##### 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 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2006



| ̈ | Transition Report Pursuant to 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

Registrant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 February 13, 2007, the issuer had 1,864,038 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 December 31, 2006(unaudited) And June 30, 2006                                 |  | 3   
|               |  |                                                                                                                                 
|               |  | Consolidated Statements of Income for the Six and Three-Month Periods Ended December 31, 2006 and 2005(unaudited)                |  | 4   
|               |  |                                                                                                                                 
|               |  | Consolidated Statements of Comprehensive Income for the Six and Three-Month Periods Ended December 31, 2006 and 2005 (unaudited) |  | 5   
|               |  |                                                                                                                                 
|               |  | Consolidated Statements of Cash Flows for the Six-Month Periods Ended December 31, 2006 and 2005(unaudited)                      |  | 6   
|               |  |                                                                                                                                 
|               |  | Notes to Financial Statements (unaudited)                                                                                        |  | 7   
|               |  |                                                                                                                                 
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                            |  | 10  
|               |  |                                                                                                                                 
|Item 3.        |  | Controls and procedures                                                                                                          |  | 18  
|               |  |                                                                                                                                 
|PART II.       |  | OTHER INFORMATION                                                                                                                |  |     
|               |  |                                                                                                                                 
|Item 1.        |  | Legal Proceedings                                                                                                                |  | 19  
|               |  |                                                                                                                                 
|Item 2.        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                      |  | 19  
|               |  |                                                                                                                                 
|Item 3.        |  | Defaults Upon Senior Securities                                                                                                  |  | 19  
|               |  |                                                                                                                                 
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                                              |  | 19  
|               |  |                                                                                                                                 
|Item 5.        |  | Other Information                                                                                                                |  | 19  
|               |  |                                                                                                                                 
|Item 6.        |  | Exhibits                                                                                                                         |  | 19  
|               | 
|Signature      |  | 20                                                                                                                              
|               | 
|Certifications |  | 21                                                                                                                              



2



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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 per share data)



|                                                                                                                               |  |                              |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                                               |  | December 31, 2006(Unaudited) |         |   | June 30,2006 |  
|                                                                                                                               |  |                             
|Assets                                                                                                                         |  |                              |         |   |              |   |         |  
|Cash on hand and due from banks                                                                                                |  | $                            | 3,891   |   |              |   | 4,839   |  
|Interest bearing deposits in other banks                                                                                       |  |                              | 855     |   |              |   | 968     |  
|Federal funds sold                                                                                                             |  |                              |        |   |              |   | 2,381   |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Cash and Cash equivalents                                                                                                      |  |                              | 4,746   |   |              |   | 8,188   |  
|Time deposits at other financial institutions                                                                                  |  |                              |        |   |              |   | 605     |  
|Securities, available for sale                                                                                                 |  |                              | 15,203  |   |              |   | 16,667  |  
|Loans receivable, net of allowance for loan losses of $1,001, and $1,000, respectively                                         |  |                              | 213,038 |   |              |   | 190,589 |  
|Investments required by law, at cost                                                                                           |  |                              | 2,539   |   |              |   | 2,416   |  
|Property and equipment, net                                                                                                    |  |                              | 3,678   |   |              |   | 2,175   |  
|Goodwill and other intangible assets                                                                                           |  |                              | 3,329   |   |              |   | 3,354   |  
|Accrued interest and other assets                                                                                              |  |                              | 4,281   |   |              |   | 4,076   |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total assets                                                                                                                   |  | $                            | 246,814 |   |              | $ | 228,070 |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Liabilities and Stockholders Equity                                                                                           |  |                              |         |   |              |   |         |  
|Liabilities:                                                                                                                   |  |                              |         |   |              |   |         |  
|Deposits:                                                                                                                      |  |                              |         |   |              |   |         |  
|Non interest bearing deposits                                                                                                  |  | $                            | 12,688  |   |              | $ | 13,186  |  
|Interest bearing deposits                                                                                                      |  |                              | 169,909 |   |              |   | 153,647 |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total Deposits                                                                                                                 |  |                              | 182,597 |   |              |   | 166,833 |  
|Short term debt                                                                                                                |  |                              | 112     |   |              |   |        |  
|Junior Subordinated Debentures                                                                                                 |  |                              | 5,000   |   |              |   | 5,000   |  
|Long term Debt                                                                                                                 |  |                              | 37,800  |   |              |   | 35,050  |  
|                                                                                                                               |  |                             
|Accrued expenses and other liabilities                                                                                         |  |                              | 2,200   |   |              |   | 2,899   |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total liabilities                                                                                                              |  |                              | 227,709 |   |              |   | 209,782 |  
|                                                                                                                               |  |                             
|Temporary Equity  ESOP shares subject to put option                                                                           |  |                              | 1,203   |   |              |   | 1,121   |  
|                                                                                                                               |  |                             
|Stockholders equity:                                                                                                          |  |                              |         |   |              |   |         |  
|Common stock $0.01 par value: authorized 4,000,000 shares: issued and outstanding 1,850,157 and 1,813,925 shares, respectively |  |                              | 19      |   |              |   | 18      |  
|Additional paid-in capital                                                                                                     |  |                              | 7,003   |   |              |   | 6,950   |  
|Obligation under deferred compensation                                                                                         |  |                              | 416     |   |              |   | 395     |  
|Deferred compensation contra                                                                                                   |  |                              | (78     | ) |              |   | (78     | )
|Retained earnings, substantially restricted                                                                                    |  |                              | 10,786  |   |              |   | 10,317  |  
|Accumulated other comprehensive loss, net of taxes                                                                             |  |                              | (244    | ) |              |   | (435    | )
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total stockholders equity  permanent                                                                                         |  |                              | 17,902  |   |              |   | 17,167  |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total stockholders equity -including temporary equity                                                                         |  |                              | 19,105  |   |              |   | 18,288  |  
|                                                                                                                               |  |                              |         |   |              |   |         |  
|Total liabilities and stockholders equity                                                                                     |  | $                            | 246,814 |   |              | $ | 228,070 |  
|                                                                                                                               |  |                              |         |   |              |   |         |  

