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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2009

OR



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

For the transition period from  to

Commission File Number: 0-53163





BCSB BANCORP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 26-1424764                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

4111 E. Joppa Road, Suite 300,
Baltimore, Maryland 21236

(Address of principal executive offices) (Zip Code)

(410) 256-5000

Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one)



|                        |  |                                                                    |  |                           |  |  
|----------------------- |  | ------------------------------------------------------------------ |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈                                  
          Accelerated Filer   ̈ |  |                           |  |  
|                        |  |                                                                    | 
|Non-Accelerated Filer   |  |  ̈  (Do not check if a smaller reporting company)                   |  | Smaller Reporting Company |  | x

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 January 31, 2010 the issuer had 3,120,945 shares of Common Stock issued and outstanding.









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##### Table of Contents

CONTENTS



|           |  |                                                                                                                      |  |     
|---------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                      |  | PAGE
|           |  |                                                                                                                     
|PART I.    |  | FINANCIAL INFORMATION                                                                                                |  |     
|           |  |                                                                                                                     
|Item 1.    |  | Financial Statements                                                                                                 |  |     
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Financial Condition as of December 31, 2009 (unaudited) and September 30,
2009            |  | 3   
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Operations for the Three Months Ended December 31, 2009 and 2008
(unaudited)              |  | 4   
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Comprehensive Income (Loss) for Three Months Ended December 31, 2009 and 2008 (unaudited) |  | 5   
|           |  |                                                                                                                     
|           |  | Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2009 and 2008
(unaudited)              |  | 6   
|           |  |                                                                                                                     
|           |  | Notes to Consolidated Financial Statements (unaudited)                                                               |  | 8   
|           |  |                                                                                                                     
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                |  | 21  
|           |  |                                                                                                                     
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |  | 31  
|           |  |                                                                                                                     
|Item 4.    |  | Controls and Procedures                                                                                              |  | 31  
|           |  |                                                                                                                     
|PART II.   |  | OTHER INFORMATION                                                                                                    |  |     
|           |  |                                                                                                                     
|Item 1.    |  | Legal Proceedings                                                                                                    |  | 32  
|           |  |                                                                                                                     
|Item 1A.   |  | Risk Factors                                                                                                         |  | 32  
|           |  |                                                                                                                     
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |  | 32  
|           |  |                                                                                                                     
|Item 3.    |  | Defaults Upon Senior Securities                                                                                      |  | 32  
|           |  |                                                                                                                     
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                  |  | 32  
|           |  |                                                                                                                     
|Item 5.    |  | Other Information                                                                                                    |  | 32  
|           |  |                                                                                                                     
|Item 6.    |  | Exhibits                                                                                                             |  | 33  
|           | 
|SIGNATURES |  | 34                                                                                                                  



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                         |  | December 31,2009       |         |   | September 30,2009 |  
|                                                                                                                                                         |  | (unaudited)            |         |   |                   |  
|                                                                                                                                                         |  | (dollars in thousands) |        
|Assets                                                                                                                                                   |  |                        |         |   |                   |   |         |  
|Cash and due from banks                                                                                                                                  |  | $                      | 5,525   |   |                   | $ | 5,535   |  
|Interest-bearing deposits in other banks                                                                                                                 |  |                        | 2,787   |   |                   |   | 3,786   |  
|Federal funds sold                                                                                                                                       |  |                        | 54,931  |   |                   |   | 30,931  |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                |  |                        | 63,243  |   |                   |   | 40,252  |  
|                                                                                                                                                         |  |                       
|Interest bearing time deposits                                                                                                                           |  |                        | 100     |   |                   |   | 100     |  
|Loans receivable, net of allowances ($4,228) and ($3,927)                                                                                                |  |                        | 397,431 |   |                   |   | 401,011 |  
|Mortgage-backed securities, available for sale                                                                                                           |  |                        | 86,689  |   |                   |   | 90,478  |  
|Foreclosed real estate and repossessed assets                                                                                                            |  |                        | 13      |   |                   |   | 639     |  
|Premises and equipment, net                                                                                                                              |  |                        | 8,278   |   |                   |   | 9,024   |  
|Federal Home Loan Bank of Atlanta stock, at cost                                                                                                         |  |                        | 1,485   |   |                   |   | 1,485   |  
|Bank owned life insurance                                                                                                                                |  |                        | 15,159  |   |                   |   | 15,001  |  
|Core deposit intangible                                                                                                                                  |  |                        | 93      |   |                   |   | 101     |  
|Accrued interest and other assets                                                                                                                        |  |                        | 13,249  |   |                   |   | 11,347  |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Total assets                                                                                                                                             |  | $                      | 585,740 |   |                   | $ | 569,438 |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|                                                                                                                                                         |  |                       
|Liabilities and Stockholders Equity                                                                                                                     |  |                        |         |   |                   |   |         |  
|Liabilities                                                                                                                                              |  |                        |         |   |                   |   |         |  
|Deposits:                                                                                                                                                |  |                        |         |   |                   |   |         |  
|Non-interest bearing                                                                                                                                     |  | $                      | 27,342  |   |                   | $ | 25,529  |  
|Interest-bearing                                                                                                                                         |  |                        | 475,868 |   |                   |   | 462,460 |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Total deposits                                                                                                                                           |  |                        | 503,210 |   |                   |   | 487,989 |  
|Junior subordinated debentures                                                                                                                           |  |                        | 17,011  |   |                   |   | 17,011  |  
|Other liabilities                                                                                                                                        |  |                        | 5,415   |   |                   |   | 5,305   |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Total liabilities                                                                                                                                        |  |                        | 525,636 |   |                   |   | 510,305 |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|                                                                                                                                                         |  |                       
|Stockholders Equity                                                                                                                                     |  |                        |         |   |                   |   |         |  
|Preferred stock (par value $.01 - 5,000,000 authorized, 10,800 shares issued and outstanding at December 31, 2009 and
September 30, 2009, respectively)  |  |                        | 10,383  |   |                   |   | 10,383  |  
|Common stock (par value $.01  50,000,000 authorized, 3,120,945 shares issued and outstanding at December 31, 2009 and
September 30, 2009, respectively) |  |                        | 31      |   |                   |   | 31      |  
|Stock warrants                                                                                                                                           |  |                        | 395     |   |                   |   | 481     |  
|Additional paid-in capital                                                                                                                               |  |                        | 39,116  |   |                   |   | 38,984  |  
|Obligation under rabbi trust                                                                                                                             |  |                        | 1,035   |   |                   |   | 1,035   |  
|Retained earnings                                                                                                                                        |  |                        | 12,630  |   |                   |   | 12,117  |  
|Accumulated other comprehensive loss (net of taxes)                                                                                                      |  |                        | (1,420  | ) |                   |   | (1,812  | )
|Employee stock ownership plan                                                                                                                            |  |                        | (1,080  | ) |                   |   | (1,100  | )
|Stock held by rabbi trust                                                                                                                                |  |                        | (986    | ) |                   |   | (986    | )
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Total stockholders equity                                                                                                                               |  |                        | 60,104  |   |                   |   | 59,133  |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  
|Total liabilities and stockholders equity                                                                                                               |  | $                      | 585,740 |   |                   | $ | 569,438 |  
|                                                                                                                                                         |  |                        |         |   |                   |   |         |  

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



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                        |  |                                              |       |   |      |   |       |  
|------------------------------------------------------- |  | -------------------------------------------- | ----- | - | ---- | - | ----- | -
|                                                        |  | For the Three Months EndedDecember 31,       |      
|                                                        |  | 2009                                         |       |   | 2008 |  
|                                                        |  | (dollars in thousands except per share data) |      
|Interest Income                                         |  |                                              |       |  
|Interest and fees on loans                              |  | $                                            | 6,237 |   |      | $ | 6,287 |  
|Interest on mortgage backed securities                  |  |                                              | 1,171 |   |      |   | 1,288 |  
|Interest and dividends on investment securities         |  |                                              | 1     |   |      |   | 17    |  
|Other interest income                                   |  |                                              | 36    |   |      |   | 82    |  
|                                                        |  |                                              |       |   |      |   |       |  
|Total interest income                                   |  |                                              | 7,445 |   |      |   | 7,674 |  
|                                                        |  |                                             
|Interest Expense                                        |  |                                              |       |   |      |   |       |  
|Interest on deposits                                    |  |                                              | 2,367 |   |      |   | 3,509 |  
|Interest on borrowings  short term                     |  |                                              |      |   |      |   | 113   |  
|Other interest expense                                  |  |                                              | 154   |   |      |   | 345   |  
|                                                        |  |                                              |       |   |      |   |       |  
|Total interest expense                                  |  |                                              | 2,521 |   |      |   | 3,967 |  
|                                                        |  |                                              |       |   |      |   |       |  
|                                                        |  |                                             
|Net interest income                                     |  |                                              | 4,924 |   |      |   | 3,707 |  
|Provision for losses on loans                           |  |                                              | 300   |   |      |   | 150   |  
|                                                        |  |                                              |       |   |      |   |       |  
|Net interest income after provision for losses on loans |  |                                              | 4,624 |   |      |   | 3,557 |  
|                                                        |  |                                              |       |   |      |   |       |  
|                                                        |  |                                             
|Other Income                                            |  |                                              |       |   |      |   |       |  
|Gain on repossessed assets                              |  |                                              | 7     |   |      |   | 172   |  
|Mortgage banking operations                             |  |                                              | 24    |   |      |   | 13    |  
|Fees on transaction accounts                            |  |                                              | 218   |   |      |   | 293   |  
|Income from bank owned life insurance                   |  |                                              | 151   |   |      |   | 36    |  
|Miscellaneous income                                    |  |                                              | 300   |   |      |   | 89    |  
|                                                        |  |                                              |       |   |      |   |       |  
|Total other income                                      |  |                                              | 700   |   |      |   | 603   |  
|                                                        |  |                                              |       |   |      |   |       |  
|                                                        |  |                                             
|Non-Interest Expenses                                   |  |                                              |       |   |      |   |       |  
|Salaries and related expense                            |  |                                              | 2,348 |   |      |   | 1,789 |  
|Occupancy expense                                       |  |                                              | 586   |   |      |   | 578   |  
|Data processing expense                                 |  |                                              | 413   |   |      |   | 413   |  
|Federal deposit insurance premiums                      |  |                                              | 222   |   |      |   | 125   |  
|Property and equipment expense                          |  |                                              | 194   |   |      |   | 232   |  
|Professional fees                                       |  |                                              | 280   |   |      |   | 240   |  
|Advertising                                             |  |                                              | 95    |   |      |   | 95    |  
|Telephone, postage and office supplies                  |  |                                              | 80    |   |      |   | 90    |  
|Other expenses                                          |  |                                              | 78    |   |      |   | 185   |  
|                                                        |  |                                              |       |   |      |   |       |  
|Total non-interest expenses                             |  |                                              | 4,296 |   |      |   | 3,747 |  
|                                                        |  |                                              |       |   |      |   |       |  
|                                                        |  |                                             
|Income before tax expense                               |  |                                              | 1,028 |   |      |   | 413   |  
|Income tax expense                                      |  |                                              | 358   |   |      |   | 173   |  
|                                                        |  |                                              |       |   |      |   |       |  
|Net income                                              |  |                                              | 670   |   |      |   | 240   |  
|Preferred stock dividends and discount accretion        |  |                                              | (156  | ) |      |   | (10   | )
|                                                        |  |                                              |       |   |      |   |       |  
|Net income available to common shareholders             |  | $                                            | 514   |   |      | $ | 230   |  
|                                                        |  |                                             
|Per Share Data: (1)                                     |  |                                              |       |   |      |   |       |  
|Basic and diluted earnings per common share             |  | $                                            | 0.18  |   |      | $ | 0.08  |  
|                                                        |  |                                              |       |   |      |   |       |  
|Dividends per common share                              |  | $                                            |      |   |      | $ |      |  
|                                                        |  |                                              |       |   |      |   |       |  

