FORM 10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


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



For Quarter Ended:              June 30, 1998
                            __________________________

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                           (I.R.S. Employer
  incorporation or organization)                           Identification No.)

17 New England Executive Park, Burlington, Massachusetts  01803
________________________________________________________________________________
  (Address of principal executive offices)              (Zip Code)

                                  (781) 273-0300
________________________________________________________________________________
              (Registrant's telephone number, including area code)

                                  Not Applicable
________________________________________________________________________________
              (Former name, former address and former fiscal year,
                          if changed since last report)


    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes  (X)                No   (    )

Number of shares of common stock, par value $.01 per share,
outstanding as of July 31, 1998:  5,393,137.

<PAGE>

                        BOSTONFED BANCORP INC.
                              FORM 10-Q
                               INDEX



PART I - FINANCIAL INFORMATION                                     Page
______________________________                                     ____

 Item 1.    Financial Statements:

            Consolidated Balance Sheets as of 
            June 30, 1998 (unadudited) and December 31, 1997        2

            Consolidated Statements of Operations for the Three
            and Six Months ended June 30, 1998 and 1997 (unaudited) 3

            Consolidated Statement of Changes in Stockholders'
            Equity for the Six Months ended 
            June 30, 1998 (unaudited)                               4

            Consolidated Statements of Cash Flows for the
            Six Months ended June 30, 1998 and 1997 (unaudited)     5 - 6

            Notes to Consolidated Financial Statements              7 - 8

            Average Balances and Yield / Costs                      9 - 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 - 19





PART II _ OTHER INFORMATION
___________________________

 Item 1.    Legal Proceedings                                       19

 Item 2.    Changes in Securities                                   19

 Item 3.    Defaults Upon Senior Securities                         19

 Item 4.    Submission of Matters to a Vote of Security Holders     19

 Item 5.    Other Information                                       20

 Item 6.    Exhibits and Reports on Form 8-K                        20

 Signature Page                                                     21


                                       1

<PAGE>
                    BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                          Consolidated Balance Sheets
                          ---------------------------
                  (Dollars in Thousands, Except Per Share Data)

                                                    June 30,    December 31,
                                                      1998         1997
                                                  -----------  --------------
Assets                                            (Unaudited)
------------
Cash and cash equivalents                            $ 21,619   $  24,690
Investment securities available for sale
  (amortized cost of $52,090 and $31,554 at
  June 30, 1998 and December 31, 1997
  respectively)                                        52,124      31,768
Investment securities held to maturity (fair
  value of $13,029 and $20,630 at June 30, 1998
  and December 31, 1997, respectively)                 12,993      20,630
Mortgage-backed securities available for sale
  (amortized cost of $14,776 and $19,007 at
  June 30, 1998 and December 31, 1997, 
  respectively)                                        14,866      19,125
Mortgage-backed securities held to maturity (fair
  value of $33,317 and $38,903 at June 30, 1998 
  and December 31, 1997, respectively)                 32,799      38,350
Mortgage loans held for sale                           29,317       9,817
Loans, net of allowance for loan losses of $7,459
  and $6,600 at June 30, 1998 and December 31, 
  1997, respectively                                  855,494     791,728
Accrued interest receivable                             5,472       5,163
Stock in FHLB of Boston and Federal Reserve Bank       16,613      16,613
Premises and equipment                                  6,760       6,842
Real estate owned                                          99         195
Other assets                                           10,051       9,759
                                                     --------    --------
            Total assets                           $1,058,207    $974,680
                                                     ========    ========

Liabilities and Stockholders' Equity
---------------------------------------
Liabilities:
 Deposit accounts                                    $652,308    $619,821
 Federal Home Loan Bank advances                      314,061     256,500
 Securities sold under agreements to repurchase             0       7,140
 Advance payments by borrowers for taxes
  and insurance                                         2,870       3,133
 Other liabilities                                      6,414       6,475
                                                      -------     -------
            Total liabilities                         975,653     893,069
                                                      -------     -------
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 (5,393,137 and 
  5,520,437 shares outstanding, respectively)              66          66
 Additional paid-in capital                            66,080      65,282
 Retained earnings                                     41,408      38,645
 Accumulated other comprehensive income                    74         242
  Less Treasury Stock, (1,196,480 shares and 
   1,069,180 shares, respectively), at cost           (20,941)    (18,146)
  Less unallocated ESOP shares                         (3,174)     (3,174)
  Less unearned Stock-Based Incentive Plan               (959)     (1,304)
                                                      --------    -------- 
            Total stockholders' equity                 82,554      81,611
                                                      --------    --------
Total liabilities and stockholders' equity         $1,058,207    $974,680
                                                      ========    ========

See accompanying condensed notes to consolidated financial statements.
                                      2 
<PAGE>

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

                                 Three Months Ended        Six Months Ended
                                 ------------------       ------------------
                                 6/30/98    6/30/97       6/30/98    6/30/97
                                 ------------------       ------------------  
                              
                                                  (Unaudited)
                          
Interest income:
 Loans                          $ 16,047  $  14,686      $ 31,896  $  28,472
 Mortgage-backed securities          856      1,073         1,797      2,204
 Investment securities             1,390      1,311         2,801      2,391
                                 -------    -------       -------    -------
   Total interest income          18,293     17,070        36,494     33,067
                                 -------    -------       -------    -------
Interest expense:
 Deposit accounts                  5,922      4,762        11,616      8,934
 Borrowed funds                    4,480      4,420         8,783      9,105
                                 -------    -------       -------    -------
   Total interest expense         10,402      9,182        20,399     18,039
                                 -------    -------       -------    -------
Net interest income                7,891      7,888        16,095     15,028
Provision for loan losses            342        455           745        880
                                 -------    -------       -------    -------
 Net interest
   income after provision          7,549      7,433        15,350     14,148
Non-interest income:
 Loan processing and servicing 
   fees                              196        298           340        597
 Gain on sale of loans               771        252         1,426        382
 Deposit service fees                414        444           823        825
 Other                               205        187           401        372
                                 -------    -------       -------    -------
Total non-interest income          1,586      1,181         2,990      2,176
                                 -------    -------       -------    -------
Non-interest expense:
 Compensation and benefits         3,498      3,368         6,908      6,608
 Occupancy and equipment             810        846         1,584      1,542
 Federal deposit insurance
  premiums                            80         71           159        142
 Real estate operations              (24)      (219)          (38)    (1,110)
 Other                             1,729      1,430         3,460      2,779
                                 -------    -------       -------    -------
  Total non-interest expense       6,093      5,496        12,073      9,961
                                 -------    -------       -------    -------
Income before income taxes         3,042      3,118         6,267      6,363
Income tax expense                 1,239      1,413         2,575      2,744
                                 -------    -------       -------    -------
Net income                      $  1,803   $  1,705      $  3,692   $  3,619
                                 =======    =======       =======    =======    
                                                              
