United States

Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-QSB

(Mark One)



|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2008
|- | -------------------------------------------------------------------------------------------------------------------------------------



| ̈ | 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

PATAPSCO BANCORP, INC.

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



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Maryland                                                      |  | 52-1951797                         
|(State or Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification No.)

1301 Merritt Boulevard, Dundalk, Maryland 21222-2194

(Address of Principal Executive Offices)

(410) 285-1010

Registrants Telephone Number, Including Area Code

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 May 9, 2008, the issuer had 1,861,855 shares of Common Stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):

Yes   ̈    No  x









---

|                              |  |                                                                                                                    |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  | CONTENTS                                                                                                           |  | PAGE
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                                                   
|                              |  |                                                                                                                   
|Item 1.                       |  | Financial Statements (Unaudited)                                                                                   |  | 3   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Financial Condition at March 31, 2008 and June 30, 2007                                 |  | 3   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Operations for the Nine and Three-Month Periods Ended March 31, 2008 and 2007           |  | 4   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Comprehensive Income for the Nine and Three-Month Periods Ended March 31, 2008 and 2007 |  | 5   
|                              |  |                                                                                                                   
|                              |  | Consolidated Statements of Cash Flows for the Nine-Month Periods Ended March 31, 2008 and 2007                     |  | 6   
|                              |  |                                                                                                                   
|                              |  | Notes to Consolidated Financial Statements                                                                         |  | 7   
|                              |  |                                                                                                                   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operation                               |  | 11  
|                              |  |                                                                                                                   
|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                                                                                                           |  | 20  
|                              | 
|Signatures                    |  | 21                                                                                                                
|                              | 
|Certifications                |  |                                                                                                                   



2



---

Part I. FINANCIAL INFORMATION



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

Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

($ in thousands except for share data)



|                                                                                                |  |               |         |   |              |   |         |  
|----------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                |  | March 31,2008 |         |   | June 30,2007 |  
|Assets                                                                                          |  |               |         |   |              |   |         |  
|Cash:                                                                                           |  |               |         |   |              |   |         |  
|On hand and due from banks                                                                      |  | $             | 3,334   |   |              | $ | 4,308   |  
|Interest bearing deposits in other banks                                                        |  |               | 3,323   |   |              |   | 907     |  
|Federal funds sold                                                                              |  |               | 12,206  |   |              |   | 2,255   |  
|                                                                                                |  |               |         |   |              |   |         |  
|Cash & cash equivalents                                                                         |  |               | 18,863  |   |              |   | 7,470   |  
|Securities, available for sale                                                                  |  |               | 9,210   |   |              |   | 13,147  |  
|Loans receivable, net of allowance for loan losses of $1,625 and $1,110, respectively           |  |               | 221,731 |   |              |   | 220,239 |  
|Investment in securities required by law, at cost                                               |  |               | 2,784   |   |              |   | 2,599   |  
|Property and equipment, net                                                                     |  |               | 4,235   |   |              |   | 4,474   |  
|Goodwill and core deposit intangible                                                            |  |               | 3,264   |   |              |   | 3,303   |  
|Accrued interest and other assets                                                               |  |               | 4,338   |   |              |   | 4,226   |  
|                                                                                                |  |               |         |   |              |   |         |  
|Total assets                                                                                    |  | $             | 264,425 |   |              | $ | 255,458 |  
|                                                                                                |  |               |         |   |              |   |         |  
|Liabilities and Stockholders Equity                                                            |  |               |         |   |              |   |         |  
|Liabilities:                                                                                    |  |               |         |   |              |   |         |  
|Deposits:                                                                                       |  |               |         |   |              |   |         |  
|Non interest bearing deposits                                                                   |  |               | 11,397  |   |              |   | 11,753  |  
|Interest bearing deposits                                                                       |  |               | 184,583 |   |              |   | 177,959 |  
|                                                                                                |  |               |         |   |              |   |         |  
|Total Deposits                                                                                  |  |               | 195,980 |   |              |   | 189,712 |  
|Accrued expenses and other liabilities                                                          |  |               | 3,178   |   |              |   | 3,030   |  
|Long term debt                                                                                  |  |               | 40,300  |   |              |   | 38,800  |  
|Subordinated debentures                                                                         |  |               | 5,000   |   |              |   | 5,000   |  
|                                                                                                |  |               |         |   |              |   |         |  
|Total liabilities                                                                               |  |               | 244,458 |   |              |   | 236,542 |  
|Temporary equity - ESOP shares subject to put option                                            |  |               |        |   |              |   | 935     |  
|Stockholders equity:                                                                           |  |               |         |   |              |   |         |  
|Common stock $0.01 par value: authorized 4,000,000 shares: issued and outstanding 1,861,855 and |  |               |         |   |              |   |         |  
|1,864,985 shares, respectively                                                                  |  |               | 18      |   |              |   | 18      |  
|Additional paid in capital                                                                      |  |               | 7,378   |   |              |   | 6,937   |  
|Obligation under deferred compensation                                                          |  |               | 442     |   |              |   | 423     |  
|Deferred Comp contra                                                                            |  |               | (78     | ) |              |   | (78     | )
|Retained income, substantially restricted                                                       |  |               | 12,255  |   |              |   | 10,994  |  
|Accumulated other comprehensive loss, net of taxes                                              |  |               | (48     | ) |              |   | (313    | )
|                                                                                                |  |               |         |   |              |   |         |  
|Total stockholders equity - Permanent                                                          |  |               | 19,967  |   |              |   | 17,981  |  
|Total stockholders equity including temporary equity                                           |  |               | 19,967  |   |              |   | 18,916  |  
|                                                                                                |  |               |         |   |              |   |         |  
|Total liabilities and stockholders equity                                                      |  | $             | 264,425 |   |              | $ | 255,458 |  
|                                                                                                |  |               |         |   |              |   |         |  

See accompanying notes to financial statements.



