##### Table of Contents



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FORM 10-Q

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D. C. 20549

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

|                       |  |                | 
|---------------------- |  | -------------- | 
|For Quarter Ended:     |  | March 31, 2002 | 
|                       |  |                | 
|                       |  |                | 
|                      
|                      
|                      
|                      
|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 BOX)         No     (BOX)

Number of shares of common stock, par value $.01 per share,
outstanding as of April 30, 2002: 4,495,503.



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TABLE OF CONTENTS



|                               |                                                                                                                     |                                                            |  |  |  |  |  | 
|------------------------------ | ------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements:                                                                                      
|                               |                                                                                                                     | Consolidated Balance Sheets                               
|                               |                                                                                                                     | Consolidated Statements of Operations                     
|                               |                                                                                                                     | Consolidated Statements of Changes in Stockholders Equity
|                               |                                                                                                                     | Consolidated Statements of Cash Flows                     
|                               |                                                                                                                     | Notes to Consolidated Financial Statements                
|                               |                                                                                                                     | Average Balances and Yields / Costs                       
|                               | Item 2. MANAGEMENTSS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                      AND RESULTS OF OPERATIONS
|                               | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                                  
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                                          
|                               | Item 2. Changes in Securities and Use of Proceeds                                                                  
|                               | Item 3. Defaults Upon Senior Securities                                                                            
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                                        
|                               | Item 5. Other Information                                                                                          
|                               | Item 6. Exhibits and Reports on Form 8-K                                                                           
|Signatures                    



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##### Table of Contents



BOSTONFED BANCORP INC.
FORM 10-Q
INDEX

|                               |  |                                                                                                                 |  |        
|------------------------------ |  | --------------------------------------------------------------------------------------------------------------- |  | -------
|                               |  |                                                                                                                 |  | Page   
|                              
|                              
|                              
|                              
|PART I  FINANCIAL INFORMATION |  |                                                                                                                
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 1.                        |  | Financial Statements:                                                                                           |  |        
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Consolidated Balance Sheets as of
March 31, 2002 (unaudited) and December 31, 2001                              |  | 2      
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Consolidated Statements of Operations for the Three
Months ended March 31, 2002 and 2001 (unaudited)            |  | 3      
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Consolidated Statement of Changes in Stockholders
Equity for the Three Months ended March 31, 2002 (unaudited) |  | 4      
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Consolidated Statements of Cash Flows for the
Three Months ended March 31, 2002 and 2001 (unaudited)            |  | 5 - 6  
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Notes to Consolidated Financial Statements                                                                      |  | 7 - 9  
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|                               |  | Average Balances and Yield / Costs                                                                              |  | 10     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 2                         |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations                           |  | 11 - 17
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 3.                        |  | Quantitative and Qualitative Disclosures About
Market Risk                                                      |  | 18     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION    |  |                                                                                                                
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 1.                        |  | Legal Proceedings                                                                                               |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                                                       |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 3.                        |  | Defaults Upon Senior Securities                                                                                 |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                             |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 5.                        |  | Other Information                                                                                               |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                                |  | 19     
|                              
|                              
|                              
|                              
|                               |  |                                                                                                                 |  |        
|                              
|                              
|                              
|                              
|Signature Page                 |  | 20                                                                                                             

1



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##### Table of Contents












BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets




(In Thousands)


|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |         |         |           | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------- | --------- | ------------ | ------- | ------- | --------- | 
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         | March 31,   |           | December 31,
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         | 2002        |           | 2001        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |             
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         | (Unaudited) |           |              |         |        
|Assets                                                                                                                        |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Cash and cash equivalents                                                                                                     |                                                                                                                                               | $                                                                                                                                   | 83,426                     |         |             | $         | 95,957       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Investment securities available for sale
(amortized cost of $74,457 at March 31,
2002 and $62,868 at December 31, 2001)       |                                                                                                                                               |                                                                                                                                     | 74,398                     |         |             |           | 63,258       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Investment securities held to maturity (fair
value of $595 at March 31, 2002 and $598
at December 31, 2001)                   |                                                                                                                                               |                                                                                                                                     | 554                        |         |             |           | 554          |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Mortgage-backed securities available for sale
(amortized cost of $101,223 at March 31, 2002
and $95,139 at December 31, 2001) |                                                                                                                                               |                                                                                                                                     | 100,727                    |         |             |           | 94,922       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Mortgage-backed securities held to maturity (fair
value of $36,864 at March 31, 2002 and $41,547
at December 31, 2001)        |                                                                                                                                               |                                                                                                                                     | 36,284                     |         |             |           | 40,822       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Loans held for sale                                                                                                           |                                                                                                                                               |                                                                                                                                     | 22,757                     |         |             |           | 24,612       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Loans, net of allowance for loan losses of $12,640
and $12,328 at March 31, 2002 and December 31,
2001                        |                                                                                                                                               |                                                                                                                                     | 1,044,730                  |         |             |           | 1,055,798    |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Accrued interest receivable                                                                                                   |                                                                                                                                               |                                                                                                                                     | 6,803                      |         |             |           | 6,317        |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Stock in FHLB of Boston and Federal Reserve Bank                                                                              |                                                                                                                                               |                                                                                                                                     | 24,208                     |         |             |           | 24,208       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Premises and equipment                                                                                                        |                                                                                                                                               |                                                                                                                                     | 10,244                     |         |             |           | 10,295       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Goodwill, net of amortization                                                                                                 |                                                                                                                                               |                                                                                                                                     | 17,776                     |         |             |           | 17,776       |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Other assets                                                                                                                  |                                                                                                                                               |                                                                                                                                     | 37,853                     |         |             |           | 36,347       |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     | Total assets               |         | $           | 1,459,760 |              |         | $       | 1,470,866 | 
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|Liabilities and Stockholders Equity                                                                                          |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Liabilities:                                                                                                                  |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Deposit accounts                                                                                                                              |                                                                                                                                     | $                          | 881,213 |             |           | $            | 884,516 |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Federal Home Loan Bank advances and other
Borrowed Money                                                                                      |                                                                                                                                     |                            | 439,000 |             |           |              | 449,000 |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Corporation-obligated mandatorily redeemable
capital securities                                                                               |                                                                                                                                     |                            | 32,000  |             |           |              | 32,000  |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Advance payments by borrowers for taxes
and insurance                                                                                         |                                                                                                                                     |                            | 2,766   |             |           |              | 2,614   |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Other liabilities                                                                                                                             |                                                                                                                                     |                            | 10,015  |             |           |              | 9,348   |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     | Total liabilities          |         |             | 1,364,994 |              |         |         | 1,377,478 | 
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|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 (4,483,003
and 4,450,653 shares outstanding at March 31, |                                                                                                                                     |                            |         |             |           |              |         |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              |                                                                                                                                               | 2002 and December 31, 2001, respectively)                                                                                           |                            |         | 66          |           |              |         | 66      |          
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Additional paid-in capital                                                                                                                    |                                                                                                                                     |                            | 68,914  |             |           |              | 68,259  |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Retained earnings                                                                                                                             |                                                                                                                                     |                            | 66,052  |             |           |              | 64,702  |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              | Accumulated other comprehensive (loss) income                                                                                                 |                                                                                                                                     |                            | (340    | )           |           |              | 105     |        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              |                                                                                                                                               | Less: Treasury stock, at cost (2,106,614 shares
and 2,138,964 shares at March 31, 2002
and December 31, 2001, respectively at cost) |                            |         | (39,354     | )         |              |         | (39,158 | )        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              |                                                                                                                                               | Less: Unallocated ESOP shares                                                                                                       |                            |         | (529        | )         |              |         | (529    | )        
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                              |                                                                                                                                               | Less: Unearned Stock-Based Incentive Plan                                                                                           |                            |         | (43         | )         |              |         | (57     | )        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     | Total stockholders equity |         |             | 94,766    |              |         |         | 93,388    | 
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        
|Total liabilities and stockholders equity                                                                                    |                                                                                                                                               | $                                                                                                                                   | 1,459,760                  |         |             | $         | 1,470,866    |        
|                                                                                                                              |                                                                                                                                               |                                                                                                                                     |                            |         |             |           |              |        

See accompanying condensed notes to consolidated financial statements.

