##### Table of Contents

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United States

Securities and Exchange Commission

Washington, D. C. 20549



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FORM 10-QSB



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(Mark One)

|x | Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2007



| ̈ | Transition Report Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 0-28032



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PATAPSCO BANCORP, INC.

(Exact Name of Small Business Issuer as Specified in its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 52-1951797                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

1301 Merritt Boulevard, Dundalk, Maryland 21222-2194

(Address of Principal Executive Offices)

(410) 285-1010

Issuers Telephone Number, Including Area Code



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

As of November 13, 2007, the issuer had 1,855,490 shares of Common Stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):    Yes ̈No  x



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##### Table of Contents

CONTENTS



|                              |  |                                                                                                                    |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                                    |  | PAGE
|PART I. FINANCIAL INFORMATION |  |                                                                                                                   
|                              |  |                                                                                                                   
|Item 1.                       |  | Financial Statements                                                                                               |  |     
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Financial Condition at September 30, 2007 and June 30, 2007( Unaudited)                 |  | 3   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Income for the Three Months Ended September 30, 2007 and 2006 (Unaudited)               |  | 4   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2007 and 2006 (Unaudited) |  | 5   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2007 and 2006 (Unaudited)           |  | 6   
|                              |  |                                                                                                                   
|                              |  | Notes to Consolidated Financial Statements (Unaudited)                                                             |  | 7   
|                              |  |                                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis or Plan of Operation                                                          |  | 9   
|                              |  |                                                                                                                   
|Item 3.                       |  | Controls and Procedures                                                                                            |  | 17  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                   
|                              |  |                                                                                                                   
|Item 1.                       |  | Legal Proceedings                                                                                                  |  | 17  
|                              |  |                                                                                                                   
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                        |  |     
|                              |  |                                                                                                                   
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                    |  | 17  
|                              |  |                                                                                                                   
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                |  | 17  
|                              |  |                                                                                                                   
|Item 5.                       |  | Other Information                                                                                                  |  | 17  
|                              |  |                                                                                                                   
|Item 6.                       |  | Exhibits                                                                                                           |  | 17  
|                              | 
|Signatures                    |  | 18                                                                                                                
|                              | 
|Certifications                |  |                                                                                                                   



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##### Table of Contents

Part I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION





|                                                                                                                               |  |                   |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | ------------ | - | ------- | -
|($ in thousands except for share data)                                                                                         |  | September 30,2007 |         |   | June 30,2007 |  
|Assets                                                                                                                         |  |                   |         |   |              |   |         |  
|Cash:                                                                                                                          |  |                   |         |   |              |   |         |  
|On hand and due from banks                                                                                                     |  | $                 | 5,025   |   |              | $ | 4,308   |  
|Interest-bearing deposits in other banks                                                                                       |  |                   | 738     |   |              |   | 907     |  
|Federal funds sold                                                                                                             |  |                   | 2,901   |   |              |   | 2,255   |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Cash & Cash equivalents                                                                                                        |  |                   | 8,664   |   |              |   | 7,470   |  
|Securities, available for sale                                                                                                 |  |                   | 11,897  |   |              |   | 13,147  |  
|Loans receivable, net of allowance for loan losses of $1,153 and $1,110, respectively                                          |  |                   | 222,119 |   |              |   | 220,239 |  
|Investment in securities required by law, at cost                                                                              |  |                   | 2,756   |   |              |   | 2,599   |  
|Property and equipment, net                                                                                                    |  |                   | 4,390   |   |              |   | 4,474   |  
|Goodwill and core deposit intangible                                                                                           |  |                   | 3,290   |   |              |   | 3,303   |  
|Accrued interest and other assets                                                                                              |  |                   | 4,250   |   |              |   | 4,226   |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Total assets                                                                                                                   |  | $                 | 257,366 |   |              | $ | 255,458 |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Liabilities and Stockholders Equity                                                                                           |  |                   |         |   |              |   |         |  
|Liabilities:                                                                                                                   |  |                   |         |   |              |   |         |  
|Deposits:                                                                                                                      |  |                   |         |   |              |   |         |  
|Noninterest-bearing deposits                                                                                                   |  | $                 | 10,649  |   |              | $ | 11,753  |  
|Interest-bearing deposits                                                                                                      |  |                   | 179,024 |   |              |   | 177,959 |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Total Deposits                                                                                                                 |  |                   | 189,673 |   |              |   | 189,712 |  
|Accrued expenses and other liabilities                                                                                         |  |                   | 1,898   |   |              |   | 3,030   |  
|Short-term Debt                                                                                                                |  |                   | 7,700   |   |              |   |        |  
|Long-term Debt                                                                                                                 |  |                   | 34,600  |   |              |   | 38,800  |  
|Subordinated Debentures                                                                                                        |  |                   | 5,000   |   |              |   | 5,000   |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Total liabilities                                                                                                              |  |                   | 238,871 |   |              |   | 236,542 |  
|Temporary Equity - ESOP shares subject to put option                                                                           |  |                   |        |   |              |   | 935     |  
|                                                                                                                               |  |                  
|Stockholders equity:                                                                                                          |  |                   |         |   |              |   |         |  
|Common stock $0.01 par value: authorized 4,000,000 shares: issued and outstanding 1,850,063 and 1,864,985 shares, respectively |  |                   | 18      |   |              |   | 18      |  
|Additional paid in capital                                                                                                     |  |                   | 7,280   |   |              |   | 6,937   |  
|Obligation under Deferred Compensation                                                                                         |  |                   | 433     |   |              |   | 423     |  
|Deferred Comp contra                                                                                                           |  |                   | (78     | ) |              |   | (78     | )
|Retained income, substantially restricted                                                                                      |  |                   | 11,043  |   |              |   | 10,994  |  
|Accumulated other comprehensive loss, net of taxes                                                                             |  |                   | (201    | ) |              |   | (313    | )
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Total stockholders equity - Permanent                                                                                         |  |                   | 18,495  |   |              |   | 17,981  |  
|Total stockholders equity including temporary equity                                                                          |  |                   | 18,495  |   |              |   | 18,916  |  
|                                                                                                                               |  |                   |         |   |              |   |         |  
|Total liabilities and stockholders equity                                                                                     |  | $                 | 257,366 |   |              | $ | 255,458 |  
|                                                                                                                               |  |                   |         |   |              |   |         |  

See accompanying notes to financial statements.