3



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|--------------------------------------------------- |  | ------------------------------ | ------ | ------------------------------- | - | ------ |  | ---- | ------ |  | - | ------
|($ in thousands except for per share data)          |  | For Nine MonthsEnded March 31, |        | For Three MonthsEnded March 31,
|                                                    |  | 2008                           |        | 2007                            |   | 2008   |  | 2007
|Interest income:                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Loans receivable                                    |  | $                              | 12,397 |                                 | $ | 11,420 |  | $    | 4,060  |  | $ | 3,979 
|Securities, including securities required by law    |  |                                | 506    |                                 |   | 611    |  |      | 151    |  |   | 196   
|Federal funds sold and other investments            |  |                                | 143    |                                 |   | 100    |  |      | 70     |  |   | 32    
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Total interest income                               |  |                                | 13,046 |                                 |   | 12,131 |  |      | 4,281  |  |   | 4,207 
|Interest expense:                                   |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Deposits                                            |  |                                | 4,816  |                                 |   | 3,938  |  |      | 1,613  |  |   | 1,452 
|Short-term debt                                     |  |                                | 188    |                                 |   | 37     |  |      | 22     |  |   | 2     
|Long-term debt                                      |  |                                | 1,558  |                                 |   | 1,493  |  |      | 533    |  |   | 513   
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Total interest expense                              |  |                                | 6,562  |                                 |   | 5,468  |  |      | 2,168  |  |   | 1,967 
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Net interest income                                 |  |                                | 6,484  |                                 |   | 6,663  |  |      | 2,113  |  |   | 2,240 
|Provision for loan losses                           |  |                                | 900    |                                 |   | 285    |  |      | 300    |  |   | 175   
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Net interest income after provision for loan losses |  |                                | 5,584  |                                 |   | 6,378  |  |      | 1,813  |  |   | 2,065 
|Non-interest income:                                |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Fees and service charges                            |  |                                | 536    |                                 |   | 538    |  |      | 167    |  |   | 187   
|Gain on sale of other repossessed assets            |  |                                | 5      |                                 |   |       |  |      | 5      |  |   |      
|Gain on sale of office building                     |  |                                |       |                                 |   | 14     |  |      |       |  |   | 14    
|Merger Termination Fee                              |  |                                | 2,000  |                                 |   |       |  |      | 2,000  |  |   |      
|Other                                               |  |                                | 83     |                                 |   | 73     |  |      | 37     |  |   | 20    
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Total non-interest income                           |  |                                | 2,624  |                                 |   | 625    |  |      | 2,209  |  |   | 221   
|Non-interest expenses:                              |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Compensation and employee benefits                  |  |                                | 3,215  |                                 |   | 3,349  |  |      | 1,153  |  |   | 1,110 
|Professional fees                                   |  |                                | 519    |                                 |   | 421    |  |      | 189    |  |   | 291   
|Equipment expense                                   |  |                                | 244    |                                 |   | 246    |  |      | 79     |  |   | 96    
|Net occupancy expense                               |  |                                | 421    |                                 |   | 425    |  |      | 143    |  |   | 148   
|Advertising                                         |  |                                | 29     |                                 |   | 90     |  |      | 3      |  |   | 44    
|Data processing                                     |  |                                | 228    |                                 |   | 228    |  |      | 84     |  |   | 75    
|Amortization of core deposit intangible             |  |                                | 39     |                                 |   | 39     |  |      | 13     |  |   | 13    
|Telephone, postage & delivery                       |  |                                | 188    |                                 |   | 189    |  |      | 65     |  |   | 63    
|Other                                               |  |                                | 716    |                                 |   | 654    |  |      | 326    |  |   | 227   
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Total non-interest expense                          |  |                                | 5,599  |                                 |   | 5,641  |  |      | 2,055  |  |   | 2,067 
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Income before provision for income taxes            |  |                                | 2,609  |                                 |   | 1,362  |  |      | 1,967  |  |   | 219   
|Provision for income taxes                          |  |                                | 958    |                                 |   | 505    |  |      | 559    |  |   | 78    
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Net income                                          |  | $                              | 1,651  |                                 | $ | 857    |  | $    | 1,408  |  | $ | 141   
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Basic earnings per share                            |  | $                              | 0.86   |                                 | $ | 0.45   |  | $    | 0.73   |  | $ | 0.07  
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Diluted earnings per share                          |  | $                              | 0.85   |                                 | $ | 0.44   |  | $    | 0.73   |  | $ | 0.07  
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       
|Cash dividends declared per common share            |  | $                              | 0.2100 |                                 | $ | 0.2025 |  | $    | 0.0700 |  | $ | 0.0700
|                                                    |  |                                |        |                                 |   |        |  |      |        |  |   |       

See accompanying notes to financial statements.



4



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

($ in thousands)



|                                                                                                                      |  |                               |       |                                |   |       |  |      |       |  |   |    
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ----- | ------------------------------ | - | ----- |  | ---- | ----- |  | - | ---
|                                                                                                                      |  | For Nine MonthsEnded March 31 |       | For Three MonthsEnded March 31
|                                                                                                                      |  | 2008                          |       | 2007                           |   | 2008  |  | 2007
|Net income                                                                                                            |  | $                             | 1,651 |                                | $ | 857   |  | $    | 1,408 |  | $ | 141
|Other comprehensive income, net of tax:                                                                               |  |                               |       |                                |   |       |  |      |       |  |   |    
|Unrealized net holding gains on securities available-for-sale, net of taxes, of $172, $139, $55 and $19, respectively |  |                               | 265   |                                |   | 221   |  |      | 85    |  |   | 30 
|                                                                                                                      |  |                               |       |                                |   |       |  |      |       |  |   |    
|Comprehensive income                                                                                                  |  | $                             | 1,916 |                                | $ | 1,078 |  | $    | 1,493 |  | $ | 171
|                                                                                                                      |  |                               |       |                                |   |       |  |      |       |  |   |    

See accompanying notes to financial statements.



5



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Patapsco Bancorp, Inc. and Subsidiary

