SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 QUARTER ENDED MARCH 31, 2001 or  ̈       TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. COMMISSION FILE NUMBER: 000-25077 SEACOAST FINANCIAL SERVICES
  CORPORATION(Exact Name of Registrant as Specified in Its
  Charter)
  Massachusetts
  04-1659040(State of Incorporation)
  (IRS Employer Identification No.)
  One Compass Place, New Bedford,
  Massachusetts
  02740(Address of Principal Executive Offices)
  (Zip Code)
  (508) 984-6000(Registrants Telephone Number)
  N/AFormer 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. Yesx     No  ̈ At May 10, 2001, the Company
had 24,843,361 shares of common stock outstanding.


SEACOAST FINANCIAL SERVICES CORPORATIONINDEX PART I - FINANCIAL INFORMATION Item
1.    Financial Statements (Unaudited) Consolidated Balance Sheets
at March 31, 2001 and December
31, 2000 Consolidated Statements
of Income for the three months ended
March 31, 2001 and 2000 Consolidated
Statements of Changes in Stockholders Equity for the three months ended March 31, 2001 and 2000 Consolidated
Statements of Cash Flows for the three months ended March 31, 2001 and 2000 Notes
to Unaudited Consolidated Financial Statements Item
2.    Managements Discussion and Analysis
of Financial Condition and
Results of Operations Liquidity and Capital Resources Item
3.    Quantitative and Qualitative
Disclosures about Market Risk PART II - OTHER INFORMATION Item 1.    Legal Proceedings Item
2.    Changes in Securities and Use of
Proceeds Item 3.    Defaults upon Senior Securities Item
4.    Submission of Matters to a Vote of
Security Holders Item 5.    Other Information Item 6.    Exhibits and Reports on Form 8-K SIGNATURES


SEACOAST FINANCIAL SERVICES
CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands, except
share amounts) March 31,
  2001
  December 31,
  2000ASSETS:Cash
  and due from banks
  $84,941
  $101,665Federal
  funds sold
  64,217
  5,848Total
  cash and cash equivalents
  149,158
  107,513Investment
  securitiesAvailable-for-sale,
  at fair value
  246,737
  248,855Held-to-maturity,
  at amortized cost
  23,595
  29,728Restricted
  equity securities
  34,349
  28,974Loans
  held-for-sale
  20,662
  13,666Loans,
  net (Note 3)
  2,426,633
  2,338,251Accrued
  interest receivable
  15,215
  14,927Banking
  premises and equipment, net
  51,510
  50,878Other
  real estate owned, net
  462
  86Net
  deferred tax asset
  10,238
  11,247Intangible
  assets, net  (Note 2)
  36,948
  38,800Other
  assets
  8,457
  7,840Total
  assets
  $3,023,964
  $2,890,765LIABILITIES
  AND STOCKHOLDERS EQUITY:Deposits
  (Note 4)
  $2,010,609
  $1,989,630Short-term
  borrowings
  27,852
  31,427Federal
  Home Loan Bank advances
  662,683
  556,958Other
  borrowings
  1,867
  1,881Mortgagors
  escrow payments
  5,733
  4,428Accrued
  expenses and other liabilities
  21,672
  18,253Total
  liabilities
  2,730,416
  2,602,577COMMITMENTS
  AND CONTINGENCIESStockholders
  equity (Notes 7 and 8):Preferred
  stock, par value $.01 per share; authorized 10,000,000 shares; none issued
  
  Common
  stock, par value $.01 per share; authorized 100,000,000 shares; 26,758,136
  shares issued
  268
  268Additional
  paid-in capital
  152,839
  152,795Treasury
  stock, at cost, 1,904,775 shares in 2001 and 1,799,775 shares in 2000
  (19,508)
  (17,990)Retained
  earnings
  171,684
  166,865Accumulated
  other comprehensive income
  2,406
  791Unearned
  compensation - ESOP and restricted stock
  (13,932)
  (14,384)Shares
  held in employee trust
  (209)
  (157)Total
  stockholders equity
  293,548
  288,188Total
  liabilities and stockholders equity
  $3,023,964
  $2,890,765 See
accompanying notes to the unaudited consolidated financial statements.


SEACOAST FINANCIAL SERVICES
CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000(Unaudited)(In thousands, except
per share amounts) 2001
  2000INTEREST
  AND DIVIDEND INCOME:Interest
  on loans
  $47,212
  $33,213Interest
  and dividends on investment securities
  4,971
  4,146Interest
  on federal funds sold
  481
  9Total
  interest and dividend income
  52,664
  37,368INTEREST
  EXPENSE:Interest
  on deposits
  19,267
  13,750Interest
  on borrowed funds
  9,464
  4,657Total
  interest expense
  28,731
  18,407Net
  interest income
  23,933
  18,961PROVISION
  FOR LOAN LOSSES
  1,400
  1,050Net
  interest income after provision for loan losses
  22,533
  17,911NONINTEREST
  INCOME:Deposit
  and other banking fees
  1,676
  1,228Loan
  servicing fees, net
  281
  203Card
  fee income, net
  356
  180Other
  loan fees
  424
  225Gain
  (loss) on sales of investment securities, net
  (1)
  4Gain
  on sales of loans, net
  39
  Other
  income
  347
  339Total
  noninterest income
  3,122
  2,179NONINTEREST
  EXPENSE:Salaries
  and employee benefits
  7,999
  6,695Occupancy
  and equipment expenses
  2,156
  1,445Data
  processing expenses
  1,643
  1,158Marketing
  expenses
  619
  524Professional
  services expenses
  818
  328Amortization
  of intangibles (Note 2)
  736
  152Other
  operating expenses
  1,894
  1,404Total
  noninterest expense
  15,865
  11,706Income
  before provision for income taxes
  9,790
  8,384PROVISION
  FOR INCOME TAXES
  3,059
  2,956Net
  income
  $6,731
  $5,428Earnings
  per share (Note 5):Basic
  $0.29
  $0.23Diluted
  $0.28
  $0.23 See
accompanying notes to the unaudited consolidated financial statements.


