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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended December 31, 2004

OR

For the transition period from              to             

Commission File Number: 0-24589

BCSB BANKCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

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

(Address of Principal Executive Offices)

(410) 256-5000

Issuer’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

Indicate by check mark ü whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of January 31, 2005, the issuer had 5,900,048 shares of Common Stock issued and outstanding.

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CONT ENTS

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

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

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

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

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 - Principles of Consolidation

BCSB Bankcorp, Inc. (the “Company”) owns 100% of Baltimore County Savings Bank, F.S.B. and subsidiaries (the “Bank”), and also invests in federal funds sold, interest-bearing deposits in other banks and U.S. Agency bonds. The Bank owns 100% of Baltimore County Service Corporation and Ebenezer Road, Inc. The accompanying consolidated financial statements include the accounts and transactions of these companies on a consolidated basis. All intercompany transactions have been eliminated in the consolidated financial statements. Ebenezer Road, Inc. sells insurance products. It’s operations are not material to the consolidated financial statements.

The “Company” owns 100% of the common stock of BCSB Capital Trust I and BCSB Capital Trust II and in accordance with FASB Interpretation Number 46 these entities have not been consolidated in the accompanying consolidated financial statements.

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, 2004 are not necessarily indicative of the results of operations that may be expected for the year ending September 30, 2005. The consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes which are incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended September 30, 2004.

The preparation of the financial statements in conformity with accounting principles generally accepted in the United Sates 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.

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.

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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, unless the effect is to reduce a loss or increase earnings per share. No adjustments were made to net income (numerator) for all periods presented. The basic and diluted weighted average shares outstanding for the three months ended December 31, 2004 and 2003 is as follows:

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BCSB BANKCORP, INC. AND SUBSIDIARIES

Baltimore, Maryland

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table sets forth the Bank’s capital position at December 31, 2004.

Note 6 - Stock Option Plan

Stock-Based Employee Compensation- At December 31, 2004 and 2003 the Company has four stock-based employee compensation plans, which are described more fully in the 2004 Annual Report. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No compensation cost is reflected in income for the granted options as all granted options had an exercise price equal to the market value of the underlying common stock on the date of grant. Compensation cost is recorded for the value of shares of common stock granted to certain employees and directors under the Bank’s Management Recognition Plan. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

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Note 7 - Recent Accounting Pronouncements

In November 2003, the Emerging Issues Task Force (“EITF”) of the FASB issued EITF Abstract 03-01, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments” (“EITF”) 03-1”) effective for fiscal years ending after December 15, 2003. This abstract provides guidelines on the meaning of other-than-temporary impairment and its application to investments. Declines in fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issue for a period of time sufficient to allow for any anticipated recovery in fair value.

In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R) (“SFAS 123(R)”), “Share-Based Payment”. This statement replaces Statement of Financial Accounting Standards No. 123(“SFAS 123”), “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) will require compensation costs related to share-based payment transactions to be recognized in the financial statements (with limited exceptions). The amount of compensation cost will be measured based on the grant-date fair value of the equity of liability instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. This statement is effective for public entities as of the beginning of the first interim or annual reporting period that begins after June 15, 2005.

Note 8 - Guarantees

The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Standby letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Generally, all letters of credit, when issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loans facilities to customers. The Company, generally holds collateral and/or personal guarantees supporting these commitments. The Company has $625,000 of standby letters of credit as of December 31, 2004. 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, 2004 for guarantees under standby letters of credit issued is not considered to be material.

General

BCSB Bankcorp is a growing company headquartered in Baltimore, Maryland. The Company provides general consumer and commercial banking services in the greater Baltimore Metropolitan area. The Company will open two new branches in the next quarter, one in Honeygo, Maryland and another in Sparks, Maryland. The Company has also signed a contract to open a branch in the Owings Mills area. The anticipated opening is the second half of 2005.

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.