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF INCOME



|                                                    |  |                                     |       |      |   |       
|--------------------------------------------------- |  | ----------------------------------- | ----- | ---- | - | ------
|                                                    |  | For Three Months EndedSeptember 30,
|($ in thousands except for per share data)          |  | 2007                                |       | 2006
|Interest income:                                    |  |                                     |       |      |   |       
|Loans receivable                                    |  | $                                   | 4,133 |      | $ | 3,600 
|Securities, including securities required by law    |  |                                     | 181   |      |   | 213   
|Federal funds sold and other investments            |  |                                     | 26    |      |   | 25    
|                                                    |  |                                     |       |      |   |       
|Total interest income                               |  |                                     | 4,340 |      |   | 3,838 
|                                                    |  |                                    
|Interest expense:                                   |  |                                     |       |      |   |       
|Deposits                                            |  |                                     | 1,576 |      |   | 1,140 
|Short-term debt                                     |  |                                     | 65    |      |   | 34    
|Long-term debt                                      |  |                                     | 515   |      |   | 459   
|                                                    |  |                                     |       |      |   |       
|Total interest expense                              |  |                                     | 2,156 |      |   | 1,633 
|                                                    |  |                                    
|Net interest income                                 |  |                                     | 2,184 |      |   | 2,205 
|Provision for loan losses                           |  |                                     | 150   |      |   | 40    
|                                                    |  |                                     |       |      |   |       
|Net interest income after provision for loan losses |  |                                     | 2,034 |      |   | 2,165 
|Non-interest income:                                |  |                                     |       |      |   |       
|Fees and service charges                            |  |                                     | 182   |      |   | 162   
|Other                                               |  |                                     | 25    |      |   | 25    
|                                                    |  |                                     |       |      |   |       
|Total non-interest income                           |  |                                     | 207   |      |   | 187   
|Non-interest expenses:                              |  |                                     |       |      |   |       
|Compensation and employee benefits                  |  |                                     | 1,044 |      |   | 1,143 
|Professional fees                                   |  |                                     | 163   |      |   | 59    
|Equipment expense                                   |  |                                     | 87    |      |   | 68    
|Net occupancy expense                               |  |                                     | 145   |      |   | 136   
|Advertising                                         |  |                                     | 19    |      |   | 25    
|Data processing                                     |  |                                     | 74    |      |   | 74    
|Amortization of core deposit intangible             |  |                                     | 13    |      |   | 13    
|Telephone, postage & delivery                       |  |                                     | 67    |      |   | 60    
|Other                                               |  |                                     | 187   |      |   | 207   
|                                                    |  |                                     |       |      |   |       
|Total non-interest expense                          |  |                                     | 1,799 |      |   | 1,785 
|                                                    |  |                                     |       |      |   |       
|Income before provision for income taxes            |  |                                     | 442   |      |   | 567   
|Provision for income taxes                          |  |                                     | 263   |      |   | 211   
|                                                    |  |                                     |       |      |   |       
|Net Income                                          |  | $                                   | 179   |      | $ | 356   
|                                                    |  |                                     |       |      |   |       
|Basic earnings per share                            |  | $                                   | 0.09  |      | $ | 0.19  
|                                                    |  |                                     |       |      |   |       
|Diluted earnings per share                          |  | $                                   | 0.09  |      | $ | 0.19  
|                                                    |  |                                     |       |      |   |       
|Cash dividends declared per common share            |  | $                                   | 0.07  |      | $ | 0.0625
|                                                    |  |                                     |       |      |   |       

See accompanying notes to financial statements.



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                                     |  |                                   |     |      |   |    
|---------------------------------------------------------------------------------------------------- |  | --------------------------------- | --- | ---- | - | ---
|                                                                                                     |  | For Three MonthsEndedSeptember 30
|($ in thousands)                                                                                     |  | 2007                              |     | 2006
|Net income                                                                                           |  | $                                 | 179 |      | $ | 356
|Other comprehensive income, net of tax:                                                              |  |                                   |     |      |   |    
|Unrealized net holding gain securities available-for-sale net of taxes of $70, and $89, respectively |  |                                   | 112 |      |   | 142
|                                                                                                     |  |                                   |     |      |   |    
|Comprehensive income                                                                                 |  | $                                 | 291 |      | $ | 498
|                                                                                                     |  |                                   |     |      |   |    

See accompanying notes to financial statements.