See accompanying notes to financial statements



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##### Table of Contents

Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

($ in thousands except for per
share data)



|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|--------------------------------------------------- |  | -------------------------------- | ----- | ---------------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                                    |  | For Six Months EndedDecember 31, |       | For Three Months EndedDecember 31,
|                                                    |  | 2006                             |       | 2005                               |   | 2006  |  | 2005
|Interest income:                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Loans receivable                                    |  | $                                | 7,441 |                                    | $ | 5,838 |  | $    | 3,841 |  | $ | 3,072
|Securities, including securities required by law    |  |                                  | 415   |                                    |   | 472   |  |      | 203   |  |   | 230  
|Federal funds sold and other investments            |  |                                  | 68    |                                    |   | 63    |  |      | 42    |  |   | 25   
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Total interest income                               |  |                                  | 7,924 |                                    |   | 6,373 |  |      | 4,086 |  |   | 3,327
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Interest expense:                                   |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Deposits                                            |  |                                  | 2,486 |                                    |   | 1,583 |  |      | 1,345 |  |   | 814  
|Short-term borrowings                               |  |                                  | 36    |                                    |   | 24    |  |      | 2     |  |   | 22   
|Long-term debt                                      |  |                                  | 980   |                                    |   | 559   |  |      | 521   |  |   | 305  
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Total interest expense                              |  |                                  | 3,502 |                                    |   | 2,166 |  |      | 1,868 |  |   | 1,141
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Net interest income                                 |  |                                  | 4,422 |                                    |   | 4,207 |  |      | 2,218 |  |   | 2,186
|Provision for loan losses                           |  |                                  | 110   |                                    |   | 40    |  |      | 70    |  |   | 20   
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Net interest income after provision for loan losses |  |                                  | 4,312 |                                    |   | 4,167 |  |      | 2,148 |  |   | 2,166
|                                                    |  |                                  |       |                                   
|Non-interest income:                                |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Fees and service charges                            |  |                                  | 351   |                                    |   | 300   |  |      | 189   |  |   | 162  
|Gain on sale of office building                     |  |                                  |      |                                    |   | 64    |  |      |      |  |   |     
|Other                                               |  |                                  | 54    |                                    |   | 77    |  |      | 29    |  |   | 36   
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Total non-interest income                           |  |                                  | 405   |                                    |   | 441   |  |      | 218   |  |   | 198  
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Non-interest expenses:                              |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Compensation and employee benefits                  |  |                                  | 2,239 |                                    |   | 2,220 |  |      | 1,096 |  |   | 1,140
|Professional fees                                   |  |                                  | 130   |                                    |   | 97    |  |      | 72    |  |   | 54   
|Equipment expense                                   |  |                                  | 150   |                                    |   | 174   |  |      | 82    |  |   | 91   
|Occupancy expense                                   |  |                                  | 277   |                                    |   | 282   |  |      | 141   |  |   | 123  
|Advertising                                         |  |                                  | 46    |                                    |   | 46    |  |      | 21    |  |   | 20   
|Data processing                                     |  |                                  | 153   |                                    |   | 135   |  |      | 80    |  |   | 71   
|Amortization of core deposit intangible             |  |                                  | 26    |                                    |   | 26    |  |      | 13    |  |   | 13   
|Telephone, postage & delivery                       |  |                                  | 126   |                                    |   | 139   |  |      | 65    |  |   | 67   
|Other                                               |  |                                  | 428   |                                    |   | 426   |  |      | 221   |  |   | 221  
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Total non-interest expense                          |  |                                  | 3,575 |                                    |   | 3,545 |  |      | 1,791 |  |   | 1,800
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Income before provision for income taxes            |  |                                  | 1,142 |                                    |   | 1,063 |  |      | 575   |  |   | 564  
|Provision for income taxes                          |  |                                  | 427   |                                    |   | 399   |  |      | 216   |  |   | 213  
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Net Income                                          |  | $                                | 715   |                                    | $ | 664   |  | $    | 359   |  | $ | 351  
|Preferred dividends declared                        |  |                                  |      |                                    |   | 83    |  |      |      |  |   | 40   
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Net income available to common stockholders         |  | $                                | 715   |                                    | $ | 581   |  | $    | 359   |  | $ | 311  
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Basic earnings per share                            |  | $                                | 0.38  |                                    | $ | 0.39  |  | $    | 0.19  |  | $ | 0.21 
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Diluted earnings per share                          |  | $                                | 0.37  |                                    | $ | 0.35  |  | $    | 0.19  |  | $ | 0.18 
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      
|Cash dividends declared per common share            |  | $                                | 0.133 |                                    | $ | 0.125 |  | $    | 0.07  |  | $ | 0.625
|                                                    |  |                                  |       |                                    |   |       |  |      |       |  |   |      

See accompanying notes to financial statements.



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

($ in
thousands)



|                                                                                                                              |  |                                  |     |      |                                    |      |      |  |      |     |  |   |      |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --- | ---- | ---------------------------------- | ---- | ---- |  | ---- | --- |  | - | ---- | -
|                                                                                                                              |  | For Six Months EndedDecember 31, |     |      | For Three Months EndedDecember 31, |     
|                                                                                                                              |  | 2006                             |     | 2005 |                                    |      | 2006 |  | 2005 |    
|Net income                                                                                                                    |  | $                                | 715 |      | $                                  | 664  |      |  | $    | 359 |  | $ | 351  |  
|Other comprehensive income(loss), net of tax:                                                                                 |  |                                  |     |      |                                    |      |      |  |      |     |  |   |      |  
|Unrealized net holding (losses)/gains on securities, available-for-sale net of taxes of $120, $96, $31,and $121, respectively |  |                                  | 191 |      |                                    | (153 | )    |  |      | 49  |  |   | (193 | )
|                                                                                                                              |  |                                  |     |      |                                    |      |      |  |      |     |  |   |      |  
|Comprehensive income                                                                                                          |  | $                                | 906 |      | $                                  | 511  |      |  | $    | 408 |  | $ | 158  |  
|                                                                                                                              |  |                                  |     |      |                                    |      |      |  |      |     |  |   |      |  

See accompanying notes to financial statements.



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##### Table of Contents

Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

($ in
thousands)