Basic earnings per share           $0.35      $0.30          $.72       $.63
Diluted earnings 
  per share                        $0.33      $0.30          $.68       $.62
Basic weighted average shares
  outstanding                  5,106,663  5,579,032     5,136,368  5,658,257
Common stock equivalents
  due to dilutive effect
  of stock options               315,319    176,867       288,453    176,867
Diluted total weighted average
  shares outstanding           5,421,982  5,755,899     5,424,821  5,835,124

See accompanying condensed notes to consolidated financial statements.
                                      3
<PAGE>
<TABLE>
                             BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Changes in Stockholders' Equity
                                        (In Thousands)
                                Six Months Ended June 30, 1998
                                          (Unaudited)
<CAPTION>
                                                                               
                                                                                                    Unearned
                                                                         Accumulated                 Stock-       
                                        Additional                          other     Unallocated    Based      Total            
                                Common    paid-in   Retained  Treasury  Comprehensive   ESOP       Incentive  stockholders'
                                stock     capital   earnings    Stock       income     shares         Plan       equity
                                ------   --------  ---------   --------   ----------   -----------  ----------  ------------    
<S>                             <C>       <C>        <C>       <C>            <C>         <C>          <C>          <C>
Balance at December 31, 1997    $ 66      65,282     38,645    (18,146)       242         (3,174)      (1,304)      81,611
                                                                       
Net income                       - -         - -      1,889       - -          - -           - -        - -          1,889

Change in net unrealized gain/(loss)
 on investments available for sale
 (net of tax benefit of $89)     - -         - -        - -       - -         (204)          - -        - -           (204)   
                                                                                                                    --------
Total comprehensive income       - -         - -        - -       - -          - -           - -        - -          1,685
                               
Cash dividends declared and
 paid ($0.07 per share)          - -         - -       (387)      - -          - -           - -        - -           (387)
                                                                  
Common Stock repurchased         
 (98,200 shares at an average
  price of $21.27 per share)     - -         - -        - -     (2,089)        - -           - -        - -         (2,089)         
Allocation relating to earned
  portion of Stock-Based
  Incentive Plan                 - -         - -        - -       - -          - -           - -         197           197

Options exercised                - -          (2)       - -         7          - -           - -        - -              5

Appreciation in fair value of
  shares charged to expense for
  compensation plans             - -         217        - -       - -          - -           - -        - -            217
                               -------    -------   --------   ---------    ---------      --------   ---------    --------
                                                                  
Balance at March 31, 1998       $ 66      65,497     40,147    (20,228)         38         (3,174)     (1,107)      81,239
                               -------    -------   --------   ---------    ---------      --------   ---------    --------         

Net income                       - -         - -      1,803       - -          - -           - -        - -          1,803

Change in net unrealized gain/(loss)
 on investments available for sale
 (net of tax benefit of $51)     - -         - -        - -       - -            36            - -        - -             36   
                                                                                                                    --------
Total comprehensive income       - -         - -        - -       - -          - -           - -        - -          1,839
                               
Cash dividends declared and
 paid ($0.10 per share)          - -         - -       (542)      - -          - -           - -        - -           (542)
                                                                  
Common Stock repurchased         
 (30,000 shares at an average
  price of $24.05 per share)     - -         - -        - -       (721)        - -           - -        - -           (721)         
Allocation relating to earned
  portion of Stock-Based
  Incentive Plan                 - -         - -        - -       - -          - -           - -        148            148

Options exercised                - -           1        - -         8          - -           - -        - -              9

Tax benefit of stock
  distributed relating to the
  stock-based incentive plan     - -         317        - -       - -          - -           - -        - -            317

Appreciation in fair value of
  shares charged to expense for
  compensation plans             - -         265        - -       - -          - -           - -        - -            265
                               -------    -------   --------   ---------    ---------      --------   ---------    --------
                                                                  
Balance at June 30, 1998        $ 66      66,080     41,408    (20,941)         74         (3,174)       (959)      82,554
                               -------    -------   --------   ---------    ---------      --------   ---------    --------         






                                                                 
                                    
</TABLE>
See accompanying condensed notes to consolidated financial statements.
                                      4
<PAGE>
           BOSTONFED BANCORP, INC. AND SUBSIDIARIES                           
            Consolidated Statements of Cash Flows                             
                        (In Thousands)                                         
                                                                           
                                                 For the Six Months Ended
                                                         June 30,            
                                                    1998          1997
                                                   -------       -------
                                                      (Unaudited)
Net cash flows from operating activities:
    Net income                                  $    3,692    $    3,619
    Adjustments to reconcile net income to
     net cash provided by operating activities:
      Depreciation, amortization and                              
       accretion, net                                  670           564
      Earned SIP shares                                345           603  
      Appreciation in fair value of shares      
       charged to expense for compensation plans       481           507
      Provision for loan losses                        745           880
      Loans originated for sale                   (182,855)      (54,708)
      Proceeds from sale of loans                  164,781        43,856
      Provision for valuation allowance 
       for real estate owned                             -            57
      Gain on sale of real estate held
       for development                                   -          (898) 
      Gain on sale of real estate          
       acquired through foreclosure                    (32)         (433)
      Gain on sale of loans                         (1,426)         (382)
      Increase in accrued interest receivable         (309)         (755)
      Decrease(increase) in prepaid expenses 
       and other assets, net                           (81)         2,389
      Decrease in accrued expenses and
       other liabilities, net                          (34)          (700)
                                                   --------       -------
          Net cash used in                      
           operating activities                    (14,023)       (5,401)
                                                   --------       -------
                                                              
Cash flows from investing activities:                         
  Net cash of acquired institution                       -        11,908
  Proceeds from sale of mortgage-backed
   securities available for sale                         -         1,084  
  Proceeds from maturities of investment
   securities held to maturity                       8,650         3,850    
  Proceeds from maturities of investment              
   securities available for sale                     3,000         2,000
  Purchase of investment securities               
   available for sale                              (23,489)      (12,019)
  Purchase of investment securities       
   held to maturity                                 (1,000)       (3,900)
  Purchase of mortgage-backed securities
   held to maturity                                   (997)            -
  Principal payments on mortgage-backed             
   securities available for sale                     4,190         1,548
  Principal payments on mortgage-           
   backed securities held to maturity                6,532         2,287
  Increase in loans, net                           (64,511)      (16,816)
  Purchases of premises and equipment                 (472)         (494)
  Proceeds from sale of real estate owned              128         2,360
  Additional investment in real estate owned             -            (2)       
  Proceeds from sale of real estate held for                                    
   development                                           -         2,102 
                                                    -------       -------
       Net cash used in 
         investing activities                      (67,969)       (6,092)
                                                    -------     ---------
                          -Continued on next page-  
                                      5
<PAGE>                          
           BOSTONFED BANCORP, INC. AND SUBSIDIARIES                           
            Consolidated Statements of Cash Flows                             
                        (In Thousands)                                         
                                                                           
                                                  For the Six Months Ended
                                                          June 30,        
                                                    1998            1997
                                                   -------        -------
                                                      (Unaudited)

Cash flows from financing activities:                         
    Increase in deposit accounts                    32,487        27,912
    Repayments of securities sold under
     agreement to repurchase                        (7,140)      (23,548)
    Proceeds from securities sold under 
     agreements to repurchase                            -        28,685 
    Repayments of Federal Home Loan            
     Bank advances                                (224,518)     (144,250)
    Proceeds from Federal Home Loan 
     Bank advances                                 282,079       140,500       
    Cash dividends paid                               (929)         (731) 
    Common stock repurchased                        (2,810)       (4,952)
    Options exercised                                   15             -
    Increase in advance payments by          
     borrowers for taxes and insurance                (263)          (42)
                                                  --------       -------
                                                              
         Net cash provided by  
            financing activities                    78,921        23,574
                                                   -------       -------        
                        
         Net increase(decrease)       
          in cash and cash equivalents              (3,071)       12,081
                                                              

Cash and cash equivalents at January 1              24,690        18,278
                                                   -------       ------- 
                                                              
Cash and cash equivalents at June 30            $   21,619    $   30,359
                                                   =======       =======
                                                              
Supplemental disclosure of cash flow                          
 information:
     Payments during 
      the six months ended June 30, for:

       Interest                                 $   20,062     $  17,798
                                                   =======       ======= 
                                                              
       Taxes                                    $    2,590     $     928 
                                                   =======       =======
                                                              
Supplemental schedule of non-cash                             
 investing activities:
       Transfers of mortgage       
        loans to real estate owned             $         -     $     223
                                                   =======       =======
See accompanying condensed notes to consolidated financial statements.
                                      6                            


<PAGE>
                         BOSTONFED BANCORP INC. AND SUBSIDIARIES
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (UNAUDITED)


NOTE 1:  BASIS OF PRESENTATION

     The accompanying  unaudited  consolidated  financial statements include the
accounts of BostonFed  Bancorp,  Inc.,  ("BostonFed"  or the  "Company") and its
wholly-owned  subsidiaries,  Boston Federal  Savings Bank ("BFS") and BF Funding
Corporation  as of June 30,  1998 and  December  31, 1997 and for the three- and
six-month  periods  ended  June  30,  1998 and  1997,  and the  accounts  of its
wholly-owned  subsidiary,  Broadway  National Bank ("BNB") effective at close of
business February 7, 1997 through June 30, 1998.  Broadway Capital  Corporation,
the former holding company of Broadway  National Bank, was merged into BostonFed
effective May 28, 1997.

     The  accompanying  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- and  six-month
periods  ended  June 30,  1998 and 1997 are not  necessarily  indicative  of the
results that may be expected for the entire fiscal year.

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and  Hedging  Activities",  which sets  accounting  and
reporting  standards  for  derivative  instruments  and hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in the balance sheet and measure those  instruments  at fair value.
This Statement is effective for years  beginning  January 1, 2000. The impact of
adoption is not expected to be material to the Company.


NOTE 2:  COMMITMENTS,  CONTINGENCIES AND CONTRACTS 

     At June  30,  1998,  the  Company  had  commitments  of $67.9  million  to
originate  mortgage loans and $4.1 million to purchase loans from  correspondent
lenders. Of these $72.0 million commitments,  $44.3 million were adjustable rate
mortgage  loans at rates  ranging  from 5.13% to 10.00% and $27.7  million  were
fixed rate mortgage loans with interest  rates ranging from 6.13% to 8.75%.  The
Company also had commitments to sell $53.8 million of mortgage loans.

     At June 30,  1998,  the  Company was  servicing  first  mortgage  loans of
approximately  $591.8  million,  which are either  partially or  wholly-owned by
others.

                                      7
<PAGE>
NOTE 3:  LEGISLATIVE MATTERS

     The  proposed  legislation  regarding  elimination  of the  federal  thrift
charter and related  issues  remains  pending  before  Congress.  The Company is
unable to predict whether such legislation will be enacted, the  extent to which
the legislation  would restrict or disrupt its operations or whether the BIF and
SAIF  funds  will  eventually  merge.  See Form 10-K for the  fiscal  year ended
December 31, 1997 for a discussion of the proposed legislation.


NOTE 4:  ACQUISITIONS 

     On February 7, 1997 the Company  acquired  BNB,  headquartered  in Chelsea,
Massachusetts.  The purchase  price was $22 million and was  accounted for using
the purchase method of accounting.  The results of operations include the effect
of the purchase  beginning February 8, 1997. In connection with the acquisition,
the fair value of assets acquired and liabilities assumed were as follows:

                                                 February 7, 1997
                                                 ----------------
                                                  (in thousands)
Assets acquired:
      Cash and cash equivalents                    $   5,758      
      Fed Funds                                       28,150
      Investments available for sale                  35,352     
      Investment securities                            4,646
      Loans, net                                      66,093
      Premises and equipment                           1,972
      Other assets                                     4,192
                                                   ---------
        Total assets acquired                        146,163

Liabilities assumed:
      Deposits                                       125,022
      Borrowed funds                                       -
      Other liabilities                                2,318
                                                    --------
        Total liabilities assumed                    127,340
                                                    --------
        Assets in excess of liabilities               18,823

        Cash paid to Broadway shareholders            22,000
                                                    --------
        Goodwill                                    $  3,177
                                                    ========


The  following  condensed  consolidated  pro-forma  results of the Company  were
prepared as if the  acquisition  had taken place on January 1 of the  respective
year. The pro-forma results are not necessarily indicative of the actual results
of operations had the Company's  acquisition of BNB actually occurred on January
1 of the respective year.

                                              Six Months Ended
                                             ------------------
                                                  6/30/97
                                             ------------------
                                    (In thousands except per share amounts)
Total interest and dividend 
 income and total 
 non-interest income                              $ 36,184
Net income                                        $  3,770
Net income per share                                $ 0.65





                                       8

<PAGE>

<TABLE>
                                                  BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                                                     Average Balances and Yields / Costs
                                                                    (Unaudited)
<CAPTION>
For the quarter ended June 30:                             1998                                       1997        
                                               -------------------------------------       ------------------------------     
                                                                            Average                                  Average
                                                 Average                     Yield/         Average                   Yield/
                                                 Balance       Interest       Cost          Balance      Interest      Cost
                                               ----------     ----------   ---------       ---------    ----------  ---------
                                                                            (Dollars in thousands)
Assets:                                                             
<S>                                             <C>            <C>          <C>           <C>             <C>           <C>
Interest-earning assets:                                                             
 Investment securities (1)                      $  88,588      $ 1,390      6.28%         $  87,776       $ 1,311       5.97%
 Loan, net and mortgage loans held for sale (2)   853,276       16,047      7.52%           757,134        14,686       7.76%
 Mortgage-backed securities (3)                    51,148          856      6.69%            63,400         1,073       6.77%
                                               ----------    ---------     ---------       ---------    ----------  ---------
   Total interest-earning assets                  993,012       18,293      7.37%           908,310        17,070       7.52%
                                                             ---------     ---------                    ----------  ---------
 Non-interest-earning assets                       41,963                                    41,125              
                                               ----------                                  ---------   
   Total assets                               $ 1,034,975                                 $ 949,435              
                                               ==========                                  =========   

Liabilities and Stockholders' Equity:

Interest-bearing Liabilities:
 Money market deposit accounts                  $  63,220          467      2.95%         $  63,696           470       2.95%
 Savings accounts                                 116,211          718      2.47%           121,141           752       2.48%
 NOW accounts                                     105,331          300      1.14%            99,670           277       1.11%
 Certificate accounts                             304,069        4,437      5.84%           232,641         3,263       5.61%
                                                ----------    ---------    ---------       ---------    ----------  ---------
   Total                                          588,831        5,922      4.02%           517,148         4,762       3.68%
 Borrowed Funds (4)                               300,064        4,480      5.97%           297,514         4,420       5.94%
                                                ----------    ---------    ---------       ---------    ----------  ---------
   Total interest-bearing liabilities             888,895       10,402      4.68%           814,662         9,182       4.51%
                                                              ---------    ---------                    ----------  ---------  
 Non-interest-bearing liabilities                  62,715                                    48,437           
                                                ----------                                 ---------      
   Total liabilities                              951,610                                   863,099               
                                                ----------                                 ---------  
 Stockholders' equity                              83,365                                    86,336               
                                                ----------                                 ---------
   Total liabilities and                        
    stockholders' equity                      $ 1,034,975                                 $ 949,435
                                                ==========                                 ========= 
 Net interest rate spread (5)                                  $ 7,891      2.69%                         $ 7,888       3.01%
                                                              =========    =========                    ==========  =========
 Net interest margin (6)                                                    3.18%                                       3.47%
                                                                           =========                                ========= 
Ratio of interest-earning assets to 
 interest-bearing liabilities                     111.71%                                   111.50%                
                                                 =========                                 =========        
<FN>
(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 5.97% and 5.93% for the three months ended June 30, 1998 and 
    June 30, 1997, 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.
</FN>
</TABLE>

                                       9
<PAGE>

<TABLE>
                                                  BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                                                     Average Balances and Yields / Costs
                                                                    (Unaudited)
<CAPTION>
For the six months ended June 30:                             1998                                       1997        
                                               -------------------------------------       ------------------------------     
                                                                            Average                                  Average
                                                 Average                     Yield/         Average                   Yield/
                                                 Balance       Interest       Cost          Balance      Interest      Cost
                                               ----------     ----------   ---------       ---------    ----------  ---------
                                                                            (Dollars in thousands)
Assets:                                                             
<S>                                             <C>            <C>          <C>           <C>             <C>           <C>
Interest-earning assets:                                                             
 Investment securities (1)                      $  90,293      $ 2,801      6.20%         $  80,104       $ 2,391       5.97%
 Loan, net and mortgage loans held for sale (2)   836,732       31,896      7.62%           740,057        28,472       7.69%
 Mortgage-backed securities (3)                    53,695        1,797      6.69%            64,642         2,204       6.82%
                                               ----------    ---------     ---------       ---------    ----------  ---------
   Total interest-earning assets                  980,720       36,494      7.44%           884,803        33,067       7.47%
                                                             ---------     ---------                    ----------  ---------
 Non-interest-earning assets                       41,680                                    39,674              
                                               ----------                                  ---------   
   Total assets                               $ 1,022,400                                 $ 924,477              
                                               ==========                                  =========   

Liabilities and Stockholders' Equity:

Interest-bearing Liabilities:
 Money market deposit accounts                  $  63,430          937      2.95%         $  60,501           892       2.95%
 Savings accounts                                 116,881        1,448      2.48%           114,234         1,414       2.48%
 NOW accounts                                     104,162          596      1.14%            92,561           518       1.12%
 Certificate accounts                             297,380        8,635      5.81%           219,773         6,110       5.56%
                                                ----------    ---------    ---------       ---------    ----------  ---------
   Total                                          581,853       11,616      3.99%           487,069         8,934       3.67%
 Borrowed Funds (4)                               295,195        8,783      5.95%           308,263         9,105       5.91%
                                                ----------    ---------    ---------       ---------    ----------  ---------
   Total interest-bearing liabilities             877,048       20,399      4.65%           795,332        18,039       4.54%
                                                              ---------    ---------                    ----------  ---------  
 Non-interest-bearing liabilities                  61,689                                    42,173           
                                                ----------                                 ---------      
   Total liabilities                              938,737                                   837,505               
                                                ----------                                 ---------  
 Stockholders' equity                              83,663                                    86,972               
                                                ----------                                 ---------
   Total liabilities and                        
    stockholders' equity                      $ 1,022,400                                 $ 924,477
                                                ==========                                 ========= 
 Net interest rate spread (5)                                  $16,095      2.79%                         $15,028       2.93%
                                                              =========    =========                    ==========  =========
 Net interest margin (6)                                                    3.28%                                       3.40%
                                                                           =========                                ========= 
Ratio of interest-earning assets to 
 interest-bearing liabilities                     111.82%                                   111.25%                
                                                 =========                                 =========        
<FN>
(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 5.94% and 5.90% for the six months ended June 30, 1998 and 
    June 30, 1997, 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.
</FN>
</TABLE>





                                        10
<PAGE>

                       BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                            MANAGEMENT'S DISCUSSION AND
                           ANALYSIS OF FINANCIAL POSITION
                              AND RESULTS OF OPERATIONS


