##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549


Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended: March 31, 2003

Commission File Number 1-13936

BOSTONFED BANCORP INC.




(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-1940834                          
|                                                              
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                              
|17 New England Executive Park, Burlington, Massachusetts       |  | 01803                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          

(781)  273-0300




(Registrants telephone number, including area code)


Not Applicable




(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 is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).



| |                     
| | --------------------
| | Yes (X)       No ( )

Number of shares of common stock, par value $.01 per share, outstanding
as of April 30, 2003: 4,401,496.





---

TABLE OF CONTENTS



|                             |                                                                                                |                                                            |  |  |  |  |  | 
|---------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|                             |                                                                                                | Consolidated Balance Sheets                               
|                             |                                                                                                | Consolidated Statements of Operations                     
|                             |                                                                                                | Consolidated Statements of Changes in Stockholders Equity
|                             |                                                                                                | Consolidated Statements of Cash Flows                     
|                             |                                                                                                | Consolidated Statements of Cash Flows                     
|                             |                                                                                                | CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      
|                             | Item 2. MANAGEMENTSS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                             | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                             
|                             | Item 4. CONTROLS AND PROCEDURES                                                               
|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                  
|CERTIFICATION               
|EX-99.1 CERTIFICATION OF CEO
|EX-99.2 CERTIFICATION OF CFO



---



##### Table of Contents



BOSTONFED BANCORP INC.
FORM 10-Q
INDEX

|                               |  |                                                                                                                  |  |  |      |      
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------------- |  |  | ---- | -----
|Part I - FINANCIAL INFORMATION |  |                                                                                                                  |  |  | Page
|                               |  |                                                                                                                  |  | 
|Item 1.                        |  | Financial Statements:                                                                                            |  |  |      |      
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Consolidated Balance Sheets as of March 31, 2003
and December 31, 2002 (unaudited)                               |  |  |      | 2    
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Consolidated Statements of Operations for the
Three Months Ended March 31, 2003 and 2002 (unaudited)             |  |  |      | 3    
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Consolidated Statements of Changes in Stockholders
Equity for the Three Months Ended
March 31, 2003 (unaudited) |  |  |      | 4    
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2003 and 2002 (unaudited)             |  |  |      | 5-6  
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Notes to Consolidated Financial Statements                                                                       |  |  |      | 7-9  
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Average Balances and Yield / Costs                                                                               |  |  |      | 10-11
|                               |  |                                                                                                                  |  |  |      |      
|Item 2.                        |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                            |  |  |      | 1220
|                               |  |                                                                                                                  |  |  |      |      
|Item 3.                        |  | Quantitative and Qualitative Disclosures About
Market Risk                                                       |  |  |      | 21   
|                               |  |                                                                                                                  |  |  |      |      
|Item 4.                        |  | Controls and Procedures                                                                                          |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Part II  OTHER INFORMATION    |  |                                                                                                                  |  |  |      |      
|                               |  |                                                                                                                  |  |  |      |      
|Item 1.                        |  | Legal Proceedings                                                                                                |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                                                        |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Item 3.                        |  | Defaults Upon Senior Securities                                                                                  |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                              |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Item 5.                        |  | Other Information                                                                                                |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                 |  |  |      | 23   
|                               |  |                                                                                                                  |  |  |      |      
|                               |  | Signature Page                                                                                                   |  |  |      | 25   

1



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
(Unaudited)

|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |         |         |  
|------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | --------- | --------- | ------- | ------------ | --------- | ------- | ------- | -
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           | March 31, |         | December 31,
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           | 2003      |         | 2002        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |             
|Assets                                                                                                                         |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Cash and cash equivalents                                                                                                      |                                                                                                                                                                                         | $                                                                                                                            | 76,137    |           |         | $            | 74,672    |        
|Investment securities available for sale
(amortized cost of $117,647 at March 31,
2003 and $112,056 at December 31, 2002)      |                                                                                                                                                                                         |                                                                                                                              | 118,526   |           |         |              | 112,888   |        
|Investment securities held to maturity (fair
value of $2,578 at March 31, 2003 and $2,576
at December 31, 2002)                |                                                                                                                                                                                         |                                                                                                                              | 2,524     |           |         |              | 2,524     |        
|Mortgage-backed securities available for sale
(amortized cost of $119,186 at March 31,
2003 and $113,550 at December 31, 2002) |                                                                                                                                                                                         |                                                                                                                              | 118,711   |           |         |              | 114,515   |        
|Mortgage-backed securities held to maturity (fair
value of $22,081 at March 31, 2003 and $26,598
at December 31, 2002)         |                                                                                                                                                                                         |                                                                                                                              | 21,185    |           |         |              | 25,429    |        
|Loans held for sale                                                                                                            |                                                                                                                                                                                         |                                                                                                                              | 22,901    |           |         |              | 31,614    |        
|Loans, net of allowance for loan losses of $13,032
and $12,656 at March 31, 2003 and December 31, 2002                         |                                                                                                                                                                                         |                                                                                                                              | 1,037,885 |           |         |              | 1,071,356 |        
|Accrued interest receivable                                                                                                    |                                                                                                                                                                                         |                                                                                                                              | 6,285     |           |         |              | 6,470     |        
|Stock in FHLB of Boston and Federal Reserve Bank                                                                               |                                                                                                                                                                                         |                                                                                                                              | 24,552    |           |         |              | 24,552    |        
|Bank-owned life insurance                                                                                                      |                                                                                                                                                                                         |                                                                                                                              | 24,635    |           |         |              | 24,316    |        
|Premises and equipment, net                                                                                                    |                                                                                                                                                                                         |                                                                                                                              | 9,942     |           |         |              | 10,133    |        
|Goodwill, net of amortization                                                                                                  |                                                                                                                                                                                         |                                                                                                                              | 10,776    |           |         |              | 10,776    |        
|Other assets                                                                                                                   |                                                                                                                                                                                         |                                                                                                                              | 16,707    |           |         |              | 16,367    |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Total assets                                                                                                                   |                                                                                                                                                                                         |                                                                                                                              | 1,490,766 |           |         |              | 1,525,612 |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Liabilities and Stockholders Equity                                                                                           |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Liabilities:                                                                                                                   |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|                                                                                                                               | Deposit accounts                                                                                                                                                                        |                                                                                                                              |           | 960,726   |         |              |           | 960,278 |        
|                                                                                                                               | Federal Home Loan Bank advances and other
borrowings                                                                                                                                    |                                                                                                                              |           | 395,444   |         |              |           | 426,560 |        
|                                                                                                                               | Corporation-obligated mandatorily redeemable
capital securities                                                                                                                         |                                                                                                                              |           | 32,000    |         |              |           | 32,000  |        
|                                                                                                                               | Advance payments by borrowers for taxes
and insurance                                                                                                                                   |                                                                                                                              |           | 2,551     |         |              |           | 2,317   |        
|                                                                                                                               | Other liabilities                                                                                                                                                                       |                                                                                                                              |           | 10,427    |         |              |           | 11,484  |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Total liabilities                                                                                                              |                                                                                                                                                                                         |                                                                                                                              | 1,401,148 |           |         |              | 1,432,639 |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Commitments and contingencies                                                                                                  |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Stockholders equity:                                                                                                          |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|                                                                                                                               | Preferred stock, $ .01 par value, 1,000,000 shares
authorized; none issued                                                                                                              |                                                                                                                              |           |          |         |              |           |        |        
|                                                                                                                               | Common stock, $0.01 par value, 17,000,000 shares
authorized; 6,589,617 shares issued (4,415,596 and
4,425,348 shares outstanding at March 31, 2003 and
December 31, 2002, respectively) |                                                                                                                              |           | 66        |         |              |           | 66      |        
|                                                                                                                               | Additional paid-in capital                                                                                                                                                              |                                                                                                                              |           | 69,325    |         |              |           | 69,281  |        
|                                                                                                                               | Retained earnings                                                                                                                                                                       |                                                                                                                              |           | 61,936    |         |              |           | 64,242  |        
|                                                                                                                               | Accumulated other comprehensive income                                                                                                                                                  |                                                                                                                              |           | 246       |         |              |           | 1,096   |        
|                                                                                                                               |                                                                                                                                                                                         | Less: Treasury stock, at cost ( 2,174,021 shares
and 2,164,269 shares at March 31, 2003 and
December 31, 2002, respectively) |           |           | (41,947 | )            |           |         | (41,698 | )
|                                                                                                                               |                                                                                                                                                                                         | Less: Unearned Stock-Based Incentive Plan                                                                                    |           |           | (8      | )            |           |         | (14     | )
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Total stockholders equity                                                                                                     |                                                                                                                                                                                         |                                                                                                                              | 89,618    |           |         |              | 92,973    |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        
|Total liabilities and stockholders equity                                                                                     |                                                                                                                                                                                         | $                                                                                                                            | 1,490,766 |           |         | $            | 1,525,612 |        
|                                                                                                                               |                                                                                                                                                                                         |                                                                                                                              |           |           |         |              |           |        

See accompanying condensed notes to consolidated financial statements.

2



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)