Dundalk, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                                            |  |                           |         |   |               |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                            |  | For the Nine MonthsEnded, |        
|($ in thousands)                                                                            |  | March 31,2008             |         |   | March 31,2007 |  
|Cash flows from operating activities:                                                       |  |                           |         |   |               |   |         |  
|Net Income                                                                                  |  | $                         | 1,651   |   |               | $ | 857     |  
|Adjustments to reconcile net income to net cash provided by/(used in) operating activities: |  |                           |         |   |               |   |         |  
|Amortization of premiums and discounts, net                                                 |  |                           | 36      |   |               |   | 25      |  
|Amortization of deferred loan origination fees                                              |  |                           | (19     | ) |               |   | (26     | )
|Provision for loan losses                                                                   |  |                           | 900     |   |               |   | 285     |  
|Depreciation                                                                                |  |                           | 268     |   |               |   | 224     |  
|Gain on sale of office building                                                             |  |                           | 0       |   |               |   | (14     | )
|Amortization of core deposit intangible                                                     |  |                           | 39      |   |               |   | 39      |  
|Increase in cash surrender value of life insurance                                          |  |                           | (55     | ) |               |   | (50     | )
|Increase in accrued interest and other assets                                               |  |                           | (204    | ) |               |   | (275    | )
|Non-cash compensation under stock-based benefit plan                                        |  |                           | 48      |   |               |   | 86      |  
|Merger termination fee earned but not received                                              |  |                           | (2,000  | ) |               |   | 0       |  
|Increase in accrued expenses and other liabilities                                          |  |                           | 686     |   |               |   | 42      |  
|                                                                                            |  |                           |         |   |               |   |         |  
|Net cash provided by operations                                                             |  |                           | 1,350   |   |               |   | 1,193   |  
|                                                                                            |  |                           |         |   |               |   |         |  
|Cash flows from investing activities:                                                       |  |                           |         |   |               |   |         |  
|Proceeds from maturing time deposits                                                        |  |                           | 0       |   |               |   | 600     |  
|Proceeds from maturity of investments and principal payments on mortgage backed securities  |  |                           | 4,347   |   |               |   | 2,119   |  
|Proceeds from sale of securities available for sale                                         |  |                           | 0       |   |               |   | 92      |  
|Purchase of securities available for sale                                                   |  |                           | 0       |   |               |   | (20     | )
|Net Change in Loans                                                                         |  |                           | 177     |   |               |   | (24,675 | )
|Purchase of consumer loans                                                                  |  |                           | (577    | ) |               |   | (1,333  | )
|Purchase of investments required by law                                                     |  |                           | (185    | ) |               |   | (127    | )
|Cash received in sale of premises and equipment                                             |  |                           | 0       |   |               |   | 50      |  
|Purchase of premises and equipment                                                          |  |                           | (29     | ) |               |   | (2,404  | )
|                                                                                            |  |                           |         |   |               |   |         |  
|Net cash provided/(used) by investing activities:                                           |  |                           | 3,733   |   |               |   | (25,698 | )
|                                                                                            |  |                           |         |   |               |   |         |  
|Cash flows from financing activities:                                                       |  |                           |         |   |               |   |         |  
|Net increase in deposits                                                                    |  |                           | 6,282   |   |               |   | 23,366  |  
|Proceeds from long-term borrowings                                                          |  |                           | 19,200  |   |               |   | 5,000   |  
|Payment on long-term borrowings                                                             |  |                           | (17,700 | ) |               |   | (2,250  | )
|Decrease in advance payments by borrowers                                                   |  |                           | (537    | ) |               |   | (547    | )
|Cash received from exercise of stock options                                                |  |                           | 115     |   |               |   | 217     |  
|Repurchase of common stock due to ESOP Put Options exercised                                |  |                           | (659    | ) |               |   | 0       |  
|Dividends paid                                                                              |  |                           | (391    | ) |               |   | (359    | )
|                                                                                            |  |                           |         |   |               |   |         |  
|Net cash provided by financing activities                                                   |  |                           | 6,310   |   |               |   | 25,427  |  
|                                                                                            |  |                           |         |   |               |   |         |  
|Net increase in cash and cash equivalents                                                   |  |                           | 11,393  |   |               |   | 922     |  
|Cash and cash equivalents at beginning of period                                            |  |                           | 7,470   |   |               |   | 8,188   |  
|                                                                                            |  |                           |         |   |               |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $                         | 18,863  |   |               | $ | 9,110   |  
|                                                                                            |  |                           |         |   |               |   |         |  
|Interest paid                                                                               |  | $                         | 6,330   |   |               | $ | 5,373   |  
|Income taxes paid                                                                           |  |                           | 750     |   |               |   | 759     |  

See accompanying notes to financial statements.



6



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Patapsco Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Note 1: Principles of Consolidation

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

Note 2: The Patapsco Bank

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

Note 3: Basis of Presentation

The accompanying consolidated
financial statements have been prepared in accordance with instructions for Form 10-QSB and therefore, do not include all disclosures necessary for a complete presentation of the financial statements in conformity with accounting principles
generally accepted in the United States of America. However, all adjustments that are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included. Such adjustments were of a normal
recurring nature. The results of operations for the three and nine months ended March 31 2008 are not necessarily indicative of the results that may be expected for the entire year. For additional information, refer to the consolidated
financial statements and footnotes thereto included in the Companys Annual report on Form 10-KSB for the year ended June 30, 2007.

Note 4:
Cash and Cash Equivalents

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

Note 5: Regulatory Capital Requirements

At March 31, 2008, the Bank met each of the three minimum regulatory capital requirements. The following table summarizes the Banks regulatory capital position
at March 31, 2008:



|                                         |  |        |        |   |                             |   |        |                                                        |        |  |      |        |  |   |        |  |       |  
|---------------------------------------- |  | ------ | ------ | - | --------------------------- | - | ------ | ------------------------------------------------------ | ------ |  | ---- | ------ |  | - | ------ |  | ----- | -
|                                         |  | Actual |        |   | For CapitalAdequacyPurposes |   |        | Well CapitalizedUnder PromptCorrective ActionProvision |       
|($ in thousands)                         |  | Amount |        | % |                             |   | Amount |                                                        | %      |  |      | Amount |  | % |       
|Total Capital (to Risk Weighted Assets)  |  | $      | 21,637 |   | 10.80                       | % |        | $                                                      | 16,027 |  | 8.00 | %      |  | $ | 20,034 |  | 10.00 | %
|Tier 1 Capital (to Risk Weighted Assets) |  | $      | 20,012 |   | 9.99                        | % |        | $                                                      | 8,013  |  | 4.00 | %      |  | $ | 12,020 |  | 6.00  | %
|Tier 1 Capital (to Average Assets)       |  | $      | 20,012 |   | 7.75                        | % |        | $                                                      | 10,323 |  | 4.00 | %      |  | $ | 12,904 |  | 5.00  | %



7



---

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



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

Note 6: Earnings Per Share

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



|                                     |  |                             |       |                            |   |       |  |      |       |  |   |      
|------------------------------------ |  | --------------------------- | ----- | -------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                     |  | Three MonthsEnded March 31, |       | Nine MonthsEnded March 31,
|(in thousands except for share data) |  | 2008                        |       | 2007                       |   | 2008  |  | 2007
|Net Income                           |  | $                           | 1,408 |                            | $ | 141   |  | $    | 1,651 |  | $ | 857  
|Basic EPS shares                     |  |                             | 1,916 |                            |   | 1,922 |  |      | 1,913 |  |   | 1,898
|Basic EPS                            |  | $                           | 0.73  |                            | $ | 0.07  |  | $    | 0.86  |  | $ | 0.45 
|Dilutive shares                      |  |                             | 10    |                            |   | 38    |  |      | 19    |  |   | 42   
|Diluted EPS shares                   |  |                             | 1,926 |                            |   | 1,960 |  |      | 1,932 |  |   | 1,940
|Diluted EPS                          |  | $                           | 0.73  |                            | $ | 0.07  |  | $    | 0.85  |  | $ | 0.44 

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 $1,739,000 of standby letters of credit as of March 31, 2008 and $1,749,000 outstanding as of June 30, 2007. Management believes
that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as
of March 31, 2008 and June 30, 2007 for guarantees under standby letters of credit issued is not material.