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



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)



|                                                                                                                    |  |                                        |     |      |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | --- | ---- | - | ------ | -
|                                                                                                                    |  | For the Three Months EndedDecember 31, |    
|                                                                                                                    |  | 2009                                   |     | 2008 |  
|                                                                                                                    |  | ( in thousands)                        |    
|Net income available to common shareholders                                                                         |  | $                                      | 514 |      | $ | 230    |  
|Other comprehensive income ( loss), net of tax:                                                                     |  |                                        |     |      |   |        |  
|Unrealized net holding gains (losses) on Available-for-sale portfolios, net of tax of $255 and $(898),
respectively |  |                                        | 392 |      |   | (1,427 | )
|                                                                                                                    |  |                                        |     |      |   |        |  
|Comprehensive Income (Loss)                                                                                         |  | $                                      | 906 |      | $ | (1,197 | )
|                                                                                                                    |  |                                        |     |      |   |        |  

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



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                                 |  |                                        |        |   |      |   |         |  
|-------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                 |  | For the Three Months EndedDecember 31, |       
|                                                                                 |  | 2009                                   |        |   | 2008 |  
|                                                                                 |  | (dollars in thousands)                 |       
|Operating Activities                                                             |  |                                        |        |   |      |   |         |  
|Net income                                                                       |  | $                                      | 670    |   |      | $ | 240     |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                                        |        |   |      |   |         |  
|Amortization of deferred loan fees and cost, net                                 |  |                                        | 65     |   |      |   | (74     | )
|Non-cash compensation under stock-based benefit plan                             |  |                                        | 44     |   |      |   | 45      |  
|Provision for losses on loans                                                    |  |                                        | 300    |   |      |   | 150     |  
|Amortization of purchase premiums and discounts, net                             |  |                                        | 120    |   |      |   | 59      |  
|Provision for depreciation                                                       |  |                                        | 238    |   |      |   | 253     |  
|Gains on sale of real estate and repossessed assets                              |  |                                        | (7     | ) |      |   | (172    | )
|Increase in cash surrender value of bank owned life insurance                    |  |                                        | (151   | ) |      |   | (36     | )
|Increase in accrued interest and other assets                                    |  |                                        | (2,158 | ) |      |   | (76     | )
|Gain on sale of loans                                                            |  |                                        | (26    | ) |      |   | (2      | )
|Loans originated for sale                                                        |  |                                        | (2,266 | ) |      |   | (222    | )
|Proceeds from loans sold                                                         |  |                                        | 2,292  |   |      |   | 224     |  
|(Decrease) increase in other liabilities                                         |  |                                        | (51    | ) |      |   | 499     |  
|Decrease in obligation under Rabbi Trust                                         |  |                                        |       |   |      |   | (10     | )
|                                                                                 |  |                                        |        |   |      |   |         |  
|Net cash (used) provided by operating activities                                 |  |                                        | (930   | ) |      |   | 878     |  
|                                                                                 |  |                                       
|Cash Flows from Investing Activities                                             |  |                                        |        |   |      |   |         |  
|Purchase of bank owned life insurance                                            |  |                                        | (7     | ) |      |   | (27     | )
|Net decrease in loans                                                            |  |                                        | 3,088  |   |      |   | 4,512   |  
|Purchase of mortgage-backed securities  available for sale                      |  |                                        |       |   |      |   | (10,162 | )
|Principal collected on mortgage-backed securities                                |  |                                        | 4,421  |   |      |   | 1,827   |  
|Proceeds from sales of foreclosed real estate                                    |  |                                        | 639    |   |      |   | 1,455   |  
|Proceeds from sales of repossessed assets                                        |  |                                        | 24     |   |      |   | 12      |  
|Increase in accounts payable trade date securities                               |  |                                        |       |   |      |   | 2,029   |  
|Investment in premises and equipment                                             |  |                                        | (56    | ) |      |   | (8      | )
|Proceeds from sale of fixed assets                                               |  |                                        | 564    |   |      |   |        |  
|                                                                                 |  |                                        |        |   |      |   |         |  
|Net cash provided (used) by investing activities                                 |  |                                        | 8,673  |   |      |   | (362    | )
|                                                                                 |  |                                        |        |   |      |   |         |  

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



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)



|                                                                                  |  |                                        |        |   |      |   |       
|--------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------
|                                                                                  |  | For the Three Months EndedDecember 31,
|                                                                                  |  | 2009                                   |        |   | 2008
|                                                                                  |  | (dollars in thousands)                
|                                                                                  |  |                                       
|Cash Flows from Financing Activities                                              |  |                                        |        |   |      |   |       
|Net increase in deposits                                                          |  | $                                      | 15,220 |   |      | $ | 2,324 
|Net increase in advances by borrowers for taxes and insurance                     |  |                                        | 163    |   |      |   | 83    
|Net proceeds from preferred stock offering (Troubled Asset Relief Program TARP) |  |                                        |       |   |      |   | 10,800
|Dividends paid on preferred stock                                                 |  |                                        | (135   | ) |      |   |      
|                                                                                  |  |                                        |        |   |      |   |       
|Net cash provided (used) by financing activities                                  |  |                                        | 15,248 |   |      |   | 13,207
|                                                                                  |  |                                        |        |   |      |   |       
|                                                                                  |  |                                       
|Increase in cash equivalents                                                      |  |                                        | 22,991 |   |      |   | 13,723
|Cash and cash equivalents at beginning of period                                  |  |                                        | 40,252 |   |      |   | 34,983
|                                                                                  |  |                                        |        |   |      |   |       
|Cash and cash equivalents at end of period                                        |  | $                                      | 63,243 |   |      | $ | 48,706
|                                                                                  |  |                                        |        |   |      |   |       
|                                                                                  |  |                                       
|Supplemental Disclosures of Cash Flows Information:                               |  |                                        |        |   |      |   |       
|Cash paid during the period for:                                                  |  |                                        |        |   |      |   |       
|Interest                                                                          |  | $                                      | 2,468  |   |      | $ | 3,892 
|                                                                                  |  |                                        |        |   |      |   |       
|Income taxes                                                                      |  | $                                      | 45     |   |      | $ | 20    
|                                                                                  |  |                                        |        |   |      |   |       

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



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Principles of Consolidation

BCSB Bancorp, Inc. (the Company) owns 100% of Baltimore County Savings Bank, F.S.B. and its subsidiaries (the
Bank). The Bank owns 100% of Ebenezer Road, Inc. The accompanying consolidated financial statements include the accounts and transactions of these companies on a consolidated basis since the date of acquisition. All intercompany
transactions have been eliminated in the consolidated financial statements. Ebenezer Road, Inc. sells insurance products. Its operations are not material to the consolidated financial statements.

Note 2 - Basis for Financial Statement Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q.
Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, (none of which were other
than normal recurring accruals) necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. The financial statements of the Company are presented on a consolidated basis with
those of the Bank. The results for the three months ended December 31, 2009 are not necessarily indicative of the results of operations that may be expected for the year ending September 30, 2010. The Company has evaluated subsequent
events for potential recognition and/or disclosure through February 10, 2010, the date the consolidated financial statements included in this Quarterly Report on Form 10-Q were issued. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes which are incorporated by reference in BCSB Bancorp, Inc.s Annual Report on Form 10-K for the year ended September 30, 2009.

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term related to the determination of the allowance for loan losses (the
Allowance), other-than-temporary impairment of investment securities and deferred tax assets.

Note 3 - Organization

The Company is a Maryland corporation which was recently organized to be the stock holding company for the Bank in connection
with our second-step conversion and reorganization completed on April 10, 2008, discussed further below. The Bank operates as a federally chartered stock savings association. The Banks deposit accounts are insured up to a maximum of
$250,000 by the Federal Deposit Insurance Corporation (FDIC). The maximum insurance limit is scheduled to revert to $100,000 after December 31, 2013. The Banks non-interest earning demand deposit accounts currently have
unlimited FDIC insurance.

BCSB Bankcorp, Inc., a federal corporation, was the former mid-tier stock holding company for the
Bank. BCSB Bankcorp Inc. was organized in conjunction with the Banks reorganization from the mutual savings association to the mutual holding company structure in 1998. Baltimore County Savings Bank, M.H.C., a federal mutual holding company,
was the mutual holding company parent of BCSB Bankcorp, Inc. and owned 63.3% of BCSB Bankcorp, Inc.s outstanding stock. As a result of treasury stock purchases, this stake increased to approximately 64.5% of BCSB Bankcorps outstanding
stock at the time of the second-step conversion.

On April 10, 2008, a second-step conversion was completed after which
Baltimore County Savings Bank, M.H.C. and BCSB Bankcorp, Inc. ceased to exist and BCSB Bancorp, Inc., was organized as the new stock-form holding company for the Bank and successor to BCSB Bankcorp, Inc. The second-step conversion was accounted for
as a change in corporate form with no resulting change in the historical basis of the former BCSB



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 3 - Organization - continued

Bankcorp, Inc.s assets, liabilities and equity. A total of 1,976,538 new shares of the Company were sold at $10 per share in the
subscription, community and syndicated community offerings through which the Company received proceeds of approximately $17.1 million, net of offering costs of approximately $2.8 million. The Company contributed $8.5 million or approximately 50% of
the net proceeds to the Bank in the form of a capital contribution. The Company loaned $1.2 million to the Banks Employee Stock Ownership Plan (the ESOP) and the ESOP used those funds to acquire 122,197 shares of the Companys
common stock at $10 per share. As part of the conversion, outstanding public shares of BCSB Bankcorp, Inc. were exchanged for .5264 shares of the new holding company of the Bank. No fractional shares were issued. Instead, cash was paid to
shareholders at $10 per share for any fractional shares that would otherwise be issued. A total of 3,121,076 shares were outstanding as of the closing of the second-step conversion on April 10, 2008.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 4 - Mortgage-Backed Securities

The amortized cost and estimated fair values of mortgage-backed securities are as follows as of December 31, 2009 and September 30,
2009:



|                                    |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|----------------------------------- |  | ------------- | ------ | -------------------- | - | --------------------- |  | - | ------------------ | - |  | - | ------
|(in thousands)                      |  | AmortizedCost |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFairValue
|                                    |  |               |        |                     
|Available for sale:                 |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|                                    |  |               |        |                     
|December 31, 2009                   |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|GNMA certificates                   |  | $             | 3,684  |                      | $ | 96                    |  | $ |                   |   |  | $ | 3,780 
|Collateralized mortgage obligations |  |               | 21,299 |                      |   |                      |  |   | (5,178             | ) |  |   | 16,121
|FNMA certificates                   |  |               | 46,411 |                      |   | 1,937                 |  |   | (50                | ) |  |   | 48,298
|FHLMC participating certificates    |  |               | 17,640 |                      |   | 850                   |  |   |                   |   |  |   | 18,490
|                                    |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|                                    |  | $             | 89,034 |                      | $ | 2,883                 |  | $ | (5,228             | ) |  | $ | 86,689
|                                    |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|                                    |  |               |        |                     
|September 30, 2009                  |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|GNMA certificates                   |  | $             | 3,716  |                      | $ | 250                   |  | $ |                   |   |  | $ | 3,966 
|Collateralized mortgage obligations |  |               | 21,866 |                      |   |                      |  |   | (6,095             | ) |  |   | 15,771
|FNMA certificates                   |  |               | 49,450 |                      |   | 2,026                 |  |   | (44                | ) |  |   | 51,432
|FHLMC participating certificates    |  |               | 18,438 |                      |   | 871                   |  |   |                   |   |  |   | 19,309
|                                    |  |               |        |                      |   |                       |  |   |                    |   |  |   |       
|                                    |  | $             | 93,470 |                      | $ | 3,147                 |  | $ | (6,139             | ) |  | $ | 90,478
|                                    |  |               |        |                      |   |                       |  |   |                    |   |  |   |       

There were no sales of available for sale
mortgage-backed securities during the three months ended December 31, 2009 or the year ended September 30, 2009.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4 - Mortgage-Backed Securities - continued



Below is a schedule of mortgage backed securities with unrealized losses as of
December 31, 2009 and the length of time the individual security has been in a continuous unrealized loss position.



|                                      |  |                     |       |                  |                   |     |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  
|------------------------------------- |  | ------------------- | ----- | ---------------- | ----------------- | --- | --------- | ----- | ---------------- | ------ |  | --------- | ------ | ---------------- |  | - | ------ |  | - | ------ | -
|                                      |  | Less than 12 months |       |                  | 12 months or more |     |           | Total |                 
|(in thousands)                        |  | FairValue           |       | UnrealizedLosses |                   |     | FairValue |       | UnrealizedLosses |        |  | FairValue |        | UnrealizedLosses | 
|                                      |  |                     |       |                  |                   |    
|Mortgage-backed securities            |  | $                   | 6,097 |                  | $                 | (50 | )         |       | $                |       |  | $         |       |                  |  | $ | 6,097  |  | $ | (50    | )
|Collateralized mortgage obligations   |  |                     |      |                  |                   |    |           |       |                  | 16,121 |  |           | (5,178 | )                |  |   | 16,121 |  |   | (5,178 | )
|                                      |  |                     |       |                  |                   |     |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  
|Total temporarily impaired securities |  | $                   | 6,097 |                  | $                 | (50 | )         |       | $                | 16,121 |  | $         | (5,178 | )                |  | $ | 22,218 |  | $ | (5,228 | )
|                                      |  |                     |       |                  |                   |     |           |       |                  |        |  |           |        |                  |  |   |        |  |   |        |  

At December 31, 2009 the Company has eight securities in an unrealized loss position.

During the quarter ended December 31, 2009, we determined that, based on our most recent estimate of cash flows, no additional
other-than-temporary-impairment (OTTI) had occurred with respect to one of our mortgage-backed securities that had previously resulted in a pre-tax charge to earnings of $500,000. This security was rated AAA by
Standard & Poors at origination. This security had an original principle balance of $5.0 million and has a current principle balance of $3.2 million and its underlying collateral is comprised of ALT A mortgages originated in
2006. This security has an estimated fair value of $1.8 million at December 31, 2009. Most of the decline in fair value related to this security is principally due to non-credit factors. Under the revised guidance for recognition and
presentation of other-than-temporary impairments, impairment recognition for the Companys investment and mortgage-backed securities are now segmented into credit and non credit related components. Any fair value adjustment due to identified
credit-related components will be record as an adjustment to current period earnings, while non-credit-related fair value adjustments will be recorded through other comprehensive income.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 5 - Cash Flow Presentation

For purposes of the statements of cash flows, cash and cash equivalents include cash and amounts due from depository institutions,
investments in federal funds, and certificates of deposit with original maturities of 90 days or less.

Note 6 - Earnings Per Share

Basic per share amounts are based on the weighted average shares of common stock outstanding. Diluted earnings per share
assume the conversion, exercise or issuance of all potential common stock instruments such as options and warrants, unless the effect is to reduce a loss or increase earnings per share. The basic and diluted weighted average common shares
outstanding for three month periods ended December 31, 2009 and 2008 are as follows:



|                                                                 |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    
|---------------------------------------------------------------- |  | --------------------------------------- | ---- | - | ------ | ----- | -------- | - | ---- | ------ |  | - | ------ | - | -------- | ----- |  | - | ---
|                                                                 |  | For the Three Months Ended December 31,
|                                                                 |  | 2009                                    |      |   | 2008  
|                                                                 |  | (in thousands except per share data)   
|                                                                 |  | Income                                  |      |   | Shares |       | PerShare |   |      | Income |  |   | Shares |   | PerShare
|Basic EPS                                                        |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    
|Net Income                                                       |  | $                                       | 670  |   |        | 2,917 |          | $ | .23  |        |  | $ | 240    |   |          | 2,900 |  | $ | .08
|Less preferred dividend                                          |  |                                         | (156 | ) |        | 2,917 |          |   | (.05 | )      |  |   | (10    | ) |          |      |  |   |   
|                                                                 |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    
|Income available to common shareholders                          |  |                                         | 514  |   |        | 2,917 |          |   | .18  |        |  |   | 230    |   |          | 2,900 |  |   | .08
|                                                                 |  |                                         |      |   |        |      
|Diluted EPS                                                      |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    
|Effect of dilutive shares                                        |  |                                         |     |   |        | 3     |          |   |     |        |  |   |       |   |          | 9     |  |   |   
|                                                                 |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    
|Income available to common shareholders plus assumed conversions |  | $                                       | 514  |   |        | 2,920 |          | $ | .18  |        |  | $ | 230    |   |          | 2,909 |  |   | .08
|                                                                 |  |                                         |      |   |        |       |          |   |      |        |  |   |        |   |          |       |  |   |    

Options to purchase 74,175 shares which were outstanding at
December 31, 2009 and 86,151 shares which were outstanding December 31, 2008, were not included in the computation of diluted EPS because the effect would have been anti-dilutive.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 7 - Preferred Stock

On December 23, 2008, as part of the Troubled Asset Relief Program (TARP) Capital Purchase Program, the Company entered into
a Letter Agreement, and the related Securities Purchase Agreement  Standard Terms (collectively, the Purchase Agreement), with the United States Department of the Treasury (Treasury), pursuant to which the Company
issued (i) 10,800 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share (Series A preferred stock), and (ii) a warrant to purchase 183,465 shares of the Companys
common stock, par value $0.01 per share, for an aggregate purchase price of $10,800,000 in cash.

The Series A preferred stock
qualifies as Tier 1 capital and pays cumulative dividends at a rate of 5% per annum until February 15, 2014. Beginning February 16, 2014, the dividend rate will increase to 9% per annum. On and after February 15, 2012, the
Company may, at its option, redeem shares of Series A preferred stock, in whole or in part, at any time and from time to time, for cash at a per share amount equal to the sum of the liquidation preference per share plus any accrued and unpaid
dividends to but excluding the redemption date. Under the original terms of the Purchase Agreement, the Company is prohibited from redeeming the Series A preferred stock within the first three years unless it completed a qualified equity offering
whereby it received aggregate gross proceeds of not less than $2.7 million. However, the provisions introduced by the American Recovery and Reinvestment Act of 2009 indicate that once the Company notifies Treasury that it would like to redeem the
Series A preferred stock, the Treasury must permit the Company to do so subject to consultation with the OTS. The Company will be subject to existing supervisory procedures for approving redemption requests for capital instruments. The OTS will
weigh the Companys desire to redeem the Series A preferred stock against the contribution of Treasury capital to the Companys overall soundness, capital adequacy and ability to lend, including confirming that the Company has a
comprehensive internal capital assessment process.

The warrant is exercisable at $8.83 per share at any time on or before
December 23, 2018. The number of shares of common stock issuable upon exercise of the warrant and the exercise price per share will be adjusted if specific events occur.

The Series A preferred stock and the warrants were issued in a transaction exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended. Neither the Series A preferred stock nor the warrant will be subject to any contractual restrictions on transfer.

Note 8 - Regulatory Capital

The following table sets forth the Banks capital position at
December 31, 2009.



|                   |  |                                    |        |            |                              |   |                |                                                               |            |  |      |                |  |            |        |  |       |     
|------------------ |  | ---------------------------------- | ------ | ---------- | ---------------------------- | - | -------------- | ------------------------------------------------------------- | ---------- |  | ---- | -------------- |  | ---------- | ------ |  | ----- | ----
|                   |  | Actual                             |        |            | For CapitalAdequacy Purposes |   |                | To Be WellCapitalized UnderPrompt CorrectiveAction Provisions |           
|                   |  | ActualAmount                       |        | % ofAssets |                              |   | RequiredAmount |                                                               | % ofAssets |  |      | RequiredAmount |  | % ofAssets |       
|                   |  | (Unaudited) (dollars in thousands) |       
|Tangible (1)       |  | $                                  | 66,496 |            | 11.40                        | % |                | $                                                             | 8,748      |  | 1.50 | %              |  | $          | N/A    |  | N/A   | %(3)
|Tier I capital (2) |  |                                    | 66,496 |            | 17.53                        |   |                |                                                               | N/A        |  | N/A  | (3)            |  |            | 22,759 |  | 6.00  |     
|Core (1)           |  |                                    | 66,496 |            | 11.40                        |   |                |                                                               | 23,329     |  | 4.00 |                |  |            | 29,161 |  | 5.00  |     
|Risk-weighted (2)  |  |                                    | 69,771 |            | 18.39                        |   |                |                                                               | 30,345     |  | 8.00 |                |  |            | 37,931 |  | 10.00 |     



|(1) | To adjust total assets
|--- | ----------------------

|(2) | To risk-weighted assets
|--- | -----------------------

|(3) | Not applicable
|--- | --------------



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 9 - Stock Option Plans

On July 15, 1999, the Company established a Stock Option Plan (the 1999 Plan) whereby 120,366 shares of common stock have
been reserved for issuance under the 1999 Plan. Options granted under the Plan may be Incentive Stock Options within the meaning of Section 422 of the Internal Revenue Code of 1986 as amended or Non-Qualified Stock Options. Options are
exercisable in four or five annual installments at the market price of common stock at the date of grant. The Options must be exercised within ten years from the date of grant. There were 43,428 options granted during the year ended
September 30, 2002. There were 15,792 options granted during the year ended September 30, 2007, 22,193 options granted during the year ended September 30, 2008 and 11,796 options granted during the year ended September 30, 2009.
No options were granted during the years ended September 30, 2003 through 2006. There were no options granted during the three months ended December 31, 2009.

