prompt Corrective
                                         Actual                      Adequacy Purposes                 Action Provisions
                              --------------------------         ------------------------         ---------------------------
                                   Actual          % of           Required         % of           Required             % of
                                 Amount           Assets           Amount         Assets           Amount             Assets
                                 ------           ------          ---------       ------          --------            ------
<S>                                 <C>            <C>              <C>            <C>          <C>
       September 30, 2000
       ------------------
       Tangible (1)                 $33,822,029    10.6%            $  4,782,513   1.50%        $      N/A             N/A %
       Tier I capital (2)            33,822,029    16.8                 N/A         N/A               12,098,760       6.00
       Core (1)                      33,822,029    10.6               12,753,367   4.00               15,941,709       5.00
       Risk-weighted (2)             35,224,940    17.5               16,131,680   8.00               20,164,600      10.00

       September 30, 1999
       ------------------
       Tangible (1)                 $34,200,742    11.77%           $  4,358,431   1.50%        $      N/A             N/A %
       Tier I capital (2)            34,200,742    19.57                N/A         N/A               10,484,460       6.00
       Core (1)                      34,200,742    11.77               8,716,862   3.00               14,528,103       5.00
       Risk-weighted (2)             35,473,473    20.30              13,979,280   8.00               17,474,100      10.00
       <FN>
              -----------
       (1)  To adjusted total assets.
       (2)  To risk-weighted assets.
       </FN>
</TABLE>

                   The OTS has  adopted  an  interest  rate  risk  component  of
              regulatory  capital  requirements  effective  January 1, 1994. The
              rule  requires  additional  capital to be maintained if the Bank's
              interest rate risk exposure, measured by the decline in the market
              value of the Bank's net portfolio value, exceeds 2% of assets as a
              result  of a 200  basis  point  shift  in  interest  rates.  As of
              September  30, 2000,  the Bank is not subject to the interest rate
              risk requirement.

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





                                      F-25

<PAGE>

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

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

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

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

               The  mutual  holding  company for the Company,  Baltimore  County
          Savings Bank,  M.H.C.  ("M.H.C.")  has waived receipt of its quarterly
          dividends,  thereby reducing the actual dividend payout by the Company
          in 2000 and 1999. The dividends  waived by M.H.C.  are considered as a
          restriction  on the retained  earnings of the Bank.  The amount of any
          dividend  waived by M.H.C.  is available for declaration as a dividend
          solely to M.H.C. At September 30, 2000, the cumulative  amount of such
          waived dividends was $2,816,220.

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

               The current tax provision consists of the following for the years
          ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
                                                                                          2000             1999
                                                                                          ----             ----
              <S>                                                                      <C>             <C>
              Current expense                                                          $  254,151      $1,299,576
              Deferred expense (benefit)                                                  183,471        (342,109)
                                                                                       ----------      ----------
                 Total tax expense                                                     $  437,622      $  957,467
                                                                                       ==========      ==========
</TABLE>

               The  tax  effects  to  temporary  differences  that  give rise to
          significant  portions  of the  deferred  tax assets and  deferred  tax
          liabilities at September 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
                                                                                          2000             1999
                                                                                          ----             ----
              <S>                                                                      <C>             <C>
              Deferred Tax Assets:
                Charitable deduction carryforward                                       $  60,173       $   70,047
                ESOP and MRP                                                               39,515             --
                 Market value change in Rabbi Trust assets                                   --            116,028
                 Allowance for loan losses                                                541,803          491,529
                 Allowance for uncollected interest                                        24,307           24,307
                                                                                         --------        ---------
                    Total gross deferred tax assets                                       665,798          701,911

</TABLE>
                                      F-26


<PAGE>

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

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

Note 16 - Income Taxes - Continued
          ------------
<TABLE>
<CAPTION>
                                                                                           2000                 1999
                                                                                           ----                 ----
              <S>                                                                       <C>                  <C>
              Deferred Tax Liabilities:
                 Federal Home Loan Bank of Atlanta
                  stock dividends                                                       $(151,928)           $(151,928)
                 Depreciation                                                            (201,809)            (123,317)
                 Bad debt deduction in excess of
                  base year reserves                                                     (152,323)            (228,486)
                Market value change in Rabbi Trust assets                                (145,029)               --
                                                                                        ---------            ---------
                       Total gross deferred tax liabilities                              (651,089)            (503,731)
                                                                                        ---------            ---------
              Net Deferred Tax Assets                                                   $  14,709            $ 198,180
                                                                                        =========            =========
</TABLE>