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Critical Accounting Policies

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

The Company adopted the disclosure only provisions of FASB Statement No. 123, see note 6 to the consolidated financial statements. The Company does not expect to expense the fair market value of stock options until required for reporting periods beginning after June 15, 2005.

Forward-Looking Statements

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

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

Comparison of Financial Condition at December 31, 2004 and September 30, 2004

During the three months ended December 31, 2004, the Company’s assets increased by $2.0 million, or .30% from $773.6 million at September 30, 2004 to $775.6 million at December 31, 2004. The Company’s interest bearing deposits in other banks remained stable at $2.5 million at December 31, 2004 and September 30, 2004. The Company’s investment portfolio available for sale decreased $5.2 million or 3.3%, from $158.9 million at September 30, 2004 to $153.7 million at December 31, 2004. The Company’s investment portfolio held to maturity remained stable at $2.5 million at September 30, 2004 and December 31, 2004. Net loans receivable, increased $6.7 million, or 1.7%, from $386.2 million at September 30, 2004 to $392.9 million at December 31, 2004. The Company’s mortgage-backed securities available for sale decreased by $3.0 million, or 2.1%, from $144.3 million at September 30, 2004 to $141.3 million at December 31, 2004. The Company’s mortgage-backed securities held to maturity decreased $200,000, or ..7% from $26.6 million at September 30, 2004 to $26.4 million at December 31, 2004. The cash surrender value on the Bank Owned Life Insurance increased $351,000, or 2.9% from $11.9 million at September 30, 2004 to $12.2 million at December 31, 2004. All of the preceding was accomplished in an effort to reduce interest rate risk in the balance sheet. As a result of the low interest rate environment during the three months ended December 31, 2004 Management’s emphasis has been on short term loans such as automobile loans, home equity loans and short term mortgages.

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Deposits increased by $5.2 million, or.9%, from $580.6 million at September 30, 2004 to $585.8 million at December 31, 2004. The increase in deposits was achieved through normal marketing efforts. The growth in deposits helped to fund loan demand. Advances from the Federal Home Loan Bank of Atlanta decreased by $3.3 million, or 2.7% from $120.9 million at September 30, 2004 to $117.6 million at December 31, 2004.

Stockholders’ equity decreased by $385,000, or .9% from $44.1 million at September 30, 2004 to $43.7 million at December 31, 2004, which was primarily attributable to the increase in accumulated other comprehensive loss of $310,000 from, a negative $1.7 million at September 30, 2004 to a negative $2.1 million at December 31, 2004. These unrealized losses are considered temporary as they reflect market values on December 31, 2004 and are subject to change daily as interest rates fluctuate. This decrease is due to the effect rising interest rates have on the available for sale securities recorded at fair value. This decline in value has no impact on the Bank’s regulatory capital.

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Comparison of Operating Results for the Three Months Ended December 31, 2004 and 2003

Net Income. Net income decreased by $102,000, or 54.3%, from $188,000 for the three months ended December 31, 2003 to $86,000 for the three months ended December 31, 2004. The decrease in net income was primarily attributable to an increase in non-interest expenses of $183,000. This was partially offset by decreases in the provision for loan losses and income taxes.

Net Interest Income. Net interest income was $4.0 million for the three months ended December 31, 2004, compared to $3.9 million for the three months ended December 31, 2003, representing an increase of $143,000, or 3.7%. The increase was primarily due to the increase in the average balance of interest-earning assets. The average balance of interest-earning assets increased $132.2 million, or 22.3% from $593.1 million for the three months ended December 31, 2003 to $725.3 million at December 31, 2004. The increase in the average balance of interest earning-assets more than offset the decrease in the average rate on interest-earning assets of 51 basis points from, 5.27% for the three months ended December 31, 2003 to 4.76% for the three months ended December 31, 2004. Due to declining interest rates and loans re-pricing faster than deposits the interest rate spread decreased 50 basis points from, 2.70% for the three months ended December 31, 2003 to 2.20% for the three months ended December 31, 2004. The Company’s ratio of average interest-earning assets to average interest-bearing liabilities increased from 96.75% for the three months ended December 31, 2003 to 100.22% for the three months ended December 31, 2004. The Company’s spread has decreased due to its strategy of making loans and purchasing mortgage backed securities and investments in a prevailing low rate economy. In an effort to avoid long term fixed rate assets in the current interest rate environment, the Company’s investment strategy was to purchase securities that were short term in nature and had step-up provisions. Likewise, investments in mortgage-backed securities were primarily in adjustable loan products or maturities of ten years or less. Improvements in spread should occur as interest rates rise and the company has the resources from either re-pricing assets or new funds received.