The following table summarizes the shares under the Companys stock option plan at September 30, 2009:



|                 |  |       |       |                                  |     
|---------------- |  | ----- | ----- | -------------------------------- | ----
|Number of Shares |  | Price |       | Weighted AverageContractual Life
|26,452           |  | $     | 21.61 |                                  | 2.4 
|10,528           |  |       | 28.41 |                                  | 7.0 
|5,264            |  |       | 17.95 |                                  | 8.0 
|22,193           |  |       | 11.61 |                                  | 8.2 
|11,796           |  |       | 8.25  |                                  | 10.0

The total exercisable
shares of 39,369 have a weighted average contractual life of 4.3 years, and an aggregate intrinsic value of $0.

At the annual
shareholders meeting held in May 2009 the Company approved an additional Stock Option Plan (the 2009 Plan) whereby 191,740 shares of common stock have been reserved for issuance under the 2009 Plan. Options granted under the Plan may be
Incentive Stock Options within the meaning of Section 422 of the Internal Revenue Code of 1986 as amended or Non-Qualified Stock Options. Options are exercisable in four or five annual installments at the market price of common stock at the
date of grant. The Options must be exercised within ten years from the date of grant. There were no options granted during the three months ended December 31, 2009.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



The following table presents the activity related to options under all plans for the three months ended
December 31, 2009.



|                                  |  |        |  |                                |      
|--------------------------------- |  | ------ |  | ------------------------------ | -----
|                                  |  | Shares |  | Weighted AverageExercise
Price
|Outstanding at September 30, 2009 |  | 76,233 |  | $                              | 17.32
|Options exercised                 |  |       |  |                                |     
|Forfeited                         |  |       |  |                                |     
|Granted                           |  |       |  |                                |     
|                                  |  |        |  |                                |      
|Outstanding at December 31, 2009  |  | 76,233 |  | $                              | 17.32
|                                  |  |        |  |                                |      
|                                  |  |       
|Exercisable at December 31, 2009  |  | 39,369 |  | $                              | 21.20
|                                  |  |        |  |                                |      

There were no options granted during the three months ended
December 31, 2009 and 2008.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 10 - Recent Accounting Pronouncements

All pending but not yet effective Accounting Standards Updates (ASU) were evaluated and only those listed below could have a
material impact on the Companys financial condition or results of operations.

In June 2009, the FASB issued guidance
on, Accounting for Transfers of Financial Assets that requires enhanced disclosures about the transfer of financial assets and a companys continuing involvement in transferred assets. This guidance is effective for financial
statements issued for fiscal years beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. This statement
changes the derecognition guidance for transferors of financial assets, including entities that sponsor securitizations.

In
June 2009 FASB issued guidance which eliminates the concept of a qualifying special purpose entity (QSPE). The guidance eliminates any reference to a QSPE and requires a transferor to evaluate transfers to such entities under the amended
guidance. This guidance also introduces the concept of a participating interest. A participating interest is defined as a proportionate interest ownership interest in a financial asset in which the cash flows from the asset are allocated to the
participating interest holders in proportion to their ownership share.

Additionally, this guidance significantly modifies the
conditions required for a transfer of a financial asset or a participating interest therein to qualify as a sale and also changes the measurement guidance for transfers of financial assets in that it requires that a transferor recognize and
initially measure at fair value any servicing assets, servicing liabilities, and any other assets obtained and liabilities incurred in a sale. The statement amends the disclosure requirements that will allow financial statement users to
understand the nature and extent of the transferors continuing involvement with financial assets that have been transferred. The Company does not expect that the adoption of this statement will have a material impact on its financial position,
results of operations or cash flows.

In June 2009, the FASB issued guidance, which 1) replaces the quantitative-based risks
and rewards calculations for determining whether an enterprise is the primary beneficiary in a variable interest entity with an approach that is primarily qualitative, 2) requires ongoing assessments of whether an enterprise is the primary
beneficiary of a variable interest entity, and 3) requires additional disclosure about an enterprises involvement in variable interest entities. This guidance is effective for financial statements issued for fiscal years beginning after
November 15, 2009. We do not expect the adoption of the guidance to have a material impact, if any on the Companys consolidated financial condition or results of operations.

Note 11 - 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 has $983,000 of standby letters of credit as of December 31, 2009. Management believes that the proceeds obtained through a liquidation of collateral and the
enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. The current amount of the liability as of December 31, 2009 for guarantees under standby letters of
credit issued is not considered to be material.

Note 12 - Fair Value Measurements

Effective October 1, 2008, the Company adopted FASB guidance for  Fair Value Measurements . This guidance defined the concept of fair
value, established a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. This guidance applies only to fair value measurements required or permitted under current accounting pronouncements, but does not
require any new fair value measurements. Fair value is defined as



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 12 - Fair Value Measurements - continued



the price to sell an asset or to transfer a liability in an orderly transaction between willing market participants as of the measurement date. The statement also expands disclosures about
financial instruments that are measured at fair value and eliminates the use of large position discounts for financial instruments quoted in active markets. The disclosures emphasis is on the inputs used to measure fair value and the effect on
the measurement on earnings for the period. The adoption of this guidance did not have any effect on the Companys financial position or results of operations.

SFAS No. 157 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based on the inputs used to value the particular asset or liability at
the measurement date. The three levels are defined as follows:



| |  |  | Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted process of
identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| | - |  | -------------------------------------------------------------------------------------------------------------

Each financial instruments level assignment with the valuation hierarchy is based upon the lowest level of input that is significant to the fair value
measurement for the particular category.

The following is a description of the valuation methodologies used for instruments measured at fair
value, as well as the general classification of each instrument under the valuation hierarchy.

Securities Available for Sale

Fair values of investment securities are estimated by using pricing models, quoted prices of securities with similar characteristics, or
discounted cash flows and are generally classified within Level 2 of the valuation hierarchy.

The following table presents the financial
instruments measured at fair value on the recurring basis as of December 31, 2009 on the Consolidated Statement of Financial Condition utilizing the hierarchy discussed above.



|                              |  |                      |        |         |   |         |  |         |        |                                                       |   |   |  |   |  
|----------------------------- |  | -------------------- | ------ | ------- | - | ------- |  | ------- | ------ | ----------------------------------------------------- | - | - |  | - | -
|                              |  | At December 31, 2009
|($ in thousands)              |  | Total                |        | Level 1 |   | Level 2 |  | Level 3 |        | Total changes Infair valuesIncluded in PeriodEarnings
|Securities available for sale |  | $                    | 86,689 |         | $ |        |  | $       | 86,689 |                                                       | $ |  |  | $ | 
|                              |  |                      |        |         |   |         |  |         |        |                                                       |   |   |  |   |  

Nonrecurring fair value changes

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These instruments are not measured at fair value on an ongoing basis, but
are subject to fair value in certain circumstances, such as when there is evidence of impairment that may require write downs. The write-downs for the Companys more significant assets or liabilities measured on a non-recurring basis are based
on the lower of amortized cost or estimated fair value.

Impaired Loans

The Company considers loans to be impaired when it becomes probable that the Company will be unable to collect all amounts due in accordance with the
contractual terms of the loan agreement. All non-accrual loans are considered impaired. The measurement of impaired loans is based on the present value of the expected cash flows discounted at the historical effective interest rate, the market price
of the loan, or the fair value of the underlying collateral asset.



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BCSB BANCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Foreclosed Real Estate and Repossessed Assets

Once an asset is determined to be uncollectible, the underlying collateral is repossessed and reclassified to Foreclosed Real Estate and Repossessed Assets.
These assets are carried at lower of cost or fair value of the collateral, less costs to sell. There was no Foreclosed Real Estate at December 31, 2009.

Impaired loans , Foreclosed Real Estate and Repossessed Assets are classified as Level 3 within the valuation hierarchy.



|                                              |  |                      |       |         |   |         |  |         |   |  |   |      
|--------------------------------------------- |  | -------------------- | ----- | ------- | - | ------- |  | ------- | - |  | - | -----
|                                              |  | At December 31, 2009
|($ in thousands)                              |  | Total                |       | Level 1 |   | Level 2 |  | Level 3
|Impaired Loans                                |  | $                    | 3,397 |         | $ |        |  | $       |  |  | $ | 3,397
|Foreclosed Real Estate and Repossessed Assets |  | $                    | 13    |         | $ |        |  | $       |  |  | $ | 13   
|                                              |  |                      |       |         |   |         |  |         |   |  |   |      
|Total                                         |  | $                    | 3,410 |         | $ |        |  | $       |  |  | $ | 3,410
|                                              |  |                      |       |         |   |         |  |         |   |  |   |      



|                                                                                                        |  |                                                            |        |  
|------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | ------ | -
|($ in thousands)                                                                                        |  | Impaired Loans,Foreclosed RealEstate andRepossessed Assets |       
|Balance at September 30, 2009                                                                           |  | $                                                          | 8,329  |  
|Total net gains for the year                                                                            |  |                                                            |       |  
|Net transfers in/(out) Level 3                                                                          |  |                                                            | (4,919 | )
|                                                                                                        |  |                                                            |        |  
|Balance at December 31, 2009                                                                            |  | $                                                          | 3,410  |  
|                                                                                                        |  |                                                            |        |  
|                                                                                                        | 
|Net realized gains included in net income for the year to date relating to sales of repossessed assets. |  | $                                                          | 7      |  
|                                                                                                        |  |                                                            |        |  



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BCSB BANCORP, INC.

AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Disclosures About Fair Value of Financial Instruments

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

The carrying amount is a reasonable estimate of fair value for cash, federal funds and interest-bearing deposits
in other banks. Fair value is based on bid prices and pricing models received from third party pricing services for investment securities and mortgage backed securities. The carrying amount of Federal Home Loan Bank of Atlanta stock is a reasonable
estimate of fair value. Loans receivable were discounted using a single discount rate, comparing the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. These rates were
used for each aggregated category of loans as reported on the Office of Thrift Supervision Quarterly Report. The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The
Junior Subordinated Debentures are considered to be at fair value. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered on deposits of similar remaining maturities. The fair value of Federal Home
Loan Bank advances is estimated using rates currently offered on advances of similar remaining maturities. The carrying amounts of accrued interest receivable, accrued interest payable, and mortgage servicing rights approximate fair value. Fair
values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing.