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##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars In Thousands, except per share amount)

|                                                                 |                                                                               |                            |                           |        |                    |        |           |        |       |        | 
|---------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------------- | ------------------------- | ------ | ------------------ | ------ | --------- | ------ | ----- | ------ | 
|                                                                 |                                                                               |                            |                           |        | Three Months Ended
|                                                                 |                                                                               |                            |                           |        |                   
|                                                                 |                                                                               |                            |                           |        | 3/31/02            |        | 3/31/01  
|                                                                 |                                                                               |                            |                           |        |                    |        |          
|                                                                 |                                                                               |                            |                           |        | (Unaudited)       
|Interest income:                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loans                                                                         |                            | $                         | 18,515 |                    |        | $         | 20,890 |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Mortgage-backed securities                                                    |                            |                           | 1,886  |                    |        |           | 1,286  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Investment securities                                                         |                            |                           | 982    |                    |        |           | 1,690  |      
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                 |                                                                               |                            | Total interest income     |        |                    | 21,383 |           |        |       | 23,866 | 
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Interest expense:                                                |                                                                               |                            |                           |        |                    |        |           |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Deposit accounts                                                              |                            |                           | 5,817  |                    |        |           | 8,224  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Borrowed funds                                                                |                            |                           | 5,760  |                    |        |           | 5,414  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Corporation obligated mandatorily
redeemable capital securities
distributions |                            |                           | 880    |                    |        |           | 880    |      
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                 |                                                                               |                            | Total interest expense    |        |                    | 12,457 |           |        |       | 14,518 | 
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Net interest income                                              |                                                                               |                            | 8,926                     |        |                    |        | 9,348     |       
|                                                                
|                                                                
|                                                                
|                                                                
|Provision for loan losses                                        |                                                                               |                            | 250                       |        |                    |        | 212       |       
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                 | Net interest
income after provision                                           |                            |                           | 8,676  |                    |        |           | 9,136  |      
|                                                                
|                                                                
|                                                                
|                                                                
|Non-interest income:                                             |                                                                               |                            |                           |        |                    |        |           |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Deposit service fees                                                          |                            |                           | 637    |                    |        |           | 574    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loan processing and servicing
fees                                            |                            |                           | (311   | )                  |        |           | 130    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Gain on sale of loans                                                         |                            |                           | 2,868  |                    |        |           | 1,619  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Income from bank owned life
insurance                                         |                            |                           | 297    |                    |        |           | 306    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Gain on sale of investments                                                   |                            |                           | 240    |                    |        |           | 215    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Other                                                                         |                            |                           | 397    |                    |        |           | 356    |      
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                 |                                                                               |                            | Total non-interest income |        |                    | 4,128  |           |        |       | 3,200  | 
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Non-interest expense:                                            |                                                                               |                            |                           |        |                    |        |           |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Compensation and benefits                                                     |                            |                           | 5,789  |                    |        |           | 5,452  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Occupancy and equipment                                                       |                            |                           | 1,186  |                    |        |           | 1,092  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Data processing                                                               |                            |                           | 455    |                    |        |           | 439    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Advertising expense                                                           |                            |                           | 233    |                    |        |           | 220    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Federal deposit insurance
premiums                                            |                            |                           | 40     |                    |        |           | 44     |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Real estate operations                                                        |                            |                           | 0      |                    |        |           | 3      |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Amortization of goodwill                                                      |                            |                           | 0      |                    |        |           | 354    |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Legal Settlement                                                              |                            |                           | 500    |                    |        |           | 0      |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Other                                                                         |                            |                           | 1,528  |                    |        |           | 1,622  |      
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|                                                                 |                                                                               | Total non-interest expense |                           |        | 9,731              |        |           |        | 9,226 |       
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Income before income taxes                                       |                                                                               |                            | 3,073                     |        |                    |        | 3,110     |       
|                                                                
|                                                                
|                                                                
|                                                                
|Income tax expense                                               |                                                                               |                            | 1,051                     |        |                    |        | 1,100     |       
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Net income                                                       |                                                                               | $                          | 2,022                     |        |                    | $      | 2,010     |       
|                                                                 |                                                                               |                            |                           |        |                    |        |           |       
|Basic earnings per share                                         |                                                                               | $                          | 0.46                      |        |                    | $      | 0.45      |       
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted earnings
per share                                       |                                                                               | $                          | 0.43                      |        |                    | $      | 0.42      |       
|                                                                
|                                                                
|                                                                
|                                                                
|Basic weighted average shares
outstanding                        |                                                                               |                            | 4,398,124                 |        |                    |        | 4,497,832 |       
|                                                                
|                                                                
|                                                                
|                                                                
|Common stock equivalents
due to dilutive effect
of stock options |                                                                               |                            | 268,776                   |        |                    |        | 320,229   |       
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted total weighted average
shares outstanding                |                                                                               |                            | 4,666,900                 |        |                    |        | 4,818,061 |       

See accompanying condensed notes to consolidated financial statements.

3



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##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders Equity
Three Months Ended March 31, 2002
(Dollars In Thousands, Except Per Share Amounts)
(Unaudited)