                   The amount computed by applying the statutory  federal income
              tax rate to income before taxes and extraordinary  item is greater
              than the taxes provided for the following reasons:
<TABLE>
<CAPTION>
                                                                    For the Years Ended September 30,
                                                        -----------------------------------------------------------------
                                                                      2000                              1999
                                                        ----------------------------          ---------------------------
                                                                           Percent                             Percent
                                                                          of Pretax                           of Pretax
                                                            Amount          Income            Amount           Income_
                                                            ------        ---------           ------          ----------
<S>                                                            <C>         <C>                <C>              <C>
              Statutory federal income tax rate             $382,291       34.00%             $796,231         34.00%
              Increases (Decreases)
               Resulting From
              --------------------
                 State income tax net of
                  federal income tax benefit                  52,906        4.70               111,542          4.76
                 Other                                         2,425         .22                49,694          2.12
                                                            --------       -----              --------         -----
                                                            $437,622       38.92%             $957,467         40.88%
                                                            ========       =====              ========         =====
</TABLE>

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

                   Qualified thrift lenders such as the Bank are not required to
             provide a deferred  tax  liability  for bad debt  reserves  for tax
             purposes that arose in fiscal years  beginning  before December 31,
             1987. Such bad debt reserve for the Bank amounted to  approximately
             $4,227,000 with an income tax effect of approximately $1,633,000 at
             September 30, 2000.  This bad debt reserve would become  taxable if
             certain conditions are met by the Bank.


                                      F-27
<PAGE>

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

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

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

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

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

               The estimated fair values of the Bank's financial instruments are
          as follows:
<TABLE>
<CAPTION>
                                                                September 30, 2000              September 30, 1999
                                                              ------------------------        -------------------------
                                                              Carrying       Estimated        Carrying       Estimated
                                                               Amount        Fair Value        Amount        Fair Value
                                                              --------       ----------       --------       ----------
                                                                             (Amounts in Thousands)
    <S>                                                    <C>              <C>             <C>             <C>
    Financial Assets
    ----------------
     Cash                                                  $    6,571       $  6,571        $  5,977        $  5,977
     Interest bearing deposits in other banks                   5,256          5,256           8,651           8,651
     Federal funds sold                                           455            455             449             449
     Investment securities - held to maturity                  41,158         40,356          35,232          34,218

    Loans Receivable
    ----------------
        Mortgage loans                                       $172,328       $169,902        $164,142        $161,826
        Share loans                                               593            593             581             581
        Consumer loans                                         68,599         67,808          50,660          50,736
     Mortgage backed securities                                19,824         19,705          23,500          23,396
     Federal Home Loan Bank of Atlanta stock                    1,834          1,834           1,650           1,650
</TABLE>



                                      F-28

<PAGE>

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

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


Note 17- Disclosures About Fair Value of Financial Instruments - Continued
         -----------------------------------------------------
<TABLE>
<CAPTION>
                                                                  September 30, 2000              September 30, 1999
                                                                ---------------------           ----------------------
                                                                Carrying       Estimated        Carrying       Estimated
                                                                 Amount        Fair Value        Amount        Fair Value
                                                                --------       ----------       --------       ----------
                                                                             (Amounts in Thousands)
<S>                                                              <C>            <C>             <C>               <C>
    Financial Liabilities
    ---------------------
     Deposits                                                    $268,882       $269,049        $233,364          $233,481
     Federal Home Loan Bank of Atlanta
      advances                                                      9,500          9,500          16,000            16,000
     Mortgage loan commitments                                       --            1,105            --               3,664
</TABLE>

Note 18 - Condensed Financial Information (Parent Company Only)
          -----------------------------------------------------

               Information  as to the financial  position of BCSB Bankcorp as of
          September  30 and the  results  of  operations  and cash flows for the
          years ended September 30 are summarized below.
<TABLE>
<CAPTION>
                                                                                  September 30,           September 30,
                                                                                     2000                     1999
                                                                                 ---------------        -------------------
             <S>                                                                  <C>                     <C>
             Statement of Financial Condition

                                            Assets
                                            ------
             Cash                                                                 $ 1,859,917             $   227,761
             Interest bearing deposits in other banks                                 701,720               1,205,965
             Investment securities, held to maturity                                7,248,275               7,247,897
             Employee Stock Ownership Plan loan                                     1,463,424               1,646,352
             Accrued interest receivable                                              235,438                 245,539
             Investment in subsidiary                                              32,313,296              35,069,404
                                                                                  -----------             -----------
             Total assets                                                         $43,822,070             $45,642,918
                                                                                  ===========             ===========