The Company charges fees for commitments to extend credit. Interest rates on loans for which these commitments are extended
are normally committed for periods of less than one month. Fees charged on standby letters of credit and other financial guarantees are deemed to be immaterial and these guarantees are expected to be settled at face amount or expire unused. It is
impractical to assign any fair value to these commitments.



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BCSB BANCORP, INC.

AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Disclosures About Fair Value of Financial Instruments - Continued

The estimated fair values of the Banks financial instruments are as follows:



|                                                |  |                        |         |                     |   |                |  |                    |         |  |   |        
|----------------------------------------------- |  | ---------------------- | ------- | ------------------- | - | -------------- |  | ------------------ | ------- |  | - | -------
|                                                |  | December 31, 2009      |         | September 30, 2009 
|                                                |  | CarryingAmount         |         | Estimated FairValue |   | CarryingAmount |  | EstimatedFairValue
|                                                |  | (Amounts in Thousands)
|Financial Assets                                |  |                        |         |                     |   |                |  |                    |         |  |   |        
|Cash                                            |  | $                      | 5,525   |                     | $ | 5,525          |  | $                  | 5,535   |  | $ | 5,535  
|Interest-bearing deposits in other banks        |  |                        | 2,787   |                     |   | 2,787          |  |                    | 3,786   |  |   | 3,786  
|Federal funds sold                              |  |                        | 54,931  |                     |   | 54,931         |  |                    | 30,931  |  |   | 30,931 
|Interest-bearing time deposits                  |  |                        | 100     |                     |   | 100            |  |                    | 100     |  |   | 100    
|                                                |  |                        |         |                    
|Loans Receivable                                |  |                        |         |                     |   |                |  |                    |         |  |   |        
|Mortgage loans                                  |  |                        | 389,372 |                     |   | 399,687        |  |                    | 391,560 |  |   | 399,425
|Share loans                                     |  |                        | 632     |                     |   | 632            |  |                    | 661     |  |   | 661    
|Consumer loans                                  |  |                        | 7,427   |                     |   | 10,819         |  |                    | 8,790   |  |   | 9,053  
|Mortgage-backed securities  available for sale |  |                        | 86,689  |                     |   | 86,689         |  |                    | 90,478  |  |   | 90,478 
|Federal Home Loan Bank of Atlanta stock         |  |                        | 1,485   |                     |   | 1,485          |  |                    | 1,485   |  |   | 1,485  
|Accrued interest receivable                     |  |                        | 2,338   |                     |   | 2,338          |  |                    | 2,306   |  |   | 2,306  
|Mortgage servicing rights                       |  |                        | 270     |                     |   | 270            |  |                    | 296     |  |   | 296    
|                                                |  |                        |         |                    
|Financial Liabilities                           |  |                        |         |                     |   |                |  |                    |         |  |   |        
|Deposits                                        |  | $                      | 503,210 |                     | $ | 504,884        |  | $                  | 487,989 |  | $ | 488,756
|Junior Subordinated Debt                        |  |                        | 17,011  |                     |   | 17,011         |  |                    | 17,011  |  |   | 17,011 
|Accrued interest payable                        |  |                        | 63      |                     |   | 67             |  |                    | 51      |  |   | 51     



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##### Table of Contents

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

General

The Company
is a Maryland corporation which was organized to be the stock holding company for the Bank in connection with our second-step conversion and reorganization completed on April 10, 2008, discussed further below. The Bank operates as a federally
chartered stock savings association. The Banks deposit accounts are insured up to a maximum of $250,000 by the FDIC. This maximum insurance limit is scheduled to revert to $100,000 after December 31, 2013. The Banks noninterest
earning demand deposit accounts have unlimited FDIC insurance.

BCSB Bankcorp, Inc., a federal corporation, was the former
mid-tier stock holding company for the Bank. BCSB Bankcorp was organized in conjunction with the Banks reorganization from the mutual savings association to the mutual holding company structure in 1998. Baltimore County Savings Bank, M.H.C., a
federal mutual holding company, was the mutual holding company parent of BCSB Bankcorp, Inc. and originally owned 63.3% of BCSB Bankcorp, Inc.s outstanding stock. As a result of treasury stock purchases, this stake increased to approximately
64.5% of BCSB Bankcorps outstanding stock at the time of the second-step conversion. On April 10, 2008, a second-step conversion was completed after which Baltimore County Savings Bank, M.H.C. and BCSB Bankcorp, Inc. ceased to exist. A
newly organized Maryland corporation BCSB Bancorp, Inc., became the holding company for the Bank. The second-step conversion was accounted for as a change in corporate form with no resulting change in the historical basis of the former BCSB
Bankcorp, Inc.s assets, liabilities and equity. A total of 1,976,538 new shares of the Company were sold at $10.00 per share in the subscription, community and syndicated community offerings through which the Company received proceeds of
approximately $17.1 million, net of offering costs of approximately $2.6 million. The Company contributed $8.5 million or approximately 50% of the net proceeds to the Bank in the form of a capital contribution. The Company loaned $1.2 million to the
Banks Employee Stock Ownership Plan (the ESOP) and the ESOP used those funds to acquire 122,197 shares of the Companys common stock at $10 per share. As part of the conversion, outstanding public shares of BCSB Bankcorp, Inc.
were exchanged for .5264 shares of the new holding company of the Bank. No fractional shares were issued. Instead, cash was paid to shareholders at $10.00 per share for any fractional shares that would otherwise be issued. The exchange resulted in
an additional 1,144,407 outstanding shares of the Company for a total of 3,120,945 outstanding shares as of the closing of the second-step conversion on April 10, 2008. Information herein for dates and periods prior to April 10, 2008
reflect such information for BCSB Bankcorp, Inc.

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

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

Critical Accounting Policies and Estimates

Managements discussion and analysis of the Companys financial condition is based on the consolidated financial statements, which
are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the allowance for loan losses.

Management believes the allowance for loan losses is a critical accounting policy that requires the most significant estimates and
assumptions used in the preparation of the consolidated financial statements. The allowance for loan losses is based on managements evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan
portfolio. Management believes the allowance for loan losses is a significant estimated loss and therefore regularly evaluates it for adequacy by taking into consideration factors such as prior loan loss experience, the character and size of the
loan portfolio,



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##### Table of Contents

business and economic conditions and managements estimation of losses. The use of different estimates or assumptions could produce different provisions for loan losses.

Securities are evaluated periodically to determine whether a decline in their value is other than temporary. The term other than
temporary is not intended to indicate a permanent decline in value. Rather, it means that the prospects for near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or
greater than, the carrying value of the investment. Under the revised guidance, for recognition and presentation of other-than-temporary impairments the amount of other-than-temporary impairment that is recognized through earnings for debt
securities is determined by comparing the present value of the expected cash flows to the amortized cost of the security. The revised guidance also requires that an evaluation be done to determine whether the Company has the intent to sell or is
more likely than not required to sell these securities. The discount rate used to determine the credit loss is the expected book yield on the security.

The Company accounts for income taxes under the asset/liability method. Deferred tax assets are recognized for the future consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period indicated by the enactment date. A valuation
allowance is established for deferred tax assets when, in the judgment of management, it is more likely than not that such deferred tax assets will not become realizable. The judgment about the level of future taxable income is dependent to a great
extent on matters that may, at least in part, be beyond the Companys control. It is at least reasonably possible that managements judgment about the need for a valuation allowance for deferred tax assets could change in the near term.

Available Information

The Company and Bank maintain an Internet website at http://www.baltcosavings.com. The Company makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to such reports filed with the Securities and Exchange Commission (SEC) as well as other information related to the Company, free of charge. SEC reports are available on this site as soon as reasonably
practicable after electronically filed.



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Recent Developments

Sale of Branches

On January 12, 2010, BCSB Bancorp, Inc. (the
Company) announced that on January 12, 2010 its subsidiary, Baltimore County Savings Bank, F.S.B. (the Bank) entered into a definitive Purchase and Assumption Agreement (the Agreement) with American Bank
(American) under which the Bank will sell four branch offices, located at 6335 Baltimore National Pike, Catonsville, Maryland,9416 Baltimore National Pike, Ellicott City, Maryland, 4228 Harford Road, Baltimore, Maryland, and 9231
Lakeside Boulevard, Owings Mills, Maryland(collectively, the Branches), to American. The agreement provides that American will assume the deposits associated with the Branches, which totaled approximately $81 million at December 31,
2009. Under the agreement, American will purchase the personal property, furniture, fixtures, leasehold improvements and equipment located at the Branches and the Banks right, title and interest in and to the real property on which the
Hamilton Branch is located and the buildings and improvements situated thereon. American also will assume the leases for the premises for the Catonsville, Ellicott City and Owings Mills Branches. American will pay a premium equal to the lesser of 2%
of the deposit liabilities it assumes or $1,350,000. For further information regarding the proposed sale of branches, including a copy of the Purchase and Assumption Agreement, see the Companys current report on Form 8-K filed with the
Securities and Exchange Commission on January 15, 2010.

Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q, 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, whether regulatory approval will be obtained for the branch sales described above under Sale of Branches, competition and information provided by third-party vendors that could cause actual results to differ
materially from historical earnings and those presently anticipated or projected and the risk factors described in Item 1A of the Companys Annual Report on Form 10-K for the year ended September 30, 2009. 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.

Comparison of Financial Condition at December 31, 2009 and September 30, 2009

During the three months ended December 31, 2009, assets increased by $16.3 million, or 2.9%, from $569.4 million at September 30, 2009 to $585.7 million at December 31, 2009. Our cash and
cash equivalents increased $23.0 million, or 57.1% from $40.3 million at September 30, 2009 to $63.2 million at December 31, 2009, primarily due to an increase in deposits and principal repayments on loans receivable and mortgage-backed
securities. Net loans receivable decreased $3.6 million, or .90%, from $401.0 million at September 30, 2009 to $397.4 million at December 31, 2009. Managements lending strategy remains focused on commercial real estate, commercial
business and home equity lending. We have ceased our indirect auto lending program. Mortgage-backed securities available for sale decreased by $3.8 million, or 4.2%, from $90.5 million at September 30, 2009 to $86.7 million at December 31,
2009 resulting primarily from principal payments received during the period. At December 31, 2009, all mortgage-backed securities were classified as available for sale for liquidity purposes. The cash surrender value on the bank owned life
insurance increased $158,000, or 1.0% from $15.0 million at September 30, 2009 to $15.1 million at December 31, 2009. Accrued interest and other assets increased $1.9 million from $11.3 million at September 30, 2009 to $$13.2 million
at December 31, 2009 primarily due to the prepayment of the FDIC premium.

Deposits increased by $15.2 million, or 3.1%,
from $488.0 million at September 30, 2009 to $503.2 million at December 31, 2009. The Bank has been successful in attracting new deposits without increasing the overall cost for such funds.