|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  |             |      |       |  |       |      |          |  |  |     |   |  |  |        |  
|--------------------------------------------------------------------------------------------------- |  | ------ | -- | ------- |  | ---------- | ------ | -------- |  | ------ | ------ | ------ |  | --------- | ------- | ------------- |  | ----------- | ---- | ----- |  | ----- | ---- | -------- |  |  | --- | - |  |  | ------ | -
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  | Accumulated |      |       |  |       |      | Unearned |  |  |     |  
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  | other       |      |       |  |       |      | Stock-   |  |  |     |  
|                                                                                                    |  |        |    |         |  | Additional |        |          |  |        |        |        |  |           |         | Comprehensive |  | Unallocated |      | Based |  | Total
|                                                                                                    |  | Common |    | paid-in |  | Retained   |        | Treasury |  | income |        | ESOP   |  | Incentive |         | stockholders'
|                                                                                                    |  | stock  |    | capital |  | earnings   |        | Stock    |  | (loss) |        | shares |  | Plan      |         | equity       
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |              
|Balance at December 31, 2001                                                                        |  | $      | 66 |         |  |            | 68,259 |          |  |        | 64,702 |        |  |           | (39,158 | )             |  |             | 105  |       |  |       | (529 | )        |  |  | (57 | ) |  |  | 93,388 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net income                                                                                          |  |        |   |         |  |            |       |          |  |        | 2,022  |        |  |           |        |               |  |             |     |       |  |       |     |          |  |  |    |   |  |  | 2,022  |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Change in net unrealized gain/(loss)
on investments available for sale
(net of tax benefit of $284) |  |        |   |         |  |            |       |          |  |        |       |        |  |           |        |               |  |             | (445 | )     |  |       |     |          |  |  |    |   |  |  | (445   | )
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  |             |      |       |  |       |      |          |  |  |     |   |  |  |        |  
|Total comprehensive income                                                                          |  |        |   |         |  |            |       |          |  |        |       |        |  |           |        |               |  |             |     |       |  |       |     |          |  |  |    |   |  |  | 1,577  |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Cash dividends declared and
paid ($0.15 per share)                                                  |  |        |   |         |  |            |       |          |  |        | (672   | )      |  |           |        |               |  |             |     |       |  |       |     |          |  |  |    |   |  |  | (672   | )
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Common Stock repurchased
(25,750 shares at an average
price of $24.32 per share)                    |  |        |   |         |  |            |       |          |  |        |       |        |  |           | (626    | )             |  |             |     |       |  |       |     |          |  |  |    |   |  |  | (626   | )
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Stock options exercised                                                                             |  |        |   |         |  |            | 456    |          |  |        |       |        |  |           | 430     |               |  |             |     |       |  |       |     |          |  |  |    |   |  |  | 886    |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Allocation relating to earned
portion of Stock-Based
Incentive Plan                                 |  |        |   |         |  |            |       |          |  |        |       |        |  |           |        |               |  |             |     |       |  |       |     |          |  |  | 14  |   |  |  | 14     |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Appreciation in fair value of
shares charged to expense for
compensation plans                      |  |        |   |         |  |            | 199    |          |  |        |       |        |  |           |        |               |  |             |     |       |  |       |     |          |  |  |    |   |  |  | 199    |  
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  |             |      |       |  |       |      |          |  |  |     |   |  |  |        |  
|Balance at March 31, 2002                                                                           |  | $      | 66 |         |  |            | 68,914 |          |  |        | 66,052 |        |  |           | (39,354 | )             |  |             | (340 | )     |  |       | (529 | )        |  |  | (43 | ) |  |  | 94,766 |  
|                                                                                                    |  |        |    |         |  |            |        |          |  |        |        |        |  |           |         |               |  |             |      |       |  |       |      |          |  |  |     |   |  |  |        |  

See accompanying condensed notes to consolidated financial statements.

4



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##### Table of Contents






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

|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |         |       |         |         |  
|----------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------- | ----- | -------------------------- | ------ | ------- | ----- | ------- | ------- | -
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       | For the Three Months Ended
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       | March 31,                 
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                           
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       | 2002                       |        | 2001   
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       | (Unaudited)               
|Net cash flows from operating activities: |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      | Net income                                                                                  |                                                                                | $                                                   | 2,022 |                            |        | $       | 2,010 |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      | Adjustments to reconcile net income to
net cash provided by (used in) operating
activities: |                                                                                |                                                     |       |                            |        |         |       |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Depreciation, amortization and
accretion, net                                  |                                                     |       | 482                        |        |         |       | 599     |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Earned SIP shares                                                              |                                                     |       | 14                         |        |         |       | 37      |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Appreciation in fair value of shares
charged to expense for compensation plans |                                                     |       | 199                        |        |         |       | 171     |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Income from bank owned life insurance                                          |                                                     |       | (297                       | )      |         |       | (306    | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Provision for loan losses                                                      |                                                     |       | 250                        |        |         |       | 212     |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Loans originated for sale                                                      |                                                     |       | (153,036                   | )      |         |       | (85,066 | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Proceeds from sale of loans                                                    |                                                     |       | 157,759                    |        |         |       | 80,391  |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Gain on sale of premises and equipment                                         |                                                     |       |                           |        |         |       | (60     | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Gain on sale of investment securities                                          |                                                     |       | (240                       | )      |         |       | (215    | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Gain on sale of loans                                                          |                                                     |       | (2,868                     | )      |         |       | (1,619  | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Increase in accrued interest receivable                                        |                                                     |       | (486                       | )      |         |       | (29     | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Increase in prepaid expenses
and other assets, net                             |                                                     |       | (1,209                     | )      |         |       | (511    | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                      |                                                                                             | Increase in accrued expenses and
other liabilities, net                        |                                                     |       | 950                        |        |         |       | 108     |        
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|                                          |                                                                      |                                                                                             |                                                                                | Net cash provided by (used in)
operating activities |       |                            | 3,540  |         |       |         | (4,278  | )
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|Cash flows from investing activities:     |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from sale of investment
securities available for sale       |                                                                                             |                                                                                | 690                                                 |       |                            |        | 3,113   |      
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from maturities of investment
securities held to maturity   |                                                                                             |                                                                                |                                                    |       |                            |        | 1,000   |      
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from maturities of investment
securities available for sale |                                                                                             |                                                                                |                                                    |       |                            |        | 16,900  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of investment securities
available for sale                 |                                                                                             |                                                                                | (12,398                                             | )     |                            |        | (23,883 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of mortgage-backed securities
available for sale            |                                                                                             |                                                                                | (27,243                                             | )     |                            |        | (24,960 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of FHLB and Federal Reserve Stock                           |                                                                                             |                                                                                |                                                    |       |                            |        | (25     | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Principal payments on mortgage-backed
securities available for sale  |                                                                                             |                                                                                | 21,073                                              |       |                            |        | 941     |      
|                                         
|                                         
|                                         
|                                         
|                                          | Principal payments on mortgage-backed securities held to maturity    |                                                                                             |                                                                                | 4,533                                               |       |                            |        | 2,454   |      
|                                         
|                                         
|                                         
|                                         
|                                          | Principal payments on investment
securities available for sale       |                                                                                             |                                                                                | 357                                                 |       |                            |        | 150     |      
|                                         
|                                         
|                                         
|                                         
|                                          | Decrease (increase) in loans, net                                    |                                                                                             |                                                                                | 10,818                                              |       |                            |        | (5,704  | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Purchases of premises and equipment                                  |                                                                                             |                                                                                | (338                                                | )     |                            |        | (197    | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from sale of premises                                       |                                                                                             |                                                                                |                                                    |       |                            |        | 343     |      
|                                         
|                                         
|                                         
|                                         
|                                          | Additional investment in real estate owned                           |                                                                                             |                                                                                |                                                    |       |                            |        | (2      | )    
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        
|                                          |                                                                      |                                                                                             |                                                                                | Net cash used in
investing activities               |       |                            | (2,508 | )       |       |         | (29,870 | )
|                                          |                                                                      |                                                                                             |                                                                                |                                                     |       |                            |        |        

-Continued on next page-

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##### Table of Contents



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

|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |         |   |        |        | 
|------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------- | -------- | ---------------------------------------------------- | - | -------------------------- | ------- | ------- | - | ------ | ------ | 
|                                                  |                                                                              |                                 |          |                                                      |   | For the Three Months Ended
|                                                  |                                                                              |                                 |          |                                                      |   | March 31,                 
|                                                  |                                                                              |                                 |          |                                                      |   |                           
|                                                  |                                                                              |                                 |          |                                                      |   | 2002                       |         | 2001   
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                  |                                                                              |                                 |          |                                                      |   | (Unaudited)               
|Cash flows from financing activities:             |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Increase (decrease) in deposit accounts                                      |                                 |          | (3,303                                               | ) |                            |         | 8,663   |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Repayments of Federal Home Loan
Bank advances                                |                                 |          | (60,511                                              | ) |                            |         | (63,964 | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Proceeds from Federal Home Loan
Bank advances                                |                                 |          | 50,511                                               |   |                            |         | 96,130  |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash dividends paid                                                          |                                 |          | (672                                                 | ) |                            |         | (604    | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Common stock repurchased                                                     |                                 |          | (626                                                 | ) |                            |         | (2,211  | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Options exercised, net of taxes                                              |                                 |          | 886                                                  |   |                            |         | 41      |  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Increase (decrease) in advance payments
by borrowers for taxes and insurance |                                 |          | 152                                                  |   |                            |         | 227     |  
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                  |                                                                              |                                 |          | Net cash (used in) provided by
financing activities  |   |                            | (13,563 | )       |   |        | 38,282 | 
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                  |                                                                              |                                 |          | Net (decrease) increase
in cash and cash equivalents |   |                            | (12,531 | )       |   |        | 4,134  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Cash and cash equivalents at beginning of period  |                                                                              |                                 | 95,957   |                                                      |   |                            | 50,675  |        
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|Cash and cash equivalents at end of period        |                                                                              | $                               | 83,426   |                                                      |   | $                          | 54,809  |        
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|Supplemental disclosure of cash flow
information: |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                              | Payments during
the period for: |          |                                                      |   |                            |         |         |   |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                              |                                 | Interest |                                                      | $ | 12,327                     |         |         | $ | 14,837 |       
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        
|                                                  |                                                                              |                                 | Taxes    |                                                      | $ | 42                         |         |         | $ | 138    |       
|                                                  |                                                                              |                                 |          |                                                      |   |                            |         |        