|                                                                                                         |  |                                  |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                         |  | For Six Months EndedDecember 31, |        
|                                                                                                         |  | 2006                             |         |   | 2005 |  
|Cash flows from operating activities:                                                                    |  |                                  |         |   |      |   |         |  
|Net income                                                                                               |  | $                                | 715     |   |      | $ | 664     |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities:              |  |                                  |         |   |      |   |         |  
|(Accretion)/amortization of premiums and discounts, net                                                  |  |                                  | 14      |   |      |   | (3      | )
|Amortization of deferred loan origination fees, net of costs                                             |  |                                  | (14     | ) |      |   | (20     | )
|Provision for loan losses                                                                                |  |                                  | 110     |   |      |   | 40      |  
|Depreciation                                                                                             |  |                                  | 128     |   |      |   | 154     |  
|Gain on sale of office building                                                                          |  |                                  |        |   |      |   | (64     | )
|Amortization of core deposit intangible                                                                  |  |                                  | 26      |   |      |   | 26      |  
|Increase in the cash surrender value of life insurance                                                   |  |                                  | (33     | ) |      |   | (29     | )
|Increase in accrued interest and other assets                                                            |  |                                  | (266    | ) |      |   | (86     | )
|Non-cash compensation under stock-based benefit plans                                                    |  |                                  | 65      |   |      |   |        |  
|Increase in accrued expenses and other liabilities                                                       |  |                                  | 354     |   |      |   | 276     |  
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Net cash provided by operating activities                                                                |  |                                  | 1,099   |   |      |   | 958     |  
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Cash flows from investing activities:                                                                    |  |                                  |         |   |      |   |         |  
|Loan principal disbursements, net of repayments                                                          |  |                                  | (21,218 | ) |      |   | (16,857 | )
|Proceeds from maturing time deposit investments                                                          |  |                                  | 600     |   |      |   |        |  
|Proceeds from maturing investments available for sale & principal payments on mortgage-backed securities |  |                                  | 1,757   |   |      |   | 3,525   |  
|Purchase of investment securities                                                                        |  |                                  | (2      | ) |      |   |        |  
|Purchase of consumer loans                                                                               |  |                                  | (1,333  | ) |      |   | (2,217  | )
|Purchase of investments required by law                                                                  |  |                                  | (123    | ) |      |   | (411    | )
|Cash received in sale of premises and equipment                                                          |  |                                  |        |   |      |   | 154     |  
|Purchase of property and equipment                                                                       |  |                                  | (1,631  | ) |      |   | (210    | )
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Net cash (used in)/provided by investing activities                                                      |  |                                  | (21,950 | ) |      |   | (16,016 | )
|Cash flows from financing activities:                                                                    |  |                                  |         |   |      |   |         |  
|Net increase in deposits                                                                                 |  |                                  | 15,781  |   |      |   | 3,001   |  
|Proceeds from long-term borrowings                                                                       |  |                                  | 5,000   |   |      |   | 9,000   |  
|Increase in short-term borrowings                                                                        |  |                                  | 112     |   |      |   | 4,500   |  
|Repayments of long-term borrowings                                                                       |  |                                  | (2,250  | ) |      |   | (5,183  | )
|Net decrease in deposits by borrowers for taxes and insurance                                            |  |                                  | (1,071  | ) |      |   | (1,163  | )
|Proceeds from the issuance of subordinated debentures                                                    |  |                                  |        |   |      |   | 5,000   |  
|Cash received from exercise of stock options                                                             |  |                                  | 67      |   |      |   | 141     |  
|Dividends paid                                                                                           |  |                                  | (230    | ) |      |   | (268    | )
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Net cash provided by financing activities                                                                |  |                                  | 17,409  |   |      |   | 15,028  |  
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                                |  | $                                | (3442   | ) |      | $ | (30     | )
|Cash and cash equivalents at beginning of period                                                         |  |                                  | 8,188   |   |      |   | 7,648   |  
|Cash and cash equivalents end of period                                                                  |  | $                                | 4,746   |   |      | $ | 7,618   |  
|                                                                                                         |  |                                  |         |   |      |   |         |  
|Supplemental information:                                                                                |  |                                  |         |   |      |   |         |  
|Interest paid on deposits and borrowed funds                                                             |  | $                                | 3,487   |   |      | $ | 2,098   |  
|Income taxes paid                                                                                        |  | $                                | 536     |   |      | $ | 73      |  

See accompanying notes to financial statements.



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##### Table of Contents

Patapsco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

(unaudited)

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 unaudited 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 and six months ended December 31, 2006 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, 2006.

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

On February 27, 2006, The Board of Governors of the Federal Reserve System
(Board) announced the approval of a final rule that expands the definition of a small bank holding company under the Boards Small Bank Holding Company Policy Statement and the Boards risk based and leverage capital guidelines for bank
holding companies. The Company has been informed by the Federal Reserve Bank of Richmond that it meets the expanded criteria for definition as a small bank holding company. One result of this rule change is that the Company is now exempt from the
Boards consolidated risk-based and leverage capital adequacy guidelines for Bank Holding Companies. The Banks regulatory capital guidelines remain unchanged.

At December 31, 2006, the Bank met each of the three minimum regulatory capital requirements. The following table summarizes the Banks regulatory capital position at December 31, 2006.



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##### Table of Contents

|                                         |  |        |        |   |                              |   |        |                                                         |        |  |      |        |  |        |  |       |  
|---------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | ------------------------------------------------------- | ------ |  | ---- | ------ |  | ------ |  | ----- | -
|                                         |  | Actual |        |   | For CapitalAdequacy Purposes |   |        | Well Capitalized UnderPrompt CorrectiveAction Provision |       
|($ in thousands)                         |  | Amount |        | % |                              |   | Amount |                                                         | %      |  |      | Amount |  | %      | 
|Total Capital (to Risk Weighted Assets)  |  | $      | 19,126 |   | 10.38                        | % |        | $                                                       | 14,735 |  | 8.00 | %      |  | 18,419 |  | 10.00 | %
|                                         |  |        |        |   |                              |  
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 18,125 |   | 9.84                         | % |        | $                                                       | 7,367  |  | 4.00 | %      |  | 11,051 |  | 6.00  | %
|                                         |  |        |        |   |                              |  
|Tier 1 Capital (to Average Assets)       |  | $      | 18,125 |   | 7.57                         | % |        | $                                                       | 9,571  |  | 4.00 | %      |  | 11,964 |  | 5.00  | %

The following table summarizes the Banks regulatory capital position at June 30, 2006 (in thousands).



|                                         |  |        |        |   |                              |   |        |                                                         |        |  |      |        |  |   |        |  |    |  
|---------------------------------------- |  | ------ | ------ | - | ---------------------------- | - | ------ | ------------------------------------------------------- | ------ |  | ---- | ------ |  | - | ------ |  | -- | -
|                                         |  | Actual |        |   | For CapitalAdequacy Purposes |   |        | Well Capitalized UnderPrompt CorrectiveAction Provision |       
|($ in thousands)                         |  | Amount |        | % |                              |   | Amount |                                                         | %      |  |      | Amount |  | % |       
|Total Capital (to Risk Weighted Assets)  |  | $      | 18,144 |   | 11.25                        | % |        | $                                                       | 12,904 |  | 8.00 | %      |  | $ | 16,130 |  | 10 | %
|                                         |  |        |        |   |                              |  
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 17,144 |   | 10.63                        | % |        | $                                                       | 6,452  |  | 4.00 | %      |  | $ | 9,678  |  | 6  | %
|                                         |  |        |        |   |                              |  
|Tier 1 Capital (to Average Assets)       |  | $      | 17,144 |   | 7.66                         | % |        | $                                                       | 8,958  |  | 4.00 | %      |  | $ | 11,197 |  | 5  | %