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Stockholders equity increased by $971,000, or 1.6%, from $59.1 million at
September 30, 2009 to $60.1 million at December 31, 2009. This increase was due to net income during the period and a decline in accumulated other comprehensive loss. Our accumulated other comprehensive loss net of taxes was $1.4 million
at December 31, 2009, compared to accumulated other comprehensive loss net of taxes of $1.8 million at September 30, 2009. At December 31, 2009, we had $5.2 million of gross unrealized losses related to collateralized mortgage
obligations with an amortized cost of $21.3 million as of that date. These securities contain mortgages with Alt-A characteristics. Gross unrealized losses for these same securities were approximately $6.1 million as of September 30, 2009. We
recorded other-than-temporary impairment (OTTI) charges of $500,000 on these securities during the year ended September 30, 2009. We do not intend to sell, nor is it more likely than not we will be required to sell these securities
before maturity or recovery. If in the future it is determined that declines in market values with respect to these or any other securities are other than temporary, the Company would be required to recognize additional losses in its Consolidated
Statement of Operations.

Comparison of Operating Results for the Three Months Ended December 31, 2009 and 2008

Net Income. Net income available to common shareholders increased by $284,000 or 123.5%, from $230,000 for the three
months ended December 31, 2008 to $514,000 for the three months ended December 31, 2009. The increase was primarily due to improved net interest income and other income, partially offset by increases in loan loss provisions and
non-interest expenses.

Net Interest Income. Net interest income increased by $1.2 million, or 32.8%,
from $3.7 million for the three months ended December 31, 2008 to $4.9 million for the three months ended December 31, 2009. The increase in net interest income primarily was attributable to reduced cost of funds on the deposit portfolio
during the period. The net interest margin increased 86 basis points from 2.80% for the three months ended December 31, 2008 to 3.66% for the three months ended December 31, 2009.

Interest Income. Interest income decreased by $229,000, or 3.0% from $7.7 million for the three months ended
December 31, 2008 to $7.4 for the three months ended December 31, 2009. This was primarily due to a decrease in the average rate earned on all interest earning assets during the period. The average rate earned on total interest-earning
assets declined by 26 basis points from 5.79% for the three months ended December 31, 2009 to 5.53 % for the three months ended December 31, 2009. Changes in average balances of loans receivable and mortgage-backed securities during
the period were not significant.

Interest Expense. Interest expense, which consists of interest on
deposits, interest on borrowed money and other interest expense decreased from $4.0 million for the three months ended December 31, 2008 to $2.5 million for the three months ended December 31, 2009, a decrease of $1.4 million or 36.4%.
Interest on deposits decreased $1.1 million from $3.5 million for the three months ended December 31, 2008 to $2.4 million for the three months ended December 31, 2009. This decrease was due to the decrease in the average cost of deposits
of 100 basis points from 2.90% for the three months ended December 31, 2008 to 1.90% for the three months ended December 31, 2009. This was partially offset by an increase in the average balance of deposits of $14.7 million from $484.6
million for the three months ended December 31, 2008 to $499.3 million for the three months ended December 31, 2009. Interest on short-term borrowings decreased by $113,000 for the three months ended December 31, 2009 as there were no
short-term borrowings outstanding during the period. Other interest expense decreased by $191,000 or 55.4% from $345,000 for the three months ended December 31, 2008 to $154,000 for the three months ended December 31, 2009. This was due to
the decline in interest expense on Junior Subordinated Debentures. The average cost of funds on the debt decreased by 449 basis points, from 8.11% for the three months ended December 31, 2008 to 3.62% for the three months ended
December 31, 2009. The rates on the Junior Subordinated Debentures are based on LIBOR and adjust quarterly.



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Average Balance Sheet. The following table 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 yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average
daily balance of assets or liabilities, respectively, for the three month periods ended December 31, 2009 and 2008. Total average assets are computed using month-end balances.

The table also presents information for the periods indicated with respect to the differences between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities, or interest rate spread, which banks have traditionally used as an indicator of profitability. Another indicator of net interest income is net interest
margin, which is net interest income divided by the average balance of interest-earning assets.



|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|------------------------------------------------------------------ |  | --------------------------------------- | ------- | -------- | ---- | ----------- |  | ------ | -------------- |  | -------- | ------- | ----------- | - | ----- |  | ------ | -
|                                                                   |  | For the Three Months Ended December 31, |        
|                                                                   |  | 2009                                    |         |          | 2008 |            
|                                                                   |  | AverageBalance                          |         | Interest |      | AverageRate |  |        | AverageBalance |  | Interest |         | AverageRate |  
|                                                                   |  | (Dollars in thousands)                  |        
|Interest-earning assets:                                           |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Loans receivable, net                                              |  | $                                       | 400,751 |          | $    | 6,237       |  | 6.23   | %              |  | $        | 397,999 |             | $ | 6,287 |  | 6.32   | %
|Mortgage-backed securities                                         |  |                                         | 89,390  |          |      | 1,171       |  | 5.24   |                |  |          | 90,393  |             |   | 1,288 |  | 5.70   |  
|FHLB stock and Investment securities                               |  |                                         | 1,485   |          |      | 1           |  | .27    |                |  |          | 2,539   |             |   | 17    |  | 2.68   |  
|Other interest-earning assets                                      |  |                                         | 46,817  |          |      | 36          |  | .31    |                |  |          | 38,951  |             |   | 82    |  | .84    |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Total Interest-earning assets                                      |  |                                         | 538,443 |          |      | 7,445       |  | 5.53   |                |  |          | 529,882 |             |   | 7,674 |  | 5.79   |  
|Bank Owned Life Insurance                                          |  |                                         | 15,057  |          |      |             |  |        |                |  |          | 14,382  |             |   |       |  |        |  
|Noninterest-earning assets                                         |  |                                         | 25,615  |          |      |             |  |        |                |  |          | 30,253  |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Total assets                                                       |  | $                                       | 579,115 |          |      |             |  |        |                |  | $        | 574,517 |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |            
|Interest-bearing liabilities:                                      |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Deposits                                                           |  | $                                       | 499,308 |          | $    | 2,367       |  | 1.90   | %              |  | $        | 484,599 |             | $ | 3,509 |  | 2.90   | %
|Short-term FHLB Advances                                           |  |                                         |        |          |      |            |  |       |                |  |          | 10,000  |             |   | 113   |  | 4.52   |  
|Junior Subordinated Debentures                                     |  |                                         | 17,011  |          |      | 154         |  | 3.62   |                |  |          | 17,011  |             |   | 345   |  | 8.11   |  
|Other liabilities                                                  |  |                                         | 955     |          |      |            |  |       |                |  |          | 2,087   |             |   |      |  |       |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Total interest-bearing liabilities                                 |  |                                         | 517,274 |          |      | 2,521       |  | 1.95   |                |  |          | 513,697 |             |   | 3,967 |  | 3.09   |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Noninterest-bearing liabilities                                    |  |                                         | 1,808   |          |      |             |  |        |                |  |          | 7,559   |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Total liabilities                                                  |  |                                         | 519,082 |          |      |             |  |        |                |  |          | 521,256 |             |   |       |  |        |  
|Stockholders Equity                                               |  |                                         | 60,033  |          |      |             |  |        |                |  |          | 53,261  |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Total liabilities and stockholders equity                         |  | $                                       | 579,115 |          |      |             |  |        |                |  | $        | 574,517 |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|                                                                   |  |                                         |         |          |      |            
|Net interest income                                                |  |                                         |         |          | $    | 4,924       |  |        |                |  |          |         |             | $ | 3,707 |  |        |  
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Interest rate spread                                               |  |                                         |         |          |      |             |  | 3.58   | %              |  |          |         |             |   |       |  | 2.70   | %
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Net interest margin                                                |  |                                         |         |          |      |             |  | 3.66   | %              |  |          |         |             |   |       |  | 2.80   | %
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  
|Ratio average interest-earning assets/interest-bearing liabilities |  |                                         |         |          |      |             |  | 104.09 | %              |  |          |         |             |   |       |  | 103.15 | %
|                                                                   |  |                                         |         |          |      |             |  |        |                |  |          |         |             |   |       |  |        |  



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##### Table of Contents

Rate/Volume Analysis.The table below sets forth certain information regarding
changes in interest income and interest expense for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to: (i) changes in volume (changes in volume
multiplied by old rate); (ii) changes in rates (change in rate multiplied by old volume); and (iii) changes in rate/volume (changes in rate multiplied by the changes in volume).



|                                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|---------------------------------- |  | ----------------------------------- | ---- | - | ---- | - | ------ | ----------- |  | - | ----- | - |  | - | ------ | -
|                                   |  | For Three Months Ended December 31, |     
|                                   |  | 2009 Vs. 2008                       |     
|                                   |  | Increase (Decrease) Due to          |     
|                                   |  | Volume                              |      |   | Rate |   |        | Rate/Volume |  |   | Total |  
|                                   |  | (In Thousands)                      |     
|Interest income:                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|Loans receivable, net              |  | $                                   | 43   |   |      | $ | (92    | )           |  | $ | (1    | ) |  | $ | (50    | )
|Mortgage-backed securities         |  |                                     | (14  | ) |      |   | (104   | )           |  |   | 1     |   |  |   | (117   | )
|Investment securities              |  |                                     | (7   | ) |      |   | (15    | )           |  |   | 6     |   |  |   | (16    | )
|Other interest-earning assets      |  |                                     | 17   |   |      |   | (53    | )           |  |   | (10   | ) |  |   | (46    | )
|                                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|Total interest-earning assets      |  |                                     | 39   |   |      |   | (264   | )           |  |   | (4    | ) |  |   | (229   | )
|                                   |  |                                     |      |  
|Interest expense:                  |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|Deposits                           |  |                                     | 107  |   |      |   | (1,212 | )           |  |   | (37   | ) |  |   | (1,142 | )
|Short-term FHLB advances           |  |                                     | (113 | ) |      |   |       |             |  |   |      |   |  |   | (113   | )
|Junior Subordinated Debentures     |  |                                     |     |   |      |   | (191   | )           |  |   |      |   |  |   | (191   | )
|                                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|Total interest-bearing liabilities |  |                                     | (6   | ) |      |   | (1,403 | )           |  |   | (37   | ) |  |   | (1,446 | )
|                                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  
|                                   |  |                                     |      |  
|Change in net interest income      |  | $                                   | 45   |   |      | $ | 1,139  |             |  | $ | 33    |   |  | $ | 1,217  |  
|                                   |  |                                     |      |   |      |   |        |             |  |   |       |   |  |   |        |  

Provision for Loan Losses. We charge or credit to income provisions for loan losses to
maintain the total allowance for loan losses at a level we consider adequate to provide losses inherent in the loan portfolio as of the balance sheet date. In determining the provision, we consider a number of factors such as existing loan levels,
prior loss experience, current economic conditions and the probability of these conditions affecting existing loans. During the three months ended December 31, 2009 we established additional provisions for losses on loans of $300,000, as
compared to a provision of $150,000 for the three months ended December 31, 2008. Nonperforming assets have increased substantially during the quarter ended December 31, 2009 as compared to the same quarter in the prior year, warranting
increased loss reserve levels. Loan charge-offs for the three months ended December 31, 2009 were $41,000 as compared to $81,000 for the three months ended December 31, 2008. Loan recoveries were $42,000 for the three months ended
December 31, 2009 compared to $90,000 for the three months ended December 31, 2008. In establishing such provisions, we considered an analysis of the risk inherent in the loan portfolio. For additional information see Asset
Quality.