8



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Note 9: Share-Based Compensation

A summary of share option activity for the nine month period ended March 31, 2008 follows:



|                             |  |        |  |                              |      |                                                 |      |                                |   |    
|---------------------------- |  | ------ |  | ---------------------------- | ---- | ----------------------------------------------- | ---- | ------------------------------ | - | ---
|                             |  | Shares |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualTerm inYears |      | AggregateIntrinsicValue (000s)
|Outstanding at June 30, 2007 |  | 47,872 |  | $                            | 6.02 |                                                 | 3.92 |                                | $ | 801
|Granted                      |  |       |  |                              |     |                                                 |     |                                |   |    
|Exercised                    |  | 27,040 |  |                              | 5.87 |                                                 |     |                                |   |    
|Forfeited or expired         |  |       |  |                              |     |                                                 |     |                                |   |    
|                             |  |        |  |                              |      |                                                 |      |                                |   |    
|Balance at March 31, 2008    |  | 20,832 |  | $                            | 6.29 |                                                 | 3.39 |                                | $ | 93 

A summary of the status of the Companys non-vested shares as of March 31, 2008 is presented below:



|                               |  |              |  |                                     |      
|------------------------------ |  | ------------ |  | ----------------------------------- | -----
|                               |  | CommonShares |  | WeightedAverageGrant-DateFair Value
|Non-Vested as of June 30, 2007 |  | 14,453       |  | $                                   | 13.71
|Awards Granted                 |  |             |  |                                     |     
|Vested                         |  |             |  |                                     |     
|Forfeited                      |  | 1,804        |  |                                     | 13.71
|                               |  |              |  |                                     |      
|Non-Vested at March 31, 2008   |  | 12,649       |  | $                                   | 13.71

As of March 31, 2008 there was $85,000 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 17 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 $41,000, $6,000, $29,000, and $18,000 in the nine and three month periods ending March 31, 2008 and 2007, respectively, has been recognized as a result of these awards.

Note 10: Termination of Merger Agreement

On January 3, 2008, Patapsco Bancorp, Inc. and Bradford Bancorp, Inc.
announced that they have mutually terminated the Agreement and Plan of Merger that the parties previously executed on March 19, 2007. Pursuant to the termination agreement, Bradford Mid-Tier Company has agreed to pay Patapsco Bancorp a
termination fee of $2.0 million payable in the form of a promissory note. This $2.0 million was recognized as income in the quarter ended March 31, 2008. The promissory note matures on December 31, 2008 and provides for interest equal to
the prime rate plus one percent. On August 1, 2008, this rate will increase to the prime rate plus three percent. The termination agreement also provides for a mutual release of claims in connection with the merger.

Note 11: Recent Accounting Pronouncements:

FASB Statement
No. 141(R)

FASB statement No. 141 (R) Business Combinations was issued in December of 2007. This Statement establishes
principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The Statement also
provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business
combination. The guidance will become effective as of the beginning of a companys fiscal year beginning after December 15, 2008. The impact to the Company is dependent upon acquisitions consummated after the effective date.



9



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FASB Statement No. 160

FASB statement No. 160 Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51 was issued in December of 2007. This Statement establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of a companys fiscal year beginning after December 15, 2008. The Company believes that this new
pronouncement will have an immaterial impact on the Companys financial statements in future periods.

SAB 110

Staff Accounting Bulletin No. 110 (SAB 110) amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment, of the Staff Accounting
Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the simplified method in developing an estimate of expected term of plain vanilla share options and allows usage of
the simplified method for share option grants prior to December 31, 2007. SAB 110 allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the
simplified method for estimating the expected term of plain vanilla share option grants after December 31, 2007. SAB 110 is effective January 1, 2008.

SAB 109

Staff Accounting Bulletin No. 109 (SAB 109), Written Loan Commitments Recorded at Fair Value Through
Earnings expresses the views of the staff regarding written loan commitments that are accounted for at fair value through earnings under generally accepted accounting principles. To make the staffs views consistent with current
authoritative accounting guidance, the SAB revises and rescinds portions of SAB No. 105, Application of Accounting Principles to Loan Commitments. Specifically, the SAB revises the SEC staffs views on incorporating
expected net future cash flows related to loan servicing activities in the fair value measurement of a written loan commitment. The SAB retains the staffs views on incorporating expected net future cash flows related to internally-developed
intangible assets in the fair value measurement of a written loan commitment. The staff expects registrants to apply the views in Question 1 of SAB 109 on a prospective basis to derivative loan commitments issued or modified in fiscal quarters
beginning after December 15, 2007. The Company does not expect SAB 109 to have a material impact on its financial statements.

FSP 157-2

In December 2007, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157, that permits a one-year deferral in
applying the measurement provisions of Statement No. 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entitys financial statements on a recurring
basis (at least annually). Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of Statement
157 to that item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company is currently evaluating the impact, if any, that the adoption of FSP 157-2 will have on the
Companys operating income or net earnings.

EITF 06-11

In June 2007, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11). EITF 06-11 states that
an entity should recognize a realized tax benefit associated with dividends on nonvested equity shares, nonvested equity share units and outstanding equity share options charged to retained earnings as an increase in additional paid in
capital. The amount recognized in additional paid in capital should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payment awards. EITF 06-11 should be applied
prospectively to income tax benefits of dividends on equity-classified share-based payment awards that are declared in fiscal years beginning after December 15, 2007. The Company expects that EITF 06-11 will not have an impact on its
consolidated financial statements.



10



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|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.

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



11



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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.

The Companys assessment of potential impairment associated with goodwill and other intangible assets as well as other than temporary impairment of
investment securities are also critical accounting policies.

Comparison of Financial Condition at March 31, 2008 and June 30, 2007

The Companys assets increased by $9.0 million or 3.5% to $264.4 million at March 31, 2008 compared to $255.5 million at June 30, 2007.

Total loans grew by $1.5 million or 0.7% to $221.7 million at March 31, 2008 from $220.2 million at June 30, 2007. The modest growth in loans
was due to the early pay-offs in loans which almost entirely offset new production for the period.

Interest-bearing deposits increased $6.6 million or
3.7% to $184.6 million at March 31, 2008 from $178.0 million at June 30, 2007. Non-interest bearing deposits decreased $0.4 million or 3.0% to $11.4 million at March 31, 2008 from $11.8 million at June 30, 2007. During the
nine-month period ended March 31, 2008, the Company paid down $3.5 million in brokered deposits and replaced them with long-term borrowings from the Federal Home Loan Bank of Atlanta and retail interest-bearing deposits.

Comparison of Operating Results for the Quarter and Nine Months Ended March 31, 2008 and March 31, 2007

Net Income

The Companys net income increased by $1.3 million to
$1.4 million for the quarter ended March 31, 2008 from $141,000 for the quarter ended March 31, 2007. The Companys net income increased by $794,000 or 92.7% to $1,651,000 for the nine months ended March 31, 2008 from $857,000
for the nine months ended March 31, 2007. The increase in the Companys net income during the comparable quarter and nine month period resulted primarily from the $2 million fee recognized in the mutual agreement to terminate the Agreement
and Plan of Merger with Bradford Bancorp, Inc. offset in part by lower net interest income and higher provision for loan losses.

Interest Income

Total interest income increased by $74,000 or 1.8% to $4.3 million for the quarter ended March 31, 2008 when compared to $4.2 million in the quarter
ended March 31, 2007 due to a $10.2 million or 5% growth in average loan balances. This more than offset the impact of the 19 basis point decline in loan yields.