A.  GENERAL

     The Company is the holding  company  for two banking  subsidiaries,  Boston
Federal Savings Bank, a federally  chartered community savings bank and Broadway
National Bank, a nationally  chartered commercial bank. On February 7, 1997, the
Company  acquired BNB and as a result of the  acquisition,  the Company became a
bank holding  company subject to regulation by the Federal Reserve Bank ("FRB").
Boston Federal Savings Bank is regulated by the Office of Thrift Supervision and
Broadway  National  Bank is  regulated by the Office of the  Comptroller  of the
Currency. Substantially all of the Company's business is coordinated through its
subsidiary  banks  and  references  herein  to  "Company"  include  the banks as
appropriate.  The  Company's  principal  business  has been and  continues to be
attracting  retail deposits from the general public in the areas surrounding its
branch offices and investing those deposits,  together with funds generated from
operations and borrowings, primarily in one- to four-family residential mortgage
loans.  To a lesser  extent,  the  Company  invests  in  multi-family  mortgage,
commercial real estate,  construction and land, consumer loans,  business loans,
and investment securities. The Company originates loans for investment and loans
for sale in the secondary market,  generally  retaining the servicing rights for
loans  sold.  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 mortgage loans,
and  to  a  lesser  extent,   interest  and  dividends  on  its  investment  and
mortgage-backed  securities,  fees  and loan  servicing  income.  The  Company's
primary sources of funds are deposits,  principal and interest payments on loans
and  mortgage-backed  securities,  FHLB  advances,   repurchase  agreements  and
proceeds from the sale of loans. Since the acquisition of BNB was consummated at
the close of  business  on February 7, 1997,  the  financial  statements  of the
Company and the following discussion regarding the Company's financial condition
at June 30, 1998 and December 31, 1997,  and the results of  operations  for the
three- and six- months  ended June 30, 1998 and 1997  includes  information  and
data of BNB from February 8, 1997 through June 30, 1998.

     Included  in other  non-interest  expenses  for the  three-  and  six-month
periods ended June 30, 1998 and 1997 are charges incurred in connection with the
modification  or  replacement of software or hardware in order for the Company's
computer and related  systems to properly  recognize  dates beyond  December 31,
1999. 

     The impact of computer  systems  ability to process dates beyond 1999,  the
Year 2000 issue,  creates a significant  business challenge for the Company. The
Company is addressing this issue as it affects all of its software, hardware and
other  systems to insure the  Company is Year 2000  compliant.  The  Company has
developed a plan that is based upon the FFIEC  (Federal  Financial  Institutions
Examination  Council)  recommended phases and time frames for insuring Year 2000
compliance.  These phases include awareness, assessment,  renovation, validation
and  implementation.  The Company has  completed  the  awareness  phase  through
development  of a Year 2000  committee and reporting  structure.  The assessment
phase has been  completed  with a review of all software,  hardware and business
systems  including an evaluation  of the critical  nature and year 2000 business
risk that each application presents.  The Company primarily utilizes third-party
vendors for the  processing of its critical data  processing  applications.  The
company is working  closely  with these critical  vendors to monitor  renovation
and  validation  efforts to insure that the time frames set out in the Company's
plan are met. The plan anticipates completion of renovations in 1998 and testing
of all critical  applications  by March 31, 1999. The target date for completion
of the  implementation  phase is June 30, 1999, a date prior to any  anticipated
impact on operating systems.

     In the event that the Company's  third-party vendors do not successfully or
timely achieve Year 2000 compliance, the Company's operations could be adversely
effected.  The Company is developing  contingency plans in the event that one or
all of these significant vendors fails to meet Year 2000 operating requirements.
Further,  the Company will seek  alternative  vendors should one of the critical
vendors  fail to achieve  satisfactory  Year 2000  compliance.  In the event the
Company's  current third party data  processing vendors were not to achieve Year
2000 compliance and the Company could not engage alternative vendors in a timely
manner the Company's operations would be adversely impacted.

     The  total  cost of the Year 2000  project  is  estimated  at  $300,000  to
$500,000 which includes  estimated costs and time  associated  with  third-party
Year 2000 issues,  based on information  currently  available.  Through June 30,
1998 the Company has expensed approximately $75,000 to date toward the Year 2000
remediation efforts. A significant portion of the costs associated with the year
2000  project are not  expected to be  incremental  to the  Company,  but rather
represent a reprioritization of existing internal systems technology.

     The  costs  of the  project  and the  date on which  the  Company  plans to
complete the Year 2000 modifications are based upon management's best estimates,
which are derived utilizing numerous assumptions of future events, including the
continued availability of certain resources,  third-party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved and actual  results  could differ  materially  from those  anticipated.
Specific  factors  that might cause such material differences  include,  but are
not limited to, the availability and cost of personnel trained in this area, the
ability  to  locate  and  correct  all  relevant  computer  codes,  and  similar
uncertainties.

                                       11

<PAGE>




B. FINANCIAL CONDITION


     Total  assets  at June 30,  1998 were  $1.06  billion,  compared  to $974.7
million at December 31, 1997,  an increase of $83.5  million or 8.6%.  The major
components of asset growth included  investment  securities  available for sale,
mortgage  loans  held for sale and  loans,  net of  allowance  for loan  losses.
Investment  securities available for sale increased to $52.1 million at June 30,
1998 from $31.8  million at December 31, 1997 due to an investment in two mutual
funds that invest  primarily in government  agency  mortgage-backed  securities.
Mortgage loans held for sale increased from $9.8 million at December 31, 1997 to
$29.3  million at June 30, 1998 due to the  increased  activity in the secondary
market  resulting  from  heavy  volume  of  fixed-  and   adjustable-rate   loan
originations  for sale.  Loans,  net of allowance for loan losses,  increased by
$63.8 million, or 8.1%, from a balance of $791.7 million at December 31, 1997 to
$855.5  million  at June  30,  1998,  primarily  due to  growth  in  BFS's  loan
portfolio.  Deposit accounts increased by $32.5 million from a balance of $619.8
million at December  31, 1997 to a balance of $652.3  million at June 30,  1998.
The increase is mainly attributable to the successful roll-out of a new 15-month
retail  certificate  of deposit  acquisition  program  initiated  by BFS.  BNB's
deposits also grew by $3.0 million  during the  six-months  ended June 30, 1998.
Federal  Home Loan Bank  advances  increased by $57.6  million,  to a balance of
$314.1 million at June 30, 1998 from a balance of $256.5 million at December 31,
1997. These advances were used to fund the increase in investments available for
sale and  mortgage  loans  held  for  sale.  Other  borrowed  money  (repurchase
agreements),  which  amounted to $7.1 million at December 31, 1997,  were repaid
during the six-months ended June 30, 1998.





                                      12
<PAGE>





C.  LIQUIDITY AND CAPITAL RESOURCES

     The Company's  primary sources of funds are deposits,  (including  brokered
deposits),    principal   and   interest   payments   on   loans,   investments,
mortgage-backed  and  related  securities  and loan  sales,  FHLB  advances  and
repurchase agreements.  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.  The
Company has maintained in excess of the required minimum levels of liquid assets
at BFS as defined by OTS regulations.  This requirement,  which may be varied at
the direction of the OTS depending  upon economic  conditions and deposit flows,
is based upon a  percentage  of the BFS's  deposits and  short-term  borrowings.
BFS's current required liquidity ratio is 4%. At June 30, 1998 and December 31,
1997  BFS's  liquidity  ratio  was 5.6% and 5.7%  respectively.  Management  has
maintained  liquidity as close as possible to the minimum requirement so that it
may invest any excess  liquidity in higher yielding  interest-earning  assets or
use  such  funds to  repay  higher  cost  FHLB  advances.  The OCC does not have
specific  guidance  for  liquidity  ratios  for BNB, but does  require  banks to
maintain  reasonable  and prudent  liquidity  levels.  Management  believes such
levels have been maintained since the acquisition date.

     The Company's  most liquid assets are cash,  overnight  federal funds sold,
short-term  investments 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.  At June 30,  1998,  BFS' cash,
short-term  investments  and loans and  investments  available  for sale totaled
$47.3  million  or 5.2% of  BFS's  total  assets.  Additional  investments  were
available which qualified for BFS's regulatory liquidity requirements.

     The Company has other sources of liquidity if a need for  additional  funds
arises,  including  FHLB  advances.  At June 30, 1998, BFS had $314.1 million in
advances  outstanding  from the FHLB.  The  Company  generally  does not pay the
highest deposit rates in its market and accordingly utilizes alternative sources
of funds such as FHLB advances and repurchase agreements to supplement cash flow
needs.

     At June 30,  1998,  the Company had  commitments  to  originate  loans and
unused  outstanding  lines of  credit  totaling  $126.0  million.   The  Company
anticipates  that it will have  sufficient  funds  available to meet its current
loan origination commitments. Certificate accounts which are scheduled to mature
in less than one year from June 30, 1998, totaled $149.8 million.

     At June 30, 1998,  the  consolidated  stockholders'  equity to total assets
ratio was 7.8%.  As of June 30, 1998, the  Company, BFS and BNB exceeded  all of
their  regulatory  capital  requirements.  The  Company's  consolidated  Tier 1 
capital,  total capital and Tier 1 leverage  ratios were 14.0%,  15.2% and 7.7%,
respectively.  BFS's tier 1,  total risk-based,  tier 1 risk-based and  tangible
equity  capital  ratios  were  5.4%, 10.8%, 9.6% and 5.4%,  respectively.  BNB's
respective capital ratios were 9.3%, 16.2%, 15.2%, and 7.5%.

                                       13

<PAGE>
D.  COMPARISON OF THREE- AND SIX-MONTHS ENDED JUNE 30, 1998 AND 1997

   General

     Earnings  for the quarter  ended June 30, 1998 were $1.8  million,  or $.35
basic  earnings  per  share,  $.33 per share on a  diluted  basis,  compared  to
earnings of $1.7 million,  or $.30 basic and diluted  earnings per share for the
second  quarter of 1997.  Earnings for the  six-months  ended June 30, 1998 were
$3.7  million or $.72  basic  earnings  per  share,  $.68 per share on a diluted
basis,  compared to earnings of $3.6  million or $.63 basic  earnings per share,
$.62 per share on a diluted  basis  during the  six-months  ended June 30, 1997.
Earnings  for the first six months of 1997 were  enhanced  by  earnings  of $1.1
million (before income taxes) from real estate operations, which included a gain
of $891,000 (before income taxes), from the sale of a land sub-division owned by
a  subsidiary  of BFS. The current six months were also  positively  impacted by
gain on sale of loans of $1.4 million  (before  income  taxes)  compared to last
year's first six months gain on sale of loans totaling  $382,000  (before income
tax).  The  Company's  annualized  return  on  average  assets  was .72% and the
annualized  return  on  average   stockholders'  equity  was  8.83%  during  the
six-months ended June 30, 1998,  compared to .78% and 8.32%,  respectively,  for
the  six-months  ended  June  30,  1997  (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 June
30, 1998 increased by $1.2 million,  or 7.0%, to $18.3 million,  compared to the
quarter  ended June 30,  1997.  The  increase in interest  income was  primarily
attributable  to a $84.7 million  increase in average  interest-earning  assets,
offset by a 15 basis point decrease in the average  yield.  The average yield on
interest-earning  assets  decreased to 7.37% for the three months ended June 30,
1998 from 7.52% for the three months ended June 30, 1997.  For the first half of
1998, total interest income was $36.5 million, compared to $33.1 million for the
same period in 1997.  The major reason for the  increase was also the  increased
average balances of interest-earning assets which were $980.7 million during the
six-months ended June 30, 1998, compared to $884.8 million during the comparable
period in 1997. The average  yields during the  six-months  ending June 30, 1998
and 1997 were 7.44% and 7.47%, respectively.

     Interest  income  on  loans,  net,  for the  quarter  ended  June 30,  1998
increased by $1.3 million,  or 8.8%, to $16.0 million  compared to $14.7 million
for the same quarter in 1997. On a year to date basis, interest income on loans.
net,  increased  $3.4  million to $31.9  million from the $28.5  million  earned
during the first half of 1997. The increase in interest income from loans,  net,
for the quarter and six months ended June 30, 1998, compared to the same periods
last year, was primarily  attributable to increases in average balances of $96.1
million and $96.7 million,  respectively. The earnings impact of higher balances
of loans,  net was  partially offset by  declines in the average yield on loans,
net which  decreased by 24 basis  points to 7.52% during the quarter  ended June
30, 1998, compared to 7.76% during the quarter ended June 30, 1997. On a year to
date basis,  the yield on loans, net,  decreased  from 7.69% for  the six months
ended June 30,  1997,  to 7.62%  during the  current  year  period.  Interest on
mortgage-backed  securities  for the quarter  ended June 30, 1998  decreased  by
$217,000 to  $856,000,  compared to $1.1  million for the same  quarter in 1997.
This  decrease in income was due  primarily to the $12.3  million  lower average
balance  during the quarter  ended June 30, 1998,  compared to the quarter ended
June 30, 1997. Additionally,  the average yield declined by 8 basis points to an
average of 6.69% during the quarter  ended June 30,  1998,  compared to the same
quarter  last  year.  On a year  to  date  basis,  interest  on  mortgage-backed
securities was $1.8 million,  compared to last year's comparable period total of
$2.2 million,  also due to declines in average balances and yields.  The average
balance of mortgage-backed securities declined by $10.9 million to $53.7 million
for the six-months ended June 30, 1998 compared to the prior year period average
balance of $64.5  million.  Average  yields  were also lower by 13 basis  points
during the current period.

     Income  from  investment  securities  was $1.4  million  during  the second
quarter of 1998, compared to $1.3 million for the comparable quarter in 1997. On
a year to date basis,  income from  investment  securities  was $2.8 million and
$2.4 million,  respectively for the six-months ended June 30, 1998 and 1997. The
average  yield on  investment  securities  increased by 31 and 23 basis  points,
respectively,  in the current  three- and  six-month  periods,  compared to last
year's periods due to the higher yields  received by BFS on the two mutual funds
it invested in January,  1998. The average  balance  increased by $812,000 to an
average of $88.6 million during the quarter ended June 30, 1998,  compared to an
average  balance of $87.8 million for the quarter  ended June 30, 1997.  For the
six-months ended June 30, 1998, the average  investment  securities  balance was
$90.3  million,  compared  to $80.1 for the prior  period.  The  increase in the
average  balance also is primarily  due to BFS's  investment in the mutual funds
previously mentioned.