Interest Income. Interest income increased by $823,000, or 10.5% from $7.8 million for the three months ended December 31, 2003 to $8.6 million for the three months ended December 31, 2004. Interest and fees on loans remained relatively stable at $5.6 million for the three months ended December 31, 2003 and 2004. This was primarily due to an increase in the average balance of loans receivable of $25.8 million, or 7.1% from $361.6 million at December 31, 2003 to $387.4 million at December 31, 2004. The increase in the average balance of loans offset the decrease in the average yield on loans of 41 basis points from 6.25% for the three months ended December 31, 2003 to 5.84% for the three months ended December 31, 2004. The decrease in the average yield was attributed to the prevailing market rates in the economy. Interest on mortgage-backed securities increased by $437,000 or 36.4% from $1.2 million for the three months ended December 31, 2003 to $1.6 million for the three months ended December 31, 2004. This increase was primarily due to the increase in the average balance of mortgage-backed securities from $108.1 million at December 31, 2003 to $171.6 million at December 31, 2004. Interest and dividends on investment securities increased by $367,000 or 38.9% from $943,000 for the three months ended December 31, 2003 to $1.3 million for the three months ended December 31, 2004. This was primarily due to an increase in the average balance of investments of $42.8 million from, $119.6 million at December 31, 2003 to $162.4 million at December 31, 2004, and an increase in the average yield of 8 basis points from, 3.15 % for the three months ended December 31, 2003 to 3.23% for the three months ended December 31, 2004.

Interest Expense. Interest expense, which consists of interest on deposits, interest on borrowed money and other interest expense increased from $3.9 million for the three months ended December 31, 2003 to $4.6 million for the three months ended December 31, 2004 an increase of $680,000 or 17.2%. Interest on deposits increased $156,000 due to an increase in the average volume of deposits of $31.6 million, or 5.7% from $555.2 million at December 31, 2003 to $586.8 million at December 31, 2004. This was partially offset by a decrease in the average yield on deposits of 3 basis points from 2.43% at December 31, 2003 to 2.40% at December 31, 2004. The Company was able to increase its deposits through normal marketing efforts. Interest on short-term borrowings increased by $198,000 for the three months ended December 31, 2004, and interest on long-term borrowings increased by $272,000 for the three months ended December 31, 2004. This increase was primarily due to an increase of $28.8 million in the average balance of short term advances from the Federal Home Loan Bank of Atlanta, from $16.2 million at December 31, 2003 to $45.1 million at December 31, 2004.Long-term advances from the FHLB of Atlanta also increase by $50.0 million from, $18.0 million at December 31, 2003 to $68.0 million at December 31, 2004. The Company has $48.8 million in short term advances and $68.0 million in long term advances with the Federal Home Loan Bank of Atlanta. The funds from these advances were used to purchase short term investment securities and mortgage backed securities in an effort to mitigate interest rate risk and have funds available to reinvest as interest rates rise. Also contributing to interest expense was interest on the Trust Preferred Securities/Junior Subordinated Debentures which was $321,000 for the three month period ending December 31, 2004, compared to $268,000 for the three month period ending December 31, 2003.

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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 average 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, 2004 and 2003. 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 its net interest income divided by the average balance of interest-earning assets.