Note 6: Earnings Per Share

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



|                                         |  |                                |       |                              |   |       |  |      |       |  |   |      
|---------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                         |  | Three Months EndedDecember 31, |       | Six Months EndedDecember 31,
|                                         |  | 2006                           |       | 2005                         |   | 2006  |  | 2005
|(in thousands except for per share data) |  |                                |       |                              |   |       |  |     
|                                         |  |                                |       |                             
|Net Income as Reported                   |  | $                              | 359   |                              | $ | 351   |  | $    | 715   |  | $ | 664  
|Dividends on Preferred Shares            |  |                                |      |                              |   | 40    |  |      |      |  |   | 83   
|                                         |  |                                |       |                              |   |       |  |      |       |  |   |      
|Net Income available to common           |  | $                              | 359   |                              | $ | 311   |  | $    | 715   |  | $ | 581  
|Basic EPS shares                         |  |                                | 1,886 |                              |   | 1,485 |  |      | 1,895 |  |   | 1,473
|Basic EPS                                |  | $                              | 0.19  |                              | $ | 0.21  |  | $    | 0.38  |  | $ | 0.39 
|Dilutive shares                          |  |                                | 48    |                              |   | 435   |  |      | 46    |  |   | 447  
|Diluted EPS shares                       |  |                                | 1,934 |                              |   | 1,920 |  |      | 1,941 |  |   | 1,920
|Diluted EPS                              |  | $                              | 0.19  |                              | $ | 0.18  |  | $    | 0.37  |  | $ | 0.35 



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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 $1,487,000 of standby letters of credit as of December 31, 2006 and $1,583,000 outstanding as of June 30, 2006. 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
December 31, 2006 and June 30, 2006 for guarantees under standby letters of credit issued is not material.

Note 9: Recent Accounting
Pronouncements

FAS 157

In September 2006, the the Financial
Accounting Standards Board FASB issued FASB Statement No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value
measurements. FASB Statement No. 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15,
2007, and for interim periods within those fiscal years. We are currently evaluating the potential impact, if any, of the adoption of FASB Statement No. 157 on our consolidated financial position, results of operations and cash flows.

SAB 108

On September 13, 2006, the Securities and
Exchange Commission SEC issued Staff Accounting Bulleting No. 108 (SAB 108). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in
quantifying a potential current year misstatement. Prior to SAB 108, Companies might evaluate the materiality of financial-statement misstatements using either the income statement or balance sheet approach, with the income statement approach
focusing on new misstatements added in the current year, and the balance sheet approach focusing on the cumulative amount of misstatement present in a companys balance sheet. Misstatements that would be material under one approach could be
viewed as immaterial under another approach, and not be corrected. SAB 108 now requires that companies view financial statement misstatements as material if they are material according to either the income statement or balance sheet approach. The
Company has analyzed SAB 108 and determined that upon adoption it will have no impact on the reported results of operations or financial conditions.

FAS
123(R)

In December 2004, the FASB issued SFAS No. 123 (revised), Share-Based Payment (SFAS 123(R)). SFAS 123(R) replaces SFAS
No. 123, Accounting for Stock-Based Compensation (SFAS 123), and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123(R) requires compensation costs
related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides services in exchange for the award. The Company adopted effective July 1, 2006, the new standard using the
modified prospective method. Under the modified prospective method, companies are required to record compensation cost for new and modified awards over the related vesting period of such awards



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prospectively, and to record compensation cost prospectively on the non-vested portion, at the date of adoption, of previously issued and outstanding awards
over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified prospective method. The Company recognized pre-tax expense of approximately $5,600 in the quarter ending September 30, 2006
for the expense related to the final scheduled vesting of all outstanding stock option awards. No options have been granted since August 3, 2000. Any additional impact of adopting the new accounting standard will be determined by share-based
payments granted in future periods.

. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of FASB Statement No. 123.



|                                                                                                                                                   |  |                              |      |   |                                |   |      |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | - | ------------------------------ | - | ---- | -
|                                                                                                                                                   |  | Six Months EndedDecember 31, |      |   | Three Months EndedDecember 31, |  
|                                                                                                                                                   |  | 2005                         |      |   | 2005                           |  
|Net Income as reported                                                                                                                             |  | $                            | 664  |   |                                | $ | 351  |  
|Amounts recognized as expense in the financial statements                                                                                          |  |                              | 9    |   |                                |   | 4    |  
|Deduct: Total stock option based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                              | (12  | ) |                                |   | (3   | )
|                                                                                                                                                   |  |                              |      |   |                                |   |      |  
|Proforma Net Income                                                                                                                                |  | $                            | 661  |   |                                | $ | 352  |  
|                                                                                                                                                   |  |                              |      |   |                                |   |      |  
|Earnings per share:                                                                                                                                |  |                              |      |   |                                |   |      |  
|Basic  as reported                                                                                                                                |  | $                            | 0.39 |   |                                | $ | 0.21 |  
|Basic  pro forma                                                                                                                                  |  |                              | 0.39 |   |                                |   | 0.21 |  
|Diluted  as reported                                                                                                                              |  | $                            | 0.35 |   |                                | $ | 0.18 |  
|Diluted  pro forma                                                                                                                                |  |                              | 0.34 |   |                                |   | 0.18 |  

A summary of share option activity for the six month period ended December 31, 2006 follows:



|                             |  |         |  |                              |      |                                                  |     |                                |   |    
|---------------------------- |  | ------- |  | ---------------------------- | ---- | ------------------------------------------------ | --- | ------------------------------ | - | ---
|                             |  | Shares  |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualTerm in Years |     | AggregateIntrinsicValue (000s)
|Outstanding at July 1, 2006  |  | 138,495 |  | $                            | 5.62 |                                                  | 3.6 |                                | $ | 704
|Granted                      |  | 0       |  |                              |     |                                                  |    |                                |   |    
|Exercised                    |  | 45,775  |  |                              | 4.74 |                                                  | 0   |                                |   | 195
|Forfeited or expired         |  | 0       |  |                              |     |                                                  |    |                                |   |    
|Balance at December 31, 2006 |  | 92,720  |  | $                            | 6.07 |                                                  | 4.5 |                                |   | 497



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A summary of the status of the Companys non-vested shares as of December 31, 2006 is presented below:



|                                |  |               |  |                                       
|------------------------------- |  | ------------- |  | --------------------------------------
|                                |  | Common Shares |  | Weighted Average Grant-Date Fair Value
|Non-Vested as of July 31, 2006  |  | 0             |  | $                                    
|Awards Granted, November 2006   |  | 14,453        |  | $ 13.71                               
|Vested                          |  | 0             |  | $                                    
|Forfeited                       |  | 0             |  | $                                    
|Non-vested at December 31, 2006 |  | 14,453        |  | $ 13.71                               

As of December 31, 2006 there was $186,000 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 32 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 $12,000 has been recognized in the three and six month periods ended December31, 2006 as a result of these awards.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

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
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 re-price at different times, or on a different basis, than its interest-bearing liabilities. To a lesser extent, the Companys results of operations are also affected
by the amount of its non-interest income, primarily deposit 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, and competition 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.



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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 financial statements and accompanying notes. These estimates, assumptions, and judgments are based on
information available as of the date of the 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.

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.

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.