                                      14
<PAGE>
   Interest Expense

     Total  interest  expense on  interest-bearing  liabilities  for the quarter
ended  June 30,  1998  increased  by $1.2  million  or 13.0%,  to $10.4  million
compared to the quarter  ended June 30, 1997.  The increase in interest  expense
for the quarter  ended June 30, 1998 was due  primarily  to an increase of $74.2
million in the average balance of  interest-bearing  liabilities  which averaged
$888.9 million  during the current  quarter,  compared to an average  balance of
$814.7 million during the quarter ended June 30, 1997. A 17 basis point increase
in the average cost of  interest-bearing  liabilities  also  contributed  to the
increase in interest expense.  The average cost of interest-bearing  liabilities
increased to 4.68% during the quarter ended June 30, 1998, compared to 4.51% for
last year's  comparable  quarter.  On a year to date basis,  interest expense on
interest-bearing  liabilities totaled $20.4 million,  compared to last year's to
date total of $18.0 million,  a 13.3%  increase.  The increase was caused by the
combined  effects of an 11 basis point increase in the average cost of funds and
an increase of $81.7  million in average  balances  during the six months  ended
June 30, 1998, compared to the prior year period.

     Interest expense on deposit accounts was $5.9 million for the quarter ended
June 30, 1998, an increase of $1.1 million from the $4.8 million for the quarter
ended June 30,  1997.  The  increase in the  expense  was due to higher  average
deposit  account  balances of $71.7 million and a 34 basis point increase in the
average  cost of funds during the quarter  ended June 30, 1998,  compared to the
quarter  ended June 30, 1997. A major reason for the higher cost of funds is due
to the Company's use of wholesale  brokered  certificates  of deposit,  which at
June 30, 1998 amounted to $75 million  compared to $35 million at June 30, 1997.
The average  balance of deposit  accounts  increased from $517.1 million for the
quarter  ending  June 30, 1997 to an average  balance of $588.8  million for the
quarter ending June 30, 1998, mostly due to the successful  roll-out of a new 15
month retail certificate of deposit  acquisition program initiated by BFS during
1998.  For the  six-months  ended  June 30,  1998,  interest  expense on deposit
accounts was $11.6 million,  compared $8.9 million for the prior year period, an
increase  of $2.7  million or 30.3%.  The  increase  was caused by the  combined
effects of higher average deposit account  balances that averaged $581.9 million
during the  six-months  ended June 30, 1998,  compared to $487.1  million in the
prior year period.  Additionally, a 32 basis point increase in  the average cost
of deposit  accounts  also  contributed  to the  increase in  interest  expense.
Interest  expense on borrowed funds  increased from $4.4 million for the quarter
ended June 30, 1997 to $4.5 million for the current quarter. The average cost of
borrowed funds increased from 5.94% during the quarter ended June 30, 1997 to an
average of 5.97% during the current quarter. The average balances increased from
$297.5 million during the second quarter of 1997 to an average balance of $300.1
million during the second  quarter of 1998.  For the  six-months  ended June 30,
1998,  interest  expense on borrowed  funds was $8.8  million,  compared to $9.1
million  for the  six-months  ended June 30,  1997.  The  reduction  in interest
expense on borrowed funds was caused by a $13.1 million  decrease in the average
balances from $308.3 million during the six-months ended June 30, 1997 to $295.2
million during the current  period.  The decrease was offset  somewhat by a four
basis increase in the cost of borrowed funds during the current quarter.

Net Interest Income

     Net interest income during the second quarter of 1998 was $7.9 million, the
same as the second quarter of 1997 as industry-wide  margin shrinkage was offset
by net interest  income earned from asset growth.  On a year to date basis,  net
interest income was $16.1 million,  compared to $15.0 million for the prior year
to date. The net interest  margin,  at 3.18% for the quarter ended June 30, 1998
was 29 basis points lower than last year's comparable quarter. On a year to date
basis, the net interest margin  of 3.28% is 12 basis points lower than last year
to  date.  The net  interest  margin  was  compressed  due to the  effects  of a
continuation  of the  relatively  flat interest rate yield curve.

                                      15
<PAGE>

Provision for Loan Losses

     The  Company's  provision  for loan losses  amounted  to  $342,000  for the
quarter ended June 30, 1998,  compared to the $455,000  loan loss  provision for
the  comparable  quarter  last year.  For the six months ended June 30, 1998 and
1997, the provision was $745,000 and $880,000,  respectively.  The allowance for
loan losses  increased from $6.6 million at December 31, 1997 to $7.5 million at
June 30, 1998 due to the year-to-date provision and net recoveries.

     The Company  establishes  provisions for loan losses,  which are charged to
operations,  in order to maintain the allowance for loan losses at a level which
is deemed to be  appropriate  based  upon  management's  assessment  of the risk
inherent in its loan portfolio in light of current economic  conditions,  actual
loss  experience,  industry  trends and other  factors which may affect the real
estate  values in the  Company's  market area.  In addition  various  regulatory
agencies, as an integral part of their examination process,  periodically review
the Company's  allowance for loan losses.  Such agencies may require the Company
to make  additional  provisions for estimated loan losses based upon  judgements
different  from those of  management.  While  management  believes  the  current
allowance for loan losses is adequate,  actual losses are dependent  upon future
events, and as such, future provisions for loan losses may be necessary. 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 June 30, 1998, the Company  classified  $5.5 million of
loans ($4.3 million of BFS and $1.2 million of BNB) as sub-standard  compared to
$5.8 million ($4.3 million of BFS and $1.5 million of BNB) at December 31, 1997.
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 June 30, 1998 was sufficient to provide for  anticipated  losses
inherent in the loan portfolio.

     The Company's allowance for loan losses at June 30, 1998 was $7.5 million,
which  represented  500.3%  of  non-performing  loans  or .84% of  total  loans,
compared to $6.6 million at December 31, 1997, or 469.8% of non-performing loans
and .82% of total loans.

     Non-performing  loans at June 30, 1998 amounted to $1.5 million or .17% of
total loans,  compared to $1.4 million,  or .17% of total loans, at December 31,
1997.

     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 $78,000 and $91,000 for the six-month  periods ended June 30, 1998 and 1997,
respectively. The amount of interest income that was recorded on these loans was
$30,000  and  $17,000 for the  six-month  periods  ended June 30, 1998 and 1997,
respectively.