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                            |  |                             |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                            |  | For the Three Months Ended, |        
|($ in thousands)                                                                            |  | September 30,2007           |         |   | September 30,2006 |  
|Cash flows from operating activities:                                                       |  |                             |         |   |                   |   |         |  
|Net Income                                                                                  |  | $                           | 179     |   |                   | $ | 356     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                             |         |   |                   |   |         |  
|Amortization of premiums and discounts, net                                                 |  |                             | 11      |   |                   |   | 4       |  
|Amortization of deferred loan origination fees                                              |  |                             | (9      | ) |                   |   | (8      | )
|Provision for loan losses                                                                   |  |                             | 150     |   |                   |   | 40      |  
|Depreciation                                                                                |  |                             | 92      |   |                   |   | 65      |  
|Amortization of core deposit intangible                                                     |  |                             | 13      |   |                   |   | 13      |  
|Increase in cash surrender value of life insurance                                          |  |                             | (18     | ) |                   |   | (16     | )
|Increase in accrued interest and other assets                                               |  |                             | (60     | ) |                   |   | (172    | )
|Non-cash compensation under stock-based benefit plan                                        |  |                             | 20      |   |                   |   | 16      |  
|Increase in accrued expenses and other liabilities                                          |  |                             | 67      |   |                   |   | 123     |  
|                                                                                            |  |                             |         |   |                   |   |         |  
|Net cash provided by operations                                                             |  |                             | 445     |   |                   |   | 421     |  
|                                                                                            |  |                            
|Cash flows from investing activities:                                                       |  |                             |         |   |                   |   |         |  
|Proceeds from maturity of investments andprincipal payments on mortgage-backed securities   |  |                             | 1,426   |   |                   |   | 347     |  
|Purchase of securities available for sale                                                   |  |                             |        |   |                   |   | (2      | )
|Loan principal disbursements, net of repayments                                             |  |                             | (1,828  | ) |                   |   | (11,784 | )
|Purchase of consumer loans                                                                  |  |                             | (202    | ) |                   |   | (540    | )
|Purchase of investments required by law                                                     |  |                             | (157    | ) |                   |   | (123    | )
|Purchase of premises and equipment                                                          |  |                             | (8      | ) |                   |   | (530    | )
|                                                                                            |  |                             |         |   |                   |   |         |  
|Net cash used by investing activities                                                       |  |                             | (769    | ) |                   |   | (12,632 | )
|                                                                                            |  |                            
|Cash flows from financing activities:                                                       |  |                             |         |   |                   |   |         |  
|Net (decrease) increase in deposits                                                         |  |                             | (34     | ) |                   |   | 6,998   |  
|Net increase in short-term borrowings                                                       |  |                             | 7,700   |   |                   |   |        |  
|Proceeds from long-term borrowings                                                          |  |                             | 13,500  |   |                   |   | 5,000   |  
|Payment on long-term borrowings                                                             |  |                             | (17,700 | ) |                   |   | (2,250  | )
|Decrease in advance payments by borrowers                                                   |  |                             | (1,198  | ) |                   |   | (1,136  | )
|Cash received from exercise of stock options                                                |  |                             | 40      |   |                   |   | 46      |  
|Repurchase of common shares due to ESOP put options exercised                               |  |                             | (659    | ) |                   |   |        |  
|Dividends paid                                                                              |  |                             | (131    | ) |                   |   | (115    | )
|                                                                                            |  |                             |         |   |                   |   |         |  
|Net cash provided by financing activities                                                   |  |                             | 1,518   |   |                   |   | 8,543   |  
|                                                                                            |  |                             |         |   |                   |   |         |  
|                                                                                            |  |                            
|Net increase (decrease) in cash and cash equivalents                                        |  |                             | 1,194   |   |                   |   | (3,668  | )
|Cash and cash equivalents at beginning of period                                            |  |                             | 7,470   |   |                   |   | 8,188   |  
|                                                                                            |  |                             |         |   |                   |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                           | 8,664   |   |                   | $ | 4,520   |  
|                                                                                            |  |                            
|Interest paid on deposits and borrowed funds                                                |  | $                           | 1,993   |   |                   | $ | 1,637   |  
|Income taxes paid                                                                           |  |                             | 100     |   |                   |   | 70      |  

See accompanying notes to financial statements.



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Patapsco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Note 1: Principles of Consolidation

The consolidated financial statements
include the accounts of Patapsco Bancorp, Inc. (the Company) and its wholly-owned subsidiary, The Patapsco Bank (the Bank). The Patapsco Banks wholly owned subsidiaries are Prime Business Leasing and Patapsco Financial
Services, Inc. All inter-company accounts and transactions have been eliminated in the accompanying consolidated financial statements.

Note 2: The
Patapsco Bank

The Bank is regulated by The Federal Reserve Bank of Richmond (the Federal Reserve Bank) and The State of Maryland. The primary
business of the Bank is to attract deposits from individual and corporate customers and to originate residential and commercial mortgage loans, consumer loans and commercial business loans. The Bank competes with other financial and mortgage
institutions in attracting and retaining deposits and originating loans.

Note 3: Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with instructions for Form 10-QSB and therefore, do not include all disclosures
necessary for a complete presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. However, all adjustments that are, in the opinion of management, necessary for the fair
presentation of the interim financial statements have been included. Such adjustments were of a normal recurring nature. The results of operations for the three months ended September 30 2007 are not necessarily indicative of the results that
may be expected for the entire year. For additional information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual report on Form 10-KSB for the year ended June 30, 2007.

Note 4: Cash and Cash Equivalents

Cash and cash equivalents include
short-term investments, with an original maturity of 90 days or less, which consist of federal funds sold and interest bearing deposits in other financial institutions.

Note 5: Regulatory Capital Requirements

At September 30, 2007, the Bank met each of the three minimum regulatory
capital requirements. The following table summarizes the Banks regulatory capital position at September 30, 2007.



|                                         |  |        |        |   |                             |   |        |                                                        |        |  |      |        |  |   |        |  |       |  
|---------------------------------------- |  | ------ | ------ | - | --------------------------- | - | ------ | ------------------------------------------------------ | ------ |  | ---- | ------ |  | - | ------ |  | ----- | -
|                                         |  | Actual |        |   | For CapitalAdequacyPurposes |   |        | Well CapitalizedUnder PromptCorrective ActionProvision |       
|($ in thousands)                         |  | Amount |        | % |                             |   | Amount |                                                        | %      |  |      | Amount |  | % |       
|Total Capital (to Risk Weighted Assets)  |  | $      | 20,428 |   | 10.25                       | % |        | $                                                      | 15,948 |  | 8.00 | %      |  | $ | 19,935 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 19,275 |   | 9.67                        | % |        | $                                                      | 7,974  |  | 4.00 | %      |  | $ | 11,961 |  | 6.00  | %
|Tier 1 Capital (to Average Assets)       |  | $      | 19,275 |   | 7.68                        | % |        | $                                                      | 10,038 |  | 4.00 | %      |  | $ | 12,548 |  | 5.00  | %



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The following table summarizes the Banks regulatory capital position at June 30, 2007



|                                         |  |        |        |   |                              |   |        |                                                         |        |  |      |        |  |   |        |  |       |  
|---------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | ------------------------------------------------------- | ------ |  | ---- | ------ |  | - | ------ |  | ----- | -
|                                         |  | Actual |        |   | For CapitalAdequacy Purposes |   |        | Well Capitalized UnderPrompt CorrectiveAction Provision |       
|($ in thousands)                         |  | Amount |        | % |                              |   | Amount |                                                         | %      |  |      | Amount |  | % |       
|Total Capital (to Risk Weighted Assets)  |  | $      | 20,091 |   | 10.26                        | % |        | $                                                       | 15,665 |  | 8.00 | %      |  | $ | 19,582 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 18,981 |   | 9.69                         | % |        | $                                                       | 7,833  |  | 4.00 | %      |  | $ | 11,749 |  | 6.00  | %
|Tier 1 Capital (to Average Assets)       |  | $      | 18,981 |   | 7.57                         | % |        | $                                                       | 10,030 |  | 4.00 | %      |  | $ | 12,537 |  | 5.00  | %

Note 6: Earnings Per Share

The following table presents a summary of per share data and amounts for the periods indicated.