SEACOAST FINANCIAL SERVICES
CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITYFOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000(Unaudited)(In thousands, except
per share amounts) Common
  Stock
  Additional
  Paid-In Capital
  Treasury
  Stock
  Retained
  Earnings
  Accumulated
  Other Comprehensive Income (Loss)
  Unearned
  Compensation ESOP/Restricted Stock
  Shares
  Held in EmployeeTrust
  TotalBalance,
  December 31, 1999
  $268
  $152,702
  $(9,310)
  $149,256
  $(2,430)
  $(16,326)
  $(139)
  $274,021Repurchase
  of common stock (Note 7)
  
  
  (3,834)
  
  
  
  
  (3,834)Net
  income
  
  
  
  5,428
  
  
  
  5,428Other
  comprehensive income  Change in unrealized loss on securities available for
  sale, net of taxes
  
  
  
  
  (469)
  
  
  (469)Comprehensive
  income
  
  
  
  
  
  
  
  4,959Cash
  dividends - $.06 per share
  
  
  
  (1,483)
  
  
  
  (1,483)Amortization
  of unearned compensation
  
  (4)
  
  
  
  479
  
  475Other
  
  
  
  
  
  
  (5)
  (5)Balance,
  March 31, 2000
  $268
  $152,698
  $(13,144)
  $153,201
  $(2,899)
  $(15,847)
  $(144)
  $274,133Balance,
  December 31, 2000
  $268
  $152,795
  $(17,990)
  $166,865
  $791
  $(14,384)
  $(157)
  $288,188Repurchase
  of common stock (Note 7)
  
  
  (1,518)
  
  
  
  
  (1,518)Net
  income
  
  
  
  6,731
  
  
  
  6,731Other
  comprehensive income  Change in unrealized gain on securities available for
  sale, net of taxes
  
  
  
  
  1,615
  
  
  1,615Comprehensive
  income
  
  
  
  
  
  
  
  8,346Cash
  dividends - $.08 per share
  
  
  
  (1,912)
  
  
  
  (1,912)Amortization
  of unearned compensation
  
  44
  
  
  
  452
  
  496Other
  
  
  
  
  
  
  (52)
  (52)Balance,
  March 31, 2001
  $268
  $152,839
  $(19,508)
  $171,684
  $2,406
  $(13,932)
  $(209)
  $293,548 See
accompanying notes to the unaudited consolidated financial statements.


SEACOAST FINANCIAL SERVICES CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000(Unaudited)(In Thousands) 2001
  2000CASH
  FLOWS FROM OPERATING ACTIVITIES:Net
  income
  $6,731
  $5,428Adjustments
  to reconcile net income to net cash provided by operating activities Depreciation
  976
  603Amortization
  and accretion, net
  742
  194Purchase
  accounting amortization, net
  429
  Stock-based
  compensation
  496
  475Provision
  for loan losses
  1,400
  1,050(Gain)
  loss on sales of investment securities, net
  1
  (4)Gain
  on sale of fixed assets
  (30)
  Other
  real estate owned losses (income)
  (47)
  Provision
  for prepaid taxes
  (562)
  (260)Originations
  of loans held-for-sale
  (10,845)
  (215)Proceeds
  from sales of loans originated for resale
  3,888
  Gain
  on sales of loans, net
  (39)
  Net
  increase in accrued interest receivable
  (288)
  (1,266)Net
  decrease in other assets
  499
  612Net
  increase in accrued expenses and other liabilities
  3,498
  1,615Net
  cash provided by operating activities
  6,849
  8,232CASH
  FLOWS FROM INVESTING ACTIVITIES:Change
  in short-term investments, net
  