                         Liabilities and Stockholders' Equity
                         ------------------------------------
             Liabilities
             -----------
               Accrued taxes payable                                              $    23,453             $    57,860
               Dividends payable                                                      265,954                 294,797
               Other liabilities                                                      189,846                   9,802
                                                                                  -----------             -----------
                                                                                      479,253                 362,459
</TABLE>

                                      F-29


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

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

Note 18 - Condensed Financial Information (Parent Company Only) - Continued
          ----------------------------------------------------
<TABLE>
<CAPTION>
                                                                                  September 30,          September 30,
                                                                                     2000              1999
                                                                                 ---------------        --------------------
             <S>                                                                  <C>                     <C>
             Stockholders' Equity
             --------------------
                Common stock (6,116,562 shares issued
                  and outstanding)                                                  $    58,871          $     61,132
                Paid-in capital                                                      20,214,611            21,918,506
                Retained earnings (substantially restricted)                         25,447,089            25,788,692
                                                                                    -----------          ------------
                                                                                     45,720,571            47,768,330
                Employee Stock Ownership Plan                                        (1,326,228)           (1,509,156)
                Stock held by Rabbi Trust                                            (1,051,526)             (978,715)
                                                                                    -----------          ------------
             Total stockholders' equity                                              43,342,817            45,280,459
                                                                                    -----------          ------------
             Total liabilities and stockholders' equity                             $43,822,070          $ 45,642,918
                                                                                    ===========          ============

             Statement of Operations
                Interest and fees on loans                                          $    62,501          $    171,096
                Interest and dividends on investment securities                         443,237               234,152
                Other interest income                                                    23,532               275,790
                                                                                    -----------          ------------
             Total interest income                                                      529,270               681,038
               Interest on advances of Federal Home
                Loan Bank of Atlanta                                                      4,796                 --
                                                                                    -----------          -------------
             Net interest income                                                        524,474               681,038

             Other Income
                Income from subsidiary                                                  475,440             1,068,093
                                                                                    -----------          ------------
                                                                                        999,914             1,749,131
             Non-Interest Expenses
                Professional fees                                                       109,162                95,015
                Other expense                                                            64,230                70,617
                                                                                    -----------          ------------
             Total non-interest expense                                                 173,392               165,632
                                                                                    -----------          ------------
             Net income before tax provision                                            826,522             1,583,499

             Income tax provision                                                       139,758               199,110
                                                                                    -----------          ------------
             Net income                                                             $   686,764          $  1,384,389
                                                                                    ===========          ============
</TABLE>
                                      F-30
<PAGE>
BCSB BANKCORP, INC.
-------------------
 AND SUBSIDIARIES
 ----------------
Baltimore, Maryland
-------------------

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

Note 18 - Condensed Financial Information (Parent Company Only) - Continued
          ----------------------------------------------------
<TABLE>
<CAPTION>
                                                                                    September 30,          September 30,
                                                                                        2000                  1999
                                                                                   --------------        --------------
             <S>                                                                   <C>                     <C>
             Statement of Cash Flows

     Net income                                                                     $     686,764         $  1,384,389
     Adjustments to Reconcile Net Income to Net
      Cash Provided by Operating Activities
      --------------------------------------
         Accretion of discount on investments                                                (378)                (199)
         Equity in net income of subsidiary                                              (475,440)          (1,068,093)
         Decrease in accounts receivable intercompany                                     222,370              865,938
         Decrease (increase) in accrued interest
          receivable on loans                                                               2,401              (95,694)
         Decrease (increase) in accrued interest
          receivable on investments                                                         7,700             (146,792)
         Increase in other assets                                                           --                  (3,053)
         (Decrease) increase in income taxes payable                                      (34,407)              51,420
         Decrease in other liabilities                                                    (42,326)             (53,687)
                                                                                    -------------         ------------
              Net cash provided by operating activities                                   366,684              934,229

     Cash Flows from Investing Activities
     ------------------------------------
         Proceeds from maturing interest bearing deposits                                 590,000              293,000
         Purchase of interest bearing deposits                                              --                (883,000)
         Purchases of investment securities - held to maturity                              --              (7,247,518)
         Principal collected on longer term loans                                         182,928              182,928
                                                                                    -------------         ------------
              Net cash provided (used) by investing activities                            772,928           (7,654,590)

     Cash Flows from Financing Activities
     ------------------------------------
         Dividends from subsidiary                                                      3,300,000                 --
         Refund of stock offering expense                                                   --                  55,000
         Stock held by Management Retention Plan                                          (37,665)            (732,073)
         Stock repurchase                                                              (1,710,065)             (28,903)
         Dividends on stock                                                            (1,028,367)            (817,005)
         Stock vested in MRP                                                               83,239                 -
         (Decrease) increase in dividends payable                                         (28,843)             294,797
                                                                                    -------------         ------------
              Net cash provided (used) by financing activities                            578,299           (1,228,184)
                                                                                    -------------         ------------