SFAS No. 123, Accounting for Stock-Based Compensation, requires the Company to make certain disclosures as if the fair value method of accounting had
been applied to the Companys stock option grants made subsequent to 1994. Accordingly, no stock option based employee compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the
market value of the underlying common stock on the date of grant.

Comparison of Financial Condition at December 31, 2006 and June 30, 2006

The Companys assets increased by $18.7 million or 8.2% to $246.8 million at December 31, 2006 compared to $228.1 million at June 30,
2006.

Total loans grew by $22.4 million or 11.8% to $213.0 million at December 31, 2006 from $190.6 million at June 30, 2006. The growth in
loans includes $1.3 million in purchases of consumer loans. Growth in commercial business loans of $14.4 million, construction loans of $4.9 million, commercial mortgages of $2.0 million and consumer loans of $2.1 million offset a decrease of $1.0
million in residential mortgages. Commercial leases were flat at $15.4 million. The Companys commercial business loans are generally secured by real estate collateral as a secondary source of repayment. Loan-to-value ratios on commercial
business and commercial real estate loans generally do not exceed 80% of the appraised value. The residential mortgage portfolio consists of conventionally underwritten mortgages that generally conform to Fannie Mae and Freddie Mac guidelines. The
Company has not participated in the sub-prime mortgage market. Securities available for sale decreased by $1.5 million or 8.8% to $15.2 million from $16.7 million as maturities and amortization of the mortgage-backed securities portfolio was
partially offset by an increase in the market value of the portfolio. The increase in property and equipment is a result of the construction of the Companys new branch location and offices housing all of the



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##### Table of Contents

loan functions of the Bank. This location has replaced two leased properties.

Interest-bearing deposits increased $16.3 million or 10.6% to $169.9 million at December 31, 2006 from $153.6 million at June 30, 2006. Non-interest bearing deposits decreased $0.5 million or 3.79% to $12.7
million at December 31 2006 from $13.2 million at June 30, 2006. During the six-month period ended December 31, 2006, the Company acquired $10.7 million in brokered deposits to fund loan growth. Additionally, borrowings from the
Federal Home Loan Bank of Atlanta increased by $2.8 million or 7.9% to $37.8 million at December 31, 2006 from $35.1 million at June 30, 2006.

Comparison of Operating Results for the Quarter and Six Months Ended December 31, 2006 and December 31, 2005

Net Income

The Companys net income increased by $8,000 or 2.3% to $359,000 for the quarter ended December 31, 2006 from $351,000 for the quarter ended
December 31, 2005. The Companys net income increased by $51,000 or 7.7% to $715,000 for the six months ended December 31, 2006 from $664,000 for the six months ended December 31, 2005. The increase in the Companys net
income during the comparable quarter is due to higher net interest income before the provision for loan losses, higher non-interest income and lower operating expenses offsetting the higher provision for loan losses. The increase in the
Companys net income in the comparable six month periods results from higher net interest income offsetting a higher provision for loan losses, lower non-interest income and higher operating expenses.

Interest Income

Total interest income increased by $759,000 or
22.8% to $4.1 million for the quarter ended December 31, 2006 when compared to $3.3 million in the quarter ended December 31, 2005 due to both higher loan average balances and rates and loans and short-term investments offsetting lower
interest income from the security portfolio.

Total interest income increased by $1.5 million or 24.3% to $7.9 million for the six months ended
December 31, 2006 when compared to $6.4 million in the six months ended December 31, 2005 due primarily to higher loan average balances and rates offsetting lower interest income from the security portfolio.

Interest income on loans receivable increased by $769,000 or 25.0% to $3.8 million for the quarter ended December 31, 2006 from $3.1 million for the quarter ended
December 31, 2005. Interest income on loans receivable increased by $1.6 million or 27.5% to $7.4 million for the six months ended December 31, 2006 from $5.8 million for the six months ended December 31, 2005. The increase in
interest income on loans receivable during both the three and six-month periods is due to both higher average balances on loans receivable and higher yields earned on loans receivable, with the majority of the increases attributable to higher
average balances outstanding.

Interest income on investment and mortgage-backed securities decreased by $27,000 to $203,000 and by $57,000 to $415,000 in
the three and six month periods ended December 31, 2006, respectively due to lower average balances outstanding offsetting higher yields. The Company has redirected pay-downs in the mortgage-backed securities portfolio and maturities in the
investment portfolio into the loan portfolio.

Interest income on federal funds sold and other investments increased by $17,000 or 68.0% to $42,000 for the
quarter ended December 31, 2006 from $25,000 for the quarter ended December 31, 2005. Interest income on federal funds sold and other investments increased by $5,000 or 7.9% to $68,000 for the six months ended December 31, 2006 from
$63,000 for the six months ended December 31, 2005. The increase in the three month period is due to both higher average balances and higher rates earned on short-term investments The increase in the six month period is due to higher rates
earned offsetting lower average balances.

Interest Expense

Total interest expense increased by $727,000 or 63.7% to $1.9 million for the quarter ended December 31, 2006 from $1.1 million for the quarter ended December 31, 2005. Total interest expense increased $1.3 million or 61.7% to
$3.5 million for the six-month period ended December 31, 2006 from $2.2 million for the six-month period ended December 31, 2005. The increase in interest expense during the comparable quarterly and six-month periods is due primarily to
higher rates paid on interest bearing liabilities. Higher average balances outstanding of deposits and borrowings also contributed to the increases.



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##### Table of Contents

Interest expense on deposits increased by $531,000 or 65.2% to $1.3 million for the quarter ended December 31, 2006
from $814,000 for the quarter ended December 31, 2005. Interest expense on deposits increased by $903,000 or 57.0% to $2.5 million from $1.6 million for the six months ended December 31, 2005. The increase in interest expense on deposits
in both the quarterly and year to date periods is due primarily to higher rates paid on deposit accounts although the higher average balance of interest-bearing deposits outstanding also contributed to the increase. Interest expense on borrowings
increased by $196,000 or 59.9% to $523,000 for the quarter ended December 31, 2006 from $327,000 for the quarter ended December 31, 2005. Interest expense on borrowings increased by $433,000 or 74.3% to $1.0 million from $583,000 for the
six months ended December 31, 2005. The increase in interest expense in both the quarterly and year to date period results primarily from higher average balances outstanding. Higher rates paid on borrowings also contributed to the increase.

Net Interest Income

The Companys net interest
income increased by $32,000 or 1.5% to $2.2 million for the quarter ended December 31, 2006 from $2.2 million for the quarter ended December 31, 2005. Net interest income increased by $215,000 or 5.1% to $4.4 million for the six months
ended December 31, 2006 from $4.2 million during the six months ended December 31, 2005. The increases in net interest income during the comparable quarters and six-month periods were primarily due to the higher volume of earning assets.
As shown in the tables below, the Companys net interest margin has shrunk considerably in both the six and three month periods as the cost of funding has increased substantially more than the yield earned on interest bearing assets.