  143Purchase
  of securities classified as available-for-sale
  (11,086)
  (23,346)Purchase
  of restricted equity securities
  (5,375)
  (1,115)Proceeds
  from sales, calls, paydowns and maturities of securities classified as
  available-for-sale
  15,691
  30,961Proceeds
  from calls, paydowns and maturities of securities classified as held
  -to-maturity
  6,127
  Purchase
  of loans
  (1,300)
  (7,533)Net
  increase in loans
  (88,846)
  (80,302)Recoveries
  of loans previously charged off
  137
  59Proceeds
  from sales of other real estate owned
  10
  142Proceeds
  from sales of fixed assets
  104
  Purchase
  of premises and equipment
  (1,682)
  (5,928)Net
  cash used in investing activities
  (86,220)
  (86,919)CASH
  FLOWS FROM FINANCING ACTIVITIES:Increase
  in NOW, money market deposit and demand deposit accounts
  $3,631
  $8,332Increase
  (decrease) in passbook and other savings accounts
  8,386
  (519)Increase
  in certificates of deposit
  8,977
  60,290Advances
  from Federal Home Loan Bank
  154,973
  90,000Repayments
  of Federal Home Loan Bank advances
  (49,237)
  (74,621)Increase
  (decrease) in short-term and other borrowings
  (3,589)
  1,516Increase
  in mortgagors escrow payments
  1,305
  715Repurchase
  of common stock
  (1,518)
  (3,834)Cash
  dividends
  (1,912)
  (1,483)Net
  cash provided by financing activities
  121,016
  80,396Net
  Increase in Cash And Cash Equivalents
  41,645
  1,709Cash
  and Cash Equivalents, Beginning of Year
  107,513
  60,351Cash
  and Cash Equivalents, End of Period
  $149,158
  $62,060Supplemental
  Disclosure of Cash Flow Information:Interest
  paid on deposits and borrowed funds
  $28,064
  $18,313Income
  taxes paid
  758
  345Supplemental
  Disclosure of Noncash Transactions:Transfers
  from loans to other real estate owned
  339
  61 See
accompanying notes to the unaudited consolidated financial statements.


SEACOAST
FINANCIAL SERVICES CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSMARCH 31, 2001 AND 2000 (1)        BASIS OF
PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The
unaudited consolidated financial statements of Seacoast Financial Services
Corporation and its wholly-owned subsidiaries, Compass Bank for Savings
(Compass), Nantucket Bank and Lighthouse Securities Corporation (collectively
referred to herein as the Company) presented herein should be read in
conjunction with the consolidated financial statements of the Company as of and
for the year ended December 31, 2000 included as part of its Form 10-K. In
the opinion of management, the accompanying unaudited financial statements reflect
all adjustments (consisting of normal recurring adjustments) and disclosures
necessary for a fair presentation. 
Management is required to make estimates and assumptions that affect
amounts reported in the financial statements. 
Actual results could differ significantly from those estimates. Summary of Significant
Accounting Policies The
Companys significant accounting policies are described in Note 1 of the Notes
to Consolidated Financial Statements included in its Form 10-K for the year
ended December 31, 2000 filed with the Securities and Exchange Commission.  For interim reporting purposes, the Company
follows the same significant accounting policies. (2)        ACQUISITION
OF HOME PORT BANCORP, INC. On
December 31, 2000, the Company completed its acquisition of  Home Port Bancorp, Inc. (Home Port) for
$68.2  million in cash, exclusive of
transaction costs.  Home Port was the
holding company for Nantucket Bank, a three branch savings bank located on
Nantucket Island, Massachusetts.  This
transaction has been accounted for under the purchase method of accounting and,
accordingly, Home Ports results of operations are included in the Companys
consolidated statements of income from the date of acquisition. The
Companys pro forma summarized results of operations for the three months ended
March 31, 2000, assuming Home Port had been acquired as of January 1, 1999, are
as follows (in thousands): Interest
  income
  $43,471Interest
  expense
  22,015Net interest income
  21,456Provision
  for loan losses
  1,100Noninterest
  income
  2,595Noninterest
  expense
  14,154Income before taxes
  8,797Provision
  for income taxes
  3,345Net income
  $5,452Earnings per share
  $0.23 Intangible
assets resulting from this acquisition total $36.4 million.  This asset is being amortized on a
straight-line basis over 15 years. 
Amortization expense was $606,000 for the three months ended March 31,
2001.


(3)LOANS The
loan portfolio consisted of the following: March 31,2001
  December 31,
  2000(In thousands)Real
  estate loans:Residential (one-to-four family)
  $1,253,041
  $1,212,595Commercial
  328,168
  322,724Home equity lines of credit
  41,486
  39,932Construction
  108,676
  109,360Total real estate loans
  1,731,371
  1,684,611Commercial
  loans
  115,171
  100,789Consumer
  loans:Indirect auto loans
  553,242
  528,653Less-unearned discount
  4,860
  6,781Indirect auto loans, net
  548,382
  521,872Other
  57,922
  56,060Total consumer loans,net
  606,304
  577,932Total loans
  2,452,846
  2,363,332Less-allowance
  for loan losses
  26,213
  25,081$2,426,633
  $2,338,251 Non-accrual
loansamountedto $6,107,000 and
$8,295,000 at December 31, 2000 and March 31, 2001, respectively. (4)        DEPOSITS A summaryofdeposit balances is as follows: March
  31,
  2001
  December
  31,
  2000(In
  thousands)Demand deposit accounts
  $160,973
  $159,740NOW and money market deposit accounts
  580,176
  577,778Passbook and other savings accounts
  243,856
  235,470Total non-certificate accounts
  985,005
  972,988Certificates of deposit -Term certificates of $100,000 and over
  272,224
  265,583Term certificates less than $100,000
  753,380
  751,059Total certificates of deposit
  1,025,604
  1,016,642$2,010,609
  $1,989,630 (5)        EARNINGSPERSHARE (EPS)

Basic EPS for the three months
ended March 31, 2000 and 2001 was computed based on the weighted average number
of shares outstanding during the periods, which amounted to 24,037,346 shares
and 23,483,824 shares, respectively. 
Unallocated ESOP shares and unvested restricted stock awards are not
considered outstanding for purposes of the computation of basic EPS.  Diluted EPS reflects the potential dilution
that could occur if certain agreements to issue common stock were exercised and
has been computed after giving consideration to the dilutive effect of the
Companys stock options and unvested restricted stock awards.