|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |       |        |        | 
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ------------------------- | ---------------------- | ----- | ------------------ | --------- | --------- | ----- | ------ | ------ | 
|                                                                      |                                                                               |                            |                           |                        |       | Three Months Ended
|                                                                      |                                                                               |                            |                           |                        |       |                   
|                                                                      |                                                                               |                            |                           |                        |       | 3/31/2003          |           | 3/31/2002
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |          
|Interest income:                                                      |                                                                               |                            |                           |                        |       |                    |           |          
|                                                                      | Loans                                                                         |                            | $                         | 16,579                 |       |                    | $         | 18,515    |      
|                                                                      | Mortgage-backed securities                                                    |                            |                           | 1,537                  |       |                    |           | 1,886     |      
|                                                                      | Investment securities                                                         |                            |                           | 1,138                  |       |                    |           | 982       |      
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|                                                                      |                                                                               |                            | Total interest income     |                        |       | 19,254             |           |           |       | 21,383 |       
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Interest expense:                                                     |                                                                               |                            |                           |                        |       |                    |           |          
|                                                                      | Deposit accounts                                                              |                            |                           | 5,079                  |       |                    |           | 5,817     |      
|                                                                      | Borrowed funds                                                                |                            |                           | 4,442                  |       |                    |           | 5,760     |      
|                                                                      | Corporation obligated mandatorily redeemable
capital securities distributions |                            |                           | 881                    |       |                    |           | 880       |      
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|                                                                      |                                                                               |                            |                           | Total interest expense |       |                    | 10,402    |           |       |        | 12,457 | 
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Net interest income                                                   |                                                                               |                            | 8,852                     |                        |       |                    | 8,926     |          
|Provision for loan losses                                             |                                                                               |                            | 450                       |                        |       |                    | 250       |          
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Net interest
income after provision for loan losses                   |                                                                               |                            | 8,402                     |                        |       |                    | 8,676     |          
|Non-interest income:                                                  |                                                                               |                            |                           |                        |       |                    |           |          
|                                                                      | Deposit service fees                                                          |                            |                           | 856                    |       |                    |           | 637       |      
|                                                                      | Loan processing and servicing fees                                            |                            |                           | (858                   | )     |                    |           | (311      | )    
|                                                                      | Gain on sale of loans                                                         |                            |                           | 3,170                  |       |                    |           | 2,868     |      
|                                                                      | Income from bank-owned life insurance                                         |                            |                           | 319                    |       |                    |           | 297       |      
|                                                                      | Gain on sale of investments                                                   |                            |                           | 0                      |       |                    |           | 240       |      
|                                                                      | Other                                                                         |                            |                           | 370                    |       |                    |           | 397       |      
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|                                                                      |                                                                               |                            | Total non-interest income |                        |       | 3,857              |           |           |       | 4,128  |       
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Non-interest expense:                                                 |                                                                               |                            |                           |                        |       |                    |           |          
|                                                                      | Compensation and benefits                                                     |                            |                           | 6,133                  |       |                    |           | 5,789     |      
|                                                                      | Occupancy and equipment                                                       |                            |                           | 1,258                  |       |                    |           | 1,186     |      
|                                                                      | Data processing                                                               |                            |                           | 460                    |       |                    |           | 455       |      
|                                                                      | Advertising expense                                                           |                            |                           | 299                    |       |                    |           | 233       |      
|                                                                      | Federal deposit insurance premiums                                            |                            |                           | 48                     |       |                    |           | 40        |      
|                                                                      | Legal settlements                                                             |                            |                           |                       |       |                    |           | 500       |      
|                                                                      | Other                                                                         |                            |                           | 1,733                  |       |                    |           | 1,528     |      
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|                                                                      |                                                                               | Total non-interest expense |                           |                        | 9,931 |                    |           |           | 9,731 |       
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Income before income taxes                                            |                                                                               |                            | 2,328                     |                        |       |                    | 3,073     |          
|Income tax expense                                                    |                                                                               |                            | 3,926                     |                        |       |                    | 1,051     |          
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Net (loss) income                                                     |                                                                               | $                          | (1,598                    | )                      |       | $                  | 2,022     |          
|                                                                      |                                                                               |                            |                           |                        |       |                    |           |           |      
|Basic (loss) earnings per share                                       |                                                                               | $                          | (0.36                     | )                      |       | $                  | 0.46      |          
|Diluted (loss) earnings
per share                                     |                                                                               | $                          | (0.36                     | )                      |       | $                  | 0.43      |          
|Basic weighted average shares
outstanding                             |                                                                               |                            | 4,394,752                 |                        |       |                    | 4,398,124 |          
|Common stock equivalents
due to dilutive effect
of stock options      |                                                                               |                            | 239,294                   |                        |       |                    | 268,776   |          
|Diluted total weighted average
shares outstanding                     |                                                                               |                            | 4,634,046                 |                        |       |                    | 4,666,900 |          
|See accompanying condensed notes to
consolidated
financial statements |                                                                               |                            |                           |                        |       |                    |           |          

3



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders Equity
Three Months Ended March 31, 2003
(In thousands, except share data)
(Unaudited)

|                                                                                             |  |        |    |         |  |            |        |          |  |               |        |           |  |               |         |       |  |             |       |        |  |          |     |   |  |  |        |  
|-------------------------------------------------------------------------------------------- |  | ------ | -- | ------- |  | ---------- | ------ | -------- |  | ------------- | ------ | --------- |  | ------------- | ------- | ----- |  | ----------- | ----- | ------ |  | -------- | --- | - |  |  | ------ | -
|                                                                                             |  |        |    |         |  |            |        |          |  |               |        |           |  |               |         |       |  |             |       |        |  | Unearned |     |   |  | 
|                                                                                             |  |        |    |         |  |            |        |          |  |               |        |           |  |               |         |       |  | Accumulated |       | Stock- |  |          |     |  
|                                                                                             |  |        |    |         |  | Additional |        |          |  |               |        |           |  |               |         | other |  | Based       |       | Total 
|                                                                                             |  | Common |    | paid-in |  | Retained   |        | Treasury |  | comprehensive |        | Incentive |  | stockholders'
|                                                                                             |  | stock  |    | capital |  | earnings   |        | stock    |  | income        |        | Plan      |  | equity       
|                                                                                             |  |        |    |         |  |            |        |          |  |               |        |           |  |              
|Balance at December 31, 2002                                                                 |  | $      | 66 |         |  |            | 69,281 |          |  |               | 64,242 |           |  |               | (41,698 | )     |  |             | 1,096 |        |  |          | (14 | ) |  |  | 92,973 |  
|Net loss                                                                                     |  |        |   |         |  |            |       |          |  |               | (1,598 | )         |  |               |        |       |  |             |      |        |  |          |    |   |  |  | (1,598 | )
|Change in net unrealized gain
on investments available for sale
(net of tax benefit of $543) |  |        |   |         |  |            |       |          |  |               |       |           |  |               |        |       |  |             | (850  | )      |  |          |    |   |  |  | (850   | )
|                                                                                             |  |        |    |         |  |            |        |          |  |               |        |           |  |               |         |       |  |             |       |        |  |          |     |   |  |  |        |  
|Total comprehensive income                                                                   |  |        |   |         |  |            |       |          |  |               |       |           |  |               |        |       |  |             |      |        |  |          |    |   |  |  | (2,448 | )
|Cash dividends declared and
paid ($0.16 per share)                                           |  |        |   |         |  |            |       |          |  |               | (708   | )         |  |               |        |       |  |             |      |        |  |          |    |   |  |  | (708   | )
|Common stock repurchased
(24,100 shares at an average
price of $25.25 per share)             |  |        |   |         |  |            |       |          |  |               |       |           |  |               | (610    | )     |  |             |      |        |  |          |    |   |  |  | (610   | )
|Stock options exercised, net of taxes                                                        |  |        |   |         |  |            | (94    | )        |  |               |       |           |  |               | 361     |       |  |             |      |        |  |          |    |   |  |  | 267    |  
|Allocation relating to earned
portion of Stock-Based
Incentive Plan                          |  |        |   |         |  |            |       |          |  |               |       |           |  |               |        |       |  |             |      |        |  |          | 6   |   |  |  | 6      |  
|Fair value of shares charged to
expense for compensation plans                               |  |        |   |         |  |            | 138    |          |  |               |       |           |  |               |        |       |  |             |      |        |  |          |    |   |  |  | 138    |  
|                                                                                             |  |       
|Balance at March 31, 2003                                                                    |  | $      | 66 |         |  |            | 69,325 |          |  |               | 61,936 |           |  |               | (41,947 | )     |  |             | 246   |        |  |          | (8  | ) |  |  | 89,618 |  
|                                                                                             |  |       

4



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows(In thousands)
(Unaudited)

|                                          |                                                                                          |                                                                                |                                                     |        |                            |        |      |       |          |        |  
|----------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------- | ------ | -------------------------- | ------ | ---- | ----- | -------- | ------ | -
|                                          |                                                                                          |                                                                                |                                                     |        | For the Three Months Ended
|                                          |                                                                                          |                                                                                |                                                     |        |                           
|                                          |                                                                                          |                                                                                |                                                     |        | March 31,                  |        |      |       |         
|                                          |                                                                                          |                                                                                |                                                     |        | 2003                       |        | 2002
|Net cash flows from operating activities: |                                                                                          |                                                                                |                                                     |        |                            |        |      |      
|                                          | Net (loss) income                                                                        |                                                                                | $                                                   | (1,598 | )                          |        | $    | 2,022 |         
|                                          | Adjustments
to reconcile net (loss) income to
net cash provided by operating activities: |                                                                                |                                                     |        |                            |        |      |       |         
|                                          |                                                                                          | Depreciation, amortization and
accretion, net                                  |                                                     |        | 523                        |        |      |       | 482      |       
|                                          |                                                                                          | Earned SIP shares                                                              |                                                     |        | 6                          |        |      |       | 14       |       
|                                          |                                                                                          | Appreciation in fair value of shares
charged to expense for compensation plans |                                                     |        | 138                        |        |      |       | 199      |       
|                                          |                                                                                          | Income from bank-owned life insurance                                          |                                                     |        | (319                       | )      |      |       | (297     | )     
|                                          |                                                                                          | Provision for loan losses                                                      |                                                     |        | 450                        |        |      |       | 250      |       
|                                          |                                                                                          | Loans originated for sale                                                      |                                                     |        | (200,116                   | )      |      |       | (153,036 | )     
|                                          |                                                                                          | Proceeds from sale of loans                                                    |                                                     |        | 211,999                    |        |      |       | 157,759  |       
|                                          |                                                                                          | Gain on sale of investment securities                                          |                                                     |        |                           |        |      |       | (240     | )     
|                                          |                                                                                          | Gain on sale of loans                                                          |                                                     |        | (3,170                     | )      |      |       | (2,868   | )     
|                                          |                                                                                          | Decrease (increase) in accrued interest receivable                             |                                                     |        | 185                        |        |      |       | (486     | )     
|                                          |                                                                                          | Decrease (increase) in prepaid expenses
and other assets, net                  |                                                     |        | 224                        |        |      |       | (1,209   | )     
|                                          |                                                                                          | Increase(decrease) in accrued expenses
and other liabilities, net              |                                                     |        | (1,057                     | )      |      |       | 950      |       
|                                          |                                                                                          |                                                                                |                                                     |        |                            |        |      |      
|                                          |                                                                                          |                                                                                | Net cash provided by
operating activities           |        |                            | 7,265  |      |       |          | 3,540  |  
|                                          |                                                                                          |                                                                                |                                                     |        |                            |        |      |      
|Cash flows from investing activities:     |                                                                                          |                                                                                |                                                     |        |                            |        |      |      
|                                          |                                                                                          | Proceeds from sale of investment
securities available for sale                 |                                                     |        |                           |        |      |       | 690      |       
|                                          |                                                                                          | Proceeds from maturities of investment
securities available for sale           |                                                     |        | 1,000                      |        |      |       |         |       
|                                          |                                                                                          | Purchase of investment securities
available for sale                           |                                                     |        | (7,710                     | )      |      |       | (12,398  | )     
|                                          |                                                                                          | Purchase of mortgage-backed securities
available for sale                      |                                                     |        | (39,252                    | )      |      |       | (27,243  | )     
|                                          |                                                                                          | Principal payments on mortgage-backed
securities available for sale            |                                                     |        | 33,535                     |        |      |       | 21,073   |       
|                                          |                                                                                          | Principal payments on mortgage-backed
securities held to maturity              |                                                     |        | 4,241                      |        |      |       | 4,533    |       
|                                          |                                                                                          | Principal payments on investment
securities available for sale                 |                                                     |        | 1,076                      |        |      |       | 357      |       
|                                          |                                                                                          | Decrease in loans, net                                                         |                                                     |        | 33,021                     |        |      |       | 10,818   |       
|                                          |                                                                                          | Purchases of premises and equipment                                            |                                                     |        | (208                       | )      |      |       | (338     | )     
|                                          |                                                                                          | Additional investment in real estate owned                                     |                                                     |        | (18                        | )      |      |       |         |       
|                                          |                                                                                          |                                                                                |                                                     |        |                            |        |      |      
|                                          |                                                                                          |                                                                                | Net cash provided by (used in)
investing activities |        |                            | 25,685 |      |       |          | (2,508 | )
|                                          |                                                                                          |                                                                                |                                                     |        |                            |        |      |      



| |                         
| | ------------------------
| | -Continued on next page-