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

Provision for Loan Losses. The Company charges provisions for loan losses to earnings to maintain the total allowance for loan losses at a level management considers adequate to provide losses inherent in the loan portfolio as of the balance sheet date. In determining the provision, management considers a number of factors such as existing loan levels, prior loss experience, current economic conditions and the probability of these conditions affecting existing loans. The Company established provisions for losses on loans of $120,000 for the three months ended December 31, 2004, as compared to $182,000 for the three months ended December 31, 2003, representing a decrease of $62,000. Loan chargeoffs for the three months ended December 31, 2004 were $64,000 as compared to $329,000 for the three months ended December 31, 2003 a decrease of $265,000. The decrease in loan chargeoffs was due to prevailing low loan delinquency and a decrease in actual losses in the bank’s consumer loan portfolio. Loan recoveries were $35,000 for the three months ended December 31, 2004 compared to $26,000 for the three months ended December 31, 2003. Non performing loans at December 31, 2004 were $1.4 million as compared to $430,000 at December 31, 2003. The total loss allowance allocated to loans is $2.6 million. In establishing such provisions, management considered an analysis of the risk inherent in the loan portfolio. For additional information see Asset Quality.

Other Income. Other income decreased by $228,000, or 43.3% from $526,000 for the three months ended December 31, 2003 to $298,000 for the three months ended December 31, 2004. The decrease in other income for the three months ended December 31 2004 was partially attributable to losses on repossessed assets of $135,000 for the three months ended December 31, 2004 compared to a gain of $77,000 for the three months ended December 31, 2003. Mortgage banking operations also decreased $22,000 for the three months ended December 31, 2004. There were no loan sales during the three months ended December 31, 2004. Fees on transaction accounts also decreased $22,000 from $211,000 for the three months ended December 31, 2003 to $189,000 for the three months ended December 31, 2004, as we eliminated fees on certain products in an effort to compete in the market and increase our transaction accounts which are our lowest cost source of funding. Income from Bank Owned Life Insurance (BOLI ) decreased $9,000 for the three months ended December 31, 2004 from $122,000 for the three months ended December 31, 2003, to $113,000 for the three months ended December 31, 2003.This decrease was due to an adjustment in the rate of dividends paid on the BOLI investment.

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Non-interest Expenses. Total non-interest expenses increased by $183,000, from $3.9 million for the three months ended December 31, 2003 to $4.1 million for the three months ended December 31, 2004. The Company experienced increases of $150,000 in salaries and related expenses, from $2.1 million for the three months ended December 31, 2003 to $2.3 million for the three months ended December 31, 2004. Salaries and related expenses increased as the Company hired new personnel to staff the new offices opening next quarter. Data processing expense increased $150,000, from $386,000 for the three months ended December 31, 2003 to $536,000 for the three months ended December 31, 2004. The increase in data processing expenses was primarily due to the Bank’s decision not to renew its contracts with Intrieve and to convert its data processing system to Fiserv. The several contracts with Intrieve could not be terminated together. Therefore an early termination penalty of $273,000 was recognized. This was partially offset by a credit of $150,000 from Fiserv. Other expenses increased by $51,000, from $194,000 for the three months ended December 31, 2003 to $245,000 for the three months ended December 31, 2004. These increases were partially offset by a decrease in occupancy expense by $87,000, from $487,000 for the three months ended December 31, 2003 to $400,000 for the three months ended December 31, 2004. Advertising expense also decreased $83,000, from $241,000 for the three months ended December 31, 2003 to $158,000 for the three months ended December 31, 2004. During the next quarter, non-interest expenses will likely increase due to the opening of two new offices. However, the offices are strategically placed to eventually increase the overall performance of the Company.

Income Taxes. The Company’s income tax (benefit)/expense was $(13,000) and $91,000 for the three months ended December 31, 2004 and 2003, respectively. The Company’s effective tax rates were (17.8)% and 32.6% for the three months ended December 31, 2004 and 2003, respectively. The Company’s effective tax rate decreased for the three months ended December 31, 2004 as compared to the same quarter in the prior year as the Company earned non-taxable income from investments and $113,000 non-taxable income form the Bank Owned Life Insurance during the three months ended December 31, 2004.

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: