<PAGE>   1

                                    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:               March 31, 2001
                            --------------------------

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 April 30, 2001:  4,528,481.

<PAGE>   2

                        BOSTONFED BANCORP INC.
                              FORM 10-Q
                               INDEX



PART I - FINANCIAL INFORMATION                                          Page
------------------------------                                          ----

 Item 1.    Financial Statements:

            Consolidated Balance Sheets as of
            March 31, 2001 (unaudited) and December 31, 2000               2

            Consolidated Statements of Operations for the Three
            Months ended March 31, 2001 and 2000 (unaudited)               3

            Consolidated Statement of Changes in Stockholders'
            Equity for the Three Months ended
            March 31, 2001 (unaudited)                                     4

            Consolidated Statements of Cash Flows for the
            Three Months ended March 31, 2001 and 2000 (unaudited)     5 - 6

            Notes to Consolidated Financial Statements                 7 - 8

 Item 2     Average Balances and Yield / Costs                             9

            Management's Discussion and Analysis of Financial
            Condition and Results of Operations                       10 - 16


 Item 3.    Quantitative and Qualitative Disclosures About
            Market Risk                                                    17





PART II - OTHER INFORMATION
---------------------------

 Item 1.    Legal Proceedings                                              18

 Item 2.    Changes in Securities and Use of Proceeds                      18

 Item 3.    Defaults Upon Senior Securities                                18

 Item 4.    Submission of Matters to a Vote of Security Holders            18

 Item 5.    Other Information                                              18

 Item 6.    Exhibits and Reports on Form 8-K                               18

 Signature Page                                                            19


                                       1

<PAGE>   3
                    BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                          Consolidated Balance Sheets
                          ---------------------------
                                (In Thousands)

                                                   March 31,    December 31,
                                                     2001          2000
                                                  -----------  --------------
Assets                                            (Unaudited)
------------
Cash and cash equivalents                            $ 54,809   $  50,675
Investment securities available for sale
  (amortized cost of $67,383 at March 31, 2001
   and $63,361 at December 31, 2000)                   67,613      63,421
Investment securities held to maturity (fair
  value of $ 1,338 at March 31, 2001 and $2,328
  at December 31, 2000)                                 1,304       2,304
Mortgage-backed securities available for sale
  (amortized cost of $39,497 at March 31, 2001
   and $15,488 at December 31, 2000)                   39,483      15,372
Mortgage-backed securities held to maturity (fair
  value of $53,288 at March 31, 2001 and $54,970
  at December 31, 2000)                                52,825      55,283
Loans held for sale                                    19,110      12,816
Loans, net of allowance for loan losses of $11,504
  and $11,381 at March 31, 2001 and December 31,
  2000                                              1,041,927   1,036,435
Accrued interest receivable                             7,404       7,375
Stock in FHLB of Boston and Federal Reserve Bank       20,674      20,649
Premises and equipment                                 10,244      10,647
Real estate owned                                         147         145
Goodwill, net of amortization                          18,840      19,195
Other assets                                           34,282      33,465
                                                     --------    --------
            Total assets                           $1,368,662  $1,327,782
                                                     ========    ========

Liabilities and Stockholders' Equity
---------------------------------------
Liabilities:
 Deposit accounts                                    $858,310    $849,647
 Federal Home Loan Bank advances and other
  Borrowed Money                                      376,500     344,334
 Corporation-obligated mandatorily redeemable
  capital securities                                   32,000      32,000
 Advance payments by borrowers for taxes
  and insurance                                         3,091       2,864
 Other liabilities                                      9,360       9,024
                                                      -------     -------
            Total liabilities                       1,279,261   1,237,869
                                                     -------     -------

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 (4,555,481
  and 4,648,481 shares outstanding at March 31, 2001
  and December 31, 2000, respectively)                     66          66
 Additional paid-in capital                            67,706      67,538
 Retained earnings                                     59,102      57,696
 Accumulated other comprehensive income                   132          88
  Less: Treasury stock, at cost (2,052,236 shares
         and 1,956,736 shares at March 31, 2001 and
         December 31, 2000, respectively at cost)     (36,448)    (34,281)
  Less: Unallocated ESOP shares                        (1,058)     (1,058)
  Less: Unearned Stock-Based Incentive Plan               (99)       (136)
                                                      --------    --------
            Total stockholders' equity                 89,401      89,913
                                                      --------    --------
Total liabilities and stockholders' equity         $1,368,662  $1,327,782
                                                      ========    ========

See accompanying condensed notes to consolidated financial statements.