See accompanying condensed notes to consolidated financial statements.

6



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##### 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, 2002
and for the three-month periods ended March 31, 2002 and 2001 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,
2001.

The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles 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 generally accepted accounting principles 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. The results of operations for the three-month periods ended March 31,
2002 and 2001 are not necessarily indicative of the results that may be expected
for the entire fiscal year.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142). SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. The Company adopted the provisions of SFAS No. 142
effective January 1, 2002. In connection with SFAS No. 142s transitional
goodwill impairment evaluation, the Statement required the Company to perform an
assessment of whether there was an indication that goodwill was impaired as of
the date of adoption. As of January 1, 2002, the Company performed the required
transition impairment test of goodwill and determined that no impairment
adjustment was required as of the date of adoption. Goodwill of a reporting unit
shall be tested for impairment at least on an annual basis and between annual
tests in certain circumstances. The impairment evaluation requires the Company
to identify its reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets. To the extent the carrying amount of a reporting
unit exceeds the fair value of the reporting unit, an indication exists that the
reporting unit goodwill may be impaired and the Company must perform the second
step of the impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit goodwill with the carrying amount of
the reporting unit goodwill. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to all of the assets (recognized
and unrecognized) and liabilities of the reporting unit in a manner similar to a
purchase price allocation, in accordance with SFAS No. 141, Business
Combinations. The residual fair value after this allocation is the implied fair
value of the reporting unit goodwill. The difference between the implied fair
value and the carrying value of the goodwill is the amount of the impairment. At
March 31, 2002, the Company had $17.8 million of goodwill on its balance sheet
and recorded no amortization of goodwill during the quarter. The adoption of
this Statement increased basic and diluted earnings per share by approximately
$.05 for the quarter ended March 31, 2002.

The Company also maintains an additional intangible asset, Originated
Mortgage Servicing Rights (OMSR), which represent the present value of future
loan servicing fees, net of expected costs to service, based on certain
assumptions. During the quarter ended March 31, 2002, the Company added $1.6
million, with an expected weighted average life of 5.36 years, to the OMSR. The
balance of OMSR at March 31, 2002 was $7.5 million with an expected weighted
average life of 5.42 years.

NOTE 2: COMMITMENTS, CONTINGENCIES AND CONTRACTS

At March 31, 2002, the Company had commitments of $75.3 million to originate
mortgage loans and $2.5 million to purchase loans from correspondent lenders. Of
these $77.8 million commitments, $70.1 million were adjustable rate mortgage
loans with interest rates ranging from 4.50% to 9.00% and $7.70 million were
fixed rate mortgage loans with interest rates ranging from 5.88% to 8.88%. The
Company also had commitments to sell $64.3 million of mortgage loans.

At March 31, 2002, the Company was servicing first mortgage loans of
approximately $995.8 million, which are either partially or wholly-owned by
others.

7



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##### Table of Contents



NOTE 3: LEGAL SETTLEMENT

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 $500,000 during the quarter to settle the lawsuit, resulting
in a reduction in earnings per share of approximately $.07.

NOTE 4: 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.

8



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##### Table of Contents



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

(Dollars In Thousands)

|                                                 |                           |  |      |           |     |  |          |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |      |           | 
|------------------------------------------------ | ------------------------- |  | ---- | --------- | --- |  | -------- | ------- | ----- |  | ------------ | --------- | ------ |  | ---- | ------- | - |  | ---- | -------- | ------------ |  | ---- | --------- | 
|                                                 |                           |  |      |           |     |  |          |         |       |  | TOTAL        |           |        |  |      |         |   |  |      |          |              |  |     
|                                                 |                           |  |      |           |     |  |          |         |       |  | REPORTABLE   |           |        |  |      |         |   |  |      |          | CONSOLIDATED
|                                                 |                           |  | BFS  |           | BNB |  | SEGMENTS |         | OTHER |  | ELIMINATIONS |           | TOTALS
|                                                 |                           |  |      |           |     |  |          |         |       |  |              |           |       
|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                |  |      | 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. |          |              |  | .56  | %        
|                                                
|                                                
|                                                
|                                                
|Return on average equity                         |                           |  | 9.69 | %         |     |  | 2.26     | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 8.39 | %        
|                                                
|                                                
|                                                
|                                                
|At or for the three-months
ended March 31, 2001: |                           |  |      |           |     |  |          |         |       |  |              |           |        |  |      |         |   |  |      |          |              |  |      |          
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest income           |  | $    | 21,489    |     |  |          | 2,362   |       |  |              | 23,851    |        |  |      | 1,239   |   |  |      | (1,224   | )            |  |      | 23,866    | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest expense          |  |      | 13,296    |     |  |          | 657     |       |  |              | 13,953    |        |  |      | 1,789   |   |  |      | (1,224   | )            |  |      | 14,518    | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Provision for loan losses |  |      | 175       |     |  |          | 37      |       |  |              | 212       |        |  |      |         |   |  |      |          |              |  |      | 212       | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Non-interest income       |  |      | 2,755     |     |  |          | 276     |       |  |              | 3,031     |        |  |      | 214     |   |  |      | (45      | )            |  |      | 3,200     | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Non-interest expense      |  |      | 7,926     |     |  |          | 1,166   |       |  |              | 9,092     |        |  |      | 179     |   |  |      | (45      | )            |  |      | 9,226     | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Income tax expense        |  |      | 1,005     |     |  |          | 265     |       |  |              | 1,270     |        |  |      | (170    | ) |  |      |          |              |  |      | 1,100     | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                |  |      | 1,842     |     |  |          | 513     |       |  |              | 2,355     |        |  |      | (345    | ) |  |      |          |              |  |      | 2,010     | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Total assets              |  |      | 1,206,745 |     |  |          | 155,612 |       |  |              | 1,362,357 |        |  |      | 160,759 |   |  |      | (154,454 | )            |  |      | 1,368,662 | 
|                                                
|                                                
|                                                
|                                                
|Net interest margin                              |                           |  | 2.99 | %         |     |  | 5.27     | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 3.04 | %        
|                                                
|                                                
|                                                
|                                                
|Return on average assets                         |                           |  | .63  | %         |     |  | 1.37     | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | .61  | %        
|                                                
|                                                
|                                                
|                                                
|Return on average equity                         |                           |  | 8.36 | %         |     |  | 15.94    | %       |       |  | n.m          |           |        |  | n.m. |         |   |  | n.m. |          |              |  | 8.70 | %        

n.m. = not meaningful

9



---



##### Table of Contents






BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Average Balances and Yields / Costs
(Unaudited)