5



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)

|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |        |   |         |         |  
|------------------------------------------------- | ------------------------------------------------ | ------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------- | - | -------------------------- | ------- | ------ | - | ------- | ------- | -
|                                                  |                                                  |                                 |                                                                   |                                                      |   | For the Three Months Ended
|                                                  |                                                  |                                 |                                                                   |                                                      |   | March 31,                 
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                           
|                                                  |                                                  |                                 |                                                                   |                                                      |   | 2003                       |         | 2002  
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|Cash flows from financing activities:             |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  |                                                  |                                 | Increase (decrease) in deposit accounts                           |                                                      | $ | 448                        |         |        | $ | (3,303  | )      
|                                                  |                                                  |                                 | Repayments of Federal Home Loan
bank advances                     |                                                      |   | (53,130                    | )       |        |   | (60,511 | )      
|                                                  |                                                  |                                 | Proceeds from Federal Home Loan
bank advances                     |                                                      |   | 22,014                     |         |        |   | 50,511  |        
|                                                  |                                                  |                                 | Cash dividends paid                                               |                                                      |   | (708                       | )       |        |   | (672    | )      
|                                                  |                                                  |                                 | Common stock repurchased                                          |                                                      |   | (610                       | )       |        |   | (626    | )      
|                                                  |                                                  |                                 | Options exercised, net of taxes                                   |                                                      |   | 267                        |         |        |   | 886     |        
|                                                  |                                                  |                                 | Increase in advance payments
by borrowers for taxes and insurance |                                                      |   | 234                        |         |        |   | 152     |        
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  |                                                  |                                 |                                                                   | Net cash used in
financing activities                |   |                            | (31,485 | )      |   |         | (13,563 | )
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  |                                                  |                                 |                                                                   | Net increase (decrease)
in cash and cash
equivalents |   |                            | 1,465   |        |   |         | (12,531 | )
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  | Cash and cash equivalents at beginning of
period |                                 |                                                                   | 74,672                                               |   |                            |         | 95,957 |  
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  | Cash and cash equivalents at end of period       | $                               | 76,137                                                            |                                                      |   | $                          | 83,426  |       
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |        |   |         |        
|Supplemental disclosure of cash flow
information: |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  |                                                  | Payments during the period for: |                                                                   |                                                      |   |                            |         |        |   |        
|                                                  |                                                  |                                 |                                                                   | Interest                                             |   | $                          | 10,315  |        |   | $       | 12,327  |  
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       
|                                                  |                                                  |                                 |                                                                   | Taxes                                                |   | $                          | 1,248   |        |   | $       | 42      |  
|                                                  |                                                  |                                 |                                                                   |                                                      |   |                            |         |       

See accompanying condensed notes to consolidated financial statements.

6



---



##### Table of Contents






BOSTONFED BANCORP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

The unaudited consolidated financial statements as of March 31, 2003
and for the three-month periods ended March 31, 2003 and 2002 of
BostonFed Bancorp, Inc., (BostonFed or the Company) and its
wholly-owned subsidiaries, Boston Federal Savings Bank (BFS), Broadway
National Bank (BNB), BF Funding Corp., BFD Preferred Capital Trust I
and BFD Preferred Capital Trust II presented herein, should be read in
conjunction with the audited consolidated financial statements of the
Company as of and for the year ended December 31, 2002.

The unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America
for complete financial statements. In the opinion of management, all
necessary adjustments, consisting only of normal recurring accruals
necessary for a fair presentation, have been included. In preparing the
consolidated financial statements, the Company was required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities for the consolidated statements of financial condition as of
March 31, 2003 and December 31, 2002, and amounts of revenues and
expenses in the consolidated statements of operations for the three
months ended March 31, 2003 and 2002. All significant inter-company
accounts and transactions have been eliminated in consolidation. Certain
reclassifications have been made to prior period amounts to conform to
the current period presentation. The results of operations for the
three-month periods ended March 31, 2003 and 2002 are not necessarily
indicative of the results that may be expected for the entire fiscal
year.

NOTE 2: EMPLOYEE STOCK OPTION BENEFITS

The Company measures compensation cost for stock-based compensation
plans using the intrinsic value method. Intrinsic value is measured as
the difference between the exercise price of options granted and the fair
market value of the Companys stock at the grant date. No stock-based
employee compensation cost is reflected in net income (loss), as all
options granted under those plans had an exercise price equal to the
market value of the underlying common stock on the date of grant.
Had the Company determined compensation expense consistent with the
fair value approach, the Companys net income (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts indicated
below for the three-month periods ended March 31:

|                                                                                                                                           |  |      |        |      |  |  |       |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | ---- |  |  | ----- | -
|                                                                                                                                           |  | 2003 |        | 2002
|                                                                                                                                           |  |      |        |     
|Net (loss) income as reported                                                                                                              |  | $    | (1,598 | )    |  |  | 2,022 |  
|Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effect |  |      | (24    | )    |  |  | (46   | )
|                                                                                                                                           |  |      |        |      |  |  |       |  
|Pro forma net (loss) income                                                                                                                |  |      | (1,622 | )    |  |  | 1,976 |  
|                                                                                                                                           |  |      |        |      |  |  |       |  
|Basic (loss) earnings per share as reported                                                                                                |  |      | (.36   | )    |  |  | .46   |  
|Diluted (loss) earnings per share as reported                                                                                              |  |      | (.36   | )    |  |  | .43   |  
|Pro forma basic (loss) earnings per share                                                                                                  |  |      | (.37   | )    |  |  | .45   |  
|Pro forma diluted (loss) earnings per share                                                                                                |  |      | (.37   | )    |  |  | .42   |  

7



---



##### Table of Contents



The Company uses the Black-Scholes option pricing model to determine
the per share weighted average fair value of stock options granted.
There were no stock options granted during the three-month periods ended
March 31, 2003 and 2002.

NOTE 3: COMMITMENTS, CONTINGENCIES AND CONTRACTS

At
March 31, 2003, the Company had commitments of $167.8 million to
originate mortgage loans and $3.8 million to purchase loans from
correspondent lenders. Of these $171.6 million commitments,
$120.6 million were adjustable rate mortgage loans with interest rates ranging
from 3.75% to 9.38% and $51.0 million were fixed rate mortgage loans with
interest rates ranging from 4.50% to 8.63%. The Company also had
commitments to sell $96.8 million of mortgage loans.

At March 31, 2003, the Company was servicing first mortgage loans of
approximately $1.09 billion, which are either partially or wholly-owned
by others.

NOTE 4: LEGAL SETTLEMENTS

During the quarter ended March 31, 2002, the Company settled a
lawsuit, which had been filed against its subsidiary, Broadway National
Bank. The Company incurred a cost of approximately $325,000, net of tax,
to settle the lawsuit, resulting in a reduction in earnings per share of
approximately $.07 during the first quarter of 2002.

NOTE 5: BUSINESS SEGMENTS

The Companys wholly-owned bank subsidiaries, BFS and BNB
(collectively the Banks), have been identified as reportable operating
segments in accordance with the provisions of SFAS No. 131, Disclosures
About Segments of an Enterprise and Related Information. BF Funding
Corp., BFD Preferred Capital Trust I and BFD Preferred Capital Trust II,
wholly-owned subsidiaries of the Company, and various subsidiaries of the
Banks did not meet the quantitative thresholds for determining reportable
segments. The Banks provide general banking services to their customers,
including deposit accounts, residential, commercial, consumer and
business loans. Each Bank also invests in mortgage-backed securities and
other financial instruments. In addition to its own operations, the
Company provides managerial expertise and other professional services to
its various subsidiaries. The results of the Company, BF Funding Corp.,
BFD Preferred Capital Trust I and BFD Preferred Capital Trust II comprise
the other category.

The Company evaluates performance and allocates resources based on
the Banks net income, net interest margin, return on average assets and
return on average equity. The Banks follow generally accepted accounting
principles as described in the summary of significant accounting
policies. The Company and Banks have inter-company expense and tax
allocation agreements. These inter-company expenditures are allocated at
cost. Asset sales between the Banks were accounted for at current
market prices at the time of sale and approximated cost.

Each Bank is managed separately. BNB is managed by a President and
CEO, who reports directly to the Companys CEO and BNBs Board of
Directors. BFS is managed by a CEO, who is also the Companys CEO, and
reports directly to BFS and the Companys Board of Directors.

The following table sets forth certain information about and the
reconciliation of reported net income for each of the reportable
segments.