|                                     |  |                                 |       |      |   |      
|------------------------------------ |  | ------------------------------- | ----- | ---- | - | -----
|                                     |  | Three Months EndedSeptember 30,
|(in thousands except for share data) |  | 2007                            |       | 2007
|Net Income                           |  | $                               | 179   |      | $ | 356  
|Basic EPS shares                     |  |                                 | 1,905 |      |   | 1,875
|Basic EPS                            |  | $                               | 0.09  |      | $ | 0.19 
|Dilutive shares                      |  |                                 | 26    |      |   | 48   
|Diluted EPS shares                   |  |                                 | 1,931 |      |   | 1,923
|Diluted EPS                          |  | $                               | 0.09  |      | $ | 0.19 

Note 7: Goodwill and Intangible Assets

SFAS No. 142, Goodwill and Other Intangible Assets requires that goodwill no longer be amortized, but rather that it be tested for impairment on an annual basis at the reporting unit level, which is
either at the same level or one level below an operating segment. Other acquired intangible assets with finite lives, such as purchased customer accounts, are required to be amortized over their estimated lives. Other intangible assets are amortized
using the straight-line method over estimated useful lives of 10 years. The Company periodically assesses whether events or changes in circumstances indicate that the carrying amounts of goodwill and other intangible assets may be impaired.

Note 8: Guarantees

The Company does not issue any guarantees
that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.
Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Company,
generally, holds collateral and/or personal guarantees supporting these commitments. The Company had $1,691,000 of standby letters of credit as of September 30, 2007 and $1,749,000 outstanding as of June 30, 2007. Management believes that
the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of
September 30, 2007 and June 30, 2007 for guarantees under standby letters of credit issued is not material.



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Note 9: Share-Based Compensation

A summary of share option activity for the three month period ended September 30, 2007 follows:



|                              |  |        |  |                              |      |                                                  |      |                                |   |    
|----------------------------- |  | ------ |  | ---------------------------- | ---- | ------------------------------------------------ | ---- | ------------------------------ | - | ---
|                              |  | Shares |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualTerm in Years |      | AggregateIntrinsicValue (000s)
|Outstanding at June 30, 2007  |  | 47,872 |  | $                            | 6.02 |                                                  | 3.92 |                                | $ | 801
|Granted                       |  |       |  |                              |     |                                                  |     |                                |   |    
|Exercised                     |  | 15,220 |  |                              | 5.46 |                                                  |     |                                |   |    
|Forfeited or expired          |  |       |  |                              |     |                                                  |     |                                |   |    
|                              |  |        |  |                              |      |                                                  |      |                                |   |    
|Balance at September 30, 2007 |  | 32,652 |  | $                            | 6.29 |                                                  | 3.90 |                                | $ | 474

A summary of the activity in the Companys non-vested shares as of September 30, 2007 is presented
below:



|                                 |  |               |  |                                        |      
|-------------------------------- |  | ------------- |  | -------------------------------------- | -----
|                                 |  | Common Shares |  | Weighted Average Grant-Date Fair Value
|Non-Vested as of June 30, 2007   |  | 14,453        |  | $                                      | 13.71
|Awards Granted                   |  |              |  |                                        |     
|Vested                           |  |              |  |                                        |     
|Forfeited                        |  |              |  |                                        |     
|                                 |  |               |  |                                        |      
|Non-vested at September 30, 2007 |  | 14,453        |  | $                                      | 13.71

As of September 30, 2007 there was $131,000 of total unrecognized compensation costs related to non-vested
share-based compensation. The cost is expected to be recognized over a weighted average period of 30 months. At grant date, vesting of the shares was cliff vesting at the end of either a two or three year period. Compensation expense
totaling $18,000 and $0 has been recognized in the three month periods ended September 30, 2007 and September 30, 2006 as a result of these awards.

Note 10: Announced Transaction

As announced on March 19, 2007, Patapsco Bancorp, Inc. executed a definitive merger agreement with Bradford
Bancorp, Inc whereby the Company will be merged with and into Bradford Bancorp. The transaction is expected to be completed late in the fourth calendar quarter of 2007 or early in the first quarter of 2008 and is subject to the approval of the
members of Bradford Bank MHC, the shareholders of Patapsco Bancorp and regulatory authorities.

In connection with the merger, Bradford Banks current
mutual holding company, Bradford Bank MHC, which owns 100% of Bradford Bancorps outstanding shares, will undergo a full mutual-to-stock conversion and stock offering. Under the terms of the transaction, shareholders of Patapsco Bancorp will be
entitled to receive either $23.00 in cash or 2.3 shares of Bradford Bancorp common stock (assuming a $10.00 per share initial public offering price) in exchange for each share of Patapsco Bancorp common stock. Based upon the $23.00 per share price,
the consideration is approximately 278% of tangible book value, 229% of book value and 30 times trailing twelve months earnings at the date of announcement.



|Item 2. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

General

The Companys results of operations depend primarily on its level of net interest income, which is the difference between
interest earned on interest-earning assets, consisting primarily of loans, investment securities, mortgage-backed securities and other investments, and the interest paid on interest-bearing liabilities, consisting primarily of



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deposits and advances from the Federal Home Loan Bank of Atlanta. The net interest income earned on interest-earning assets (net interest margin)
and the ratio of interest-earning assets to interest-bearing liabilities have a significant impact on net interest income. The Companys net interest margin is affected by regulatory, economic and competitive factors that influence interest
rates, loan and deposit flows. The Company, like other financial institutions, is subject to interest rate risk to the degree that its interest-earning assets mature or reprice at different times, or on a different basis, than its interest-bearing
liabilities. The Companys results of operations are also significantly impacted by the amount of its non-interest income, including loan fees and service charges, and levels of non-interest expense, which consists principally of compensation
and employee benefits, insurance premiums, professional fees, equipment expense, occupancy costs, advertising, data processing and other operating expenses.

The Companys operating results are significantly affected by general economic and competitive conditions, in particular, changes in market interest rates, government policies and actions taken by regulatory authorities. Lending
activities are influenced by general economic conditions, 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 level of personal income and savings in the Companys market area.

Forward-Looking Statements

When used in this Form 10-QSB, 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 the ability of the Company and Bradford Bancorp to satisfy all conditions necessary to consummate their proposed merger 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.