Other Income.Other income increased $97,000, or 16.1%, from $603,000 for the three
months ended December 31, 2008 to $700,000 for the three months ended December 31, 2009. The increase in other income for the three months ended December 31, 2009 was primarily attributable to increased income from the Bank Owned Life
Insurance of $115,000 and an increase in miscellaneous income of $211,000, which was primarily due to increased commissions from investment services. These increases were partially offset by a decrease in gains on repossessed assets of $165,000 and
a decrease of $75,000 in fees on transaction accounts.

Noninterest Expenses.Total non-interest expenses
increased by $549,000, or 14.6%, from $3.7 million for the three months ended December 31, 2008 to $4.3 million for the three months ended December 31, 2009. This was primarily due to an increase of $559,000, or 31.2% in salaries and
related expenses related to additional personnel and increased benefit costs. Federal deposit insurance premiums increased by $97,000, or 77.6% from $125,000 for the three months ended December 31, 2008 to $222,000 for the three months ended
December 31, 2009. This increase was due to higher premiums arising from recent bank failures. Professional fees increased by $40,000, or 16.7% from $240,000 for the three months ended December 31, 2008 to $280,000 for the three months
ended December 31, 2009. The increase in professional fees was primarily due to increased legal and consulting services. These increases were partially offset by a decrease in property and equipment expenses of $38,000, or 16.4%, from $232,000
for the three months ended December 31, 2008 to $194,000 for the three months ended December 31, 2009. Other expenses also decreased by $107,000, or 57.8%, from $185,000 for the three months ended December 31, 2008 to $78,000 for the
three months ended December 31, 2009. This was primarily due to decreased losses on dishonored checks and ATM disputes and a decrease in bank service charges.



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##### Table of Contents

Income Taxes. Our income tax expense was $358,000 and $173,000 for the
three months ended December 31, 2009 and 2008, respectively. The change in income taxes for the three months ended December 31, 2009 as compared to the same period in the prior year was primarily due to increased income. Our effective tax
rate is impacted by income received from Bank Owned Life Insurance, which is not subject to income taxes.

Commitments, Contingencies and
Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk including commitments
to extend credit under existing lines of credit and commitments to sell loans. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

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



|                                                                                                |  |                    |        |                      |   |       
|----------------------------------------------------------------------------------------------- |  | ------------------ | ------ | -------------------- | - | ------
|                                                                                                |  | At December 312009 |        | At September 30,2009
|                                                                                                |  | (In thousands)    
|Commitments to originate new loans                                                              |  | $                  | 8,228  |                      | $ | 5,866 
|Unfunded commitments to extend credit under existing equity line and commercial lines of credit |  |                    | 34,371 |                      |   | 33,859
|Commercial letters of credit                                                                    |  |                    | 983    |                      |   | 1,038 

Commitments to
originate new loans or to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Loan commitments generally expire within 30 to 45 days. Most equity line commitments for the
unfunded portion of equity lines are for a term of 20 years, and commercial lines of credit are generally renewable on an annual basis. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on managements credit evaluation of the borrower.

Loans Receivable

Loans receivable at December 31, 2009 and
September 30, 2009 consist of the following:



|                                               |  |                  |         |   |                   |   |         |  
|---------------------------------------------- |  | ---------------- | ------- | - | ----------------- | - | ------- | -
|(in thousands)                                 |  | December 31,2009 |         |   | September 30,2009 |  
|Single-family residential mortgages            |  | $                | 134,606 |   |                   | $ | 140,991 |  
|Single-family rental property loans            |  |                  | 54,385  |   |                   |   | 51,698  |  
|Commercial real estate loans                   |  |                  | 139,826 |   |                   |   | 136,106 |  
|Construction loans                             |  |                  | 26,202  |   |                   |   | 28,869  |  
|Commercial loans secured                       |  |                  | 939     |   |                   |   | 296     |  
|Commercial loans unsecured                     |  |                  | 318     |   |                   |   | 322     |  
|Commercial lease loans                         |  |                  | 2,331   |   |                   |   | 2,855   |  
|Commercial lines of credit                     |  |                  | 7,565   |   |                   |   | 8,832   |  
|Automobile loans                               |  |                  | 5,890   |   |                   |   | 7,322   |  
|Home equity lines of credit                    |  |                  | 31,316  |   |                   |   | 29,167  |  
|Other consumer loans                           |  |                  | 2,359   |   |                   |   | 2,443   |  
|                                               |  |                  |         |   |                   |   |         |  
|                                               |  |                  | 405,737 |   |                   |   | 408,901 |  
|                                               |  |                 
|Add  purchase accounting premiums, net        |  |                  | 42      |   |                   |   | 62      |  
|Less  undisbursed portion of loans in process |  |                  | (3,825  | ) |                   |   | (3,664  | )
|- unearned interest                            |  |                  | (82     | ) |                   |   | (127    | )
|- deferred loan origination fees and costs     |  |                  | (213    | ) |                   |   | (234    | )
|- allowance for loans losses                   |  |                  | (4,228  | ) |                   |   | (3,927  | )
|                                               |  |                  |         |   |                   |   |         |  
|                                               |  |                 
|                                               |  | $                | 397,431 |   |                   | $ | 401,011 |  
|                                               |  |                  |         |   |                   |   |         |  



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Asset Quality

At December 31, 2009, we had $7.0 million in non-performing assets, consisting of nonaccrual loans and repossessed assets representing 1.20% of total assets. At September 30, 2009 non-performing
assets were $8.3 million or 1.46% of assets. Our net recoveries (charge-offs) for the three months ended December 31, 2009 and December 31, 2008 were $1,000 and $9,000, respectively. Our allowance for loan losses was $4.2 million at
December 31, 2009 compared to $3.9 million at September 30, 2009.

The following table presents an analysis of the
Companys non-performing assets:



|                                                                                             |  |                     |       |   |                      |   |       |  
|-------------------------------------------------------------------------------------------- |  | ------------------- | ----- | - | -------------------- | - | ----- | -
|                                                                                             |  | At December 30,2009 |       |   | At September 30,2009 |  
|                                                                                             |  | (In thousands)      |      
|Nonperforming loans (1):                                                                     |  |                     |       |   |                      |   |       |  
|Nonaccrual loans:                                                                            |  |                     |       |   |                      |   |       |  
|Single family residential                                                                    |  | $                   | 1,161 |   |                      | $ | 1,186 |  
|Multi-family residential                                                                     |  |                     |      |   |                      |   |      |  
|Commercial real estate                                                                       |  |                     | 5,805 |   |                      |   | 6,269 |  
|Construction                                                                                 |  |                     |      |   |                      |   |      |  
|Commercial leases                                                                            |  |                     | 25    |   |                      |   | 235   |  
|Land                                                                                         |  |                     |      |   |                      |   |      |  
|Consumer Loans                                                                               |  |                     | 11    |   |                      |   |      |  
|                                                                                             |  |                     |       |   |                      |   |       |  
|Total nonaccrual loans                                                                       |  |                     | 7,002 |   |                      |   | 7,690 |  
|Loans 90 days past due and accruing                                                          |  |                     |      |   |                      |   |      |  
|Restructured loans                                                                           |  |                     |      |   |                      |   |      |  
|                                                                                             |  |                     |       |   |                      |   |       |  
|Total non-performing loans                                                                   |  |                     | 7,002 |   |                      |   | 7,690 |  
|Other non-performing assets                                                                  |  |                     | 13    |   |                      |   | 639   |  
|                                                                                             |  |                     |       |   |                      |   |       |  
|Total nonperforming assets                                                                   |  | $                   | 7,015 |   |                      | $ | 8,329 |  
|                                                                                             |  |                     |       |   |                      |   |       |  
|                                                                                             |  |                    
|Nonperforming loans to loans receivable                                                      |  |                     | 1.76  | % |                      |   | 1.88  | %
|Nonperforming assets as a percentage of loans, foreclosed real estate and repossessed assets |  |                     | 1.76  | % |                      |   | 2.07  | %
|Nonperforming assets to total assets                                                         |  |                     | 1.20  | % |                      |   | 1.46  | %
|Loans modified in Troubled Debt Restructuring                                                |  | $                   | 3,858 |   |                      | $ | 3,863 |  
|                                                                                             |  |                     |       |   |                      |   |       |  



|(1) | Nonperforming status denotes loans on which, in the opinion of management, the collection of additional interest is questionable. Also included in this category are
Troubled Debt Restructurings (TDRs). At December 31, 2009 and September 30, 2009, TDRs totaled $3.9 million, of which $3.4 million and $3.7 million respectively, were not delinquent. Reporting guidance requires disclosure of these loans as
nonperforming even though they may be current in terms of principal and interest payments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table sets forth an analysis of the Companys allowance for loan losses for the periods
indicated.



|                                                                                     |  |                                         |       |   |      |   |       |  
|------------------------------------------------------------------------------------ |  | --------------------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                     |  | For the Three months Ended December 31, |      
|                                                                                     |  | 2009                                    |       |   | 2008 |  
|                                                                                     |  | (Dollars in thousands)                  |      
|Balance at beginning of period                                                       |  | $                                       | 3,927 |   |      | $ | 2,672 |  
|                                                                                     |  |                                        
|Loans charged-off:                                                                   |  |                                         |       |   |      |   |       |  
|Real estate mortgages:                                                               |  |                                         |       |   |      |   |       |  
|Single-family residential                                                            |  |                                         |      |   |      |   |      |  
|Multi-family residential                                                             |  |                                         |      |   |      |   |      |  
|Commercial                                                                           |  |                                         |       |   |      |   |      |  
|Construction                                                                         |  |                                         |      |   |      |   |      |  
|Commercial Leases                                                                    |  |                                         | (15   | ) |      |   | (27   | )
|Consumer                                                                             |  |                                         | (26   | ) |      |   | (54   | )
|                                                                                     |  |                                         |       |   |      |   |       |  
|Total charge-offs                                                                    |  |                                         | (41   | ) |      |   | (81   | )
|                                                                                     |  |                                        
|Recoveries:                                                                          |  |                                         |       |   |      |   |       |  
|Real estate mortgage:                                                                |  |                                         |       |   |      |   |       |  
|Single-family residential                                                            |  |                                         |      |   |      |   |      |  
|Multi-family residential                                                             |  |                                         |      |   |      |   |      |  
|Commercial                                                                           |  |                                         |      |   |      |   | 31    |  
|Construction                                                                         |  |                                         |      |   |      |   |      |  
|Commercial loans secured                                                             |  |                                         |      |   |      |   |      |  
|Consumer                                                                             |  |                                         | 42    |   |      |   | 59    |  
|Total recoveries                                                                     |  |                                         | 42    |   |      |   | 90    |  
|                                                                                     |  |                                         |       |   |      |   |       |  
|Net loans recovered (charged-off)                                                    |  |                                         | 1     |   |      |   | 9     |  
|Provision for loan losses                                                            |  |                                         | 300   |   |      |   | 150   |  
|                                                                                     |  |                                         |       |   |      |   |       |  
|Balance at end of period                                                             |  | $                                       | 4,228 |   |      | $ | 2,831 |  
|                                                                                     |  |                                         |       |   |      |   |       |  
|                                                                                     |  |                                        
|Ratio of net recoveries (charge-offs) to average loans outstanding during the period |  |                                         | .00   | % |      |   | .01   | %
|                                                                                     |  |                                         |       |   |      |   |       |  

Regulations require that we classify assets on a regular basis. There are three classifications for problem
assets: substandard, doubtful and loss. We regularly review our assets to determine whether any assets require classification or re-classification. At December 31, 2009, the Company had $2.9 million in classified assets, consisting of $2.9
million in substandard and loss loans, and $13,000 in repossessed assets. At September 30, 2009, the Company had $4.9 million in classified assets consisting of $4.3 million in substandard and loss loans, and $639,000 in foreclosed property or
other real estate owned.