Average Balance Sheet

The following tables set forth
certain information relating to the Companys average balance sheets and reflect the average yield on assets and cost of liabilities for the periods indicated and the average yields earned and rates paid. Dividing annualized income or expense
by the average balance of assets or liabilities, respectively, for the periods presented derives these yield and costs. Average balances are daily balances.

The table presents information for the periods indicated with respect to the net interest margin, which is net interest income divided by the average balance of interest-earning assets. Also presented is the difference between the average
yield earned on interest-earning assets and average rate paid on interest-bearing liabilities, or interest rate spread, which is also used to measure the earnings power of financial institutions.



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|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|-------------------------------------------------------------------------------- |  | ----------------------------- | ------- | -------- | ---- | -------------- |  | ------ | -------------- |  | -------- | ------- | -------------- | - | ----- |  | ------ | -
|                                                                                 |  | Six Months Ended December 31, |        
|                                                                                 |  | 2006                          |         |          | 2005 |               
|                                                                                 |  | AverageBalance                |         | Interest |      | AverageRate(1) |  |        | AverageBalance |  | Interest |         | AverageRate(1) |  
|                                                                                 |  | (Dollars in thousands)        |        
|Interest-earning assets:                                                         |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Loans receivable (2)                                                             |  | $                             | 201,867 |          | $    | 7,441          |  | 7.37   | %              |  | $        | 166,880 |                | $ | 5,838 |  | 7.00   | %
|Investment & Mortgage-backed securities                                          |  |                               | 18,610  |          |      | 415            |  | 4.46   | %              |  |          | 24,793  |                |   | 472   |  | 3.81   | %
|Federal funds sold and other interest-earning assets                             |  |                               | 2,829   |          |      | 68             |  | 4.82   | %              |  |          | 3,478   |                |   | 63    |  | 3.67   | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Total interest earning assets                                                    |  |                               | 223,306 |          |      | 7,924          |  | 7.10   | %              |  |          | 195,151 |                |   | 6,373 |  | 6.53   | %
|Non-interest-earning assets                                                      |  |                               | 13,883  |          |      |                |  |        |                |  |          | 13,401  |                |   |       |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Total assets                                                                     |  | $                             | 237,189 |          |      |                |  |        |                |  | $        | 208,552 |                |   |       |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Interest-bearing liabilities: Interest bearing deposits                          |  | $                             | 162,036 |          | $    | 2,486          |  | 3.07   | %              |  | $        | 151,201 |                | $ | 1,583 |  | 2.09   | %
|Short-term borrowings                                                            |  |                               | 1,279   |          |      | 36             |  | 5.56   | %              |  |          | 1,142   |                |   | 24    |  | 4.17   | %
|Long-term borrowings                                                             |  |                               | 40,482  |          |      | 980            |  | 4.84   | %              |  |          | 23,978  |                |   | 559   |  | 4.67   | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Total interest-bearing liabilities                                               |  |                               | 203,797 |          |      | 3,502          |  | 3.44   | %              |  |          | 176,321 |                |   | 2,166 |  | 2.46   | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Non-interest-bearing liabilities                                                 |  |                               | 14,630  |          |      |                |  |        |                |  |          | 14,465  |                |   |       |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Total liabilities                                                                |  |                               | 218,427 |          |      |                |  |        |                |  |          | 190,786 |                |   |       |  |        |  
|Stockholders equity                                                             |  |                               | 18,762  |          |      |                |  |        |                |  |          | 17,766  |                |   |       |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Total liabilities and stockholders equity                                       |  | $                             | 237,189 |          |      |                |  |        |                |  | $        | 208,552 |                |   |       |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Net interest income                                                              |  |                               |         |          | $    | 4,422          |  |        |                |  |          |         |                | $ | 4,207 |  |        |  
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Interest rate spread                                                             |  |                               |         |          |      |                |  | 3.66   | %              |  |          |         |                |   |       |  | 4.07   | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Net Interest margin                                                              |  |                               |         |          |      |                |  | 3.96   | %              |  |          |         |                |   |       |  | 4.31   | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                               |         |          |      |                |  | 109.57 | %              |  |          |         |                |   |       |  | 110.68 | %
|                                                                                 |  |                               |         |          |      |                |  |        |                |  |          |         |                |   |       |  |        |  

---

|(1) | Yields and rates are annualized.
|--- | --------------------------------

|(2) | Includes nonaccrual loans.
|--- | --------------------------



15



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|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------- | -------- | ---- | -------------- |  | ------ | -------------- |  | -------- | ------- |  | -------------- | ------ | - |  | ---- | -
|                                                                                 |  | Three Months Ended December 31, |        
|                                                                                 |  | 2006                            |         |          | 2005 |               
|                                                                                 |  | AverageBalance                  |         | Interest |      | AverageRate(1) |  |        | AverageBalance |  | Interest |         |  | AverageRate(1) |       
|                                                                                 |  | (Dollars in thousands)          |        
|Interest-earning assets:                                                         |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Loans receivable (2)                                                             |  | $                               | 208,228 |          | $    | 3,841          |  | 7.38   | %              |  | $        | 172,646 |  | $              | 3,072  |   |  | 7.12 | %
|Investment and mortgage-backed securities                                        |  |                                 | 18,161  |          |      | 203            |  | 4.45   | %              |  |          | 24,222  |  |                | 230    |   |  | 3.80 | %
|Federal funds sold and other interest-earning assets                             |  |                                 | 3,381   |          |      | 42             |  | 5.11   | %              |  |          | 2,426   |  |                | 25     |   |  | 4.22 | %
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Total interest earning assets                                                    |  |                                 | 229,770 |          |      | 4,086          |  | 7.11   | %              |  |          | 199,294 |  |                | 3,327  |   |  | 6.68 | %
|Non-interest-earning assets                                                      |  |                                 | 14,092  |          |      |                |  |        |                |  |          | 13,926  |  |                |        |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Total assets                                                                     |  | $                               | 243,862 |          |      |                |  |        |                |  | $        | 213,220 |  |                |        |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Interest-bearing liabilities:                                                    |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Interest bearing deposits                                                        |  | $                               | 167,335 |          | $    | 1,345          |  | 3.21   | %              |  | $        | 151,207 |  | $              | 814    |   |  | 2.15 | %
|Short-term borrowings                                                            |  |                                 | 137     |          |      | 2              |  | 4.96   | %              |  |          | 2,049   |  |                | 22     |   |  | 4.29 | %
|Long-term borrowings                                                             |  |                                 | 42,800  |          |      | 521            |  | 4.88   | %              |  |          | 26,570  |  |                | 305    |   |  | 4.59 | %
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Total interest-bearing liabilities                                               |  |                                 | 210,272 |          |      | 1,868          |  | 3.55   | %              |  |          | 179,826 |  |                | 1,141  |   |  | 2.54 | %
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Non-interest-bearing liabilities                                                 |  |                                 | 14,607  |          |      |                |  |        |                |  |          | 15,544  |  |                |        |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Total liabilities                                                                |  |                                 | 224,879 |          |      |                |  |        |                |  |          | 195,370 |  |                |        |   |  |      |  
|Stockholders equity                                                             |  |                                 | 18,983  |          |      |                |  |        |                |  |          | 17,850  |  |                |        |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Total liabilities and stockholders equity                                       |  | $                               | 243,862 |          |      |                |  |        |                |  | $        | 213,220 |  |                |        |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Net Interest Income                                                              |  |                                 |         |          | $    | 2,218          |  |        |                |  |          |         |  | $              | 2,186  |   |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Interest rate spread                                                             |  |                                 |         |          |      |                |  | 3.56   | %              |  |          |         |  |                |        |   |  | 4.14 | %
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Net interest margin                                                              |  |                                 |         |          |      |                |  | 3.86   | %              |  |          |         |  |                |        |   |  | 4.39 | %
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                                 |         |          |      |                |  | 109.27 | %              |  |          |         |  |                | 110.83 | % |  |      |  
|                                                                                 |  |                                 |         |          |      |                |  |        |                |  |          |         |  |                |        |   |  |      |  