Critical Accounting Policies

The Companys consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP) and follow general practices within the industry in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that
affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the consolidated financial statements; accordingly, as this
information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater
possibility of producing results that could be materially different than originally reported. These estimates, assumptions and judgments are necessary when financial instruments are required to be recorded at fair value or when the decline in the
value of an asset carried on the balance sheet at historic cost requires an impairment write-down or a valuation reserve to be established.

The allowance
for loan losses (allowance) represents an amount, that in the judgment of management, will be adequate to absorb probable losses on outstanding loans and leases that may become uncollectible. The allowance represents an estimate made
based upon two principles of accounting: (1) Statement of Financial Accounting Standards (SFAS) No.5 Accounting for Contingencies, that requires losses to be accrued when their occurrence is probable and estimable, and
(2) SFAS No. 114 Accounting by Creditors for Impairment of a Loan, that requires losses be accrued when it is probable that the lender will not collect all principal and interest due under the original terms of the loan. The
adequacy of the allowance is determined through careful evaluation of the loan portfolio. This determination is inherently subjective and requires significant estimates, including estimated losses on pools of homogeneous loans based on historical
loss experience and consideration of the current economic environment that may be subject to change. Loans and leases deemed uncollectible are charged against the allowance and recoveries of previously charged-off amounts are credited to it. The
level of the allowance is adjusted through the provision for loan losses that is recorded as a current period expense.



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The methodology for assessing the appropriateness of the allowance includes a specific allowance, a formula allowance and
a nonspecific allowance. The specific allowance is for risk rated credits on an individual basis. The formula allowance reflects historical losses by credit category. The nonspecific allowance captures losses whose impact on the portfolio have
occurred but have yet to be recognized in either the specific allowance or the formula allowance. The factors used in determining the nonspecific allowance include trends in delinquencies, trends in volumes and terms of loans, the size of loans
relative to the allowance, concentration of credits, the quality of the risk identification system and credit administration and local and national economic trends.

In accordance with the provisions of Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, as amended by Statement 118, Accounting by Creditors for Impairment of a
LoanIncome Recognition and Disclosures (collectively referred to as Statement 114), Patapsco determines and recognizes impairment of certain loans. A loan is determined to be impaired when, based on current information and events,
it is probable that Patapsco will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is not considered impaired during a period of delay in payment if Patapsco expects to collect all amounts due,
including past-due interest. Patapsco generally considers a period of delay in payment to include delinquency up to and including 90 days. Statement 114 requires that impairment in a loan be measured at the present value of its expected future cash
flows discounted at the loans effective interest rate, or at the loans observable market price or the fair value of the collateral if the loan is collateral dependent.

Statement 114 is generally applicable for all loans except large groups of smaller-balance homogeneous loans that are evaluated collectively for impairment, including residential first and second mortgage loans and
consumer installment loans. Impaired loans are therefore generally comprised of commercial mortgage, real estate development, and certain restructured residential loans. In addition, impaired loans are generally loans which management has placed in
non-accrual status since loans are placed in non-accrual status on the earlier of the date that management determines that the collection of principal and/or interest is in doubt or the date that principal or interest is 90 days or more past-due.

Management believes that the allowance is adequate. However, its determination requires significant judgment, and estimates of the probable losses in the
loan and lease portfolio can vary significantly from amounts that actually occur.

Comparison of Financial Condition at September 30, 2007 and
June 30, 2007

Patapsco Bancorps assets increased by $1.9 million, or 0.75% to $257.4 million at September 30, 2007 from $255.5 million
at June 30, 2007.

Total loans grew by $1.9 million or 0.85% to $222.1 million at September 30, 2007 from $220.2 million at June 30, 2007.
Growth in commercial business loans of $1.9 million, residential mortgage loans of $1.2 million, and commercial real estate loans of $0.3 million offset decreases in construction loans of $0.8 million and commercial leases of $0.7 million.
Securities available for sale decreased by $1.2 million to $11.9 million at September 30, 2007 from $13.1 million at June 30, 2007 as maturities and amortization of the mortgage-backed securities portfolio was not replaced by new purchases
of investment securities.

Interest-bearing deposits increased $1.1 million, or 0.6%, to $179.0 million at September 30, 2007 from $177.9 million at
June 30, 2007. Noninterest-bearing deposits decreased $1.1 million, or 9.4%, to $10.6 million at September 30, 2007 from $11.7 million at June 30, 2007. Borrowings from the Federal Home Loan Bank of Atlanta increased by $3.5 million
as the increase in short-term borrowings of $7.7 million offset a $4.2 million decrease in long-term borrowings. The increase in borrowings was used to replace $3.3 million in higher priced brokered deposits that matured in the period. During the
quarter, accrued expenses and other liabilities decreased by $1.1 million, or 37.4%, due primarily to escrow disbursements for property taxes of residential mortgage borrowers. The decrease in stockholders equity resulted primarily from
holders of shares in the now terminated employee stock ownership plan exercising their options to sell the shares back to Patapsco Bancorp.

Comparison
of Operating Results for the Quarter Ended September 30, 2007 and September 30, 2006

Net Income.Patapsco Bancorps net
income decreased by $177,000, or 49.7%, to $179,000 for the quarter ended



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September 30, 2007 from $356,000 for the quarter ended September 30, 2006. The decrease in Patapsco Bancorps net income during the
three-month period was due to a higher provision for loan losses, higher merger-related professional fees, a higher effective tax rate resulting from the merger -related expenses being non-tax deductible and a slight decrease in net interest income
partially offset by slightly higher noninterest income.

Interest Income. Total interest income increased by $502,000, or 13.1%, to $4.3
million for the quarter ended September 30, 2007 from $3.8 million for the quarter ended September 30, 2006. Higher average balances and rates earned on the loan portfolio offset lower volumes in other interest-earning assets. The yield on
earning assets increased by 15 basis points to 7.23% in the quarter ended September 30, 2007 compared to 7.08% in the quarter ended September 30, 2006 due to assets re-pricing at higher current market rates.

Interest income on loans receivable increased by $533,000, or 14.8%, to $4.1 million for the quarter ended September 30, 2007 from $3.6 million for the quarter
ended September 30, 2006. The increase in interest income on loans receivable during the three-month period was due primarily to the increase in the average balance of loans receivable and to a lesser extent, an increase in the average yield
earned on the loan portfolio. During the three months ended September 30, 2007 as compared to the same period in 2006, the average loans receivable balance increased by $26.1 million to $221.6 million from $195.5 million and the average yield
increased by 9 basis points to 7.46% from 7.37%. Average loan balances increased due to originations more than offsetting pay-offs and amortizations. Loan yields increased due to loans funding and re-pricing at higher current interest rates.