(6)        BUSINESS
SEGMENT INFORMATION

Prior to the acquisition of
Nantucket Bank on December 31, 2000, the Company identified its reportable
operating business segment as Community Banking based on how the business was
strategically managed.  With this
acquisition, the Community Banking segment has been replaced with separate
presentation of each of the Companys banking subsidiaries since each of the
banks operates autonomously.  The former
Community Banking business segment consisted of commercial and retail banking.  Through December 31, 2000, this segment was
managed as a single strategic unit which derived its revenues from a wide range
of banking services, including investing and lending activities and acceptance
of demand, savings and time deposits, merchant credit card services as well as
servicing loans for investors.

There is no major customer, as
defined, and the Banks operate within a single geographic area (southeastern
Massachusetts, including Nantucket and Marthas Vineyard).

Non reportable operating segments
of the Companys operations which do not have similar characteristics to its
banking operations and do not meet the quantitative thresholds requiring
disclosure, are included in the Other category in the disclosure of business
segments below.  These non reportable
segments include the Parent Company.

The financial data disclosed below
for Nantucket Bank reflects the new basis of accounting arising from the
acquisition (push-down accounting), as well as the allocation of interest
expense on the acquisition debt incurred by Compass.  Reportable segment specific information and reconciliation to
consolidated financial information is as follows

(in thousands):

March 31, 2001
  Compass
  Nantucket
  Bank
  Other
  Other
  Adjustments and Eliminations
  ConsolidatedInvestment securities
  $276,061
  $25,178
  $3,442
  $
  $304,681Net loans
  2,145,839
  280,794
  10,509
  (10,509)
  2,426,633Total assets
  2,631,593
  387,749
  294,159
  (289,537)
  3,023,964Total deposits
  1,791,268
  219,341
  
  
  2,010,609Total borrowings
  595,128
  97,274
  
  
  692,402Total liabilities
  2,410,237
  319,511
  668
  
  2,730,416Net interest income
  21,354
  2,546
  237
  (204)
  23,933Provision for loan losses
  1,350
  50
  
  
  1,400Noninterest income
  2,601
  481
  40
  
  3,122Noninterest expense
  13,194
  2,302
  369
  
  15,865Net income
  6,567
  226
  6,731
  (6,793)
  6,731March 31, 2000
  Community
  Banking
  Other
  Other
  Adjustments and Eliminations
  ConsolidatedInvestment securities
  $262,651
  $2,979
  $
  $265,630Net loans
  1,817,265
  10,706
  (10,706)
  1,817,265Total assets
  2,207,185
  274,387
  (271,332)
  2,210,240Total deposits
  1,583,725
  
  
  1,583,725Total borrowings
  331,517
  
  
  331,517Total liabilities
  1,935,852
  255
  
  1,936,107Net interest income
  18,933
  236
  (208)
  18,961Provision for loan losses
  1,050
  
  
  1,050Noninterest income
  2,179
  
  
  2,179Noninterest expense
  11,471
  235
  
  11,706Net income
  5,427
  5,428
  (5,427)
  5,428(7)        STOCK
REPURCHASE PROGRAMS

In July 1999, the Board of
Directors authorized the Company to repurchase up to 1,000,000 shares in the
open market to meet the anticipated needs of stock awards and stock options
issued in connection with the 1999 Stock Incentive Plan.  In October 1999 and July 2000, the Board of
Directors, with the approval of the Commissioner of Banks, authorized the
Company to repurchase up to an additional 1,231,900 and 1,254,312 shares,
respectively, in the open market.  The
Board of Directors delegated to the discretion of senior management the
authority to determine the timing of the repurchase programs commencement, the
timing of subsequent repurchases and the prices at which repurchases will be
made.

As of May 10, 2001, the Company had
repurchased 2,474,775 shares of its common stock under these programs at a
total cost of $26,274,905 of which 2,464,775 shares at a cost of $26,137,055
had been repurchased as of March 31, 2001.

(8)        QUARTERLY
CASH DIVIDEND

On April 26, 2001, the Board of
Directors voted the payment of a quarterly cash dividend of $.08 per
share.  The dividend is payable on May
18, 2001 to stockholders of record on May 4, 2001.