For the quarter ended March 31:

|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |       |      |  
|---------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------ | ------ | ---------------------- | --------- | -------- | - | ------ | ------ | ------- |  | -------- | ---- | ---- | ------ | --------- | --------- | ------ | - | ------ | ------ | ------- |  | ----- | ---- | -
|                                                                 |                                                                 |                                            |        | 2002                   |           | 2001    
|                                                                 |                                                                 |                                            |        |                        |           |         
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  | Average  |      |      |        |           |           |        |   |        |        | Average
|                                                                 |                                                                 |                                            |        | Average                |           |          |   |        |        | Yield/  |  | Average  |      |      |        |           |           | Yield/
|                                                                 |                                                                 |                                            |        | Balance                |           | Interest |   | Cost   |        | Balance |  | Interest |      | Cost
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |     
|                                                                 |                                                                 |                                            |        | (Dollars in thousands)
|Assets:                                                          |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                
|                                                                
|                                                                
|                                                                
|Interest-earning assets:                                         |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Investment securities (1)                                       |                                            | $      | 121,468                |           |          | $ | 982    |        |         |  | 3.23     | %    |      | $      | 99,491    |           |        | $ | 1,690  |        |         |  | 6.79  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loan, net and loans held for sale (2)                           |                                            |        | 1,087,175              |           |          |   | 18,515 |        |         |  | 6.81     | %    |      |        | 1,051,417 |           |        |   | 20,890 |        |         |  | 7.95  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Mortgage-backed securities (3)                                  |                                            |        | 131,977                |           |          |   | 1,886  |        |         |  | 5.72     | %    |      |        | 78,491    |           |        |   | 1,286  |        |         |  | 6.55  | %   
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total interest-earning assets              |        |                        | 1,340,620 |          |   |        | 21,383 |         |  |          | 6.38 | %    |        |           | 1,229,399 |        |   |        | 23,866 |         |  |       | 7.77 | %
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 | Non-interest-earning assets                                     |                                            |        | 111,663                |           |          |   |        |        |         |  |          |      |      |        | 97,924    |           |        |   |        |        |         |  |       |     
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total assets                               |        | $                      | 1,452,283 |          |   |        |        |         |  |          |      |      |        | $         | 1,327,323 |        |   |        |        |         |  |       |      |  
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|Liabilities and Stockholders Equity:                            |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                
|                                                                
|                                                                
|                                                                
|Interest-bearing Liabilities:                                    |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Money market deposit accounts                                   |                                            | $      | 59,077                 |           |          |   | 241    |        |         |  | 1.63     | %    |      | $      | 54,949    |           |        |   | 388    |        |         |  | 2.82  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Savings accounts                                                |                                            |        | 183,707                |           |          |   | 669    |        |         |  | 1.46     | %    |      |        | 168,929   |           |        |   | 1,273  |        |         |  | 3.01  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | NOW accounts                                                    |                                            |        | 134,701                |           |          |   | 109    |        |         |  | 0.32     | %    |      |        | 124,162   |           |        |   | 235    |        |         |  | 0.76  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Certificate accounts                                            |                                            |        | 391,697                |           |          |   | 4,798  |        |         |  | 4.90     | %    |      |        | 416,059   |           |        |   | 6,328  |        |         |  | 6.08  | %   
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total                                      |        |                        | 769,182   |          |   |        | 5,817  |         |  |          | 3.03 | %    |        |           | 764,099   |        |   |        | 8,224  |         |  |       | 4.31 | %
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Borrowed Funds (4)                                              |                                            |        | 439,536                |           |          |   | 5,760  |        |         |  | 5.24     | %    |      |        | 356,184   |           |        |   | 5,414  |        |         |  | 6.08  | %   
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Corporation-obligated mandatorily
redeemable capital securities |                                            |        | 32,000                 |           |          |   | 880    |        |         |  | 11.00    | %    |      |        | 32,000    |           |        |   | 880    |        |         |  | 11.00 | %   
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total interest-bearing liabilities         |        |                        | 1,240,718 |          |   |        | 12,457 |         |  |          | 4.02 | %    |        |           | 1,152,283 |        |   |        | 14,518 |         |  |       | 5.04 | %
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 | Non-interest-bearing liabilities                                |                                            |        | 115,134                |           |          |   |        |        |         |  |          |      |      |        | 82,602    |           |        |   |        |        |         |  |       |     
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total liabilities                          |        |                        | 1,355,852 |          |   |        |        |         |  |          |      |      |        |           | 1,234,885 |        |   |        |        |         |  |       |      |  
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 | Stockholders equity                                            |                                            |        | 96,431                 |           |          |   |        |        |         |  |          |      |      |        | 92,438    |           |        |   |        |        |         |  |       |     
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 |                                                                 | Total liabilities and
stockholders equity |        | $                      | 1,452,283 |          |   |        |        |         |  |          |      |      |        | $         | 1,327,323 |        |   |        |        |         |  |       |      |  
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 | Net interest rate spread (5)                                    |                                            |        |                        |           |          | $ | 8,926  |        |         |  | 2.36     | %    |      |        |           |           |        | $ | 9,348  |        |         |  | 2.73  | %   
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|                                                                 | Net interest margin (6)                                         |                                            |        |                        |           |          |   |        |        |         |  | 2.66     | %    |      |        |           |           |        |   |        |        |         |  | 3.04  | %   
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      
|Ratio of interest-earning assets to
interest-bearing liabilities |                                                                 |                                            | 108.05 | %                      |           |          |   |        |        |         |  |          |      |      | 106.69 | %         |           |        |   |        |        |         |  |      
|                                                                 |                                                                 |                                            |        |                        |           |          |   |        |        |         |  |          |      |      |        |           |           |        |   |        |        |         |  |      



---

|(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 FNMA deposits held in escrow accounts with the
Company related to the Companys FNMA servicing, which, if such interest
expense was excluded, would result in an average cost of borrowed funds
of 5.21% and 6.07% for the three months ended March 31, 2002 and
March 31, 2001, 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-earning assets.                                                                                                                                                                                                                                                                               

10



---



##### 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 includes certain
forward-looking statements 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, the allowance for losses discussion, 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 and
prices. 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.

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, investments,
mortgage-backed securities, 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 3 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).

11



---



##### Table of Contents



B. FINANCIAL CONDITION

Total assets at March 31, 2002 were $1.460 billion, compared to $1.471
billion at December 31, 2001, a decrease of $11.0 million. Increased balances in
investment securities available for sale and mortgage-backed securities
available for sale were more than offset by decreases in cash and cash
equivalents and loan, net. Cash and cash equivalents declined by $12.5 million
as funds were used to repay maturing advances from the FHLB. Investment
securities available for sale increased by $11.1 million, to a balance of $74.4
million at March 31, 2002 due primarily to additional purchases of $5.1 million
of corporate bonds and a $5.3 million increase in a mutual fund, which invests
in short duration securities. Mortgage-backed securities available for sale
increased from $94.9 million at December 31, 2001 to $100.1 million at March 31,
2002 due primarily to the purchase of various collateralized mortgage
obligations (CMOs). Loans, net, declined by $11.1 million as the Company
continued to sell essentially all fixed-rate mortgage loans and a portion of
adjustable-rate loans originated during the quarter ended March 31, 2002.