Interest income on investment securities, including investments required by law, decreased by $32,000 or 15.0% as the $3.9 million decrease in the average
balance was only partially offset by higher rates earned on these investments.

Interest income on federal funds sold and other investments increased
$1,000 or 4.0% to $26,000 as higher average balances outstanding offset lower rates earned.

Interest Expense.Total interest expense
increased by $523,000, or 32.0%, to $2.1 million for the quarter ended September 30, 2007 from $1.6 million for the quarter ended September 30, 2006 due to both higher rates paid and higher average balances of interest-bearing liabilities.
Interest expense on deposits increased by $436,000 or 38.2% to $1.6 million from $1.1 million due to both higher rates paid on deposits and higher average balances outstanding. Interest expense on short-term borrowings increased $31,000, or 91.1%,
due to higher average balances outstanding offsetting lower rates paid on such liabilities. Interest expense on long-term borrowings increased $56,000, or 12.2%, due to higher rates paid combined with higher average balances outstanding.

Net Interest Income. Patapsco Bancorps net interest income decreased by $21,000, or 0.95%, to $2.2 million for the quarter ended September 30, 2007
compared to the same quarter in 2006. The decrease in net interest income during the comparable three-month period was primarily due to higher volumes of and higher rates paid on interest-bearing liabilities offsetting higher volumes of
interest-earning assets and slightly higher rates earned on these assets. The net interest margin decreased to 3.64% in the quarter ended September 30, 2007 from 4.07% in the quarter ended September 30, 2006.

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 cost of liabilities for the periods and at the date indicated. Dividing
income or expense by the average daily balance of assets or liabilities, respectively, derives such yields and costs for the periods presented. Average balances are derived from daily balances.

The table also presents information for the periods indicated with respect to the Companys net interest margin, which is net interest income divided by the average
balance of interest earning assets. This in an important indicator of commercial bank profitability. The net interest margin is affected by yields on interest-earning assets, the costs of interest-bearing liabilities and the relative amounts of
interest earning assets and interest bearing liabilities. Another indicator of The Companys net interest income is the interest rate spread, or the difference between the average yield on interest earning assets and the average rate paid on
interest-bearing liabilities.



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|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | ------- | -------- | ---- | ----------------- |  | ------ | -------------- |  | -------- | ------- | ----------------- | - | ----- |  | ------ | -
|                                                                                 |  | Three months Ended September 30, |        
|                                                                                 |  | 2007                             |         |          | 2006 |                  
|                                                                                 |  | AverageBalance                   |         | Interest |      | AverageYield/Cost |  |        | AverageBalance |  | Interest |         | AverageYield/Cost |  
|                                                                                 |  | (Dollars in thousands)           |        
|Interest-earning assets:                                                         |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Loans receivable (1)                                                             |  | $                                | 221,625 |          | $    | 4,133             |  | 7.46   | %              |  | $        | 195,468 |                   | $ | 3,600 |  | 7.37   | %
|Investment and mortgage-backed securities (2)                                    |  |                                  | 15,179  |          |      | 181               |  | 4.77   |                |  |          | 19,051  |                   |   | 213   |  | 4.48   |  
|Short-term investments and other interest-earning assets                         |  |                                  | 3,314   |          |      | 26                |  | 3.14   |                |  |          | 2,264   |                   |   | 25    |  | 4.43   |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Total interest-earning assets                                                    |  |                                  | 240,118 |          |      | 4,340             |  | 7.23   |                |  |          | 216,783 |                   |   | 3,838 |  | 7.08   |  
|Non-interest-earning assets                                                      |  |                                  | 14,339  |          |      |                   |  |        |                |  |          | 13,914  |                   |   |       |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Total assets                                                                     |  | $                                | 254,457 |          |      |                   |  |        |                |  | $        | 230,697 |                   |   |       |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Interest-bearing liabilities:                                                    |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Deposits (3)                                                                     |  | $                                | 177,734 |          | $    | 1,576             |  | 3.55   | %              |  | $        | 156,779 |                   | $ | 1,140 |  | 2.91   | %
|Short-term borrowings                                                            |  |                                  | 4,750   |          |      | 65                |  | 5.45   |                |  |          | 2,424   |                   |   | 34    |  | 5.59   |  
|Long-term borrowings                                                             |  |                                  | 39,712  |          |      | 515               |  | 5.18   |                |  |          | 38,167  |                   |   | 459   |  | 4.81   |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Total interest-bearing liabilities                                               |  |                                  | 222,196 |          |      | 2,156             |  | 3.88   |                |  |          | 197,370 |                   |   | 1,633 |  | 3.31   |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Non-interest-bearing liabilities                                                 |  |                                  | 13,499  |          |      |                   |  |        |                |  |          | 14,785  |                   |   |       |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Total liabilities                                                                |  |                                  | 235,795 |          |      |                   |  |        |                |  |          | 212,155 |                   |   |       |  |        |  
|Total Equity                                                                     |  |                                  | 18,762  |          |      |                   |  |        |                |  |          | 18,542  |                   |   |       |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Total liabilities and equity                                                     |  | $                                | 254,457 |          |      |                   |  |        |                |  | $        | 230,697 |                   |   |       |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Net interest income                                                              |  |                                  |         |          | $    | 2,184             |  |        |                |  |          |         |                   | $ | 2,205 |  |        |  
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Net interest margin                                                              |  |                                  |         |          |      |                   |  | 3.64   | %              |  |          |         |                   |   |       |  | 4.07   | %
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Interest rate spread                                                             |  |                                  |         |          |      |                   |  | 3.35   | %              |  |          |         |                   |   |       |  | 3.77   | %
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                                  |         |          |      |                   |  | 108.07 | %              |  |          |         |                   |   |       |  | 109.84 | %
|                                                                                 |  |                                  |         |          |      |                   |  |        |                |  |          |         |                   |   |       |  |        |  

---

|(1) | Includes nonaccrual loans.
|--- | --------------------------

|(2) | Includes investments required by law
|--- | ------------------------------------

|(3) | Includes interest bearing escrow accounts
|--- | -----------------------------------------



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Provision 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 loan losses. The components of the allowance for loan losses represent an estimation done pursuant to either Statement of Financial Accounting Standards
(SFAS) No. 5, Accounting for Contingencies, or SFAS No. 114, Accounting by Creditors for Impairment of a Loan. The adequacy of the allowance for loan losses is determined through a continuous
review of the loan and lease portfolio and considers factors such as prior loss experience, type of collateral, industry standards, amount and type of past due loans in Patapsco Bancorps loan portfolio, current economic conditions, both
national and local, and other factors unique to particular loans and leases in the portfolio. Patapsco Bancorps management periodically monitors and adjusts its allowance for loan losses based upon its analysis of the loan portfolio.