Item 2.Managements
Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking StatementsThis Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  When used in this report, the
words or phrases, will likely result, are expected to, will continue, is
anticipated, estimate, believe, or similar expressions are intended to
identify such forward-looking statements. 
Actual events could differ materially from those anticipated in the
forward-looking statements.  Important
factors that might cause such a difference include, among other things, general
economic conditions, particularly the real estate market, in the Companys
primary market area, potential increases in the Companys nonperforming assets
(as well as increases in the allowance for loan losses that might be
necessary), concentrations of loans in a particular geographic area or with
certain large borrowers, changes in government regulation and supervision,
including increased deposit insurance premiums or capital or reserve
requirements, changes in interest rates, and increased competition and bank
consolidations in the Companys market area. 
These and other factors that might cause differences between actual and
anticipated results, performance and achievements are discussed in greater
detail in this Item 2. Acquisition of Home PortOn December 31, 2000, the
Company completed its acquisition of Home Port and its bank subsidiary,
Nantucket Bank, in a transaction accounted for under the purchase method of
accounting.  Accordingly, while the
consolidated assets and liabilities of Home Port are reflected in the Companys
consolidated balance sheets at March 31, 2001 and December 31, 2000, the
results of operations of Home Port for the quarter ended March 31, 2000 are not
included in the consolidated statement of income for that period, as required
by the purchase method of accounting. 
The impact of this acquisition on the consolidated statement of income for
the quarter ended March 31, 2001 has been segregated in the accompanying
discussion of the comparison of operating results for the quarters ended March
31, 2001 and 2000. Comparison of Financial
Condition at March 31, 2001 and December 31, 2000 Total assets increased by $133.2
million from $2,890.8 million at December 31, 2000 to $3,024.0 million at March
31, 2001.  During the quarter ended
March 31, 2001, the loan portfolio increased by $89.5 million, or 3.8%, which
was funded principally by additional Federal Home Loan Bank advances of $105.7
million and, to a lesser extent, deposit growth of $21.0 million.  During the quarter, the Companys borrowings
from the Federal Home Loan Bank (FHLB) exceeded its actual funding needs by
approximately $60 million due to the favorable rates offered.  The weighted average interest rate on FHLB
advances taken during the first quarter of 2001 was 4.95%.  At March 31, 2001, these additional funds
were invested in federal funds sold but are expected to be used in the second
quarter of 2001 to fund anticipated loan growth. The increase in loans occurred
primarily in the residential mortgage, indirect auto and commercial loan
portfolios.  From December 31, 2000 to
March 31, 2001, residential mortgage loans increased by $40.4 million, or 3.3%,
indirect auto loans (net of unearned discounts) increased by $26.5 million, or
5.1% and commercial loans increased by $14.4 
million, or 14.3%.  Compass has
continued  to retain all residential
mortgage loan originations in portfolio and has continued to emphasize the
origination of indirect auto loans through its network of automobile dealers
which has been expanded to include dealers in communities contiguous to the
metropolitan Boston area.  The growth in
commercial loans was primarily with existing customers to fund business
expansion and seasonal borrowing needs. Total deposits at March 31, 2001
were $2,010.6 million, an increase of $21.0 million, compared to $1,989.6
million at December 31, 2000.  Core
deposit account balances increased by $12.0 million during the quarter.  The modest change in core deposits during
the quarter was generally attributable to normal seasonal fluctuations while
the slower growth in certificates of deposit compared to the quarterly growth
experienced throughout 2000 reflects the impact of the lower interest rates
currently being offered. The increase in stockholders
equity of $5.4 million to $293.5 million at March 31, 2001 resulted from the
net income of $6.7 million for the quarter ended March 31, 2001 and an increase
of $1.6 million in the market value of investment securities available for
sale, net of taxes, which were partially offset by cash dividends and stock
repurchases totaling $3.4 million. 
During 1999 and 2000, the Company announced three stock repurchase
programs aggregating 3,486,212 shares. 
As of May 10, 2001, 2,474,775 shares had been repurchased leaving up to
1,011,437 shares for repurchase. 
Management expects to repurchase the remaining shares under these
programs during 2001.