In addition to regulatory classifications, we also classify as special mention assets
that are currently performing in accordance with their contractual terms but may exhibit some form of credit weakness and may become classified or non-performing assets in the future. At December 31, 2009, we have identified approximately $13.0
million in assets classified as special mention. At September 30, 2009, $14.7 million in assets were classified as special mention.

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



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Liquidity and Capital Resources

At December 31, 2009, the Bank exceeded all regulatory minimum capital requirements. For information comparing the Banks tangible,
core and risk-based capital levels to the regulatory requirements, see Note 8 of the Notes to Consolidated Financial Statements.

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

The primary investing activities of the Company are the origination of loans and the purchase of investment securities and mortgage-backed
securities. During the three months ended December 31, 2009 and 2008, the Company had $18.3 million and $13.4 million, respectively, of gross loan originations. During the three months ended December 31, 2009 and 2008, the Company did not
purchase any investment or mortgage-backed securities. The primary financing activity of the Company is the attraction of savings deposits.

The Company has other sources of liquidity if there is a need for funds. The Bank has the ability to obtain advances from the FHLB of Atlanta in excess of $140.0 million as of December 31, 2009. In
addition, securities in the available for sale portfolio provide liquidity and the Company has the immediately liquid resources of cash and cash due from banks, federal funds sold and securities purchased under resale agreements, if needed.

The Bank is required to maintain adequate levels of liquid assets as defined by OTS regulations. The Banks average
daily liquidity ratio for the month of December was approximately 31.1%. Management seeks to maintain a relatively high level of liquidity in order to retain flexibility in terms of investment opportunities and deposit pricing. Because liquid assets
generally provide for lower rates of return, the Banks relatively high liquidity will, to a certain extent, result in lower rates of return on assets.

The Companys most liquid assets are cash, interest-bearing deposits in other banks and federal funds sold, which are short-term, highly liquid investments with original maturities of less than three
months that are readily convertible to known amounts of cash. The levels of these assets are dependent on the Companys operating, financing and investing activities during any given period. At December 31, 2009, cash, interest-bearing
deposits in other banks and federal funds sold were $5.5 million, $2.8 million and $54.9 million, respectively.

We anticipate
that we will have sufficient funds available to meet our current commitments. Certificates of deposit which are scheduled to mature in less than one year at December 31, 2009 totaled $184.1 million. Based on past experience, management believes
that a significant portion of such deposits will remain with Baltimore County Savings Bank. Baltimore County Savings Bank is a party to financial instruments with off-balance-sheet risk made in the normal course of business to meet the financing
needs of its customers. These financial instruments are standby letters of credit, lines of credit and commitments to fund mortgage loans and involve to varying degrees elements of credit risk in excess of the amount recognized in the statement of
financial position. The contract amounts of those instruments express the extent of involvement Baltimore County Savings Bank has in this class of financial instruments and represents Baltimore County Savings Banks exposure to credit loss from
nonperformance by the other party. Baltimore County Savings Bank generally requires collateral or other security to support financial instruments with off-balance-sheet credit risk. At December 31, 2009, Baltimore County Savings Bank had
commitments under standby letters of credit, lines of credit and commitments to originate loans of $983,000, $34.4 million and $8.2 million, respectively.

In December 2002, BCSB Bankcorp issued $12,887,000 of junior subordinated debentures to BCSB Bankcorp Capital Trust I, a Delaware business trust, in which BCSB Bancorp now owns all of the common equity.
The debentures carry a rate of 3.65% over the three month LIBOR rate, and reset quarterly. The rate was 3.9% at December 31, 2009. The debentures are the sole asset of BCSB Bankcorp Capital Trust I. BCSB Bankcorp Capital Trust I issued
$12,500,000 of mandatory redeemable preferred securities to investors. BCSB Bancorps obligation under the debentures and related documents, taken together, constitute a full and unconditional guarantee by BCSB Bancorp of BCSB Bankcorp Capital
Trust I obligations under the preferred securities. The Company used a portion of the net proceeds that it retained from the 2008 completed stock offering to redeem $6.0 million of the $12.5 million in outstanding trust preferred securities issued
by a trust wholly owned by the Company.

In September 2003, BCSB Bankcorp issued $10,310,000 of junior subordinated debentures
to BCSB Bankcorp Capital Trust II, a Delaware business trust, in which BCSB Bancorp now owns all of the common equity. The debentures carry



30



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##### Table of Contents

a rate of 3.00% over the three month LIBOR rate, and reset quarterly. The rate was 3.28% at December 31, 2009. The debentures are the sole asset of BCSB Bankcorp Capital Trust II. BCSB
Bankcorp Capital Trust II issued $10,000,000 of mandatory redeemable preferred securities to investors. BCSB Bancorps obligation under the debentures and related documents, taken together, constitute a full and unconditional guarantee by BCSB
Bancorp of BCSB Bankcorp Capital Trust II obligations under the preferred securities.

Pursuant to these trust preferred
securities, the Company, must make quarterly interest payments, which totaled $892,000 during the year ended September 30, 2009 and $154,000 during the three months ended December 31, 2009.

The Company has outstanding (i) 10,800 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, liquidation preference
$1,000 per share (Series A preferred stock), and (ii) a warrant to purchase 183,465 shares of the Companys common stock, par value $0.01 per share, for an aggregate purchase price of $10,800,000 in cash.

The Series A preferred stock qualifies as Tier 1 capital and pays cumulative dividends at a rate of 5% per annum until
February 15, 2014. Beginning February 16, 2014, the dividend rate will increase to 9% per annum. The Company must remit dividends quarterly. Payments remitted totaled $135,000 during the three months ended December 31, 2009. On
and after February 15, 2012, the Company may, at its option, redeem shares of Series A preferred stock, in whole or in part, at any time and from time to time, for cash at a per share amount equal to the sum of the liquidation preference per
share plus any accrued and unpaid dividends to but excluding the redemption date. Under the original terms of the Purchase Agreement, the Company is prohibited from redeeming the Series A preferred stock within the first three years unless it
completed a qualified equity offering whereby it received aggregate gross proceeds of not less than $2.7 million. However, the provisions introduced by the American Recovery and Reinvestment Act of 2009 indicate that once the Company notifies
Treasury that it would like to redeem the Series A preferred stock, the Treasury must permit the Company to do so subject to consultation with the OTS. The Company will be subject to existing supervisory procedures for approving redemption requests
for capital instruments. The OTS will weigh the Companys desire to redeem the Series A preferred stock against the contribution of Treasury capital to the Companys overall soundness, capital adequacy and ability to lend, including
confirming that the Company has a comprehensive internal capital assessment process.

The warrant is exercisable at $8.83 per
share at any time on or before December 23, 2018. The number of shares of common stock issuable upon exercise of the warrant and the exercise price per share will be adjusted if specific events occur.

The Series A preferred stock and the warrants were issued in a transaction exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended. Neither the Series A preferred stock nor the warrants will be subject to any contractual restrictions on transfer, except that Treasury may not transfer a portion of the warrant with respect to, or exercise the
warrant for, more than one-half of the shares of common stock underlying the warrant prior to the earlier of (a) the date on which the Company has received aggregate gross proceeds of not less than $10,800,000 from one or more qualified equity
offerings and (b) December 31, 2009.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Item 3 is not necessary as the registrant is a smaller reporting company.



|Item 4. | 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 as that term is defined in Rule 13a-5(e). 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 and (2) is accumulated and communicated to the Companys management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that
the design of the Companys disclosure controls and procedures is based in part upon certain reasonable assumptions about the likelihood of future events, and there can be no reasonable assurance that any design of disclosure controls and
procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote, but the Companys principal executive and financial officers have concluded that the Companys disclosure controls and
procedures are, in fact, effective at a reasonable assurance level.



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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 has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II. OTHER INFORMATION



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

For
information regarding the Companys legal proceedings see Legal Proceedings, in the Companys Form 10-K for the fiscal year ended September 30, 2009 filed with the Securities and Exchange Commission on December 23,
2009. As of December 31, 2009, the legal proceedings of the Company have not changed materially from those reported in the Form 10-K

In addition from time to time the Company and/or Bank are a party to various legal proceedings incident to its business. There were no legal proceedings to which the Company or the Bank was a party, or to
which any of their property was subject which were expected by management to result in a material loss to the Company or Bank. There are no pending regulatory proceedings to which the Company, the Bank and their subsidiaries are a part or to which
any of their properties are subject which are currently expected to result in a material loss.



|Item 1A. | Risk Factors
|-------- | ------------

For
information regarding the Companys risk factors see Risk Factors, in the Companys Form 10-K for the fiscal year ended September 30, 2009 filed with the Securities and Exchange Commission on December 23, 2009. As of
December 31, 2009, the risk factors of the Company have not changed materially from those reported in the Form 10-K



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

(a) None

(b) None

(c) None



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

None.



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

None.



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

None.



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

The following
exhibits are filed herewith:



|              |  |                                                        
|------------- |  | -------------------------------------------------------
|ExhibitNumber |  | Title                                                  
|              | 
|31.1          |  | Rule 13a-14(a) Certification of Chief Executive Officer
|              | 
|31.2          |  | Rule 13a-14(a) Certification of Chief Financial Officer
|              | 
|32            |  | Section 1350 Certifications                            



33



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##### Table of Contents

SIGNATURES

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



|                        |  |                                             
|----------------------- |  | --------------------------------------------
|                        |  | BCSB BANCORP, INC.                          
|                        | 
|Date: February 12, 2010 |  | /s/ Joseph J. Bouffard                      
|                        |  | Joseph J. Bouffard                          
|                        |  | President                                   
|                        |  | (Principal Executive Officer)               
|                        | 
|Date: February 12, 2010 |  | /s/ Anthony R. Cole                         
|                        |  | Anthony R. Cole                             
|                        |  | Executive Vice President                    
|                        |  | (Principal Financial and Accounting Officer)



34