                                       2
<PAGE>   4

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

                                 Three Months Ended
                                 ------------------
                                 3/31/01    3/31/00
                                 ------------------

                                     (Unaudited)

Interest income:
 Loans                          $ 20,890  $  19,661
 Mortgage-backed securities        1,286        698
 Investment securities             1,690      1,387
                                 -------    -------
   Total interest income          23,866     21,746
                                 -------    -------
Interest expense:
 Deposit accounts                  8,224      7,180
 Borrowed funds                    5,414      5,716
 Corporation obligated mandatorily
  redeemable capital securities
  distributions                      880          0
                                 -------    -------
   Total interest expense         14,518     12,896
                                 -------    -------
Net interest income                9,348      8,850
Provision for loan losses            212        251
                                 -------    -------
 Net interest
   income after provision          9,136      8,599
Non-interest income:
 Deposit service fees                574        460
 Loan processing and servicing
   fees                              130        175
 Gain on sale of loans             1,619      1,908
 Income from bank owned life
   insurance                         306        315
 Gain on sale of investments         215          0
 Other                               356        308
                                 -------    -------
   Total non-interest income       3,200      3,166
                                 -------    -------
Non-interest expense:
 Compensation and benefits         5,452      5,134
 Occupancy and equipment           1,092      1,004
 Data processing                     439        355
 Advertising expense                 220        244
 Federal deposit insurance
  premiums                            44         39
 Real estate operations                3       (287)
 Amortization of goodwill            354        343
 Other                             1,622      1,395
                                 -------    -------
  Total non-interest expense       9,226      8,227
                                 -------    -------
Income before income taxes         3,110      3,538
Income tax expense                 1,100      1,256
                                 -------    -------
Net income                      $  2,010   $  2,282
                                 =======    =======

Basic earnings per share           $0.45      $0.48
Diluted earnings
  per share                        $0.42      $0.48
Basic weighted average shares
  outstanding                  4,497,832  4,744,871
Common stock equivalents
  due to dilutive effect
  of stock options               320,229     55,817
Diluted total weighted average
  shares outstanding           4,818,061  4,800,688

See accompanying condensed notes to consolidated financial statements.
                                       3
<PAGE>   5
                         BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                  Consolidated Statements of Changes in Stockholders' Equity
                            Three Months Ended March 31, 2001
                                   (In Thousands)
                                     (Unaudited)



<TABLE>


                                                                         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
                                ------   --------  ---------   --------   ----------   -----------  ----------  ------------

<S>                             <C>       <C>        <C>       <C>            <C>         <C>          <C>          <C>
Balance at December 31, 2000    $ 66      67,538     57,696    (34,281)          88      (1,058)      (136)         89,913

Net income                       - -         - -      2,010       - -           - -          - -        - -          2,010

Change in net unrealized gain/(loss)
 on investments available for sale
 (net of tax of $25)             - -         - -        - -       - -            44          - -        - -             44
                                                                                                                    --------
Total comprehensive income       - -         - -        - -       - -           - -          - -        - -          2,054

Cash dividends declared and
 paid ($0.13 per share)          - -         - -       (604)      - -           - -          - -        - -           (604)

Common Stock repurchased
 (96 shares at an average
  price of $23.15 per share)     - -         - -        - -     (2,211)         - -          - -        - -         (2,211)

Stock option exercised
 (3 shares at an average price
  $21.38 per share, net of tax
  benefit)                       - -          (3)       - -         44          - -          - -        - -             41

Allocation relating to earned
  portion of Stock-Based
  Incentive Plan                 - -         - -        - -       - -           - -          - -         37             37

Appreciation in fair value of
  shares charged to expense for
  compensation plans             - -         171        - -       - -           - -          - -        - -            171
                               -------    -------   --------   ---------    ---------     --------   ---------    --------

Balance at March 31, 2001       $ 66      67,706      59,102   (36,448)         132       (1,058)       (99)        89,401
                               -------    -------   --------   ---------    ---------     --------   ---------    --------


</TABLE>

See accompanying condensed notes to consolidated financial statements.

                                       4
<PAGE>   6
           BOSTONFED BANCORP, INC. AND SUBSIDIARIES
            Consolidated Statements of Cash Flows
                        (In Thousands)

                                                 For the Three Months Ended
                                                         March 31,
                                                    2001          2000
                                                   -------       -------
                                                      (Unaudited)
Net cash flows from operating activities:
    Net income                                  $    2,010    $    2,282
    Adjustments to reconcile net income to
     net cash provided by operating activities:
      Depreciation, amortization and
       accretion, net                                  599           629
      Earned SIP shares                                 37            69
      Appreciation in fair value of shares
       charged to expense for compensation plans       171            75
      Income from bank owned life insurance           (306)         (314)
      Provision for loan losses                        212           251
      Provision for valuation allowance for
        real state owned                                 -             6
      Loans originated for sale                    (85,066)      (61,081)
      Proceeds from sale of loan                    80,391        62,636
      Gain on sale of premises and equipment           (60)            -
      Net gain on sale of investment securities       (215)            -
      Gain on sale of loans                         (1,619)       (1,908)
      Increase in accrued interest receivable          (29)         (237)
      Increase in prepaid expenses
       and other assets, net                          (511)         (712)
      Increase in accrued expenses and
       other liabilities, net                          108           251
                                                   --------       -------
          Net cash provided by (used in)
           operating activities                     (4,278)        1,947
                                                   --------       -------

Cash flows from investing activities:
  Net cash paid for Forward Financial                    -          (994)
  Proceeds from sale of investment
   securities available for sale                     3,113             -
  Proceeds from maturities of investment
   securities held to maturity                       1,000             -
  Proceeds from maturities of investment
   securities available for sale                    16,900         1,000
  Purchase of investment securities
   available for sale                              (23,883)       (4,311)
  Purchase of mortgage-backed securities
   available for sale                              (24,960)            -
  Purchase of FHLB and Federal Reserve Stock           (25)         (338)
  Principal payments on mortgage-backed
   securities available for sale                       941           398
  Principal payments on mortgage-
   backed securities held to maturity                2,454           826
  Principal payments on investment
   securities available for sale                       150           140
  Increase in loans, net                            (5,704)      (26,631)
  Purchases of premises and equipment                 (197)       (1,131)
  Proceeds from sale of premises and equipment         343             -
  Additional investment in real estate owned            (2)            -
                                                    -------       -------
       Net cash used in
         investing activities                      (29,870)      (31,041)
                                                    -------     ---------
                          -Continued on next page-
                                       5
<PAGE>   7
           BOSTONFED BANCORP, INC. AND SUBSIDIARIES
            Consolidated Statements of Cash Flows
                        (In Thousands)

                                                 For the Three Months Ended
                                                          March 31,
                                                    2001            2000
                                                   -------        -------
                                                      (Unaudited)

Cash flows from financing activities:
    Increase in deposit accounts                    8,663         38,417
    Repayments of Federal Home Loan
     Bank advances                                (63,964)       (76,123)
    Proceeds from Federal Home Loan
     Bank advances                                 96,130         66,124
    Proceeds from other borrowings                      -          1,945
    Cash dividends paid                               (604)         (587)
    Common stock repurchased                        (2,211)       (1,073)
    Options exercised                                   41            39
    Decrease in advance payments
     by borrowers for taxes and insurance              227            78
                                                  --------       -------

         Net cash provided by
            financing activities                    38,282        28,820
                                                   -------       -------

         Net decrease(increase)
          in cash and cash equivalents               4,134          (274)


Cash and cash equivalents at beginning of quarter   50,675        34,696
                                                   -------       -------

Cash and cash equivalents at end of quarter     $   54,809    $   34,422
                                                   =======       =======

Supplemental disclosure of cash flow
 information:
     Payments during
      the quarter for:

       Interest                                 $   14,837     $  12,630
                                                   =======       =======

       Taxes                                    $      138     $     351
                                                   =======       =======



See accompanying condensed notes to consolidated financial statements.
                                       6


<PAGE>   8
                         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, 2001 and
December 31, 2000 and for the three-month  periods ended March 31, 2001 and 2000
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
consolidated  financial  statements  of the Company as of and for the year ended
December 31, 2000.

     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, 2001 and 2000 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 Certain Hedging  Activities." In June 2000, the FASB
issued SFAS No. 138, "Accounting for Certain Derivative  Instruments and Certain
Hedging  Activities,  an  Amendment  of SFAS 133." SFAS No. 133 and SFAS No. 138
require  that all  derivative  instruments  be recorded on the Balance  sheet at
their respective fair values.  The Company adopted SFAS No. 133 and SFAS No. 138
on January 1, 2001. The impact of adoption was not material to the Company.

NOTE 2:  COMMITMENTS,  CONTINGENCIES AND CONTRACTS

     At March 31,  2001,  the  Company  had  commitments  of $125.4  million  to
originate  mortgage loans and $10.6 million to purchase loans from correspondent
lenders.  Of these $136.0 million  commitments,  $112.4 million were  adjustable
rate mortgage  loans with interest  rates ranging from 5.00% to 10.38% and $23.6
million were fixed rate mortgage loans with interest rates ranging from 5.99% to
10.00%.  The  Company  also had  commitments  to sell $49.4  million of mortgage
loans.

     At March 31,  2001,  the  Company was  servicing  first  mortgage  loans of
approximately  $884.3  million,  which are either  partially or  wholly-owned by
others.

NOTE 3:  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.  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 BNB's Board of  Directors.  BFS is managed by a CEO, who is
also the Company's CEO, and reports directly to BFS' Board of Directors.

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

                                        7

<PAGE>   9
<TABLE>

<CAPTION>                                             (Dollars In Thousands)
                                                                TOTAL
                                                              REPORTABLE                                      CONSOLIDATED
                                      BFS         BNB          SEGMENTS         OTHER      ELIMINATIONS          TOTALS
                                   --------     --------     ------------      -------    --------------      ------------
<S>                             <C>             <C>          <C>              <C>           <C>                <C>
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%

At or for the three-months
ended March 31, 2000:
     Interest income            $   19,557        2,185         21,742            47            (43)              21,746
     Interest expense               12,243          592         12,835           104            (43)              12,896
     Provision for loan losses         221           30            251                                               251
     Non-interest income             2,937          276          3,213                          (47)               3,166
     Non-interest expense            6,909        1,208          8,117           157            (47)               8,227
     Income tax expense              1,104          220          1,324           (68)                              1,256
     Net income                      2,017          411          2,428          (146)                              2,282
     Total assets                1,142,673      141,728      1,284,401        94,187        (92,540)           1,286,048
Net interest margin                  2.81%        5.22%           n.m.          n.m.            n.m.               3.04%
Return on average assets              .72%        1.18%           n.m.          n.m.            n.m.                .73%
Return on average equity            10.30%       13.97%           n.m.          n.m.            n.m.              10.41%

n.m. = not meaningful


</TABLE>


                                        8

<PAGE>   10



                                       BOSTONFED BANCORP, INC. AND SUBSIDIARIES
                                          Average Balances and Yields / Costs
                                                    (Unaudited)
<TABLE>
<CAPTION>
For the quarter ended March 31:                                2001                                      2000
                                                -------------------------------------       ------------------------------
                                                                             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)                     $    99,491      $ 1,690      6.79%        $   82,990       $ 1,387       6.69%
 Loan, net and loans held for sale (2)           1,051,417       20,890      7.95%         1,039,444        19,661       7.57%
 Mortgage-backed securities (3)                     78,491        1,286      6.55%            43,234           698       6.46%
                                                ----------    ---------                     ---------    ----------
   Total interest-earning assets                 1,229,399       23,866      7.77%         1,165,668        21,746       7.46%
                                                              ---------     ---------                    ----------  ---------
 Non-interest-earning assets                        97,924                                    92,905
                                                ----------                                  ---------
   Total assets                                $ 1,327,323                                $1,258,573
                                                ==========                                  =========

Liabilities and Stockholders' Equity:

Interest-bearing Liabilities:
 Money market deposit accounts                 $   54,949          388      2.82%        $   56,205           398       2.83%
 Savings accounts                                 168,929        1,273      3.01%           149,999           980       2.61%
 NOW accounts                                     124,162          235      0.76%           112,907           216       0.77%
 Certificate accounts                             416,059        6,328      6.08%           399,253         5,586       5.60%
                                                ----------    ---------                    ---------    ----------
   Total                                          764,099        8,224      4.31%           718,364         7,180       4.00%
 Borrowed Funds (4)                               356,184        5,414      6.08%           387,068         5,716       5.91%
 Corporation-obligated mandatorily
  redeemable capital securities                    32,000          880     11.00%                 0             0       0.00%
                                               ----------    ---------                    ---------    ----------
   Total interest-bearing liabilities           1,152,283       14,518      5.04%         1,105,432        12,896       4.67%
                                                              ---------    ---------                    ----------  ---------
 Non-interest-bearing liabilities                  82,602                                    65,435
                                                ----------                                 ---------
   Total liabilities                            1,234,885                                 1,170,867
                                                ----------                                 ---------
 Stockholders' equity                              92,438                                    87,706
                                                ----------                                 ---------
   Total liabilities and
    stockholders' equity                       $1,327,323                                $1,258,573
                                                ==========                                 =========
 Net interest rate spread (5)                                  $ 9,348      2.73%                         $ 8,850       2.79%
                                                              =========    =========                    ==========  =========
 Net interest margin (6)                                                    3.04%                                       3.04%
                                                                           =========                                =========
Ratio of interest-earning assets to
 interest-bearing liabilities                     106.69%                                   105.45%
                                                 =========                                 =========
<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 6.07% and 5.90% for the three months ended March 31, 2001 and
    March 31, 2000, 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>   11



       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  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  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  26 states  across the U.S.  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,  fees and loan servicing  income.  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.
                                        10
<PAGE>   12

     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  and  borrowings.  Results  of  operations  are  also  affected  by the
Company's provision for loan losses, real estate operations expense,  investment
and loan sale activities and loan servicing.  The Company's non-interest expense
principally  consists of  compensation  and  benefits,  occupancy  and equipment
expense, advertising, data processing expense, goodwill amortization,  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").

                                        10

<PAGE>   13

B. FINANCIAL CONDITION

     Total  assets at March 31,  2001 were  $1.369  billion,  compared to $1.328
billion at December 31, 2000, an increase of $40.9 million or 3.1%. Asset growth
was  primarily  attributable  to a $24.1  million  increase  in  mortgage-backed
securities  available  for sale, a $6.3 million  increase in loans held for sale
and a$5.5 million increase in loans, net.  Mortgage-backed  securities available
for sale  increased  from $15.4 million at December 31, 2000 to $39.5 million at
March 31, 2001 due primarily to the purchase of various collateralized  mortgage
obligations,  ("CMO's")  Deposit  accounts  increased  by $8.7  million,  from a
balance of $849.6 million at December 31, 2000 to a balance of $858.3 million at
March 31, 2001.  The increase in deposits is net of $13.8  million  reduction in
wholesale  brokered  certificates  of deposit.  Thus,  retail deposit growth was
$22.5 million  during the current  quarter.  Federal Home Loan Bank advances and
other borrowings  increased by $32.2 million,  to a balance of $376.5 million at
March 31, 2001 from a balance of $344.3 million at December 31, 2000.

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 reasonable and prudent levels of liquid assets at BFS and
BNB in accordance with OTS and OCC regulations, respectively.

     The Company'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.  At March 31, 2001,  the Company's cash and
loans,  investments,  and mortgage-backed  securities available for sale totaled
$181.0 million or 13.2% of the Company's total assets.

     The Company has other sources of liquidity if a need for  additional  funds
arises,  including  FHLB  advances.  At March 31,  2001,  the Company had $376.5
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,  wholesale  brokered  deposits  and
repurchase agreements to supplement cash flow needs.

     At March 31,  2001,  the Company had  commitments  to  originate  loans and
unused  outstanding  lines  of  credit  totaling  $249.9  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 March 31, 2001, totaled $259.3 million.

     At March 31, 2001, the  consolidated  stockholders'  equity to total assets
ratio was 6.5%. As of March 31, 2001,  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 12.0%,  13.6% and 7.7%,
respectively.  BFS's tier 1, total  risk-based,  tier 1 risk-based  and tangible
equity capital ratios were 6.0%, 10.8%, 9.6% and 6.0%, respectively. BNB's total
risk-based,  tier 1 risk-based  and tier 1 leverage  capital  ratios were 13.2%,
12.3%, and 6.4%, respectively.

                                       11


<PAGE>   14
D. COMPARISON OF THREE-MONTHS ENDED MARCH 31, 2001 AND 2000

GENERAL

     Earnings for the quarter  ended March 31, 2001 were $2.0  million,  or $.45
basic and $.42 diluted earnings per share, compared to earnings of $2.3 million,
or $.48 basic and diluted  earnings per share for the first quarter of 2000. The
Company's annualized return on average assets was .61% and the annualized return
on average  stockholders'  equity was 8.70% during the three-months  ended March
31, 2001, compared to .73% and 10.41%, respectively,  for the three-months ended
March 31, 2000 (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, 2001 increased by $2.1 million, or 9.7%, to $23.9 million, compared to
the quarter ended March 31, 2000. The increase in interest income was due to the
combined  effects of an  increase of $63.7  million in average  interest-earning
assets and an increase  of 31 basis  points in the  average  yield.  The average
yield on  interest-earning  assets increased to 7.77% for the three months ended
March 31, 2001 from 7.46% for the three months ended March 31, 2000.

     Interest  income  on loans,  net,  for the  quarter  ended  March 31,  2001
increased by $1.2 million,  or 6.3%, to $20.9 million  compared to $19.7 million
for the same quarter in 2000. The increase in interest  income from loans,  net,
for the  three-months  ended  March 31,  2001,  compared to the same period last
year,  was  primarily  attributable  to increases in average  yields of 38 basis
points. The average yield on loans, net for the quarter ended March 31, 2001 was
7.95%,  compared to an average  yield of 7.57% for the three  months ended March
31, 2000.  Interest  income on loans,  net was also  positively  impacted in the
current  quarter by an increase  in average  interest  earning  balance of $12.0
million, compared to the same quarter last year.

     Interest on mortgage-backed securities for the quarter ended March 31, 2001
increased by $588,000 to $1.3 million, compared to $698,000 for the same quarter
in 2000.  This increase in income was due primarily to the $35.3 million  higher
average balance during the quarter ended March 31, 2001, compared to the quarter
ended March 31, 2000. A 9 basis point  increase in the average  yield during the
current quarter,  compared to the quarter ended March 31, 2000, also contributed
to the increased income. The average yield during the current quarter was 6.55%,
compared to 6.46% for the quarter ended March 31, 2000.

     Income from  investment  securities  was $1.7 million for the quarter ended
March 31, 2001 compared to $1.4 million for the prior year quarter.  The average
yield on  investment  securities  increased  by 10 basis  points in the  current
quarter, compared to the first quarter of 2000. The average balance increased by
$16.5 million to an average of $99.5 million  during the quarter ended March 31,
2001,  compared to an average  balance of $83.0  million  for the quarter  ended
March 31, 2000.

                                         12
<PAGE>   15
   Interest Expense

     Total  interest  expense on  interest-bearing  liabilities  for the quarter
ended  March 31,  2001  increased  by $1.6  million or 12.6%,  to $14.5  million
compared to $12.9 million for the quarter ended March 31, 2000.  The increase in
interest  expense  for the  quarter  ended  March 31, 2001 was due in part to an
increase  of  $46.9   million  in  the  average   balance  of   interest-bearing
liabilities,  which averaged $1.152 billion during the current quarter, compared
to an average balance of $1.105 billion during the quarter ended March 31, 2000.
An  increase  of 37  basis  points  in  the  average  cost  of  interest-bearing
liabilities during the current quarter  contributed to the remaining increase in
interest expense. The average cost of interest-bearing  liabilities increased to
5.04% during the quarter ended March 31, 2001, compared to 4.67% for last year's
comparable  quarter.  The increase was due to generally  higher market  interest
rates and the inclusion of the $32.0 million  corporation-obligated  mandatorily
redeemable capital securities ("trust  preferreds"),  which bear an average cost
of 11.0%.

     Interest expense on deposit accounts was $8.2 million for the quarter ended
March 31,  2001,  an  increase  of $1.0  million  from the $7.2  million for the
quarter  ended March 31,  2000.  Slightly  more than  one-half  the  increase in
interest  expense on deposit  accounts  resulted from an increase in the average
cost of funds,  which  increased  to 4.31% in the current  quarter,  compared to
4.00% for last year's  comparable  quarter.  The cost of funds  increased due to
higher  rates paid on various  types of deposit  accounts  due to rising  market
interest rates. The remaining  increase in the expense was due to higher average
deposit account balances of $764.1 million for the three-months  ended March 31,
2001,  compared  to average  deposit  account  balances  of $718.4  million,  an
increase of $45.7 million compared to the quarter ended March 31, 2000.

     Interest  expense on borrowed  funds  decreased  from $5.7  million for the
quarter  ended March 31,  2000 to $5.4  million  for the  current  quarter.  The
decline in interest  expense on  borrowed  funds was the result of a decrease in
the average  balance,  which decreased from an average balance of $387.1 million
during the first quarter of 2000 to an average  balance of $356.2 million during
the first  quarter of 2001.  The impact of the decrease in the interest  expense
caused by lower  average  balances  was  somewhat  offset by an  increase in the
average cost of borrowed  funds,  which  increased from 5.91% during the quarter
ended March 31, 2000 to an average of 6.08% during the current quarter.

Net Interest Income

     Net  interest  income  during the first  quarters of 2001 and 2000 was $9.3
million and $8.9 million,  respectively, as increases in interest-earning assets
contributed  to the  improvement in net interest  income.  The net interest rate
spread  declined  from 2.79% for the quarter  ended March 31, 2000, to 2.73% for
the current  quarter.  The net interest  margin for the quarter  ended March 31,
2001  was  3.04%,  the same as the  prior  year's  first  quarter,  despite  the
inclusion  of the trust  preferreds  at an average  cost of 11.0% in the current
quarter's calculation.  Excluding the trust preferreds,  the net interest margin
would have improved due to the gradual shift to higher  yielding  commercial and
construction  loans,  equity lines and business loans.  These loans also carry a
higher degree of credit risk than residential mortgage loans.

                                       13
<PAGE>   16

Provision for Loan Losses

     The Company's  provision for loan losses was $212,000 for the quarter ended
March 31, 2001,  compared to $251,000 for the comparable  quarter last year. The
allowance for loan losses  increased  from $11.4 million at December 31, 2000 to
$11.5  million  at  March  31,  2001  due to this  quarter's  provision,  net of
charge-offs.  The provision decreased for the three-months ended March 31, 2001,
compared  to the same  period last year,  due to the  Company's  belief 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.


     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,  2001,  the Company  classified  $3.3
million of loans  ($2.5  million  at BFS and  $836,000  at BNB) as  sub-standard
compared to $3.1 million  ($2.5  million of BFS and $563,000 of BNB) at December
31, 2000. 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,  2001 was  sufficient  to  provide  for
anticipated losses inherent in the loan portfolio.

     The  Company's  allowance  for loan  losses  at March  31,  2001 was  $11.5
million,  which  represented  1,267% of  non-performing  loans or 1.07% of total
loans,   compared  to  $11.4   million  at  December  31,  2000,  or  1,190%  of
non-performing loans and 1.07% 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   $286.5   million  at  December  31,  2000  to
approximately $287.7 million at March 31, 2001.

     Non-performing  loans at March 31,  2001  amounted  to  $908,000 or .08% of
total loans, compared to $956,000 or .09% of total loans, at December 31, 2000.

     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 $18,000 and $21,000  for the  three-month  periods  ended March 31, 2001 and
2000,  respectively.  The amount of interest  income that was  recorded on these
loans was $5,000 and $7,000 for the three-month periods ended March 31, 2001 and
2000, respectively.

     At March 31, 2001, loans characterized as impaired totaled $49,000. During
the  three-months  ended March 31, 2001, the average  recorded value of impaired
loans was $181,000, $4,000 interest income was recognized and $4,000 of interest
income would have been recognized under the loans' original terms.

     At March 31, 2001 and at December  31,  2000,  the Company had $147,000 and
$145,000 in real estate owned,  respectively.  Further,  at March 31, 2001,  the
Company also had restructured  real estate loans amounting to $205,000 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.

                                    14
<PAGE>   17

Non-Interest Income

     Total non-interest income was $3.2 million for the quarters ended March 31,
2001 and 2000. Deposit service fees increased from $460,000 in the quarter ended
March 31, 2000, to $574,000 in the current quarter.  This increase was primarily
due to higher levels of deposit accounts. Gain on sale of loans was $1.6 million
for the quarter  ended March 31, 2001,  compared to $1.9 million for last year's
comparable quarter. The decline in gain on sale of loans was due to the negative
effects  of  the  severe  winter  and  general  market   conditions  on  Forward
Financial's  loan sales,  which  amounted to $1.1  million in the quarter  ended
March 31, 2001,  compared to $1.6  million in the quarter  ended March 31, 2000.
Somewhat  offsetting was an increase in the gain on sale of loans  recognized by
BFS  totaling  $508,000  during the quarter  ended March 31,  2001,  compared to
$291,000  for the quarter  ended  March 31,  2000.  Gain on sale of  investments
totaled  $215,000  in the current  quarter as the Company  sold a portion of its
equity securities portfolio.
Non-Interest Expense

     Total non-interest expenses increased to $9.2 million for the quarter ended
March 31,  2001 from $8.2  million for the quarter  ended  March 31,  2000.  The
current  quarter's  non-interest  expenses  are higher  primarily  due to a 6.2%
increase in compensation  and benefits,  reflecting  normal annual increases and
slight  increases in staff levels and an increase in other  expenses due in part
to the write-off of uncollectable accounts. Additionally, non-operating expenses
for the three-months ended March 31, 2000 was lower due to the inclusion of real
estate  operations  income  recognized  in  the  dissolution  of a  real  estate
subsidiary of BFS.

Income Tax Expense

     Income tax expense for the quarters  ended March 31, 2001 and 2000 was $1.1
million and $1.3 million,  respectively. The effective income tax rate was 35.4%
during the current  quarter,  compared to 35.5% for the quarter  ended March 31,
2000.

                                        15
<PAGE>   18
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 deposits.

     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, 2001, the Company's one year gap was a positive 7.3%
of total  assets,  compared to a positive  8.4% of total  assets at December 31,
2000.

     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, 2000 for a
detail of the GAP and NPV tables. There have been no material changes in the net
portfolio value since December 31, 2000.

                                        16

<PAGE>   19

                         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     Except as  described  below,  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.  Broadway National Bank, a national bank subsidiary of
the Company,  was named a defendant in the  Superior  Court for Suffolk  County,
Massachusetts,  civil  action No.  SUCV  99-018F  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  alleges 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  Broadway  National  Bank.  Plaintiff
alleges  that  Broadway  National  Bank knew or should have known of the alleged
fraudulent actions of Plaintiff's  Officer, and that Broadway National Bank owed
a duty to Plaintiff to investigate the transactions  and protect  Plaintiff from
the alleged fraudulent actions. The Plaintiff is seeking damages for the alleged
breach of duty by the  defendants.  Broadway  National  Bank intends to deny the
allegations  that it owed or breached any duty to Plaintiff or that it is liable
for any  losses  incurred  by  Plaintiff.  Broadway  National  Bank  intends  to
vigorously  defend the action and believes the action is not likely to result in
any material loss or adverse effect on the financial condition of the Company.


Item 2.  Changes in Securities and Use of Proceeds

       Not applicable

Item 3.  Defaults Upon Senior Securities

       Not applicable

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

       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**

     *  Incorporated  herein by reference  into this document from Exhibits 3.1,
4.0  and  10.5 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 30, 2001.

     (b)  Reports on Form 8-k  Previously  reported  on Form 10-k for the period
ending December 31, 2000.
                                           17

<PAGE>   20

                                  SIGNATURES



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

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

undersigned thereunto duly authorized.


                                           BOSTONFED BANCORP, INC.
                                                  (Registrant)


Date:  May 14, 2001
                                        ----------------------------------
                                                     David F. Holland
                                                     President and
                                                 Chief Executive Officer


Date:  May 14, 2001
                                        ----------------------------------
                                                     John A. Simas
                                                  Executive Vice President,
                                                  Chief Financial Officer
                                                  and Corporate Secretary

                                       18