8



---



##### Table of Contents



|                                                 |                           |  |       |           |     |  |                        |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |       |           |  
|------------------------------------------------ | ------------------------- |  | ----- | --------- | --- |  | ---------------------- | ------- | ----- |  | ------------ | --------- | ------ |  | ---- | ------- | - |  | ---- | -------- | ------------ |  | ----- | --------- | -
|                                                 |                           |  |       |           |     |  | (Dollars in thousands) |         |       |  |              |           |        |  |     
|                                                 |                           |  |       |           |     |  |                        |         |       |  | Total        |           |        |  |      |         |   |  |      |          |              |  |      
|                                                 |                           |  |       |           |     |  |                        |         |       |  | Reportable   |           |        |  |      |         |   |  |      |          | Consolidated
|                                                 |                           |  | BFS   |           | BNB |  | Segments               |         | Other |  | Eliminations |           | Totals
|                                                 |                           |  |       |           |     |  |                        |         |       |  |              |           |       
|At or for the three months
ended March 31, 2003: |                           |  |       |           |     |  |                        |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |       |          
|                                                 | Interest income           |  | $     | 17,498    |     |  |                        | 1,676   |       |  |              | 19,174    |        |  |      | 1,035   |   |  |      | (955     | )            |  |       | 19,254    |  
|                                                 | Interest expense          |  |       | 9,197     |     |  |                        | 372     |       |  |              | 9,569     |        |  |      | 1,788   |   |  |      | (955     | )            |  |       | 10,402    |  
|                                                 | Provision for loan losses |  |       | 450       |     |  |                        | 0       |       |  |              | 450       |        |  |      |         |   |  |      |          |              |  |       | 450       |  
|                                                 | Non-interest income       |  |       | 3,459     |     |  |                        | 398     |       |  |              | 3,857     |        |  |      |         |   |  |      |          |              |  |       | 3,857     |  
|                                                 | Non-interest expense      |  |       | 8,549     |     |  |                        | 1,165   |       |  |              | 9,714     |        |  |      | 217     |   |  |      |          |              |  |       | 9,931     |  
|                                                 | Income tax expense        |  |       | 3,691     |     |  |                        | 562     |       |  |              | 4,253     |        |  |      | (327    | ) |  |      |          |              |  |       | 3,926     |  
|                                                 | Net income (loss)         |  |       | (930      | )   |  |                        | (25     | )     |  |              | (955      | )      |  |      | (643    | ) |  |      |          |              |  |       | (1,598    | )
|                                                 | Total assets              |  |       | 1,324,483 |     |  |                        | 171,671 |       |  |              | 1,496,154 |        |  |      | 158,043 |   |  |      | (163,431 | )            |  |       | 1,490,766 |  
|Net interest margin                              |                           |  | 2.70  | %         |     |  | 3.90                   | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 2.58  | %        
|Return on average assets                         |                           |  | (0.28 | )%        |     |  | (0.06                  | )%      |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | (0.43 | )%       
|Return on average equity                         |                           |  | (3.71 | )%        |     |  | (0.75                  | )%      |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | (6.75 | )%       
|At or for the three months
ended March 31, 2002: |                           |  |       |           |     |  |                        |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |       |          
|                                                 | Interest income           |  | $     | 19,302    |     |  |                        | 2,001   |       |  |              | 21,303    |        |  |      | 1,082   |   |  |      | (1,002   | )            |  |       | 21,383    |  
|                                                 | Interest expense          |  |       | 11,172    |     |  |                        | 499     |       |  |              | 11,671    |        |  |      | 1,788   |   |  |      | (1,002   | )            |  |       | 12,457    |  
|                                                 | Provision for loan losses |  |       | 225       |     |  |                        | 25      |       |  |              | 250       |        |  |      |         |   |  |      |          |              |  |       | 250       |  
|                                                 | Non-interest income       |  |       | 3,542     |     |  |                        | 346     |       |  |              | 3,888     |        |  |      | 240     |   |  |      |          |              |  |       | 4,128     |  
|                                                 | Non-interest expense      |  |       | 7,805     |     |  |                        | 1,722   |       |  |              | 9,527     |        |  |      | 204     |   |  |      |          |              |  |       | 9,731     |  
|                                                 | Income tax expense        |  |       | 1,245     |     |  |                        | 29      |       |  |              | 1,274     |        |  |      | (223    | ) |  |      |          |              |  |       | 1,051     |  
|                                                 | Net
income (loss)         |  |       | 2,397     |     |  |                        | 72      |       |  |              | 2,469     |        |  |      | (447    | ) |  |      |          |              |  |       | 2,022     |  
|                                                 | Total assets              |  |       | 1,290,609 |     |  |                        | 166,704 |       |  |              | 1,457,313 |        |  |      | 165,130 |   |  |      | (162,683 | )            |  |       | 1,459,760 |  
|Net interest margin                              |                           |  | 2.73  | %         |     |  | 4.21                   | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 2.66  | %        
|Return on average assets                         |                           |  | .75   | %         |     |  | .18                    | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 0.56  | %        
|Return on average equity                         |                           |  | 9.69  | %         |     |  | 2.26                   | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 8.39  | %        
|n.m. = not meaningful                            |                           |  |       |           |     |  |                        |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |       |          

NOTE 6: REAL ESTATE INVESTMENT TRUST
("REIT") RETROACTIVE TAXATION

During
the first quarter ending March 31, 2003, the Company recorded a
$3.0 million charge against the current provision for income
taxes to establish a tax accrual for a liability arising from a
retroactive change to Massachusetts law. The Governor of Massachusetts
signed legislation on March 5, 2003, which declares that the
dividends Massachusetts financial institutions receive from real
estate trust subsidiaries, or REITs, are subject to state taxation,
retroactive to 1999. The Companys two Banks, each had a REIT in
their corporate structure for each of the tax years that the new law
retoractively impacts. The charge included interest and is net of
applicable tax benefits. The Company believes the retroactive nature
of the change in tax laws is unconstitutional and is reviewing the
new legislation with its legal counsel and tax advisors to evaluate
possible courses of action. The Company will continue to accrue for
an additional potential interest on this tax liability.

NOTE 7: RECENT ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS No. 148
amends SFAS No. 123, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. Companies are able to eliminate a
ramp-up effect that the SFAS No. 123, Accounting for Stock-Based
Compensation transition rule creates in the year of adoption. Companies
can choose to elect a method that will provide for comparability amongst
years reported. In addition, this Statement amends the disclosure
requirement of Statement 123 to require prominent disclosures in both
annual and interim financial statements about the fair value based method
of accounting for stock-based employee compensation and the effect of the
method used on reported results.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities. SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, resulting in more
consistent reporting of contracts as either derivatives or hybrid
instruments. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and should be applied prospectively.
Implementation issues that have been effective for fiscal quarters that
began prior to June 15, 2003 should continue to be applied in accordance with their respective
effective dates. The Company is currently assessing the impacts of this
statement on its financial statements.

9



---



##### Table of Contents



The following table sets forth certain information relating to the
Company for the quarters ended March 31, 2003 and 2002. The average
yields and costs are derived by dividing income or expense by the average
balance of interest-earning assets or interest bearing-liabilities,
respectively, for the periods shown. The average balance data is derived
from daily balances. The yields and costs include fees, premiums and
discounts, which are considered adjustments to yields.

10



---



##### Table of Contents



|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |      |      |  
|---------------------------------------------------------------- | ------------------------------------- | ------------------------------------------ | ------- | --------- | --------- | -------- | ---------------------- | ------ | ---------------------- | ------- | ----- | -------- | ---- | ---- | ------- | --------- | --------- | ------ | ----- | ------ | ------ | ------- | ----- | ---- | ---- | -
|                                                                 |                                       |                                            |         |           |           |          |                        | 2003   |                        |         |       |          |      |      |         |           |           | 2002   |       |        |        |        
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |        
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       | Average  |      |      |         |           |           |        |       |        |        | Average
|                                                                 |                                       |                                            |         | Average   |           |          |                        |        |                        | Yield/  |       | Average  |      |      |         |           |           | Yield/
|                                                                 |                                       |                                            |         | Balance   |           | Interest |                        | Cost   |                        | Balance |       | Interest |      | Cost
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |     
|                                                                 |                                       |                                            |         |           |           |          | (Dollars in thousands) |        | (Dollars in thousands)
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                       
|For the quarter ended March 31:                                  |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |     
|Assets:                                                          |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |     
|Interest-earning assets:                                         |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |     
|                                                                 | Investment securities (1)             |                                            | $       | 163,546   |           |          | $                      | 1,138  |                        |         |       | 2.78     | %    |      | $       | 121,468   |           |        | $     | 982    |        |         |       | 3.23 | %   
|                                                                 | Loan, net and loans held for sale (2) |                                            |         | 1,083,962 |           |          |                        | 16,579 |                        |         |       | 6.12     | %    |      |         | 1,087,175 |           |        |       | 18,515 |        |         |       | 6.81 | %   
|                                                                 | Mortgage-backed securities (3)        |                                            |         | 127,126   |           |          |                        | 1,537  |                        |         |       | 4.84     | %    |      |         | 131,977   |           |        |       | 1,886  |        |         |       | 5.72 | %   
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |       
|                                                                 |                                       | Total interest-earning assets              |         |           | 1,374,634 |          |                        |        | 19,254                 |         |       |          | 5.60 | %    |         |           | 1,340,620 |        |       |        | 21,383 |         |       |      | 6.38 | %
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |         
|Non interest-earning assets                                      |                                       |                                            | 109,339 |           |           |          |                        |        |                        |         |       |          |      |      | 111,663 |           |           |        |       |        |        |         |       |     
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |        
|                                                                 |                                       | Total assets                               |         |           | 1,483,973 |          |                        |        |                        |         |       |          |      |      |         |           | 1,452,283 |        |       |        |        |         |       |      |      |  
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |        
|Liabilities and stockholders equity:                            |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |     
|Interest-bearing liabilities:                                    |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |       |     
|                                                                 | Money market deposit accounts         |                                            |         | 62,777    |           |          |                        | 186    |                        |         |       | 1.19     | %    |      |         | 59,077    |           |        |       | 241    |        |         |       | 1.63 | %   
|                                                                 | Savings accounts                      |                                            |         | 216,271   |           |          |                        | 616    |                        |         |       | 1.14     | %    |      |         | 183,707   |           |        |       | 669    |        |         |       | 1.46 | %   
|                                                                 | Now accounts                          |                                            |         | 143,301   |           |          |                        | 95     |                        |         |       | 0.27     | %    |      |         | 134,701   |           |        |       | 109    |        |         |       | 0.32 | %   
|                                                                 | Certificate accounts                  |                                            |         | 421,002   |           |          |                        | 4,182  |                        |         |       | 3.97     | %    |      |         | 391,697   |           |        |       | 4,798  |        |         |       | 4.90 | %   
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |        
|                                                                 |                                       | Total                                      |         |           | 843,351   |          |                        |        | 5,079                  |         |       |          | 2.41 | %    |         |           | 769,182   |        |       |        | 5,817  |         |       |      | 3.03 | %
|Borrowed funds (4)                                               |                                       |                                            | 406,722 |           |           |          | 4,442                  |        |                        |         | 4.37  | %        |      |      | 439,536 |           |           |        | 5,760 |        |        |         | 5.24  | %   
|Corporation-obligated mandatorily
redeemable capital securities  |                                       |                                            | 32,000  |           |           |          | 881                    |        |                        |         | 11.01 | %        |      |      | 32,000  |           |           |        | 880   |        |        |         | 11.00 | %   
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                       
|                                                                 |                                       | Total interest-bearing liabilities         |         |           | 1,282,073 |          |                        |        | 10,402                 |         |       |          | 3.25 | %    |         |           | 1,240,718 |        |       |        | 12,457 |         |       |      | 4.02 | %
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                       
|Non interest-bearing liabilities:                                |                                       |                                            | 107,188 |           |           |          |                        |        |                        |         |       |          |      |      | 115,134 |           |           |        |       |        |        |         |       |     
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      
|                                                                 |                                       | Total liabilities                          |         |           | 1,389,261 |          |                        |        |                        |         |       |          |      |      |         |           | 1,355,852 |        |       |        |        |         |       |      |      |  
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      
|Stockholders equity                                             |                                       |                                            | 94,712  |           |           |          |                        |        |                        |         |       |          |      |      | 96,431  |           |           |        |       |        |        |         |       |     
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      
|                                                                 |                                       | Total liabilities and
stockholders equity |         | $         | 1,483,973 |          |                        |        |                        |         |       |          |      |      |         | $         | 1,452,283 |        |       |        |        |         |       |      |      |  
|
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      
|Net interest rate spread (5)                                     |                                       |                                            |         |           |           | $        | 8,852                  |        |                        |         | 2.35  | %        |      |      |         |           |           | $      | 8,926 |        |        |         | 2.36  | %   
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |       
|Net interest margin (6)                                          |                                       |                                            |         |           |           |          |                        |        |                        |         | 2.58  | %        |      |      |         |           |           |        |       |        |        |         | 2.66  | %   
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |        
|Ratio of interest-earning assets to
interest-bearing liabilities |                                       |                                            | 107.22  | %         |           |          |                        |        |                        |         |       |          |      |      | 108.05  | %         |           |        |       |        |        |         |       |     
|                                                                 |                                       |                                            |         |           |           |          |                        |        |                        |         |       |          |      |      |         |           |           |        |       |        |        |         |      