The provision for loan losses was $150,000 in the quarter ended September 30, 2007, compared to $40,000 for the quarter ended September 30,
2006. The increase in the provision is primarily due to higher net charge-offs and weakness in the commercial lease portfolio. Patapsco Bancorps allowance for loan losses as a percentage of total loans outstanding increased to 0.52% of total
loans at September 30, 2007 from 0.50% at June 30, 2007. Patapsco Bancorps allowance for loan losses as a percentage of nonperforming loans was 195.7% at September 30, 2007 as compared to 230.3% at June 30, 2007. Patapsco
Bancorp has concluded, after analyzing the nonperforming loan portfolio and the factors mentioned above, that the allowance is adequate.

The following
table shows the activity in the allowance for loan losses.



|                                                                                     |  |                                |        |   |      |   |       |  
|------------------------------------------------------------------------------------ |  | ------------------------------ | ------ | - | ---- | - | ----- | -
|                                                                                     |  | Three Months EndedSeptember 30 |       
|                                                                                     |  | 2007                           |        |   | 2006 |  
|Allowance for loan losses, beginning of period                                       |  | $                              | 1,110  |   |      | $ | 1,000 |  
|Provision for loan losses                                                            |  |                                | 150    |   |      |   | 40    |  
|Loans Charged Off:                                                                   |  |                                |        |   |      |   |       |  
|Consumer                                                                             |  |                                | 49     |   |      |   | 29    |  
|Real Estate                                                                          |  |                                |       |   |      |   |      |  
|Commercial Loan                                                                      |  |                                |       |   |      |   |      |  
|Commercial Lease                                                                     |  |                                | 78     |   |      |   | 77    |  
|                                                                                     |  |                                |        |   |      |   |       |  
|Total Charge-Offs                                                                    |  |                                | 127    |   |      |   | 106   |  
|                                                                                     |  |                               
|Recoveries:                                                                          |  |                                |        |   |      |   |       |  
|Consumer                                                                             |  |                                | 12     |   |      |   | 18    |  
|Real Estate                                                                          |  |                                |       |   |      |   |      |  
|Commercial Loan                                                                      |  |                                | 2      |   |      |   | 22    |  
|Commercial Lease                                                                     |  |                                | 6      |   |      |   | 33    |  
|                                                                                     |  |                                |        |   |      |   |       |  
|Total Recoveries                                                                     |  |                                | 20     |   |      |   | 73    |  
|                                                                                     |  |                                |        |   |      |   |       |  
|Allowance for loan losses, end of period                                             |  | $                              | 1,153  |   |      | $ | 1,007 |  
|                                                                                     |  |                                |        |   |      |   |       |  
|Ratio of net charge-offs (annualized) to average loans outstanding during the period |  |                                | 0.19   | % |      |   | 0.07  | %
|                                                                                     |  |                                |        |   |      |   |       |  
|Ratio of allowance to nonperforming loans                                            |  |                                | 195.70 | % |      |   | 367.6 | %
|                                                                                     |  |                                |        |   |      |   |       |  



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The following table sets forth information with respect to the Companys non-performing assets at the dates
indicated.



|                                                               |  |                   |      |   |                  |   |      |  
|-------------------------------------------------------------- |  | ----------------- | ---- | - | ---------------- | - | ---- | -
|                                                               |  | At Sept., 30,2007 |      |   | At June, 30,2007 |  
|Loans accounted for on a non-accrual basis(1)                  |  |                   |      |   |                  |   |      |  
|Real Estate:                                                   |  |                   |      |   |                  |   |      |  
|Residential                                                    |  | $                 | 168  |   |                  | $ | 168  |  
|Commercial                                                     |  |                   |     |   |                  |   |     |  
|Construction                                                   |  |                   |     |   |                  |   |     |  
|Consumer                                                       |  |                   | 24   |   |                  |   | 14   |  
|Commercial Loan                                                |  |                   | 358  |   |                  |   | 247  |  
|Commercial Lease                                               |  |                   | 39   |   |                  |   | 53   |  
|                                                               |  |                   |      |   |                  |   |      |  
|Total                                                          |  | $                 | 589  |   |                  | $ | 482  |  
|                                                               |  |                  
|Accruing loans that are contractually past due 90 days or more |  |                   |     |   |                  |   |     |  
|                                                               |  |                   |      |   |                  |   |      |  
|Total                                                          |  | $                 | 589  |   |                  | $ | 482  |  
|                                                               |  |                   |      |   |                  |   |      |  
|Percentage of total loans                                      |  |                   | 0.27 | % |                  |   | 0.22 | %
|                                                               |  |                   |      |   |                  |   |      |  
|Other non-performing assets(2)                                 |  | $                 | 5    |   |                  | $ | 5    |  

---

|(1) | Nonaccrual status denotes loans on which, in the opinion of management, the collection of additional interest is unlikely. Payments received on nonaccrual loan are either applied to
the outstanding principal balance or recorded as interest income, depending on managements assessment of the collectability of the loan.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other nonperforming assets represent property acquired by Patapsco Bancorp through foreclosure or repossession.
|--- | ---------------------------------------------------------------------------------------------------------------

At September 30, 2007, nonaccrual loans included one residential mortgage loan with a balance of $168,000. The property securing this loan was sold at foreclosure
auction in October 2007 at a price that will result in a full recovery of principal, interest and expenses. Additionally, there were three commercial loans with a balance of $358,000 with 85% SBA guarantees, three commercial equipment leases
totaling $39,000 and three consumer loans with a balance of $24,000. Other repossessed assets represents the estimated fair value, less selling costs, of a truck that was repossessed in connection with a nonperforming equipment lease.