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

|                                         |                             |                    |         |             |           |          |         |         |           | 
|---------------------------------------- | --------------------------- | ------------------ | ------- | ----------- | --------- | -------- | ------- | ------- | --------- | 
|                                         |                             |                    |         | 3/31/02     |           | 12/31/01
|                                         |                             |                    |         |             |           |         
|                                         |                             |                    |         | (Unaudited) |           |          |         |        
|Mortgage Loans:                          |                             |                    |         |             |           |          |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Residential 1-4 family      |                    | $       | 733,003     |           |          | $       | 763,599 |          
|                                        
|                                        
|                                        
|                                        
|                                         | Multi-family                |                    |         | 21,016      |           |          |         | 25,904  |          
|                                        
|                                        
|                                        
|                                        
|                                         | Construction and Land       |                    |         | 94,285      |           |          |         | 99,337  |          
|                                        
|                                        
|                                        
|                                        
|                                         | Commercial Real Estate      |                    |         | 128,416     |           |          |         | 107,767 |          
|                                         |                             |                    |         |             |           |          |         |        
|                                         |                             |                    | 976,720 |             |           |          | 996,607 |        
|                                         |                             |                    |         |             |           |          |         |        
|Consumer and other loans:                |                             |                    |         |             |           |          |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Home equity and improvement |                    |         | 73,775      |           |          |         | 66,539  |          
|                                        
|                                        
|                                        
|                                        
|                                         | Secured by deposits         |                    |         | 623         |           |          |         | 678     |          
|                                        
|                                        
|                                        
|                                        
|                                         | Consumer                    |                    |         | 2,871       |           |          |         | 3,439   |          
|                                        
|                                        
|                                        
|                                        
|                                         | Business                    |                    |         | 25,083      |           |          |         | 28,103  |          
|                                         |                             |                    |         |             |           |          |         |        
|                                         |                             |                    | 102,352 |             |           |          | 98,759  |        
|                                         |                             |                    |         |             |           |          |         |        
|                                         |                             | Total loans, gross |         |             | 1,079,072 |          |         |         | 1,095,366 | 
|                                         |                             |                    |         |             |           |          |         |        
|Allowance for loan losses                |                             |                    | (12,640 | )           |           |          | (12,328 | )      
|                                        
|                                        
|                                        
|                                        
|Construction loans in process            |                             |                    | (24,872 | )           |           |          | (30,264 | )      
|                                        
|                                        
|                                        
|                                        
|Net unearned discount on loans purchased |                             |                    | 45      |             |           |          | 48      |        
|                                        
|                                        
|                                        
|                                        
|Deferred loan origination costs          |                             |                    | 3,125   |             |           |          | 2,976   |        
|                                         |                             |                    |         |             |           |          |         |        
|                                         |                             | Loans, net         |         |             | 1,044,730 |          |         |         | 1,055,798 | 
|                                         |                             |                    |         |             |           |          |         |        

Management believes the allowance is adequate to absorb probable loan
losses. 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 available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions. Accordingly, the ultimate collectibility of a substantial portion of
the Companys loan portfolio is affected by changes in market conditions.

As part of the Companys determination of the adequacy of the allowance for
loan losses, the Company monitors its loan portfolio through its 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, 2002, the Company classified $7.4
million of loans ($6.6 million at BFS and $787,000 at BNB) as sub-standard
compared to $2.7 million ($1.8 million of BFS and $911,000 of BNB) at December
31, 2001. The vast majority of the increase in sub-standard loans was due to the
transfer of three loans, which in the aggregate amounted to $4.3 million in one
borrower relationship, from special mention to sub-standard. Non-performing
assets at March 31, 2002 amounted to $5.4 million or .37% of total assets,
compared to $1.2 million, or .08% of total assets, at December 31, 2001. 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, 2002 was sufficient to provide for anticipated losses
inherent in the loan portfolio.

12



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##### Table of Contents



The Companys allowance for loan losses at March 31, 2002 was $12.6
million, which represented 236% of non-performing loans or 1.17% of total loans,
compared to $12.3 million at December 31, 2001, or 1,065% of non-performing
loans and 1.13% of total loans. Management believes this coverage ratio is
prudent due to the balance increase in the combined total of construction and
land, commercial real estate, multi-family, home equity and improvement,
consumer and business loans. These combined total balances increased from
approximately $331.1 million at December 31, 2001 to approximately $345.4
million at March 31, 2002.

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 $145,000 and $18,000 for the three-month periods ended March 31, 2002 and
2001, respectively. The amount of interest income that was recorded on these
loans was $1,000 and $5,000 for the three-month periods ended March 31,
2002 and 2001, respectively.

At March 31, 2002, there were 4 loans characterized as impaired. During the
three-months ended March 31, 2002, the average recorded value of impaired loans
was $1.06 million, $4,000 interest income was recognized and $127,000 of
interest income would have been recognized under the loans original terms.

At March 31, 2002 and at December 31, 2001, the Company had $29,000 and
$31,000 in other repossessed assets, respectively. Further
at March 31, 2002, the Company also had restructured real estate loans amounting
to $202,000 for which interest is being recorded in accordance with the loans
restructured terms. The amount of the interest income lost on these restructured
loans is not material to the Companys financial statements.

Deposit accounts declined by $3.3 million, from $884.5 million at December
31, 2001 to a $881.2 million at March 31, 2002 as the Company experienced net
deposit outflow during the quarter.

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

|                                           |                                   |                               |                            |         |             |         |          |         |         |         | 
|------------------------------------------ | --------------------------------- | ----------------------------- | -------------------------- | ------- | ----------- | ------- | -------- | ------- | ------- | ------- | 
|                                           |                                   |                               |                            |         | 3/31/02     |         | 12/31/01
|                                           |                                   |                               |                            |         |             |         |         
|                                           |                                   |                               |                            |         | (Unaudited) |         |          |         |        
|                                           | NOW                               |                               | $                          | 136,061 |             |         | $        | 138,528 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Regular & Statement Savings       |                               |                            | 190,687 |             |         |          | 180,966 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Money Market                      |                               |                            | 58,929  |             |         |          | 58,133  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Demand Deposits & Official Checks |                               |                            | 102,206 |             |         |          | 110,776 |        
|                                           |                                   |                               |                            |         |             |         |          |        
|                                           |                                   | Total Noncertificate Accounts |                            |         | 487,883     |         |          |         | 488,403 |        
|                                           |                                   |                               |                            |         |             |         |          |        
|Certificate Accounts:                      |                                   |                               |                            |         |             |         |          |        
|                                          
|                                          
|                                          
|                                          
|                                           | 3 to 6 months                     |                               |                            | 63,442  |             |         |          | 65,507  |        
|                                          
|                                          
|                                          
|                                          
|                                           | 1 to 3 years                      |                               |                            | 224,578 |             |         |          | 233,275 |        
|                                          
|                                          
|                                          
|                                          
|                                           | Greater than 3 years              |                               |                            | 59,558  |             |         |          | 53,701  |        
|                                          
|                                          
|                                          
|                                          
|                                           | IRA/KEOGH                         |                               |                            | 45,752  |             |         |          | 43,630  |        
|                                           |                                   |                               |                            |         |             |         |          |        
|                                           |                                   |                               | Total Certificate Accounts |         |             | 393,330 |          |         |         | 396,113 | 
|                                           |                                   |                               |                            |         |             |         |          |        
|                                           |                                   |                               | 881,213                    |         |             |         | 884,516  |        
|                                           |                                   |                               |                            |         |             |         |          |        
|Expected maturity of certificate accounts: |                                   |                               |                            |         |             |         |          |        
|                                          
|                                          
|                                          
|                                          
|                                           | Within one year                   |                               |                            | 225,659 |             |         |          | 247,745 |        
|                                          
|                                          
|                                          
|                                          
|                                           | One to two years                  |                               |                            | 87,959  |             |         |          | 79,236  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Two to three years                |                               |                            | 55,272  |             |         |          | 38,611  |        
|                                          
|                                          
|                                          
|                                          
|                                           | Over three years                  |                               |                            | 24,440  |             |         |          | 30,521  |        
|                                           |                                   |                               |                            |         |             |         |          |        
|                                           |                                   |                               | 393,330                    |         |             |         | 396,113  |        
|                                           |                                   |                               |                            |         |             |         |          |        

Federal Home Loan Bank advances and other borrowings declined by $10.0
million, to a balance of $439.0 million at March 31, 2002 from a balance of
$449.0 million at December 31, 2002 as excess liquidity was used to repay
maturing advances.

13



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##### Table of Contents



C. 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, 2002, BFS and BNB had $21.2 million of
dividends that could be paid to the Company without regulatory approval and the
Company had $3.8 million of securities available for sale and $13.1 million cash
or cash equivalents. 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. 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-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 Banks 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:

|                                              |  |                |         |                   |  |   |         | 
|--------------------------------------------- |  | -------------- | ------- | ----------------- |  | - | ------- | 
|                                              |  | March 31, 2002 |         | December 31, 2001
|                                              |  |                |         |                  
|                                              |  | (In Thousands)
|Cash and cash equivalents                     |  | $              | 83,426  |                   |  |   | 95,957  | 
|                                             
|                                             
|                                             
|                                             
|Investment Securities
available for sale      |  |                | 74,398  |                   |  |   | 63,258  | 
|                                             
|                                             
|                                             
|                                             
|Mortgage-backed securities
available for sale |  |                | 100,727 |                   |  |   | 94,922  | 
|                                             
|                                             
|                                             
|                                             
|Loans held for sale                           |  |                | 22,757  |                   |  |   | 24,612  | 
|                                              |  |                |         |                   |  |   |         | 
|Total liquid assets                           |  | $              | 281,308 |                   |  | $ | 278,749 | 
|                                              |  |                |         |                   |  |   |         | 

These amounts represent 19.3% and 19.0% of the Companys total assets at
March 31, 2002 and December 31, 2001, 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, 2002, the Banks had $439.0
million in advances outstanding from the FHLB and had, with existing collateral,
an additional $131.9 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, 2002, the Banks had commitments to originate loans and unused
outstanding lines of credit totaling $234.0 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, 2002, totaled $225.7 million.

At March 31, 2002, the consolidated stockholders equity to total assets
ratio was 6.5%. As of March 31, 2002, 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 13.4%, 12.0% and 7.5%, respectively. BFSs tier 1 (core) capital, total
risk-based, capital, tier 1 risk-based and tangible equity capital ratios were
6.6%, 11.5%, 10.3% and 6.6%, respectively. BNBs risk-based total capital,
risk-based tier 1 capital and leverage capital ratios were 12.3%, 11.1% and
5.8%, respectively.

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##### Table of Contents



D. COMPARISON OF THREE-MONTHS ENDED MARCH 31, 2002 AND 2001

GENERAL

Earnings for the quarter ended March 31, 2002 were $2.0 million, or $.46
basic and $.43 diluted on an earnings per share basis, compared to earnings of
$2.0 million, or $.45 basic and $.42 diluted earnings per share for the first
quarter of 2001. The Companys annualized return on average assets was .56% and
the annualized return on average stockholders equity was 8.39% during the
three-months ended March 31, 2002, compared to .61% and 8.70%, respectively, for
the three-months ended March 31, 2001 (annualized). 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, 2002 declined by $2.5 million, or 10.4%, to $21.4 million, compared to
the quarter ended March 31, 2001. The decrease in interest income was due to a
139 basis point decline in the average yield on interest earning assets,
partially offset by the earnings on the $111.2 million increase in
interest-earning assets. The average yield on interest-earning assets declined
to 6.38% for the three-months ended March 31, 2002 from 7.77% for the
three-months ended March 31, 2001. 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 2001.

Interest income on loans, net, for the quarter ended March 31, 2002
declined by $2.4 million, or 11.5%, to $18.5 million compared to $20.9 million
for the comparable quarter in 2001. The decrease in interest income from loans,
net, for the current three-month period was due to the 114 basis point decline
in the average yield, partially offset by a $35.8 million increase in the
average balance of loans, net. The average yield on loans, net for the
three-months ended March 31, 2002 was 6.81%, compared to an average yield of
7.95% for the three-months ended March 31, 2001.

Interest on mortgage-backed securities for the quarter ended March 31, 2002
increased to $1.9 million, compared to $1.3 million for the quarter ended March
31, 2001. The increase was due to growth in average balances, partially offset
by declines in average yields. The average balance of mortgage-backed securities
grew from $78.5 million for the quarter ended March 31, 2001 to an average of
$132.0 million during the current quarter. Yields declined from 6.55% to 5.72%
for the quarters ended March 31, 2002 and 2001, respectively. The increase in
average balances was primarily attributable to the acquisition of collateralized
mortgage obligations (CMOs). These investments were purchased as part of the
Companys effort to leverage the trust-preferred securities, which are
classified as capital for regulatory purposes.

Income from investment securities was $982,000 for the three-months ended
March 31, 2002, compared to $1.7 million for the prior year quarter. The average
balance of investment securities increased to 121.5 million for the three-months
ended March 31, 2002, compared to $99.5 million for the prior year quarter. The
decline in income was caused by a reduction in the average yield, which declined
from 6.79% for the three-months ended March 31, 2001 to 3.23% for the current
quarter. The reduction in yields on investment securities is also reflective of
the declines in market interest rates, especially the historically low rates
being paid on federal funds and Federal Home Loan Bank overnight deposits.

15



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##### Table of Contents



Interest Expense

Total interest expense on interest-bearing liabilities for the quarter
ended March 31, 2002 declined by $2.0 million, or 13.8%, to $12.5 million
compared to $14.5 million for the quarter ended March 31, 2001. The decrease in
interest expense for the quarter ended March 31, 2002 was primarily due to a 102
basis point reduction in the average cost of interest bearing liabilities,
offset somewhat by the interest cost applicable to an $88.4 million increase in
the average balance of interest-bearing liabilities, which averaged $1.241
billion during the current quarter, compared to an average balance of $1.152
billion during the quarter ended March 31, 2001. The average cost of
interest-bearing liabilities decreased to 4.02% during the quarter ended March
31, 2002, compared to 5.04% for last years comparable quarter. The Companys
cost of interest bearing liabilities has declined slower than overall market
interest rates as approximately one-half of the Companys deposits are core
deposits. These deposits were already earning low interest rates and such rates
and market conditions precluded further substantial declines in the interest
paid on these accounts.

Interest expense on deposit accounts was $5.8 million for the quarter ended
March 31, 2002, a decrease of $2.4 million from the $8.2 million for the quarter
ended March 31, 2001. The decrease in interest expense on deposit accounts
resulted primarily from a 128 basis point decrease in the average cost of
deposits. For the three-months ended March 31, 2002, the average cost of
deposits was 3.03%, compared to 4.31% for the three-months ended March 31, 2001.
Average balances of deposit accounts, at $769.2 million, were $5.1 million
higher during the quarter ended March 31, 2002, compared to average balances of
$764.1 million for the prior year quarter.