(1)  Includes investment securities available for sale and held to maturity, short term investments, stock in FHLB-Boston and daily federal funds
sold.

(2)  Amount is net of deferred loan origination costs, construction loans in process, net unearned discount on loans purchased and allowance for loan losses and includes non-performing loans.


(3)  Includes mortgage-backed securities available for sale and held to maturity.


(4)  Interest paid on borrowed funds for the periods presented includes interest expense on loan investor deposits held in escrow accounts with the
Company related to the Companys loan servicing, which, if such interest expense was excluded, would result in an average cost of borrowed
Funds of 4.36% and 5.21% for the three months ended March 31, 2003 and March 31, 2002, respectively.


(5)  Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average
cost of interest-bearing liabilities.


(6)  Net interest margin represents net interest income as a percentage of average interest assets.


11



---



##### Table of Contents






|        |  |                                                                                       
|------- |  | --------------------------------------------------------------------------------------
|Item 2. |  | MANAGEMENTSS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

A.     GENERAL

In addition to historical information, this 10-Q may contain certain
forward-looking statements, which are based on current management
expectations. Generally, verbs in the future tense and the words,
believe, expect, anticipate, intends, opinion, potential, and
similar expressions identify forward-looking statements. Examples of
this forward-looking information can be found in, but are not limited to,
the expected effects of accounting pronouncements applicable to the
Companys operations, the allowance for losses discussion, litigation,
subsequent events and any quantitative and qualitative disclosure about
market risk. The Companys actual results could differ materially from
those management expectations. Factors that could cause future results
to vary from current management expectations include, but are not limited
to, general economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, changes in tax
policies, rates and regulations of federal, state and local tax
authorities, changes in interest rates, deposit flows, the cost of funds,
demand for loan products, demand for financial services, competition,
changes in the quality or composition of the Companys loan and
investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and
technological factors and the effects of war or terrorist activities
affecting the Companys operations, markets, products, services, prices
and litigation. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be
placed on such statements. Further information concerning the Company
and its business, including additional factors that could materially
affect the Companys financial results, is included in the Companys
filings with the Securities and Exchange Commission.

Except as may be required by applicable law and regulation, 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.

The Company, headquartered in Burlington, Massachusetts, was
organized in 1995 under Delaware law as the holding company for BFS, in
connection with the conversion of BFS from a mutual to a stock form of
ownership. The Company later acquired BNB, a nationally-chartered
commercial bank, as its wholly-owned subsidiary in February 1997. In
December 1999, the Company acquired Diversified Ventures, Inc., d/b/a
Forward Financial Company (Forward Financial) and Ellsmere Insurance
Agency, Inc., (Ellsmere). Forward Financial operates as a subsidiary
of BFS and Ellsmere has limited operations as a subsidiary of BNB.

The Companys business has been conducted primarily through its
wholly-owned subsidiaries of BFS and BNB (collectively, the Banks).
BFS operates its administrative/bank branch office located in Burlington,
Massachusetts and its eight other bank branch offices located in
Arlington, Bedford, Billerica, Boston, Lexington, Peabody, Wellesley and
Woburn, all of which are located in the greater Boston metropolitan area.
BFS subsidiary, Forward Financial, maintains its headquarters in
Northborough, Massachusetts and operates in approximately one-half the
states of the nation. BNB operates two banking offices in Chelsea and
Revere, both of which are also in the greater Boston metropolitan area.
Through its subsidiaries, the Company attracts retail deposits from the
general public and invests those deposits and other borrowed funds in
loans, mortgage-backed securities, U.S. Government and federal agency
securities and other securities. The Company originates mortgage loans
for its investment portfolio and for sale and generally retains the
servicing rights of loans it sells. Additionally, the Company originates
chattel mortgage loans, substantially all of which are sold in the
secondary market, servicing released. Loan sales are made from loans
held in the Companys portfolio designated as being held for sale or
originated for sale during the period. The Companys revenues are
derived principally from interest on its loans, and to a lesser extent,
interest and dividends on its investment and mortgage-backed securities,
gains on sale of loans and service fees. The Companys primary sources
of funds are deposits, principal and interest payments on loans and

12



---



##### Table of Contents



mortgage-backed securities, interest, maturities or sales of investments,
Federal Home Loan Bank of Boston (FHLB) advances and proceeds from the
sale of loans.

The Companys results of operations are primarily dependent on net
interest income, which is the difference between the income earned on its
loan and investment portfolios and its cost of funds, consisting of the
interest paid on deposits, borrowings and corporation obligated
mandatorily redeemable capital securities distributions, (trust
preferred securities) expense. Results of operations are also affected
by the Companys provision for loan losses, investment activities, gains
or losses on sale of loans, fees and amortization or adjustments to
originated mortgage servicing rights. The Companys non-interest expense
principally consists of compensation and benefits, occupancy and
equipment expense, advertising, data processing expense, and other
expenses. Results of operations of the Company are also significantly
affected by general economic and competitive conditions, particularly
changes in interest rates, government policies and actions of regulatory
authorities.

Each of the Banks is considered a business segment and accordingly,
the Company has complied with the segment reporting requirement in Note 5
of this document and in discussion herein as appropriate. As a result of
the acquisition of BNB, the Company became a bank holding company subject
to regulation by the Federal Reserve Bank (FRB). BFS is regulated by
the Office of Thrift Supervision (OTS) and BNB is regulated by the
Office of the Comptroller of the Currency (OCC).

Critical Accounting Policies

The Companys critical accounting policies were detailed in the
Companys Annual Report for the year ended December 31, 2002, in the
Managements Discussion and Analysis of Financial Condition and Results
of Operations and in Note 1 of the Consolidated Financial Statements.
Various elements of the Companys accounting policies, by their nature,
are inherently subject to estimation techniques, valuation assumptions
and other subjective assessments. The Companys policies with respect to
the methodologies used to determine the allowance for loan losses and
asset impairment judgments, including the valuation of Originated
Mortgage Servicing Rights (OMSRs) and the value of goodwill, are the
Companys most critical accounting policies because they are important to
the presentation of the financial condition and results of operations of
the Company and they involve a higher degree of complexity and require
management to make difficult and subjective judgments, which often
require assumption or estimates about highly uncertain matters. The use
of different judgments, assumptions and estimates could result in
material differences in the results of operations or financial condition.
The critical accounting policies and their application are reviewed
quarterly by the Audit and Compliance Committee of the Board of
Directors.

13



---



##### Table of Contents



B. FINANCIAL CONDITION

Assets

Total assets at March 31, 2003 were $1.491 billion, compared to
$1.526 billion at December 31, 2002, a decrease of $34.8 million. The
decline in assets was primarily attributable to loan sales, amortization
and prepayments of loans exceeding loan closings during the quarter
ending March 31, 2003. Loans, net declined to $1.038 billion at March
31, 2003, from $1.071 billion at December 31, 2002. Also, loans held for
sale declined to $22.9 million at March 31, 2003, from $31.6 million at
December 31, 2002 as the Company has earmarked a higher percentage of
loan originations to replenish the loan portfolio, rather than for sale
in the secondary market. Increases in investment securities available
for sale and mortgage-backed securities available for sale, offset
decreases in loans held for sale. Investment securities available for
sale increased to $118.5 million at March 31, 2003, from $112.9 million
at December 31, 2002. Most of the $5.6 million increase was attributable
to investment in various corporate bonds. Mortgage-backed securities
available for sale increased to a balance of $118.7 million at March 31,
2003, from $114.5 million at December 31, 2002, as a result of increased
investments in collateralized mortgage-backed securities (CMOs).

The Companys loan portfolio was comprised of the following at:

|                                        |                             |                    |         |              |           |          |         |         |           | 
|--------------------------------------- | --------------------------- | ------------------ | ------- | ------------ | --------- | -------- | ------- | ------- | --------- | 
|                                        |                             |                    |         | In thousands
|                                        |                             |                    |         | (Unaudited) 
|                                        |                             |                    |         | 3/31/03      |           | 12/31/02
|                                        |                             |                    |         |              |           |         
|Mortgage loans:                         |                             |                    |         |              |           |          |         |        
|                                        | Residential
1-4 family      |                    | $       | 648,781      |           |          |         | 684,277 |          
|                                        | Multi-family                |                    |         | 23,671       |           |          |         | 25,290  |          
|                                        | Construction and land       |                    |         | 133,508      |           |          |         | 129,469 |          
|                                        | Commercial real estate      |                    |         | 137,854      |           |          |         | 134,169 |          
|                                        |                             |                    |         |              |           |          |         |        
|                                        |                             |                    | 943,814 |              |           |          | 973,205 |        
|                                        |                             |                    |         |              |           |          |         |        
|Consumer and other loans:               |                             |                    |         |              |           |          |         |        
|                                        | Home equity and improvement |                    |         | 99,706       |           |          |         | 94,855  |          
|                                        | Secured by deposits         |                    |         | 469          |           |          |         | 466     |          
|                                        | Consumer                    |                    |         | 4,354        |           |          |         | 3,768   |          
|                                        | Business                    |                    |         | 32,666       |           |          |         | 32,792  |          
|                                        |                             |                    |         |              |           |          |         |        
|                                        |                             |                    | 137,195 |              |           |          | 131,881 |        
|                                        |                             |                    |         |              |           |          |         |        
|                                        |                             | Total loans, gross |         |              | 1,081,009 |          |         |         | 1,105,086 | 
|                                        |                             |                    |         |              |           |          |         |        
|Allowance for loan losses               |                             |                    | (13,032 | )            |           |          | (12,656 | )      
|Construction loans in process           |                             |                    | (33,766 | )            |           |          | (24,832 | )      
|Net unearned premium on loans purchased |                             |                    | 34      |              |           |          | 36      |        
|Deferred
loan origination costs, net    |                             |                    | 3,640   |              |           |          | 3,722   |        
|                                        |                             |                    |         |              |           |          |         |        
|                                        |                             | Loans,net          |         | $            | 1,037,885 |          |         |         | 1,071,356 | 
|                                        |                             |                    |         |              |           |          |         |        