Total interest income increased by $0.9 million or 7.5% to $13.0 million for the nine months ended March 31, 2008 when compared to $12.1 million in the nine months ended March 31, 2007 due primarily to
average loan balances growing 9% while loan yields were flat.

Interest income on loans increased by $81,000 or 2.0% to $4.1 million for the quarter ended
March 31, 2008 from $4.0 million for the quarter ended March 31, 2007. Interest income on loans increased by $1.0 million or 8.6% to $12.4 million for the nine months ended March 31, 2008 from $11.4 million for the nine months ended
March 31, 2007. The increase in interest income on loans during the



12



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three month period is due to a 5% increase in higher average balances on loans receivable which more than offset an 18 basis point decline in loan yields.
The increase in interest income on loans during the nine month period is due to average loan balances growing 9% while loan yields were flat.

Interest
income on investment and mortgage-backed securities decreased by $45,000 to $151,000 in the three month period ended March 31, 2008 as average balances were $4.5 million lower. The yield was 20 basis points higher as the maturation of lower
yielding securities resulted in a favorable change in mix. For the nine month period, interest income on investments was $506,000, a $105,000 decline from the prior year, as average volumes were $4.0 million lower. The yield was 26 basis points
higher due to the improvement in mix.

Interest income on federal funds sold and other investments increased by $38,000 or 119% to $70,000 for the quarter
ended March 31, 2008 from $32,000 for the quarter ended March 31, 2007. Interest income on federal funds sold and other investments increased by $43,000 or 43.0% to $143,000 for the nine months ended March 31, 2008 from $100,000 for
the nine months ended March 31, 2007. The increase in the three month and nine month periods is due to higher average balances offsetting lower rates earned on short-term investments.

Interest Expense

Total interest expense increased by $201,000 or
10.2% to $2.2 million for the quarter ended March 31, 2008 from $2.0 million for the quarter ended March 31, 2007. Total interest expense increased $1.1 million or 20.0% to $6.6 million for the nine-month period ended March 31, 2008
from $5.5 million for the nine-month period ended March 31, 2007. The increase in interest expense during the comparable three and nine-month periods is due to both higher rates paid on interest bearing liabilities and higher average balances
in both deposits and borrowings.

Interest expense on deposits increased by $161,000 or 11.1% to $1.6 million for the quarter ended March 31, 2008
from $1.5 million for the quarter ended March 31, 2007. Interest expense on deposits increased by $878,000 or 22.3% to $4.8 million from $3.9 million for the nine months ended March 31, 2007. 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. The cost of deposits was higher in
the face of a lower interest rate environment as the growth in balances was impacted by our customers preference for higher cost time and money market products over lower cost savings deposits thereby causing an unfavorable mix. In addition,
the company is facing competitive pressures which are preventing the lowering of rates on certain deposit products consistent with the general market rate environment causing higher deposit costs.

Interest expense on short-term borrowings increased to $22,000 in the quarter ended March 31, 2008 from $2,000 in the quarter ended March 31, 2007 due to
higher average balances outstanding. Interest expense on short-term borrowings increased to $188,000 in the nine-months ended March 31, 2008 from $37,000 in the nine-months ended March 31, 2007 due to higher average balances outstanding.

Interest expense on long-term borrowings increased by $20,000 or 3.9% to $533,000 for the quarter ended March 31, 2008 from $513,000 for the quarter
ended March 31, 2007. Interest expense on long-term borrowings increased by $65,000 or 4.3% to $1.6 million from $1.5 million for the nine months ended March 31, 2007. The increase in interest expense in the quarterly period is a result of
higher average balances as well as an 8 basis point increase in the average rate. The increase in the year-to-date period is a result of higher rates paid offsetting lower average balances.

Net Interest Income

The Companys net interest income before
the provision for loan losses decreased by $127,000 or 5.7% to $2.1 million for the quarter ended March 31, 2008 from $2.2 million for the quarter ended March 31, 2007. Net interest income before the provision for loan losses decreased by
$179,000 or 2.7% to $6.5 million for the nine months ended March 31, 2008 from $6.7 million during the nine months ended March 31, 2007. The decreases in net interest income before the provision for loan losses during the comparable three
and nine-month periods were primarily due to the higher cost of interest bearing liabilities. As shown in the tables below, the Companys net interest margin has shrunk considerably in both the nine and three month periods as the cost of
funding has increased substantially more than the yield earned on interest bearing assets.



13



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Average Balance Sheet

The following tables sets forth certain information relating to the Companys average balance sheet and reflects the average yield on assets and cost of liabilities for the periods indicated and the average
yields earned and rates paid. Dividing 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 its 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.



|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|-------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------- | ---- | --------------- |  | ------ | -------------- |  | -------- | ------- | --------------- | - | ------ |  | ------ | -
|                                                                                 |  | Nine Months Ended March 31, |        
|                                                                                 |  | 2008                        |         |          | 2007 |                
|                                                                                 |  | AverageBalance              |         | Interest |      | AverageRate (1) |  |        | AverageBalance |  | Interest |         | AverageRate (1) |  
|                                                                                 |  | (Dollars in thousands)      |        
|Interest-earning assets:                                                         |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Loans receivable (2)                                                             |  | $                           | 224,420 |          | $    | 12,397          |  | 7.37   | %              |  | $        | 206,428 |                 | $ | 11,420 |  | 7.38   | %
|Investment and mortgage-backed securities                                        |  |                             | 14,280  |          |      | 506             |  | 4.72   | %              |  |          | 18,251  |                 |   | 611    |  | 4.46   | %
|Federal funds sold and other interest-earning assets                             |  |                             | 5,132   |          |      | 143             |  | 3.73   | %              |  |          | 2,754   |                 |   | 100    |  | 4.85   | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Total interest earning assets                                                    |  |                             | 243,832 |          |      | 13,046          |  | 7.13   | %              |  |          | 227,433 |                 |   | 12,131 |  | 7.11   | %
|Noninterest-earning assets                                                       |  |                             | 15,322  |          |      |                 |  |        |                |  |          | 14,217  |                 |   |        |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Total assets                                                                     |  | $                           | 259,154 |          |      |                 |  |        |                |  | $        | 241,650 |                 |   |        |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Interest-bearing liabilities:                                                    |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Interest-bearing deposits                                                        |  | $                           | 181,024 |          | $    | 4,816           |  | 3.55   | %              |  | $        | 166,217 |                 | $ | 3,938  |  | 3.16   | %
|Short-term borrowings                                                            |  |                             | 4,745   |          |      | 188             |  | 5.27   | %              |  |          | 880     |                 |   | 37     |  | 5.61   | %
|Long-term borrowings                                                             |  |                             | 41,047  |          |      | 1,558           |  | 5.06   | %              |  |          | 41,243  |                 |   | 1,493  |  | 4.83   | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Total interest-bearing liabilities                                               |  |                             | 226,816 |          |      | 6,562           |  | 3.86   | %              |  |          | 208,340 |                 |   | 5,468  |  | 3.50   | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Non-interest-bearing liabilities                                                 |  |                             | 13,245  |          |      |                 |  |        |                |  |          | 14,359  |                 |   |        |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Total liabilities                                                                |  |                             | 240,061 |          |      |                 |  |        |                |  |          | 222,699 |                 |   |        |  |        |  
|Stockholders' equity                                                             |  |                             | 19,093  |          |      |                 |  |        |                |  |          | 18,951  |                 |   |        |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Total liabilities and stockholders equity                                       |  | $                           | 259,154 |          |      |                 |  |        |                |  | $        | 241,650 |                 |   |        |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Net interest income                                                              |  |                             |         |          | $    | 6,484           |  |        |                |  |          |         |                 | $ | 6,663  |  |        |  
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Interest rate spread                                                             |  |                             |         |          |      |                 |  | 3.28   | %              |  |          |         |                 |   |        |  | 3.61   | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Net Interest margin                                                              |  |                             |         |          |      |                 |  | 3.55   | %              |  |          |         |                 |   |        |  | 3.91   | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                             |         |          |      |                 |  | 107.50 | %              |  |          |         |                 |   |        |  | 109.16 | %
|                                                                                 |  |                             |         |          |      |                 |  |        |                |  |          |         |                 |   |        |  |        |  