Interest expense on borrowed funds was $5.8 million for the three-months
ended March 31, 2002, compared to $5.4 million for the three-months ended March
31, 2001. The increase in interest expense on borrowed funds was due to the
effects of higher average balances offset by a decline in the average cost of
borrowed funds. The average balance of borrowed funds was $439.5 million in the
current quarter, an increase of $83.4 million compared to an average balance of
$356.2 million for the quarter ended March 31, 2001. The average cost of
borrowed funds was 5.24% for the three-months ended March 31, 2002, a decline of
84 basis points compared to the 6.08% cost of borrowed funds for the
three-months ended March 31, 2001.

Net Interest Income

Net interest income during the first quarters of 2002 and 2001 was $8.9
million and $9.3 million, respectively, as pressure on net interest margins
continued. The net interest rate spread declined from 2.73% for the quarter
ended March 31, 2001, to 2.36% for the current quarter. The net interest margin
for the quarter ended March 31, 2002 was 2.66%, compared to 3.04% for the prior
years first quarter. Due to market conditions, the Company has not been able to
lower interest rates on deposit accounts and borrowings to the same degree that
prime-based and treasury-indexed asset yields have fallen. While market interest
rates appear to have stabilized, the Company cannot predict when interest rates
will rise to more normal levels and whether such increases will result in higher
net interest margins.

Provision for Loan Losses

The Companys provision for loan losses was $250,000 for the quarter ended
March 31, 2002, compared to $212,000 for the comparable quarter last year. The
allowance for loan losses increased from $12.3 million at December 31, 2001 to
$12.6 million at March 31, 2002 due to this quarters provision, net of
charge-offs/recoveries. The Company believes that the allowance for loan losses
is at a reasonable level based on its current evaluation. 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
quarter ended March 31, 2002:

|                             |                |   |        |     |  
|---------------------------- | -------------- | - | ------ | --- | -
|Balance at December 31, 2001 |                | $ | 12,328 |    
|                            
|                            
|                            
|                            
|                             | Loss provision |   |        | 250 |  
|                             | Recoveries     |   |        | 66  |  
|                             | Charge-offs    |   |        | (4  | )
|                            
|                            
|                            
|                            
|Balance at March 31, 2002    |                | $ | 12,640 |    

16



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##### Table of Contents



| |  |  |  |  | 
| |  |  |  |  | 

Non-Interest Income

Total non-interest income increased to $4.1 million for the quarter ended
March 31, 2002, compared to $3.2 million for the quarter ended March 31, 2001
due primarily to an increase in gain on sale of loans. Gain on sale of loans was
$2.9 million during the quarter ended March 31, 2002, compared to $1.6 million
during the prior year quarter. The increased gains resulted from a continuation
of high volumes of mortgage loan sales, made possible by the volume of lending
activity in the current low interest rate environment. Gain on sale of
manufactured housing loans at Forward Financial was $1.1 million in the quarters
ending March 31, 2002 and 2001. Deposit service fees increased from $574,000 in
the quarter ended March 31, 2001, to $637,000 in the current quarter. The
increase was primarily due to higher levels of deposit account services
activity. Loan processing and servicing fees were a negative $311,000 in the
quarter ended March 31, 2002 compared to income of $130,000 for the quarter
ended March 31, 2001 due to adjustments for the impairment of originated
mortgage servicing rights (OMSR). Adjustments to the OMSR were necessary due
to the higher than expected levels of prepayments during the current quarter of
loans serviced by the Company.

Non-Interest Expense

Total non-interest expenses increased to $9.7 million for the quarter ended
March 31, 2002 from $9.2 million for the quarter ended March 31, 2001 due
primarily to the effect of the
Companys subsidiary BNB, agreeing with a mediators recommendation in settling
a lawsuit at a cost of $500,000. There was no goodwill amortization during the
current quarter in accordance with Financial Accounting Standard No. 142.
Amortization of goodwill amounted to $354,000 during the quarter ended March 31,
2001.

Income tax expense for each of the quarters ended March 31, 2002 and 2001
was approximately $1.1 million. The effective income tax rate was 34.2% during
the current quarter, compared to 35.4% for the quarter ended March 31, 2001.

17



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##### Table of Contents






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 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.

In recent years, 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 FHLB advances to replace 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 invest
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 which 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, 2002, the Companys one year gap was a positive 5.2%
of total assets, compared to a positive 6.8% of total assets at December 31,
2001.

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 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, 2001 for a
detail of the GAP and NPV tables. There have been no material changes in the net
portfolio value since December 31, 2001.

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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

Except as described below, 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.

An action is pending against Forward Financial, in the United States
District Court for the Northern District of New York. It was filed by a bank, in
New York state court, served on December 1, 2000, and removed to federal court.
The bank alleges that Forward Financial has breached a written agreement between
the parties under which Forward Financial originated loans secured by
manufactured homes and then sold and assigned those loans to the bank. The bank
claims that Forward Financial breached express warranties in the agreement,
including an alleged warranty that all information in the loan documents
supplied by Forward Financial was true with regard to certain loans. The bank
also claims that Forward Financial committed fraud in connection with some of
these loans. The bank seeks damages for breaches of warranty. On
February 6, 2002, the Court denied Forward Financials Motion to Dismiss and, at
the same time, ruled on the parties cross-motions for summary judgment. The
Courts decision on the motions for summary judgment appears to be ambiguous and
inconsistent in certain important respects. The Courts decision does not
resolve the case; it does, however, leave Forward Financial with significant
defenses, which Forward Financial will pursue vigorously. Forward Financial
filed its Answer to the banks Second Amended Complaint on March 7, 2002, and
filed a Motion to Clarify the Courts decision on the summary judgment motions
on March 12, 2002. Forward Financial continues to believe its defenses are
strong. Because of the numerous uncertainties that surround the litigation,
management and legal counsel are unable to estimate the amount of loss, if any,
that the Company may incur with respect to this litigation. Consequently, no
loss provision has been recorded.

During the quarter ended March 31, 2002, the Company settled a lawsuit in
which its subsidiary, BNB, had been named a defendant. The civil action was
served on April 12, 1999 in a matter captioned Glyptal, Inc. v. John Hetherton,
Jr., Fleet Bank, NA and Broadway National Bank of Chelsea. The suit alleged
that an officer of the Plaintiff, Glyptal, embezzled funds from Plaintiff, by
making unauthorized transfers from Plaintiffs corporate accounts and
subsequently deposited checks drawn on such account into an account at BNB.
Plaintiff alleged that Broadway National knew or should have known of the
alleged fraudulent actions of Plaintiffs officer, and that BNB owed a duty to
Plaintiff to investigate the transactions an protect Plaintiff from the alleged
fraudulent actions. A mediator facilitated the parties reaching a mutually
acceptable settlement on March 4, 2002. BNB paid $500,000 in order to settle the
suit with the Plaintiff.




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.*        

*     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 29, 2002.

(b) Reports on Form 8-k

None

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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)
|                  
|                  
|                  
|                  
|                   |  |                                      |  |                                                                                       
|                  
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|                  
|                  
|Date: May 14, 2002 |  | By:                                  |  | /s/ David F. Holland                                                                  
|                   |  |                                      |  |                                                                                       
|                   |  |                                      |  | David F. HollandPresident and
Chief Executive Officer                                 
|                  
|                  
|                  
|                  
|                   |  |                                      |  |                                                                                       
|                  
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|Date: May 14, 2002 |  | By:                                  |  | /s/ John A. Simas                                                                     
|                   |  |                                      |  |                                                                                       
|                   |  |                                      |  | John A. SimasExecutive Vice President,
Chief Financial Officer
and Corporate Secretary

20