Comparison of Operating
Results for the Quarters Ended March 31, 2001 and 2000 As previously noted, the
acquisition of Home Port on December 31, 2000 had a significant impact on
changes in the components of the Companys consolidated statements of income between
the quarters ended March 31, 2001 and 2000. 
The following table segregates Nantucket Banks impact on such changes
(in thousands): Quarter
  Ended March 31, 2001
  Quarter
  Ended
  March 31, 2000
  Net
  ChangeConsolidated
  Nantucket
  Bank
  NetInterest income
  $52,664
  $6,505
  $46,159
  $37,368
  $8,791Interest expense
  28,731
  3,959
  24,772
  18,407
  6,365Provision for loan losses
  1,400
  50
  1,350
  1,050
  300Noninterest income
  3,122
  481
  2,641
  2,179
  462Noninterest expense
  15,865
  2,302
  13,563
  11,706
  1,857Income before taxes
  9,790
  675
  9,115
  8,384
  731Provision for income taxes
  3,059
  449
  2,610
  2,956
  (346)Net income
  $6,731
  $226
  $6,505
  $5,428
  $1,077 The remaining discussion, unless
otherwise indicated, addresses the net change presented above, which excludes
the impact due to the acquisition of Nantucket Bank. Interest
Income.  Interest income for
the quarter ended March 31, 2001 was $46.2 million compared to $37.4 million
for the quarter ended March 31, 2000, an increase of $8.8 million, or 23.5%.  The increase in interest income resulted
from growth in average interest-earning assets of $387.7 million, or 18.9%, and
an increase in the overall yield on interest-earning assets of 28 basis points
in the 2001 period.  The principal areas
of growth in average balances were related to real estate loans (up $ 208.9
million, or 16.8%) and indirect auto loans (up $ 99.8 million, or 23.0%).  Most of the real estate loan growth resulted
from increased originations and retention in portfolio of one-to-four family
real estate loans.  The increase in
indirect auto loans resulted from the positive economic environment within
Compasss local markets and the continued geographic expansion of the network
of participating dealers. Interest
Expense.  Interest expense for the quarter ended March
31, 2001 was $24.8 million compared to $18.4 million for the quarter ended
March 31, 2000, an increase of $6.4 million or 34.6%.  This increase resulted from a 48 
basis points increase in the cost of funds from 4.22% in 2000 to 4.70%
in 2001, and a higher average balance of interest-bearing liabilities (up $
366.2 million, or 21.0%).  Average
interest-bearing deposit balances increased $199.8  million, or 14.0%, during the quarter ended March 31, 2001
compared to the same period in 2000. Interest expense on borrowed funds
increased $2.5 million in the quarter ended March 31, 2001 due to a $166.3  million increase in the average balance of
such funds, and an 8 basis points increase in the average rate paid on borrowed
funds to 5.87% in the 2001 period. The increase in the cost of funds
reflects the series of rate increases initiated by the Federal Reserve Board
beginning in June 1999 and continuing into 2000 as well as the greater
utilization of higher cost certificates of deposit and FHLB advances as a
funding source.  The incremental
increase of 20 basis points in the cost of funds over the yield on
interest-earning assets during the quarter ended March 31, 2001, as compared to
the same period in 2000, reflects the faster repricing characteristics of
Compasss interest-bearing liabilities as compared to its interest-earning
assets and the competitive pricing for certificates of deposits in 2000.  With the recent series of reductions in interest
rates initiated by the Federal Reserve Board in 2001 and the scheduled maturity
of nearly 90% of certificates of deposit in 2001 (particularly in the second
half of the year), management believes that the Companys interest rate margin
will improve during the course of the year.


Provision
for Loan Losses.  The Company
provides for loan losses in order to maintain the allowance for loan losses at
a level that management estimates is appropriate to absorb future charge-offs
of loans deemed uncollectible.  In
determining the appropriate level of the allowance for loan losses, management
considers past and anticipated loss experience, evaluations of underlying
collateral, prevailing economic conditions, the nature and volume of the loan
portfolio and the levels of nonperforming and other classified loans.  The amount of the allowance is based on
estimates and  ultimate losses may vary
from such estimates.  Management
assesses the allowance for loan losses on a quarterly basis and provides for
loan losses monthly in order to maintain the adequacy of the allowance. Compass provided $1.35 million for
loan losses in the quarter ended March 31, 2001compared to $1.05 million in the
quarter ended March 31, 2000.  The
increase of $300,000 in 2001 was attributable to both the growth in the loan
portfolio and deterioration in the financial condition of a commercial loan
customer with an aggregate loan balance of $2.5 million.  The total allowance (including Nantucket
Bank) of $26.2 million at March 31, 2001 represented 1.07% of total loans
compared to 1.06% at December 31, 2000. 
At March 31, 2001, the allowance for loan losses as a percentage of
non-performing loans was 316.0% compared to 410.7% at December 31, 2000. Noninterest
Income.  Total noninterest
income was $2.6 million for the quarter ended March 31, 2001 compared to $2.2
million in the same period of 2000, an increase of $462,000, or 21.2%.  This increase was principally caused by
increases in loan fees, checking account related income and ATM/Debit card
usage partially offset by an insurance settlement in 2000. Noninterest
Expense.   Noninterest
expense increased by $1.9 million or 15.9%, from $11.7 million for the quarter
ended March 31, 2000 to $13.6 million for the quarter ended March 31,
2001.  This increase reflected increases
in all areas of expense including salaries and employee benefits ($336,000),
occupancy and equipment ($445,000), data processing ($305,000), marketing
($51,000), professional services ($444,000) and other noninterest expense
($297,000). Salaries and employee benefits
increased $336,000, or 5.0%, during the quarter ended March 31, 2001, due to
overall salary increases averaging 4.5% and increases in staffing necessitated
by franchise expansion (three new branches). Occupancy and equipment expenses
increased $445,000, or 30.8%, during the quarter ended March 31, 2001.  This increase was primarily due to higher
costs associated with the new corporate offices and new branches in New
Bedford, Seekonk and Mattapoisett, as well as higher utility costs caused by
increases in rates charged by service providers. Data processing expenses increased
$305,000, or 26.3%, during the quarter ended March 31, 2001 due primarily to
volume-related services such as item processing, expanded branch and ATM
networks and ATM/Debit card usage. 
These increases were partially offset by a rate decrease received on
certain services from the Companys core processing service provider. Marketing expenses increased
$51,000, or 9.7%, during the quarter ended March 31, 2001.  This increase was attributable to initial
production costs for television commercials in development, partially offset by
decreases in promotions and other advertising. Professional services expenses
increased $444,000, or 135.4%, during the quarter ended March 31, 2001.  This increase reflects consulting and legal
fees associated with the start-up of Compasss private banking initiative,
certain non-recurring costs for tax services and costs associated with an
assessment of the risk management function. Other noninterest expense increased
$297,000, or 21.2%, during the quarter ended March 31, 2001.  Exclusive of a non-recurring item related to
the acquisition of Sandwich Bancorp, Inc. recognized in the quarter ended March
31, 2000, noninterest expense increased by 11.8% during the quarter ended March
31, 2001.  This increase reflects
primarily volume-related items such as printing, postage and telephone costs. Income
Taxes. The effective tax rate (including Nantucket Bank) for the
quarter ended March 31, 2001 was 31.2% compared to 35.3% in the same period in
2000.  During the quarter ended March
31, 2001, the Company completed an analysis addressing the impact of a recent
Tax Court decision on the deductibility of certain merger-related costs
incurred in connection with the acquisition of Sandwich Bancorp, Inc. in
1998.  Based on this analysis, the
provision for income taxes was reduced by $479,000 for the quarter ended March
31, 2001.  Exclusive of this
non-recurring item, the effective tax rate in 2001 was 36.1%.  This increase from 2000 reflects the impact
of nondeductible goodwill amortization. Liquidity and Capital Resources