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



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



14



---

|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|-------------------------------------------------------------------------------- |  | ---------------------------- | ------- | -------- | ---- | --------------- |  | ------ | -------------- |  | -------- | ------- | --------------- | - | ----- |  | ------ | -
|                                                                                 |  | Three Months Ended March 31, |        
|                                                                                 |  | 2008                         |         |          | 2007 |                
|                                                                                 |  | AverageBalance               |         | Interest |      | AverageRate (1) |  |        | AverageBalance |  | Interest |         | AverageRate (1) |  
|                                                                                 |  | (Dollars in thousands)       |        
|Interest-earning assets:                                                         |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Loans receivable (2)                                                             |  | $                            | 226,020 |          | $    | 4,060           |  | 7.19   | %              |  | $        | 215,812 |                 | $ | 3,979 |  | 7.37   | %
|Investment and mortgage-backed securities                                        |  |                              | 12,951  |          |      | 151             |  | 4.67   | %              |  |          | 17,525  |                 |   | 196   |  | 4.47   | %
|Federal funds sold and other interest-earning assets                             |  |                              | 9,156   |          |      | 70              |  | 3.04   | %              |  |          | 2,602   |                 |   | 32    |  | 4.92   | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Total interest earning assets                                                    |  |                              | 248,127 |          |      | 4,281           |  | 6.90   | %              |  |          | 235,939 |                 |   | 4,207 |  | 7.13   | %
|Noninterest-earning assets                                                       |  |                              | 5,948   |          |      |                 |  |        |                |  |          | 14,885  |                 |   |       |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Total assets                                                                     |  | $                            | 254,075 |          |      |                 |  |        |                |  | $        | 250,824 |                 |   |       |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Interest-bearing liabilities:                                                    |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Interest bearing deposits                                                        |  | $                            | 184,423 |          | $    | 1,613           |  | 3.50   | %              |  | $        | 174,764 |                 | $ | 1,452 |  | 3.32   | %
|Short-term borrowings                                                            |  |                              | 1,752   |          |      | 22              |  | 4.96   | %              |  |          | 105     |                 |   | 2     |  | 5.64   | %
|Long-term borrowings                                                             |  |                              | 43,859  |          |      | 533             |  | 4.87   | %              |  |          | 42,800  |                 |   | 513   |  | 4.79   | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Total interest-bearing liabilities                                               |  |                              | 230,034 |          |      | 2,168           |  | 3.77   | %              |  |          | 217,669 |                 |   | 1,967 |  | 3.61   | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Noninterest-bearing liabilities                                                  |  |                              | 5,034   |          |      |                 |  |        |                |  |          | 13,828  |                 |   |       |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Total liabilities                                                                |  |                              | 235,068 |          |      |                 |  |        |                |  |          | 231,497 |                 |   |       |  |        |  
|Stockholders equity                                                             |  |                              | 19,007  |          |      |                 |  |        |                |  |          | 19,327  |                 |   |       |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Total liabilities and stockholders equity                                       |  | $                            | 254,075 |          |      |                 |  |        |                |  | $        | 250,824 |                 |   |       |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Net Interest Income                                                              |  |                              |         |          | $    | 2,113           |  |        |                |  |          |         |                 | $ | 2,240 |  |        |  
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Interest rate spread                                                             |  |                              |         |          |      |                 |  | 3.13   | %              |  |          |         |                 |   |       |  | 3.52   | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Net interest margin                                                              |  |                              |         |          |      |                 |  | 3.41   | %              |  |          |         |                 |   |       |  | 3.80   | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                              |         |          |      |                 |  | 107.87 | %              |  |          |         |                 |   |       |  | 108.41 | %
|                                                                                 |  |                              |         |          |      |                 |  |        |                |  |          |         |                 |   |       |  |        |  



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



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

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
March 31, 2008 increased $125,000 or 71.4% to $300,000 from $175,000 in the quarter ended March 31, 2007. The provision for loan losses increased by $615,000 or 215.8% to $900,000 in the nine-months ended March 31, 2008 from $285,000
in the nine months ended March 31, 2007. The Companys allowance for loan losses has increased as a percentage of total loans outstanding to 0.73% at March 31, 2008 from 0.50% at June 30, 2007. The increase in the allowance for
loan losses is primarily due to the increase in non-accrual loans and the deterioration of the national and local economies. The Companys allowance for loan losses as a percentage of non-performing loans was 71.7% at March 31, 2008 as
compared to 230.4% at June 30, 2007.