</TABLE>

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

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


Note 18 - Condensed Financial Information (Parent Company Only) - Continued
          ----------------------------------------------------
<TABLE>
<CAPTION>
                                                                                    September 30,         September 30,
                                                                                        2000                  1999
                                                                                    -------------        --------------

<S>                                                                                  <C>                   <C>
Increase (decrease) in cash and cash equivalents                                     $  1,717,911          $(7,948,545)
Cash and cash equivalents at beginning of period                                          843,726            8,792,271
                                                                                     ------------          -----------
Cash and cash equivalents at end of period                                           $  2,561,637          $   843,726
                                                                                     ============          ===========

The following is a summary of cash and cash equivalents:
     Cash                                                                            $  1,859,917          $   227,761
     Interest bearing deposits in other banks                                             701,720            1,205,965
     Federal funds sold                                                                     --                   --
                                                                                     ------------          -----------
     Balance of cash items reflected on Statement of
      Financial Condition                                                               2,561,637            1,433,726

         Less - certificate of deposit with a maturity
                     of more than three months                                             --                  590,000
                                                                                     ------------          -----------

Cash and cash equivalents reflected on the
  Statement of Cash Flows                                                            $  2,561,637          $   843,726
                                                                                     ============          ===========
</TABLE>

NOTE 19 - RECENT ACCOUNTING PRONOUNCEMENTS

               SFAS No. 133, "Accounting for Derivative  Instruments and Hedging
          Activities" was issued in June, 1999. This Statement  standardizes the
          accounting for derivative  instruments  including  certain  derivative
          instruments  embedded in other contracts,  by requiring that an entity
          recognize  these items as assets or  liabilities  in the  statement of
          financial  position  and measure  them at fair value.  This  Statement
          generally provides for matching the timing of gain or loss recognition
          on the hedging  instrument  with the recognition of the changes in the
          fair value of the hedged asset or liability that are  attributable  to
          the  hedged  risk or the  earnings  effect  of the  hedged  forecasted
          transaction. The Statement, which is effective for all fiscal quarters
          of all fiscal years beginning after June 15, 2000, will not affect the
          Company's financial position or its results of operations.



                                      F-32

<PAGE>
<TABLE>
<CAPTION>
                               BOARD OF DIRECTORS

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

                                         FRANK W. DUNTON
                                         Retired


                               EXECUTIVE OFFICERS

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

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

                                OFFICE LOCATIONS

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

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

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

                                      2105 Rock Spring Road                   402 Constant Friendship Boulevard
                                      Forest Hill, Maryland 21050             Abingdon, Maryland 21009

                              CORPORATE INFORMATION

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS  SPECIAL COUNSEL                          ANNUAL REPORT ON FORM 10-KSB
Anderson Associates, LLP                  Stradley Ronon Housley Kantarian &
7621 Fitch Lane                           Bronstein, LLP                           A COPY OF THE COMPANY'S ANNUAL
Baltimore, Maryland 21236                 1220 19th Street, N.W., Suite 700        REPORT ON FORM 10-KSB FOR THE
                                          Washington, D.C.  20036                  FISCAL YEAR ENDED SEPTEMBER 30,
GENERAL  COUNSEL                                                                   2000 AS  FILED  WITH  THE  SECURITIES
Moore,  Carney,  Ryan &                                                            AND  EXCHANGE  COMMISSION,  WILL BE
Lattanzi,  LLC                            ANNUAL  MEETING                          FURNISHED  WITHOUT  CHARGE  TO
4111 E. Joppa Road, Suite 201             The  2001  Annual  Meeting  of           STOCKHOLDERS AS OF THE RECORD
Baltimore,  Maryland 21236                Stockholders will be held on February    DATE FOR THE 2000 ANNUAL MEETING
                                          14, 2001 at 4:00 p.m. at the Bank's      UPON WRITTEN REQUEST TO CORPORATE
TRANSFER AGENT AND REGISTRAR              Perry Hall office located at 4208        SECRETARY, BCSB BANKCORP, INC.,
Chase-Mellon Shareholder Services         Ebenezer Road, Baltimore, Maryland       4111 E. JOPPA ROAD, SUITE 300,
450 W. 33rd Street, 15th Floor                                                     BALTIMORE, MARYLAND  21236
New York, New York  10001
</TABLE>