Liquidity, represented by cash and
cash equivalents and debt securities is a product of the Companys operating,
investing, and financing activities.  The
Companys primary sources of funds are deposits, borrowings, principal and
interest payments on outstanding loans and mortgage-backed securities,
maturities of investment securities and funds provided from operations.  While scheduled payments from the
amortization of loans and mortgage related securities and maturing investment
securities are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates and, in the case
of deposits, other instruments available to the public such as mutual funds and
annuities.

As voluntary members of the Federal
Home Loan Bank of Boston (FHLB), Compass and Nantucket Bank are entitled to
borrow an amount up to the value of their qualified collateral that has not
been pledged to others.  Qualified
collateral generally consists of residential first mortgage loans, U.S.
Government and agency securities and funds on deposit at the FHLB.  At March 31, 2001, Compass and Nantucket
Bank had approximately $378.4 million and $55.3 million, respectively, in
unused borrowing capacity that is contingent upon the purchase of additional
FHLB stock.  Use of this borrowing
capacity may also be impacted by regulatory capital requirements.

Liquidity management is both a
daily and long-term function of business management.  The measure of a banks liquidity is its ability to meet its cash
commitments at all times with available cash or by conversion of other assets
to cash at a reasonable price.  At March
31, 2001, the Company maintained cash and due from banks, federal funds sold
and debt securities maturing within one year of $159.8 million, or 5.3% of
total assets.  The Company invests
excess funds, if any, in federal funds sold which provides liquidity to meet
lending requirements.

At March 31, 2001, the Company had
commitments to originate loans, unused outstanding lines of credit, standby
letters of credit and undisbursed proceeds of loans totaling $218.9
million.  The Company anticipates that
it will have sufficient funds available to meet its current loan
commitments.  Certificates of deposit
maturing within one year from March 31, 2001 amounted to $896.8 million.  The Company expects that a significant
portion of maturing certificate accounts will be retained at maturity.

The Companys and the Banks
capital ratios at March 31, 2001 were as follows:

Seacoast Financial
  Compass
  Nantucket BankTotal Capital (to risk
  weighted assets)
  13.72%
  12.47%
  15.67%Tier 1 Capital (to
  risk weighted assets)
  12.45
  11.28
  14.42Tier 1 Capital (to
  average assets)
  8.75
  8.07
  8.66These
ratios placed the Company inexcessof regulatory standards and the Banks in the well capitalized category as set
forth by the FDIC.

Item 3.  Quantitative
and Qualitative Disclosures about Market Risk

The chief market riskfactor
affecting the financial condition and operating results of the Company is
interest rate risk.  This risk is
managed by periodic evaluation of the interest risk inherent in certain balance
sheet accounts, determination of the level of risk considered appropriate given
capital and liquidity requirements, business strategy, performance objectives
and operating environment and maintenance of such risks within guidelines
approved by the Board of Directors. 
Through such management, the Company seeks to reduce the vulnerability
of its net earnings to changes in interest rates.  Each Banks Asset/Liability Committee, comprised of senior
management, is responsible for managing interest rate risk and reviewing with
its Board of Directors on a quarterly basis its activities and strategies, the
effect of those strategies on operating results, the Banks interest rate risk
position and the effect changes in interest rates would have on net interest
income. The extent of movement of interest rates is an uncertainty that could
have a negative impact on earnings.

The
principal strategies that the Company generally uses to manage interest rate
risk include (i) emphasizing the origination and retention of adjustable-rate
loans, origination of indirect auto loans (Compass only) which have relatively
short maturities  and origination of
loans with maturities at least partly matched with those of the deposits and
borrowings funding the loans, (ii) investing in debt securities with relatively
short maturities and (iii) classifying a significant portion of its investment
portfolio as available for sale so as to provide sufficient flexibility in
liquidity management.

The
Company and the Banks quantify their interest rate risk exposure using a
sophisticated simulation model. 
Simulation analysis is used to measure the exposure of net interest
income to changes in interest rates over a specified time horizon.  Simulation analysis involves projecting
future interest income and expense under various rate scenarios.  Internal guidelines on interest rate risk
specify that for every 100 basis points immediate shift in interest rates, the
estimated net interest income over the next 12 months should decline by less
than 5%.