14



---



##### Table of Contents



As noted in the above table, the allowance for loan losses amounted
to $13.0 million at March 31, 2003. Management believes the allowance is
adequate to absorb probable loan losses. The allowance for loan losses
increased from $12.7 million at December 31, 2002 due to the year-to-date
provision, net of charge-offs/recoveries. The Company believes that the
allowance for loan losses is at a reasonable level based on its
evaluation of information currently available. The Company maintains an
allowance for losses that are inherent in the Companys loan portfolio.
The allowance for loan losses is established through a provision for loan
losses charged to operations. Loan losses are charged against the
allowance when management determines that the collectibility of the loan
principal is unlikely. Recoveries on loans previously charged off are
credited to the allowance. The following is a summary of activity in the
allowance for loan losses during the three months ended March 31, 2003:

|                             |                |   |              |      |  
|---------------------------- | -------------- | - | ------------ | ---- | -
|                             |                |   | In thousands
|Balance at December 31, 2002 |                | $ | 12,656       |     
|                             | Loss provision |   |              | 450  |  
|                             | Recoveries     |   |              | 31   |  
|                             | Charge-offs    |   |              | (105 | )
|                             |                |   |              |     
|Balance at March 31, 2003    |                | $ | 13,032       |     
|                             |                |   |              |     

15



---



##### Table of Contents



Managements methodology to estimate loss exposure inherent in the
portfolio includes an analysis of individual loans deemed to be impaired,
reserve allocations for various loan types based on payment status or
loss experience and an unallocated allowance that is maintained based on
managements assessment of many factors including trends in loan
delinquencies and charge-offs, current economic conditions and their
effect on borrowers ability to pay, underwriting standards by loan type,
mix and balance of the portfolio, and the performance of individual loans
in relation to contract terms. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the
Companys allowance based on their judgments about information available
to them at the time of their examination. While management uses
information currently available to estimate inherent losses on its loans,
future additions to the allowance may be necessary based on regulatory
directives or future events, including changes in local, regional and
national economic conditions, changes in local, regional and national
real estate market and changes in market interest rates. Accordingly,
the ultimate collectibility of a substantial portion of the Companys
loan portfolio is affected by such changes.

As part of the Companys determination of the adequacy of the
allowance for loan losses, the Company monitors its loan portfolio
through its management Asset Classification Committee. The Committee
classifies loans depending on risk of loss characteristics. The most
severe classification before a charge-off is required is sub-standard.
At March 31, 2003, the Company classified $20.6 million of loans ($19.8
million at BFS and $754,000 at BNB) as sub-standard compared to $16.9
million ($16.0 million of BFS and $839,000 of BNB) at December 31, 2002.
The vast majority of the increase in sub-standard loans was due to a
business loan relationship becoming sub-standard. Non-performing assets
at March 31, 2003, totaled $6.0 million or .40% of total assets, compared
to $6.5 million, or .43% of total assets, at December 31, 2002. The
Asset Classification Committee, which meets quarterly, determines the
adequacy of the allowance for loan losses through ongoing analysis of
historical loss experience, the composition of the loan portfolios,
delinquency levels, underlying collateral values, cash flow values and
state of the real estate economy. Utilizing these procedures, management
believes that the allowance for loan losses at March 31, 2003 was
sufficient to provide for anticipated losses inherent in the loan
portfolio.

The Companys $13.0 million allowance for loan losses at March 31,
2003 represented 265% of non-performing loans or 1.21% of total loans,
compared to $12.7 million at December 31, 2002, or 230% of non-performing
loans and 1.13% of total loans. Management believes this coverage ratio
is prudent due to the increase in classified loans and the increase in
the combined balance of construction and land, commercial real estate,
multi-family, home equity and improvement, consumer and business loans.
These combined total balances increased from approximately $420.3 million
at December 31, 2002 to approximately $431.8 million at March 31, 2003.

Non-performing loans were $4.9 million at March 31, 2003. The
amount of interest income on non-performing loans that would have been
recorded had these loans been current in accordance with their original
terms, was $129,000 and $145,000 for the three-month periods ended March
31, 2003 and 2002, respectively. The amount of interest income that was
recorded on these loans was $21,000 and $1,000 for the three-month
periods ended March 31, 2003 and 2002, respectively.

At March 31, 2003, there were seven loans with a total balance of
$7.5 million, characterized as impaired. During the three months ended
March 31, 2003, the average recorded value of impaired loans was $6.41
million, $29,000 interest income was recognized and $123,000 of interest
income would have been recognized under the loans original terms during
the three months ended March 31, 2003.

16



---



##### Table of Contents



Liabilities

Deposit accounts were essentially unchanged during the quarter ended
March 31, 2003, ending the quarter with a balance of $960.7 million,
compared to $960.3 million at December 31, 2002. The Company has not
been as aggressive as some of its competition for deposits due to margin
pressures and excessive, low yielding liquid assets.

The following is a summary of deposit balances by type at:

|                                           |                      |                                |                            |         |              |         |          |         |         |         | 
|------------------------------------------ | -------------------- | ------------------------------ | -------------------------- | ------- | ------------ | ------- | -------- | ------- | ------- | ------- | 
|                                           |                      |                                |                            |         | In thousands
|                                           |                      |                                |                            |         |             
|                                           |                      |                                |                            |         | 03/31/03     |         | 12/31/02
|                                           |                      |                                |                            |         |              |         |         
|                                           |                      |                                |                            |         | (Unaudited) 
|NOW accounts                               |                      |                                | 148,691                    |         |              |         | 150,342  |        
|Regular and statement savings              |                      |                                | 221,199                    |         |              |         | 218,133  |        
|Money market                               |                      |                                | 63,896                     |         |              |         | 62,530   |        
|Demand deposits and official checks        |                      |                                | 107,420                    |         |              |         | 107,154  |        
|                                           |                      |                                |                            |         |              |         |          |        
|                                           |                      | Total non-certificate accounts |                            |         | 541,206      |         |          |         | 538,159 |        
|                                           |                      |                                |                            |         |              |         |          |        
|Certificate accounts:                      |                      |                                |                            |         |              |         |          |        
|                                           | 3 to 6 months        |                                |                            | 47,524  |              |         |          | 52,164  |        
|                                           | 1 to 3 years         |                                |                            | 248,127 |              |         |          | 246,636 |        
|                                           | Greater than 3 years |                                |                            | 76,303  |              |         |          | 75,987  |        
|                                           | IRA/KEOGH            |                                |                            | 47,566  |              |         |          | 47,332  |        
|                                           |                      |                                |                            |         |              |         |          |        
|                                           |                      |                                | Total certificate accounts |         |              | 419,520 |          |         |         | 422,119 | 
|                                           |                      |                                |                            |         |              |         |          |        
|                                           |                      |                                | 960,726                    |         |              |         | 960,278  |        
|                                           |                      |                                |                            |         |              |         |          |        
|Expected maturity of certificate accounts: |                      |                                |                            |         |              |         |          |        
|                                           | Within one year      |                                |                            | 251,007 |              |         |          | 227,898 |        
|                                           | One to two years     |                                |                            | 74,671  |              |         |          | 99,230  |        
|                                           | Two to three years   |                                |                            | 45,095  |              |         |          | 53,250  |        
|                                           | Over three years     |                                |                            | 48,747  |              |         |          | 41,741  |        
|                                           |                      |                                |                            |         |              |         |          |        
|                                           |                      |                                | 419,520                    |         |              |         | 422,119  |        
|                                           |                      |                                |                            |         |              |         |          |        

Federal Home Loan Bank (FHLB) advances and other borrowings
declined $31.1 million, to a balance of $395.4 million at March 31, 2003,
from $426.6 million at December 31, 2002, as the net proceeds from loan
sales and the reduction in loans, net, were used to repay maturing
advances.

C.     COMPARISON OF THREE MONTHS ENDED MARCH 31, 2003 AND 2002

GENERAL

During the quarter ended March 31, 2003, the Company recorded a net
loss of $1.6 million, or $.36 basic and diluted loss per share, compared
to net income of $2.0 million, or $.46 basic and $.43 diluted earnings
per share for the first quarter of 2002. The primary reason for the
current quarters loss was due to the recording of a provision of
approximately $4.6 million for additional state taxes, including interest
(approximately $3.0 million, net after tax deductions associated with
such taxes and interest), relating to the deduction for dividends
received from real estate investment trust (REIT) subsidiaries, for the
1999 through 2002 fiscal years. As was previously disclosed, the
Governor of Massachusetts signed a new law on March 5, 2003, which
effectively eliminates the dividend-received deduction applicable to REIT
dividends, retroactive

17



---



##### Table of Contents



to the tax years beginning in 1999. The Company
(as well as many other institutions affected by the change in the law) is evaluating whether to challenge the
constitutionality of the retroactive aspects of the new legislation.
Generally accepted accounting principles require the Company to record
the expense resulting from the change in law and to continue to accrue
for any additional potential interest on this tax liability. The current
quarters earnings also include the higher tax burden from the change in
the tax law. Additionally, the Company incurred a $1.1 million
impairment charge related to its OMSRs, due primarily to a record volume
of mortgage loan prepayments. Earnings for the quarter ended March 31,
2002, were impacted by the settling of a legal dispute at BNB. For the
three months ended March 31, 2003 and 2002, the annualized return on
average stockholders equity was (6.75)% and 8.39%, respectively.
Comments regarding the components of net income are detailed in the
following paragraphs.

Interest Income

Total interest income on interest-earning assets for the quarter
ended March 31, 2003 declined by $2.1 million, or 9.8%, to $19.3 million,
compared to the quarter ended March 31, 2002. The decrease in interest
income was due to a 78 basis point decline in the average yield on
interest earning assets, partially offset by the earnings on the $34.0
million increase in average interest-earning assets. The average yield
on interest-earning assets declined to 5.60% for the three months ended
March 31, 2003 from 6.38% for the three months ended March 31, 2002. The
reduced yields are due in part to the repricing of a portion of the
Companys adjustable-rate portfolio, based on much lower indexes
resulting from the Federal Reserve induced decline in market interest
rates during the past two years. Additionally, the proceeds received
from the record levels of loan prepayments and matured investment
securities have been re-invested at much lower interest rates due to the
decline in market interest rates.