---

|(1) | Yields and rates are annualized.
|--- | --------------------------------

|(2) | Includes nonaccrual loans.
|--- | --------------------------

Provision For Loan Losses

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, past due loans in the Companys loan portfolio, current economic conditions, both national and local, and other factors unique to particular loans and
leases. The Companys management periodically monitors and adjusts its allowance for loan losses based upon its analysis of the loan portfolio.

The
Companys provision for loan losses in the quarter ended December 31, 2006 increased $50,000 or 250.0% to $70,000 from $20,000 in the quarter ended December 31, 2005. The provision for loan losses increased by $70,000 or 175.0% to
$110,000 in the six-months ended December 31, 2006 from $40,000 in the six-months ended December 31, 2005. Due to charge-offs and growth in the loan portfolio, the Companys allowance for loan losses has decreased as a percentage of
total loans outstanding to 0.47% at December 31, 2006 from 0.52% at June 30, 2006. The primary driver of the level of the allowance for loan losses is the Companys determination of the level of risk in the portfolio. The Company has
determined that there is minimal risk in the residential loan portfolio (36%) of total loans. As mentioned above, the Company conservatively underwrites all commercial business and commercial real estate loans with multiple sources of
repayment. Loans granted must cash-flow on their own and be backed by substantial collateral. Additionally, $6.9 million of the commercial loan portfolio, including the one commercial loan on non-accrual are guaranteed by the Small Business
Administration with an average guarantee percentage of 76%. In the Companys estimation, the most risk in the portfolio resides in the commercial leasing portfolio whose net balance of $15.4 million represents 7.2% of the portfolio and whose
average lease size is only $16,400. These determinations by management have been reviewed by an independent third party loan review



16



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consultant in a report dated November 13, 2006. The Companys allowance for loan losses as a percentage of non-performing loans was 199.51% at
December 31, 2006 as compared to 409.81% at June 30, 2006.

Activity in the allowance for loan losses is as follows (dollars in thousands):



|                                               |  |                  |       |                    |   |      |  |      |       |  |   |    
|---------------------------------------------- |  | ---------------- | ----- | ------------------ | - | ---- |  | ---- | ----- |  | - | ---
|                                               |  | Six Months Ended |       | Three Months Ended
|                                               |  | December 31,    
|                                               |  | 2006             |       | 2005               |   | 2006 |  | 2005
|Allowance for loan losses, beginning of period |  | $                | 1,000 |                    |   | 945  |  | $    | 1,007 |  |   | 946
|                                               |  |                  |       |                   
|Provision for loan losses                      |  |                  | 110   |                    |   | 40   |  |      | 70    |  |   | 20 
|                                               |  |                  |       |                   
|Loans Charged Off:                             |  |                  |       |                    |   |      |  |      |       |  |   |    
|Consumer                                       |  |                  | 106   |                    |   | 97   |  |      | 77    |  |   | 28 
|Real Estate                                    |  |                  |      |                    |   |     |  |      |      |  |   |   
|Commercial loan                                |  |                  |      |                    |   |     |  |      |      |  |   |   
|Commercial lease                               |  |                  | 115   |                    |   | 17   |  |      | 38    |  |   | 5  
|                                               |  |                  |       |                    |   |      |  |      |       |  |   |    
|Total Charge-offs                              |  |                  | 221   |                    |   | 114  |  |      | 115   |  |   | 33 
|Recoveries:                                    |  |                  |       |                    |   |      |  |      |       |  |   |    
|Consumer                                       |  |                  | 50    |                    |   | 23   |  |      | 33    |  |   | 11 
|Real Estate                                    |  |                  |      |                    |   |     |  |      |      |  |   |   
|Commercial loan                                |  |                  | 24    |                    |   | 7    |  |      | 2     |  |   | 4  
|Commercial lease                               |  |                  | 38    |                    |   | 51   |  |      | 4     |  |   | 4  
|                                               |  |                  |       |                    |   |      |  |      |       |  |   |    
|Total Recoveries                               |  |                  | 112   |                    |   | 81   |  |      | 39    |  |   | 19 
|                                               |  |                  |       |                    |   |      |  |      |       |  |   |    
|Allowance for loan losses, end of period       |  | $                | 1,001 |                    | $ | 952  |  | $    | 1,001 |  | $ | 952
|                                               |  |                  |       |                    |   |      |  |      |       |  |   |    

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



|                                                                |  |                 |      |   |             |   |      |  
|--------------------------------------------------------------- |  | --------------- | ---- | - | ----------- | - | ---- | -
|                                                                |  | At December 31, |      |   | At June 30, |  
|                                                                |  | 2006            |      |   | 2006        |  
|($ In thousands)                                                |  |                 |      |   |             |  
|Loans accounted for on a non-accrual basis: (1)                 |  |                 |      |   |             |   |      |  
|Real estate:                                                    |  |                 |      |   |             |   |      |  
|Residential                                                     |  | $               | 168  |   |             | $ | 13   |  
|Commercial                                                      |  |                 |     |   |             |   |     |  
|Construction                                                    |  |                 |     |   |             |   |     |  
|Consumer                                                        |  |                 | 18   |   |             |   | 7    |  
|Commercial Loan                                                 |  |                 | 142  |   |             |   | 146  |  
|Commercial lease                                                |  |                 | 174  |   |             |   | 78   |  
|                                                                |  |                 |      |   |             |   |      |  
|Total                                                           |  | $               | 502  |   |             | $ | 244  |  
|                                                                |  |                
|Accruing loans which are contractually past due 90 days or more |  | $               |     |   |             | $ |     |  
|                                                                |  |                 |      |   |             |   |      |  
|Total                                                           |  | $               |     |   |             | $ |     |  
|                                                                |  |                 |      |   |             |   |      |  
|Total non-performing loans                                      |  | $               | 502  |   |             | $ | 244  |  
|                                                                |  |                 |      |   |             |   |      |  
|Percentage of total loans                                       |  |                 | 0.24 | % |             |   | 0.13 | %
|                                                                |  |                 |      |   |             |   |      |  
|Other non-performing assets (2)                                 |  | $               |     |   |             | $ |     |  
|                                                                |  |                 |      |   |             |   |      |  