15



---

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



|                                               |  |                            |       |                             |   |       |  |      |       |  |   |      
|---------------------------------------------- |  | -------------------------- | ----- | --------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                               |  | Nine MonthsEnded March 31, |       | Three MonthsEnded March 31,
|                                               |  | 2008                       |       | 2007                        |   | 2008  |  | 2007
|Allowance for loan losses, beginning of period |  | $                          | 1,110 |                             | $ | 1,000 |  | $    | 1,478 |  | $ | 1,001
|Provision for loan losses                      |  |                            | 900   |                             |   | 285   |  |      | 300   |  |   | 175  
|Loans Charged Off:                             |  |                            |       |                             |   |       |  |      |       |  |   |      
|Consumer                                       |  |                            | 208   |                             |   | 146   |  |      | 83    |  |   | 40   
|Real Estate                                    |  |                            |      |                             |   |      |  |      |      |  |   |     
|Commercial loan                                |  |                            | 37    |                             |   | 9     |  |      | 21    |  |   | 9    
|Commercial lease                               |  |                            | 190   |                             |   | 233   |  |      | 69    |  |   | 117  
|                                               |  |                            |       |                             |   |       |  |      |       |  |   |      
|Total Charge-Offs                              |  |                            | 435   |                             |   | 388   |  |      | 173   |  |   | 166  
|Recoveries:                                    |  |                            |       |                             |   |       |  |      |       |  |   |      
|Consumer                                       |  |                            | 27    |                             |   | 70    |  |      | 7     |  |   | 19   
|Real Estate                                    |  |                            |      |                             |   |      |  |      |      |  |   |     
|Commercial loan                                |  |                            | 5     |                             |   | 28    |  |      | 2     |  |   | 4    
|Commercial lease                               |  |                            | 18    |                             |   | 41    |  |      | 11    |  |   | 3    
|                                               |  |                            |       |                             |   |       |  |      |       |  |   |      
|Total Recoveries                               |  |                            | 50    |                             |   | 139   |  |      | 20    |  |   | 26   
|                                               |  |                            |       |                             |   |       |  |      |       |  |   |      
|Allowance for loan losses, end of period       |  | $                          | 1,625 |                             | $ | 1,036 |  | $    | 1,625 |  | $ | 1,036
|                                               |  |                            |       |                             |   |       |  |      |       |  |   |      

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



|                                                                |  |                 |       |   |                |   |      |  
|--------------------------------------------------------------- |  | --------------- | ----- | - | -------------- | - | ---- | -
|(dollars in thousands)                                          |  | AtMarch 31,2008 |       |   | AtJune 30,2007 |  
|Loans accounted for on a non-accrual basis: (1)                 |  |                 |       |   |                |   |      |  
|Real estate:                                                    |  |                 |       |   |                |   |      |  
|Residential                                                     |  | $               |      |   |                | $ | 168  |  
|Commercial                                                      |  |                 |      |   |                |   |     |  
|Construction                                                    |  |                 | 1,832 |   |                |   |     |  
|Consumer                                                        |  |                 | 107   |   |                |   | 14   |  
|Commercial Loan/Leases                                          |  |                 | 326   |   |                |   | 300  |  
|                                                                |  |                 |       |   |                |   |      |  
|Total                                                           |  | $               | 2,265 |   |                | $ | 482  |  
|Accruing loans which are contractually past due 90 days or more |  | $               |      |   |                | $ |     |  
|                                                                |  |                 |       |   |                |   |      |  
|Total non-performing loans                                      |  | $               | 2,265 |   |                | $ | 482  |  
|                                                                |  |                 |       |   |                |   |      |  
|Percentage of total loans                                       |  |                 | 1.01  | % |                |   | 0.22 | %
|                                                                |  |                 |       |   |                |   |      |  
|Other non-performing assets (2)                                 |  | $               | 10    |   |                | $ |     |  
|                                                                |  |                 |       |   |                |   |      |  



|(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 represent property acquired by the Company through foreclosure or repossession.
|--- | -----------------------------------------------------------------------------------------------------------



16



---

At March 31, 2008, non-accrual loans consist of one land acquisition and development loan with a balance of $1.8
million, not including a commitment to fund an additional $200,000, two commercial loans totaling $209,000, five commercial leases with a balance of $117,000, one home equity loan with a balance of $84,000 and three consumer loans with balances of
$23,000. A new appraisal has been ordered on the acquisition and development loan. As of March 31, 2008, the Company has allocated $385,000 of the loan loss allowance to this loan. Both of the commercial loans have been written down to their
respective SBA guaranteed balances. The property securing the home equity loan having a balance of $84,000 was recently appraised and as of the date of the appraisal, there is sufficient value for the Bank to recover the balance due.

Non-interest Income

The Companys non-interest income consists
of deposit fees, service charges, late fees, gains and losses on sales of securities, loans and repossessed real estate, as well as other fees received. Total non-interest income increased by $2.0 million or 899.5% to $2.2 million for the quarter
ended March 31, 2008 from $0.2 million for the quarter ended March 31, 2007. Total non-interest income increased by $2.0 million or 319.8% to $2.6 million during the nine months ended March 31, 2008 from $0.6 million during the nine
months ended March 31, 2007. These increases were primarily due to the $2 million fee recognized in the mutual agreement to terminate the Agreement and Plan of Merger with Bradford Bancorp, Inc.

Non-interest Expenses

Total non-interest expenses decreased by
$12,000 or 0.6% to $2,055,000 for the quarter ended March 31, 2008 from $2,067,000 for the quarter ended March 31, 2007. Total non-interest expense decreased by $42,000 or 0.7% to $5,599,000 for the nine months ended March 31, 2008
from $5,641,000 for the nine months ended March 31, 2007. The primary reason for the decrease in the three month period was lower merger related professional fees. In addition, advertising costs were unusually low as few commitments were made
in anticipation of the merger with Bradford Bancorp, Inc. Management expects advertising costs to increase going forward. The decrease in non-interest expense in the comparable nine-month period resulted from lower compensation and benefits expenses
due to open positions, as well as, lower advertising expenses offsetting higher merger related professional fees and other expenses.

Income Taxes

Income tax expense was $559,000 (or 28.4% of pre-tax income) and $78,000 (or 35.6% of income before the provision for income taxes) for the three month
periods ended March 31, 2008 and 2007, respectively. Income tax expense was $958,000 (or 36.7% of pre-tax income) and $505,000 (or 37.1% of pre-tax income) for the nine month periods ended March 31, 2008 and 2007, respectively. The lower
effective tax rates in both the quarterly and year-to-date periods are due to merger-related expenses, which had been non-deductible in previous periods, becoming deductible in the current quarter given that the Company terminated the merger
agreement in January 2008.

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 March 31, 2008, the Companys cash on hand, interest-bearing deposits and Federal funds sold totaled $18.9 million. In addition, the Company has approximately $9.2 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 $14.7 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 March 31, 2008 totaled $91.5 million.
Historically, a high percentage of maturing deposits have remained with the Company.



17



---

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 $845,000 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 $0.5 million. The holding company will be
receiving interest payments of approximately $140,000 on the $2,000,000 note receivable from Bradford Bancorp that resulted from the termination of the merger agreement. This note matures on December 31, 2008. The only other recurring source of
funds for the holding company is dividends from the Bank. The amount of dividends that can be paid to the holding company from the bank is limited by the earnings and capital position 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 a 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:



|                                    |  |               |        |              |   |       
|----------------------------------- |  | ------------- | ------ | ------------ | - | ------
|(dollars in thousands)              |  | March 31,2008 |        | June 30,2007
|Commitments to originate new loans  |  | $             | 14,671 |              | $ | 19,452
|Undisbursed lines of credit         |  |               | 14,889 |              |   | 14,909
|Financial standby letters of credit |  |               | 1,739  |              |   | 1,749 

Contractual Obligations

The following table sets forth the companys contractual obligations as of March 31, 2008:



|                                                        |  |          |         |             |   |            |  |             |       |       |   |        |  |   |        
|------------------------------------------------------- |  | -------- | ------- | ----------- | - | ---------- |  | ----------- | ----- | ----- | - | ------ |  | - | -------
|(dollars in thousands)                                  |  | < 1 year |         | 1 to 3Years |   | 3  5Years |  | Over 5Years |       | Total
|Time Deposits                                           |  | $        | 91,506  |             | $ | 23,121     |  | $           | 7,520 |       | $ | 152    |  | $ | 122,299
|Long-term borrowings, including subordinated debentures |  |          | 17,500  |             |   | 13,800     |  |             | 0     |       |   | 14,000 |  |   | 45,300 
|Lease obligations                                       |  |          | 191     |             |   | 329        |  |             | 313   |       |   | 4,583  |  |   | 5,417  
|                                                        |  |          |         |             |   |            |  |             |       |       |   |        |  |   |        
|                                                        |  | $        | 109,197 |             | $ | 37,250     |  | $           | 7,833 |       | $ | 18,735 |  | $ | 173,016



|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.