Interest income on loans, net, for the quarter ended March 31, 2003
declined by $1.9 million, or 10.3%, to $16.6 million compared to $18.5
million for the comparable quarter in 2002. The decrease in interest
income from loans, net, for the current three-month period was due to the
69 basis point decline in the average yield and a slight reduction in the
average balance of loans, net. The average yield on loans, net for the
three months ended March 31, 2003 was 6.12%, compared to an average yield
of 6.81% for the three months ended March 31, 2002. Many adjustable-rate
loans continue to reprice lower as the major repricing indexes remain at
historic lows. The Company has continued investing in interest sensitive
loans such as equity lines, commercial and construction, business and
other short-term indexed loans and selling essentially all fixed-rate
longer term loans into the secondary market in order to better protect
against rising interest rates.

Interest on mortgage-backed securities for the quarter ended March
31, 2003 was $1.5 million, compared to $1.9 million for the quarter ended
March 31, 2002. The decline was primarily due to an 88 basis point
decrease in the average yield and a $4.9 million reduction in average
balances. The average yield declined from 5.72% for the three months
ended March 31, 2002, to 4.84% for the current three-month period. The
reduction in yield is a reflection of the low interest rate environment
that currently exists. The average balance of mortgage-backed securities
declined from $132.0 million for the quarter ended March 31, 2002 to an
average of $127.1 million during the current quarter.

Income from investment securities was $1.1 million for the three
months ended March 31, 2003, compared to $982,000 for the prior year
quarter. The average balance of investment securities increased to
$163.5 million for the three months ended March 31, 2003, compared to
$121.5 million for the prior year quarter. While the average balance was
substantially higher in the current quarter, income did not increase to
the same extent due to a reduction in the average yield, which declined
from 3.23% for the three months ended March 31, 2002, to 2.78% for the
current quarter. The reduction in yield on investment securities is also
reflective of the declines in market interest rates; including the
historically low rates being paid on federal funds and Federal Home Loan
Bank overnight deposits. Because the Companys investment securities are
generally of a shorter-term nature, the decline in market interest rates
has had a significant impact on the overall yield of investment
securities.

18



---



##### Table of Contents



Interest Expense

Total interest expense on interest-bearing liabilities for the
quarter ended March 31, 2003 declined by $2.1 million, or 16.8%, to $10.4
million compared to $12.5 million for the quarter ended March 31, 2002.
The decrease in interest expense for the current quarter was primarily
due to a 77 basis point reduction in the average cost of interest bearing
liabilities, offset somewhat by the interest cost applicable to a $41.4
million increase in the average balance of interest-bearing liabilities,
which averaged $1.282 billion during the current quarter, compared to an
average balance of $1.241 billion during the quarter ended March 31,
2002. The average cost of interest-bearing liabilities declined to 3.25%
during the quarter ended March 31, 2003, compared to 4.02% for last
years comparable quarter. The Companys cost of interest bearing
liabilities has declined slower than overall market interest rates as
competitive market conditions, the already low interest rates being paid
on deposits and longer term FHLB advances have precluded more rapid
declines in the interest paid on these interest-bearing liabilities.

Interest expense on deposit accounts was $5.1 million for the
quarter ended March 31, 2003, a decrease of $738,000 from the $5.8
million for the quarter ended March 31, 2002. Interest expense on
deposit accounts declined due to a 62 basis point decrease in the average
cost of deposits. For the three months ended March 31, 2003, the average
cost of deposits was 2.41%, compared to 3.03% for the three months ended
March 31, 2002. Average balances of deposit accounts of $843.4 million
for the current quarter, were $74.2 million higher than the average of
$769.2 for the quarter ended March 31, 2002.

Interest expense on borrowed funds was $4.4 million for the three
months ended March 31, 2003, compared to $5.8 million for the three
months ended March 31, 2002. Borrowed funds declined to an average of
$406.7 million during the current quarter from an average of $439.5
million for the prior year quarter. The average cost of borrowed funds
declined to 4.37% for the three months ended March 31, 2003, a decline of
87 basis points, compared to the 5.24% cost of borrowed funds for the
three months ended March 31, 2002. These declines were the result of a
continuation of a lower interest rate environment.

Net Interest Income

Net interest income for the three months ended March 31, 2003 was
$8.9 million essentially the same net interest income for the three
months ended March 31, 2002. The effect of a decrease in the net
interest margin, which declined from 2.66% for the three months ended
March 31, 2002, to 2.58% in the current quarter, was offset by an
increase in average interest earning assets during the current quarter.
The Company has experienced net interest margin pressure due to increases
in classified loans, non-performing loans and the effects of declining
asset yields. Asset yields have declined more rapidly than liability
costs due to the already low interest rates being paid on core deposits
and the slower repricing of longer term certificates of deposit and FHLB
advances. The Company cannot predict when interest rates will rise or
fall and whether such changes will result in higher net interest margins.

Provision for Loan Losses

The provision for loan losses was $450,000 for the quarter ended
March 31, 2003, compared to $250,000 for the comparable period last year.
The increase in the provision was primarily due to the increased level
of non-performing loans and the higher balances invested in commercial
real estate loans, business loans and other higher yielding/higher risk
loans. See Item 2, Section B. FINANCIAL CONDITION for further discussion
on the Companys methodology for providing for loan losses.

Non-Interest Income

Total non-interest income declined to $3.9 million for the quarter
ended March 31, 2003, compared to $4.1 million for the quarter ended
March 31, 2002, due primarily to lower loan processing and servicing fees
resulting from higher levels of amortization and impairment of OMSRs.
Loan processing and servicing fees were a negative $858,000 for the
quarter ended March 31, 2003, compared to a negative $311,000 for the
quarter ended March 31, 2002. The

19



---



##### Table of Contents



primary reason for the decrease was
due to an OMSR impairment charge of $1.1 million during
the quarter ended March 31, 2003, compared to an impairment charge
of $590,000 for the prior year quarter. Both quarters impairment
charges were permanent as they apply to more rapid prepayments than
expected. Further declines in market interest rates, which affect loan
prepayments and prepayment speeds, could result in future impairment
charges. Gain on sale of loans amounted to $3.2 million for the quarter
ended March 31, 2003, compared to $2.9 million for the quarter ended
March 31, 2002. The increased gain on sale of loans resulted from a
continuation of high volumes of one- to four-family mortgage loan sales,
made possible by the volume of lending activity, including fixed-rate
one- to four-family mortgages, which are generally sold, servicing
retained, in the current low interest rate environment. Included in the
above gain on sale of loans were gains on sale of manufactured housing
loans, which amounted to $804,000 for the quarter ended March 31, 2003,
compared to $1.1 million for the quarter ended March 31, 2002, resulting
from reduced activity in the manufactured housing market. Deposit
service fees increased from $637,000 in the quarter ended March 31, 2002,
to $856,000 in the current quarter. The increase was primarily due to
increases in fees and higher levels of deposit account services activity.

Non-Interest Expense

Non-interest expense for the three months ended March 31, 2003 was
$9.9 million, higher than the $9.7 million for the three months ended
March 31, 2002, which also included a $500,000 legal settlement.
Compensation and benefits increased to $6.1 million for the current
quarter, compared to $5.8 million for the quarter ended March 31, 2002.
The primary reasons for the increase are normal year-over-year employee
expense increases, higher than usual expenses incurred for loan
originations support and the Companys accrual of approximately $258,000
for its defined benefit pension plan (the plan) during the current
quarter. The Company had not been required to make contributions to this
plan for over a decade as the plan was in an over-funded status, but is
now required to fund the plan for the fiscal year beginning July 1, 2002.
Other non-interest expense increased to $1.7 million, compared to last
years $1.5 million first quarter expense, due in part to higher outside
service fees.

Income Tax Expense

Income tax expense for the quarter ended March 31, 2003, was $3.9
million. However, the net effect of the REIT tax issue was an increase
in tax expense of approximately $3.0 million. The remaining tax of
approximately $886,000 results in an effective tax rate of 38.1% compared
to $1.1 million for an effective tax rate of 34.2% for the quarter ended
March 31, 2002. The current quarters effective tax rate is higher due
to the elimination of the dividends received deduction applicable to the
REIT dividends.

D.     LIQUIDITY AND CAPITAL RESOURCES

The primary source of cash flow for the Company is dividend payments
from BFS and BNB, sales and maturities of investment securities and, to a
lesser extent, earnings on deposits held by the Company. Dividend
payments have primarily been used to fund stock repurchase programs, pay
dividends to stockholders, interest on trust-preferred securities and
other operating expenses of the Company. The ability of BFS and BNB to
pay dividends and other capital distributions to the Company is generally
limited by OTS and OCC regulations, respectively. Additionally, the OTS
and OCC may prohibit the payment of dividends that are otherwise
permissible by regulation for safety and soundness reasons. As of March
31, 2003, BFS and BNB had $8.8 million of dividends that could be paid to
the Company without regulatory approval. Any dividend by BFS or BNB
beyond its current year net income combined with retained net income of
the preceding two years would require notification to or approval of the
OTS or the OCC. To the extent BFS or BNB were to apply for a dividend
distribution to the Company in excess of the regulatory permitted
dividend amounts, no assurances can be made such application would be
approved by the regulatory authorities. Additionally, the Company had
$6.5 million of securities available for sale and $6.3 million cash or
cash equivalents at March 31, 2003.

The Banks primary sources of funds are deposits, (including
brokered deposits), principal and interest payments on loans, sales of
loans, sales or maturities of investments, mortgage-

20



---



##### Table of Contents



backed and related
securities and borrowing from the FHLB. While maturities and scheduled
amortization of loans are predictable sources of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition. Management has maintained adequate
liquidity so that it may invest any excess liquidity in higher yielding
interest-earning assets or use such funds to repay higher cost FHLB
advances. Neither the OTS nor the OCC provide specific guidance for
liquidity ratios for BFS and BNB, respectively, but do require the Banks
to maintain reasonable and prudent liquidity levels. Management believes
such levels are being maintained.



| |                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys and Banks most liquid assets are cash, overnight
federal funds sold, and loans and investments available for sale. The
levels of these assets are dependent on the Companys operating,
financing, lending and investing activities during any given period.