Noninterest Income. Patapsco Bancorps noninterest income consists of deposit fees, service charges, income from bank owned life insurance
(BOLI) and gains. Total noninterest income increased by $20,000, or 10.7%, to $207,000 for the quarter ended September 30, 2007 from $187,000 for the quarter ended September 30, 2006. The increase was primarily a result of
higher service charges on deposits.

Noninterest Expenses. Total noninterest expenses increased by $14,000, or 0.78%, to $1.79 million for
the quarter ended September 30, 2007 from $1.78 million for the quarter ended September 30, 2006. Increased professional fees, equipment expenses, occupancy costs and telephone, postage and delivery expenses were partially offset by
decreases in compensation costs, other expenses and advertising. Professional fees expense includes $109,000 of merger -related legal and accounting expenses.

Income Taxes. Income tax expense was $263,000 (or 59.5% of income before the provision for income taxes) and $211,000 (or 37.2% of income before the provision for income taxes) for the periods ended September 30, 2007 and
2006, respectively. The large increase in the effective tax rate is a result of the non-deductibility of the above -mentioned merger -related professional fees.

Liquidity and Capital Resources

An important component of the Companys asset/liability structure is the level of liquidity
available to meet the needs of customers and creditors. The Companys Asset/Liability Management Committee has established general guidelines for the maintenance of prudent levels of liquidity. The Committee continually monitors the amount and
source of available liquidity, the time to acquire it and its cost. Management of the Company seeks to maintain a



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relatively high level of liquidity in order to retain flexibility in terms of investment opportunities and deposit pricing. Because liquid assets generally
provide lower rates of return, the Companys relatively high liquidity will, to a certain extent, result in lower rates of return on assets.

The
Companys most liquid assets are cash on hand, interest-bearing deposits 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, 2007, the Companys cash on hand, interest-bearing deposits and Federal funds sold
totaled $8.7 million. In addition, the Company has approximately $11.9 million of investment securities classified as available-for-sale, none of which are pledged.

The Company anticipates that it will have sufficient funds available to meet its current loan commitments of $19.8 million and unused lines of credit of $8.8 million. Certificates of deposit that are scheduled to
mature in less than one year at September 30, 2007 totaled $76.9 million. Historically, a high percentage of maturing deposits have remained with the Company.

The Company, as the holding company for the Bank, has an annual cash requirement of approximately $800,000 for the payment of common dividends and debt service on the subordinated debentures. The only source of funds for the holding company
is dividends from the Bank. The amount of dividends that can be paid to the holding company from the bank is limited by the earnings of the bank. At September 30, the Company had cash on hand of $2.6 million.

Contingencies and Off-Balance Sheet Items

The Company is
party to financial instruments with off-balance sheet risk including commitments to extend credit under both new facilities and under existing lines of credit. Commitments to fund loans typically expire after 60 days, commercial lines of credit are
subject to annual reviews and home equity lines of credit are generally for a term of 20 years. These instruments contain, to varying degrees, credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

Off-balance sheet financial instruments whose contract amounts represent credit and interest rate risk are summarized as follows:



|                                    |  |                        |        |               |   |       
|----------------------------------- |  | ---------------------- | ------ | ------------- | - | ------
|                                    |  | September 30, 2007     |        | June 30, 2007
|                                    |  | (dollars in thousands)
|Commitments to originate new loans  |  | $                      | 19,834 |               | $ | 19,452
|Undisbursed lines of credit         |  |                        | 8,838  |               |   | 14,909
|Financial standby letters of credit |  |                        | 1,691  |               |   | 1,749 

As discussed in Note 5 - Regulatory Capital Requirements, the Bank exceeded all regulatory minimum capital
requirements.

Contractual Obligations

The
following table sets forth the Companys contractual obligations as of September 30, 2007:



|                                                        |  |                        |        |              |   |            |  |              |        |       |   |        |  |   |        
|------------------------------------------------------- |  | ---------------------- | ------ | ------------ | - | ---------- |  | ------------ | ------ | ----- | - | ------ |  | - | -------
|                                                        |  | < 1 year               |        | 1 to 3 Years |   | 4 5 Years |  | Over 5 Years |        | Total
|                                                        |  | (dollars in thousands)
|Time Deposits                                           |  | $                      | 76,905 |              | $ | 26,075     |  | $            | 10,999 |       | $ | 50     |  | $ | 114,029
|Long-term borrowings, including subordinated debentures |  |                        | 17,500 |              |   | 3,000      |  |              | 5,100  |       |   | 14,000 |  |   | 39,600 
|Lease obligations                                       |  |                        | 183    |              |   | 351        |  |              | 318    |       |   | 2,449  |  |   | 3,301  
|                                                        |  |                        |        |              |   |            |  |              |        |       |   |        |  |   |        
|Total Contractual Obligations                           |  | $                      | 97,588 |              | $ | 29,426     |  | $            | 16,417 |       | $ | 16,499 |  | $ | 156,930
|                                                        |  |                        |        |              |   |            |  |              |        |       |   |        |  |   |        



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|Item 3: | Controls and Procedures
|------- | -----------------------

As of the end of the period covered by
this report, management of the Company carried out an evaluation, under the supervision and with the participation of the Companys principal executive officer and principal financial officer, of the effectiveness of the Companys
disclosure controls and procedures. Based on this evaluation, the Companys principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and
Exchange Commissions rules and forms

There have been no changes in the Companys internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Securities and Exchange Commission Rule 13a-15 that occurred during the Companys last fiscal quarter, that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.

Part II. Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

None.



|Item 2. | Unregistered sales of equity securities and use of proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



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

None



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------

(a) Exhibits

The following exhibits are filed herewith:



|              |  |                                                                                    
|------------- |  | -----------------------------------------------------------------------------------
|ExhibitNumber |  | Title                                                                              
|31            |  | Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer
|              | 
|32            |  | Certification pursuant to 18 U.S.C. Section                                        



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Signatures

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |                                                                                             
|----------------------- |  | --------------------------------------------------------------------------------------------
|                        |  | PATAPSCO BANCORP, INC.                                                                      
|                        | 
|Date: November 13, 2007 |  | /s/ Michael J. Dee                                                                          
|                        |  | Michael J. Dee                                                                              
|                        |  | President, Chief Executive Officer and Chief Financial Officer (Principal Financial Officer)



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