18



---

Part II. Other Information



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

None.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



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

None



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

None



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

On May 13, 2008, The
Patapsco Bank (the Bank) entered into a three-year term employment agreement with Michael J. Dee, its President and Chief Executive Officer. The term of the agreement will automatically extend for an additional day each day so that the
term always remains 36 months so long as Mr. Dee is elected as President and Chief Executive Officer of the Bank as of the date of the meeting of the stockholders of Patapsco Bancorp, Inc. (the Company). The initial annual base
salary under the employment agreement is $175,000. The employment agreement also provide for participation in employee benefit plans and programs maintained by the Bank for the benefit of its employees, including discretionary bonuses, participation
in medical, dental, disability and life insurance programs, retirement plans and certain fringe benefits described in the agreement, as well as a car allowance for Mr. Dee.

Pursuant to the employment agreement, upon termination of Mr. Dees employment for Just Cause (as defined in the agreement), he will receive no
further compensation or benefits. If the Bank terminates Mr. Dees employment for a reason other than Just Cause, or if, upon proper notice, Mr. Dee resigns after the occurrence of specified circumstances that constitute constructive
termination, Mr. Dee will receive a severance benefit equal to the sum of (i) the base salary that would have been paid to Mr. Dee for the remaining term of the agreement plus (ii) an additional 12 months base salary plus
(iii) the value of the cost of obtaining all life, health, disability and other benefits that would have been available to Mr. Dee for the remaining term of the agreement. The Bank will make this payment to Mr. Dee in a lump sum
within 10 days of his termination of employment. Under the agreement, grounds for constructive discharge include a relocation by more than 15 miles, a material reduction in his base compensation, a failure on the part of the Bank to provide
Mr. Dee with substantially similar compensation and benefits, an assignment of materially different duties and responsibilities, a failure to re-elect Mr. Dee to the board of directors of the Bank (if he is serving on the board of
directors at that time), and a material diminution in his responsibilities or authority.

Under the agreement, if Mr. Dees
employment with the Bank is terminated without his consent and not for Just Cause in connection with or within 12 months after a change in control (as defined in the agreement), the Bank will pay Mr. Dee a severance payment equal to the
difference between (i) the product of 2.99 times his base amount (as defined under Section 280G of the Code) and (ii) the value of all parachute payments (as determined under Section 280G of the Code) received by him. The Bank
will make the same severance payment to Mr. Dee if, upon giving proper notice, he voluntarily terminates his employment with the Bank within 12 months of a change in control for reasons specified in the agreement that constitute a constructive
discharge. Section 280G of the Code provides that severance payments that equal or exceed three times an individuals base amount are deemed to be excess parachute payments if they are contingent upon a change in control.
Individuals receiving excess parachute payments are subject to a 20% excise tax on the amount of the payment in excess of the base amount, and the employer may not deduct such amount for federal tax purposes. Mr. Dees employment agreement
limits payments made to him in connection with a change in control to an amount that will not exceed the limits imposed by Section 280G of the Code.



19



---

On May 13, 2008, The Patapsco Bank (the Bank) entered into a change in control severance
agreement with William C. Wiedel, Jr., the Chief Financial Officer of the Bank. The term of the agreement is for two years and will automatically extend for an additional one-year upon each anniversary of the effective date of the agreement,
provided Mr. Wiedel is elected as an officer of the Bank as of the date of the meeting of the stockholders of Patapsco Bancorp, Inc. (the Company). Under the agreement, if Mr. Wiedels employment with the Bank is
terminated without his consent and not for Just Cause (as defined in the agreement) in connection with or within 24 months after a change in control (as defined in the agreement), the Bank will pay Mr. Wiedel a severance payment equal to two
times the sum of his current base salary and the bonus paid to Mr. Wiedel in the prior calendar year. The Bank will make the same severance payment to Mr. Wiedel if, upon giving proper notice, he voluntarily terminates his employment with
the Bank within 24 months of a change in control for reasons specified in the agreement, including a relocation by more than 15 miles, a material reduction in his base compensation, a failure on the part of the Bank to provide him with substantially
similar compensation and benefits, a failure to re-elect him to the board of directors of the Bank (if he is serving on the board of directors at that time), and a material diminution in his responsibilities or authority. The Bank will make this
payment to Mr. Wiedel in a lump sum within 10 days of his termination of employment.

Section 280G of the Internal Revenue Code
of 1986, as amended (the Code), provides that severance payments that equal or exceed three times an individuals base amount are deemed to be excess parachute payments if they are contingent upon a change in control.
Individuals receiving excess parachute payments are subject to a 20% excise tax on the amount of the payment in excess of the base amount, and the employer may not deduct such amount for federal tax purposes. Mr. Wiedels change in control
agreement limits payments made to him in connection with a change in control to an amount that will not exceed the limits imposed by Section 280G of the Code.



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

The following exhibits are filed herewith:



|              |  |                                                                                                 
|------------- |  | ------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Title                                                                                           
|              | 
|10.1          |  | Employment agreement, dated May 13, 2008, by and between Patapsco Bank and Michael J. Dee       
|              | 
|10.2          |  | Severance agreement, dated May 13, 2008, by and between Patapsco Bank and William C. Wiedel, Jr.
|              | 
|31.1          |  | Rule 13a-14(a) Certification of Chief Executive Officer                                         
|              | 
|31.2          |  | Rule 13a-14(a) Certification of Chief Financial Officer                                         
|              | 
|32            |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350                     
|              | 
|32            |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350                     



20



---

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: May 14, 2008 |  |  |  |  |  | /s/ Michael J. Dee                                  
|                   |  |  |  |  |  | Michael J. Dee President and Chief Executive Officer
|                   |  |  |  |  |  |                                                     
|                   |  |  | 
|                   |  |  |  |  |  | /s/ William C. Wiedel, Jr.                          
|                   |  |  |  |  |  | William C. Wiedel, Jr.                              
|                   |  |  |  |  |  | Senior Vice President and Chief Financial Officer   



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