Liquid assets for the periods indicated, consisted of the following:

|                                              |  |                |         |          |  |   |         | 
|--------------------------------------------- |  | -------------- | ------- | -------- |  | - | ------- | 
|                                              |  | 03/13/03       |         | 12/31/02
|                                              |  |                |         |         
|                                              |  | (In Thousands)
|Cash and cash equivalents                     |  | $              | 76,137  |          |  | $ | 74,672  | 
|Investment securities available for sale      |  |                | 118,526 |          |  |   | 112,888 | 
|Mortgage-backed securities available for sale |  |                | 118,711 |          |  |   | 114,515 | 
|Loans held for sale                           |  |                | 22,901  |          |  |   | 31,614  | 
|                                              |  |                |         |          |  |   |         | 
|Total liquid assets                           |  | $              | 336,275 |          |  | $ | 333,689 | 
|                                              |  |                |         |          |  |   |         | 

These amounts represent 22.6% and 21.9% of the Companys total
assets at March 31, 2003 and December 31, 2002, respectively.

The Banks have other sources of liquidity if a need for additional
funds arises, including FHLB advances, wholesale-brokered deposits and
repurchase agreements (collateralized borrowings). At March 31, 2003,
the Banks had $395.4 million in advances outstanding from the FHLB and
had, with existing collateral, an additional $126.6 million in overall
borrowing capacity from the FHLB. Borrowing capacity can also be further
increased upon delivery of mortgage notes on non-owner occupied 1-4
family loans, multi-family and commercial loans. The Banks generally do
not pay the highest deposit rates in their market and accordingly utilize
alternative sources of funds such as FHLB advances and wholesale-brokered
deposits to supplement cash flow needs.

At March 31, 2003, the Banks had commitments to originate loans and
unused outstanding lines of credit totaling $369.5 million. The Banks
anticipate that they will have sufficient funds available to meet their
current loan origination commitments. Certificate accounts, which are
scheduled to mature in less than one year from March 31, 2003, totaled
$251.0 million.

At March 31, 2003, the consolidated stockholders equity to total
assets ratio was 6.0%. As of March 31, 2003, the Company, BFS and BNB
exceeded all of their regulatory capital requirements. The Companys
consolidated total risk-based capital, tier 1 risk-based capital and tier
1 leverage capital ratios were 12.7%, 11.2% and 7.4%, respectively.
BFSs tier 1 (core) capital, total risk-based, capital, tier 1 risk-based
and tangible equity capital ratios were 6.7%, 11.2%, 10.0% and 6.7%,
respectively. BNBs risk-based total capital, risk-based tier 1 capital
and leverage capital ratios were 13.1%, 11.9% and 5.9%, respectively.




Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

One of the principal market risks affecting the Company is interest
rate risk. The objective of the Companys interest rate risk management
function is to evaluate the interest rate risk included in certain
balance sheet accounts, determine the level of risk appropriate given the
Companys business strategy, operating environment, capital and liquidity
requirements and performance objectives, and manage the risk consistent
with Board of Directors approved guidelines. Through such management,
the Company seeks to reduce the vulnerability of its

21



---



##### Table of Contents



operations to
changes in interest rates. The Company monitors its interest rate risk
as such risk relates to its operating strategies. The Companys Board of Directors
has established a management Asset/Liability Committee that is
responsible for reviewing the Companys asset/liability policies and
interest rate risk position. The Committee reports trends and interest
rate risk position to the Board of Directors on a quarterly basis. The
extent of the movement of interest rates is an uncertainty that could
have a negative impact on the earnings of the Company.

The Company has utilized the following strategies to manage interest
rate risk: (1) emphasizing the origination and retention of
adjustable-rate, one- to four-family mortgage loans; (2) generally
selling in the secondary market substantially all fixed-rate mortgage
loans originated with terms greater than 15 years while generally
retaining the servicing rights thereof; (3) primarily investing in
investment securities or mortgage-backed securities with adjustable
interest rates; and (4) attempting to reduce the overall interest rate
sensitivity of liabilities by emphasizing longer-term deposits and
utilizing longer-term FHLB advances to reduce reliance on rate sensitive
retail deposits. A portion of the FHLB advances may be called depending
on the level of interest rates relative to the interest rate being
charged at the applicable call date. Accordingly, if interest rates rise
sufficient to trigger the call feature, the Companys net interest margin
may be negatively impacted if called advances are replaced by new, higher
cost advances.

The matching of assets and liabilities may be analyzed by examining
the extent to which such assets and liabilities are interest rate
sensitive and by monitoring the Companys interest rate sensitivity
gap. An asset or liability is said to be interest rate sensitive
within a specific time period if it will mature or reprice within that
time period. The interest rate sensitivity gap is defined as the
difference between the amount of interest-earning assets maturing or
repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time
period. These differences are a primary component of the risk to net
interest income. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate
sensitive liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Accordingly, during a period of rising interest rates,
an institution with a positive gap position would be in a better position
to reprice loans and investing cash flows from maturing assets in higher
yielding assets which, consequently, may result in the yield on its
assets increasing at a pace more closely matching the increase in the
cost of its interest-bearing liabilities than if it had a negative gap.
During a period of falling interest rates, an institution with a positive
gap would tend to have its assets repricing at a faster rate than one
with a negative gap which, consequently, may tend to restrain the growth
of its net interest income.

Certain shortcomings are inherent in gap analysis. For example,
although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in
market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind
changes in market rates. Additionally, certain assets, such as
adjustable-rate loans, have features that restrict changes in interest
rates both on a short-term basis and over the life of the asset. Further,
in the event of change in interest rates, prepayment and early withdrawal
levels would likely deviate significantly from those assumed in
calculating the table. Finally, the ability of many borrowers to service
their adjustable-rate loans may decrease in the event of an interest rate
increase.

At March 31, 2003, the Companys one-year gap was a positive 9.8% of
total assets, compared to a positive 10.7% of total assets at December
31, 2002.

The Companys interest rate sensitivity is also monitored by
management through the use of a model, which internally generates
estimates of the change in net portfolio value (NPV) over a range of
interest rate change scenarios. NPV is the present value of expected
cash flows from assets, liabilities, and off-balance sheet contracts.
The NPV ratio, under any interest rate scenario, is defined as the NPV in
that scenario divided by the market value of assets in the same scenario.

As in the case with the gap analysis, certain shortcomings are
inherent in the methodology used in the above interest rate risk
measurements. Modeling changes in NPV require the making of certain
assumptions, which may or may not reflect the manner in which actual
yields and costs

22



---



##### Table of Contents



respond to changes in market interest rates. In this
regard, the NPV model used assumes that the composition of the Companys interest sensitive assets and liabilities
existing at the beginning of a period remains constant over the period
being measured and also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the
duration to maturity or repricing of specific assets and liabilities.
Accordingly, although the NPV measurements and net interest income models
provide an indication of the Companys interest rate risk exposure at a
particular point in time, such measurements are not intended to and do
not provide a precise forecast of the effect of changes in market
interest rates on the Companys net interest income and will differ from
actual results. See the Companys Form 10-K for the year ended December
31, 2002 for a detail of the GAP and NPV tables. There have been no
material changes in the net portfolio value since December 31, 2002.




Item 4. CONTROLS AND PROCEDURES

The Company has established and maintains disclosure controls and
procedures designed to ensure that the information required to be
disclosed in its filings under the Securities and Exchange Act of 1934 is
recorded, processed, summarized, and reported on a timely basis. Within
90 days prior to the filing date of this report, under the supervision
and with the participation of the Companys Chief Executive Officer and
the Chief Financial Officer, the Company has evaluated the effectiveness
of its disclosure controls and procedures. Based on that evaluation, the
CEO and CFO concluded that the Companys disclosure controls and
procedures were effective as of the date of evaluation. There were no
significant changes in the Companys internal controls or in other
factors that could significantly affect those controls subsequent to the
date of the evaluation.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of
business. In the opinion of management, the ultimate disposition of
these matters is not expected to have a material adverse effect on the
consolidated financial position, the annual results of operations, or
liquidity 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

None




Item 5. Other Information

None




Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------



| | 3.1  |  | Restated Certificate of Incorporation*                                                                                                                                                               
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3.2  |  | Amended and Restated Bylaws as of February 23, 2000**                                                                                                                                                
|
| | 4.0  |  | Stock Certificate of BostonFed Bancorp, Inc.*                                                                                                                                                        
|
| | 99.1 |  | Chief Executive Officer Certification Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
99.2 Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

23



---



##### Table of Contents



* Incorporated herein by reference into this document from Exhibits
3.1 and 4.0 to the Form S-1, Registration Statement, and any amendments
thereto, originally filed on July 21, 1995, as amended and declared
effective on September 11, 1995. Registration No. 333-94860

**Incorporated herein by reference into this document from Exhibit
3.2 to the Annual Report on Form 10-K filed on March 31, 2003.

(b)  Reports on Form 8-K

April 18, 2003 press release announcing first quarter 2003 results

May 7, 2003 press release announcing the website availability of the
Companys March 31, 2003 Investor Presentation.


24



---



##### Table of Contents






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.



| |                                     
| | ------------------------------------
| | BOSTONFED BANCORP, INC.
(Registrant)

|      |  |              |  |                                                                                        
|----- |  | ------------ |  | ---------------------------------------------------------------------------------------
|Date: |  | May 15, 2003 |  | By: /s/ David F. Holland                                                               
|      |  |              |  |                                                                                        
|      |  |              |  | David F. Holland                                                                       
|      |  |              |  | President and
Chief Executive Officer                                                  
|Date: |  | May 15, 2003 |  | By: /s/ John A. Simas                                                                  
|      |  |              |  |                                                                                        
|      |  |              |  | John A. Simas
Executive Vice President,
Chief Financial Officer
and Corporate Secretary

25



---



##### Table of Contents






CERTIFICATION

I David F. Holland, certify, that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of BostonFed
Bancorp, Inc.;                                                                                                                                                                                                                                               
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                  
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of the internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                            



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
the internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |  |  |                                                       
|-------------------- |  |  |  | ------------------------------------------------------
|Date:   May 15, 2003 |  |  |  | By: /s/ David F. Holland                              
|                     |  |  |  |                                                       
|                     |  |  |  | David F. Holland
President and
Chief Executive Officer

26



---



##### Table of Contents



CERTIFICATION

I John A. Simas, certify, that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of BostonFed
Bancorp, Inc.                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                  
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or
operation of the internal controls which could adversely
affect the registrants ability to record, process, summarize
and report financial data and have identified for the
registrants auditors any material weaknesses in internal
controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrants internal controls; and                                                                                                                                            



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
the internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |  |  |                                                                                         
|-------------------- |  |  |  | ----------------------------------------------------------------------------------------
|Date:   May 15, 2003 |  |  |  | By: /s/ John A. Simas                                                                   
|                     |  |  |  |                                                                                         
|                     |  |  |  | John A. Simas 
Executive Vice President,
Chief Financial Officer
and Corporate Secretary

27