---

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

|(2) | Other non-performing assets represents property acquired by the Company through foreclosure or repossession.
|--- | ------------------------------------------------------------------------------------------------------------

At December 31, 2006, non-accrual loans consists of thirteen commercial leases totaling $174,000, one commercial loan with an 85% SBA guarantee totaling $142,000,
one residential mortgage loan totaling $168,000 with an



17



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approximate loan-to-value ratio of 44%,and two consumer loans totaling $18,000.

Non-interest Income

The Companys non-interest income consists of deposit fees, service charges, late fees and
gains and losses on sales of securities, loans and repossessed real estate. Total non-interest income increased by $20,000 or 10.1% to $218,000 for the quarter ended December 31, 2006 from $198,000 for the quarter ended December 31, 2005.
Total non-interest income decreased by $36,000 or 8.2% to $405,000 during the six months ended December 31, 2006 from $441,000 during the six months ended December 31, 2005. Non-interest income has increased in the quarterly period due to
higher service charges on deposit accounts and other miscellaneous fees. Non-interest income has decreased in the six-month period due to the $64,000 gain on the sale of an office building recognized in the six months ended December 31, 2005.

Non-interest Expenses

Total non-interest expenses
decreased by $9,000 or 0.5% to $1.8 million for the quarter ended December 31, 2006 from $1.8 million for the quarter ended December 31, 2005. Total non-interest expense increased by $30,000 or 0.9% to $3.6 million during the six months
ended December 31, 2006 from $3.5 million during the six months ended December 31, 2005. The primary reasons for the decrease in the three month period is lower compensation and benefit costs due to open positions offsetting higher
professional fees and occupancy costs. The increase in non-interest expense in the comparable six-month period is due to higher professional fees, compensation and data processing costs offsetting lower equipment and telephone, postage and delivery
expenses.

Income Taxes

Income tax expense was
$216,000 (or 37.6% of income before the provision for income taxes) and $213,000 (or 37.8% of income before the provision for income taxes) for the three month periods ended December 31, 2006 and 2005, respectively. Income tax expense was
$427,000 (or 37.4% of income before the provision for income taxes) and $399,000 (or 37.5% of income before the provision for income taxes) for the six month periods ended December 31, 2006 and 2005, respectively.

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 sources of available liquidity, the time to acquire it and its cost. Management of the Company seeks to maintain an adequate 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, a high level of liquidity will, to a certain extent, result in lower net interest margins and lower net income.

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 December 31,
2006, the Companys cash on hand, interest-bearing deposits and Federal funds sold totaled $4.7 million. In addition, the Company has approximately $15.2 million of mortgage-backed and investment securities classified as available-for-sale.

The Company anticipates that it will have sufficient funds available to meet its current loan commitments of $9.7 million. These funds will be internally
generated, raised through deposit operations, or borrowed. Certificates of deposits that are scheduled to mature in less than one year at December 31, 2006 totaled $67.8 million. Historically, a high percentage of maturing deposits have
remained with the Company.

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

The Company, as the holding company for the Bank, has an annual cash requirement of
approximately $841,000 for the payment of common dividends as well as interest payments on the $5.0 million in subordinated debentures. The holding company currently has cash on hand of $2.6 million. The only recurring source of funds for the
holding



18



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##### Table of Contents

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.

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

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:



|                                    |  |                        |        |               |   |       
|----------------------------------- |  | ---------------------- | ------ | ------------- | - | ------
|                                    |  | December 31, 2006      |        | June 30, 2006
|                                    |  | (dollars in thousands)
|Commitments to originate new loans  |  | $                      | 9,712  |               | $ | 13,860
|Undisbursed lines of credit         |  |                        | 11,040 |               |   | 11,161
|Financial standby letters of credit |  |                        | 1,487  |               |   | 1,583 

Contractual Obligations

The following table sets forth the companys contractual obligations as of December 31, 2006:



|                                                        |  |                        |        |              |   |             |  |              |        |       |   |        |  |   |        
|------------------------------------------------------- |  | ---------------------- | ------ | ------------ | - | ----------- |  | ------------ | ------ | ----- | - | ------ |  | - | -------
|                                                        |  | < 1 year               |        | 1 to 3 Years |   | 4  5 Years |  | Over 5 Years |        | Total
|                                                        |  | (dollars in thousands) |        |              |   |            
|Time Deposits                                           |  | $                      | 67,844 |              | $ | 20,658      |  | $            | 17,012 |       | $ | 55     |  | $ | 105,569
|Long-term borrowings, including subordinated debentures |  |                        | 8,700  |              |   | 4,000       |  |              | 5,100  |       |   | 25,000 |  |   | 42,800 
|Lease obligations                                       |  |                        | 177    |              |   | 331         |  |              | 310    |       |   | 2,450  |  |   | 3,268  
|                                                        |  |                        |        |              |   |             |  |              |        |       |   |        |  |   |        
|Total Contractual Obligations                           |  | $                      | 76,721 |              | $ | 24,989      |  | $            | 22,422 |       | $ | 27,505 |  | $ | 151,637



|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.



19



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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
|------- | ---------------------------------------------------

The following table sets forth matters that were voted upon at the Companys Annual

Meeting of Stockholders held on October 26, 2006:



|                       |  |           |  |              |  |                 |  |        
|---------------------- |  | --------- |  | ------------ |  | --------------- |  | -------
|                       |  | Votes For |  | VotesAgainst |  | BrokerNon-votes |  | Abstain
|Election of Directors: |  |           |  |              |  |                 |  |        
|                       |  |           |  |             
|Joseph J. Bouffard     |  | 1,402,336 |  | 88,548       |  |                |  |       
|Nicole N. Glaeser      |  | 1,483,021 |  | 7,863        |  |                |  |       
|                       |  |           |  |              |  |                 |  |        
|J. Thomas Hoffman      |  | 1,344,385 |  | 146,499      |  |                |  |       



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

None



|Item 6. | 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 1350                                   



20



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Signature

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: February 13, 2007 |  | /s/ Michael J. Dee                                                                          
|                        |  | Michael J. Dee                                                                              
|                        |  | President, Chief Executive Officer and Chief Financial Officer (Principal Financial Officer)



21