     At June 30,  1998,  loans  characterized  as impaired,  (which  include all
non-performing loans and some other sub-standard  assets),  pursuant to SFAS No.
114,  "Accounting by Creditors for Impairment of a Loan",  ("SFAS 114") and SFAS
No. 118,  "Accounting by Creditors for Impairment of a Loan--Income  Recognition
and  Disclosure",  ("SFAS 118") totaled $2.0 million.  All of the impaired loans
have been measured  using the fair value of the  collateral  method.  During the
six-months ended June 30, 1998, the average recorded value of impaired loans was
$2.0 million,  $59,000  interest  income was recognized and $106,000 of interest
income would have been recognized under the loans' original terms.

     At June 30,  1998 and at  December  31,  1997,  the Company had $99,000 and
$195,000  in real estate  owned,  respectively.  Further,  at June 30, 1998 the
Company also had restructured  real estate loans amounting to $214,000 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.

                                      16
<PAGE>

Non-Interest Income

     Total  non-interest  income in the  second  quarter  of 1998  increased  by
$405,000, or 34.3%, to $1.6 million from $1.2 million for the three months ended
June 30, 1997. The increase is mainly due to a $519,000 increase in gain on sale
of loans resulting from favorable  secondary market conditions,  offset somewhat
by lower loan  processing  and servicing fees due to an adjustment to reduce the
valuation  of  originated   mortgage   servicing  rights  of  $45,000  that  was
necessitated by faster loan prepayment  speeds during the current  quarter.  For
the six-months ended June 30, 1998, total non-interest  income increased to $3.0
million,  compared to $2.2  million for the prior period due to the same reasons
as for the current quarter.  The adjustment to mortgage servicing rights for the
six months ended June 30, 1998 was $181,000.

Non-Interest Expense

     Total non-interest  expense was $6.1 million for the quarter ended June 30,
1998 compared to $5.5 million for the comparable  quarter in 1997.  Compensation
and benefits  increased by $130,000,  or 3.9%, from $3.4 million for the quarter
ended June 30, 1997 to $3.5  million for the quarter  ended June 30, 1998 due to
normal  year  over  year  increases.  Increased  ESOP  expenses  were  offset by
decreases  in the  cost of the  stock-based  incentive  plan.  On a year to date
basis,  compensation and benefits expense increased by $300,000 or 4.5%, to $6.9
million for the six-months  ended June 30, 1998 compared to $6.6 million for the
prior period.  Real estate  operations  provided  income of $24,000  during  the
quarter  ended  June 30,  1998 due to  gains  on the sale of real  estate  owned
properties,  compared to income of $219,000  during the prior year's  comparable
quarter, also due to gains on the sale of real estate owned properties.  For the
six months ended June 30, 1998, real estate  operations  earned $38,000 compared
to  earnings  of  $1.1   million  for  the  six  months  ended  June  30,  1997.
Approximately  $891,000  of the  $1.1  million  was  due to the  sale  of a land
sub-division  by a  subsidiary  of BFS during the first  quarter of 1997.  Other
non-interest  expenses increased to $1.7 million  during the quarter ended June
30, 1998 from $1.4 million  during the  comparable  quarter last year. The major
reasons for the increase were  consulting  and legal costs incurred to assist in
the  implementation of certain tax planning  strategies,  and the inclusion of a
full six months of BNB's expenses for the current period.

Income Tax Expense

     Income tax expense for the  quarter  ended June 30, 1998 was $1.2  million,
compared to $1.4  million for the quarter  ended June 30,  1997.  The  effective
income tax rate was 40.7% during the current quarter,  compared to 45.3% for the
quarter  ended June 30,  1997.  On a year to date basis,  income tax expense was
$2.6 million,  for an effective  rate of 41.1%,  compared to $2.7 million for an
effective  rate of 43.1% for the six  months  ended June 30,  1997.  As with the
current  quarter,  the reason for the decreased tax expense and  effective  tax
rates during the current  six-months period is due to the  implementation of tax
saving strategies. 

                                        17

<PAGE>
Item 3. MARKET RISK AND MANAGEMENT OF INTEREST RATE RISK

     The principal  market risk 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  deposits.  The
volatile and generally  rising rate  environment  of 1996 allowed the Company to
originate   record  loan  volume,   the  majority  of  loans   originated   were
adjustable-rate  loans, which were primarily retained for BFS's portfolio.  Many
of these loans,  however,  do not reprice until the third or fifth year of their
term.  As  interest  rates  generally  fell  during the second  half of 1997 and
remained at a low level in the first half of 1998,  customer  preference shifted
to longer-term  fixed rate  mortgages,  many of which were sold in the secondary
market.  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 June 30, 1998,  the Company's one year gap was a positive 11.1% of total
assets, compared to a positive 10.2% of total assets at December 31, 1997.

     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.

                                      18

<PAGE>
     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, 1997 for a
detail of the GAP and NPV tables. There have been no material changes in the net
portfolio value since December 31, 1997.




                         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     The Company is not involved in any pending material legal proceedings other
than routine  legal  proceedings  occurring in the ordinary  course of business.
Such routine legal proceedings,  in the aggregate, are believed by management to
be immaterial to the Company's financial condition or results of operations.

Item 2.  Changes in Securities


       Not applicable


Item 3.  Defaults Upon Senior Securities


       Not applicable


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

(A) The Annual Meeting of Stockholders of the Corporation 
    was held on April 29, 1998.
(B) Directors elected at Annual Meeting:

(1) Election of Directors

Nominee                    Total Votes For        Total Votes Withheld

David F. Holland             4,946,387                 33,635
Irwin W. Sizer               4,943,056                 36,966

(2) Continuing Directors              Year Term Expires

     Edward P. Callahan                     2000
     David P. Conley                        1999
     Richard J. Dennis, Sr.                 2000
     Charles R. Kent                        2000
     W. Robert Mill                         1999

(C) Other matters submitted to a vote of the Stockholders of the Corporation:

Selection of Independent Auditors

Votes For      Votes Against        Abstentions    Broker Non-votes
4,939,917          7,747              12,358          20,000

                                      19



<PAGE>

Item 5.  Other Information

       Not applicable


Item 6.  Exhibits and Reports on Form 8-K
    
    (a) Exhibits
          3.1  Certificate of Incorporation*
          3.2  Bylaws*
          27   Financial Data Schedule


* Incorporated herein to the Company's Registration Statement on Form S-1,
as amended, (SEC No. 33-94860) originally filed on July 21, 1995
 

                                      20

<PAGE>

                                  SIGNATURES



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the

registrant  has duly  caused  this  report  to be  signed  on its  behalf by the

undersigned thereunto duly authorized.


                                           BOSTONFED BANCORP, INC.
                                                  (Registrant)


Date:  August 14, 1998                          By:     /s/ David F. Holland
                                        __________________________________
                                                     David F. Holland
                                                     President and
                                                 Chief Executive Officer


Date:  August 14, 1998                           By:     /s/ John A. Simas
                                        __________________________________
                                                     John A. Simas
                                                  Executive Vice President,
                                                  Chief Financial Officer
                                                  and Corporate Secretary

                                      21