In
utilizing a 300 basis point increase in rates in its simulation model, the full
impact of annual rate caps of 200 basis points common to most adjustable rate
mortgage loan products is considered. 
The rate shocks used assume an instantaneous and parallel change in
interest rates and that no strategies are implemented in response to the change
in interest rates.  Prepayment speeds
for loans are based on published median dealer forecasts for each interest rate
scenario.

As
of March 31, 2001, the Company's estimated exposure as a percentage of
estimated net interest income for the next twelve and twenty-four month periods
is as follows:

Percentage Change in Estimated Net Interest Income Over:12
  months
  24
  months300
  basis point increase in rates
  (11.98%)
  (10.83%)200
  basis point decrease in rates
  (1.59%)
  (5.73%)Based
on the scenario above, net income would be adversely affected (within internal
guidelines) in both the twelve and twenty-four month periods.  For each one percent change in net interest
income, the effect on net income would be $694,000 assuming a 36% tax rate.

PART II
- OTHER INFORMATION

Item
1.  Legal Proceedings

The
Company is not involved in any pending legal proceedings other than those
involved in the ordinary course of business. 
Management believes that the resolution of these matters will not
materially affect its business or the consolidated financial condition of the
Company.

Item 2.  Changes in
Securities and Use of Proceeds

Not
applicable.

Item 3.  Defaults Upon
Senior Securities

Not
applicable.

Item 4.  Submission of
Matters to A Vote of Security Holders

Not
applicable.

Item
5.  Other Information

Not
applicable.

Item 6.  Exhibits and
Reports on Form 8-K

a.
  Exhibits:2.1
  Agreement and Plan of Merger by and between
  Seacoast Financial Services Corporation and Home Port Bancorp, Inc. date as
  of July 20, 2000++++++2.2
  Stock Option Agreement between Home Port
  Bancorp, Inc. and Seacoast Financial Services Corporation dated as of July
  20, 2000++++++3.1
  Articles of Organization of Seacoast Financial
  Services Corporation+++3.2
  By-Laws of Seacoast Financial Services
  Corporation+++4
  Specimen certificate for the common stock of
  Seacoast Financial Services Corporation++10.1*
  Form of Employment Agreement by and among
  Seacoast Financial Services Corporation, Compass Bank for Savings and Kevin
  G. Champagne+10.2*
  Form of Employment Agreement by and among
  Compass Bank for Savings, Seacoast Financial Services Corporation and certain
  Officers of Compass Bank for Savings+10.3*
  Form of Change in Control Agreements by and
  among Seacoast Financial Services Corporation, Compass Bank for Savings,
  Kevin G. Champagne and certain other Officers of Compass Bank for Savings+10.4*
  Form of Change in Control Agreement by and
  among Seacoast Financial Services Corporation, Compass Bank for Savings and
  certain Officers of Compass Bank for Savings+10.5*
  Form of Executive Salary Continuation
  Agreements made and entered into by and between Compass Bank for Savings and
  Kevin G. Champagne, Arthur W. Short, John D. Kelleher and Francis S.
  Mascianica and forms of amendments thereto+10.6*
  Trust Agreement, made as of December 18, 1992,
  by and between Compass Bank for Savings and Shawmut Bank, N.A.+10.7*
  Compass Bank for Savings January 2000
  Incentive Compensation Plan+++++10.12*
  Compass Bank for Savings Executive Deferred
  Compensation Plan+10.13*
  Rabbi Trust for Compass Bank for Savings
  Executive Deferred Compensation Plan+10.17*
  Sandwich Co-operative Bank 1992 Directors Deferred
  Compensation Plan++10.20*
  Seacoast Financial Services Corporation 1999
  Stock Incentive Plan++++11
  A statement regarding earnings per share is
  included in Item 1, Note 5, of this report.(b)        Reports on Form 8-K: On January 12,
2001, a Form 8-K was filed and on March 15, 2001 Amendment No. 1 to Form 8-K
was filed, both in connection with the Companys acquisition of Home Port
Bancorp, Inc.





*           Management compensatory plan or
arrangement.

+           Incorporated by reference to the
Companys Registration Statement on Form S-1 (333-52889), filed with the
Securities and Exchange Commission under the Companys prior name, The 1855
Bancorp, on May 15, 1998.

++         Incorporated by reference to Amendment
No. 1 to the Companys Registration Statement on Form S-1 (333-52889), filed
with the Securities and Exchange Commission under the Companys prior name,
The 1855 Bancorp, on August 14, 1998.

+++      Incorporated by reference to the Companys
Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on November 18, 1998.

++++    Incorporated by reference to the Companys
Proxy Statement on Schedule 14A filed with the Securities and Exchange
Commission on April 16, 1999.

+++++  Incorporated by reference to the Companys
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 28, 2000.

++++++  Incorporated
by reference to the Companys Current Report on Form 8-K filed with the SEC on
August 3, 2000.


SIGNATURES Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized. Seacoast Financial Services Corporation(Registrant)Date: May 10, 2001
  By
  /s/ Kevin G. ChampagneKevin
  G. ChampagnePresident
  and Chief ExecutiveOfficerDate:
  May 10, 2001
  By
  /s/
  Francis S. Mascianica, Jr.Francis
  S. Mascianica, Jr.Treasurer,
  as Principal Financial andAccounting Officer