UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                                       or

          [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ____________ to _____________

                         Commission file number 1-13691

                             Bay State Bancorp, Inc.
             (Exact name of registrant as specified in its charter)

                  Delaware                                      04-3398630
      (State or other jurisdiction of                        (I.R.S. Employer
       Incorporation or organization)                       Identification No.)

1299 Beacon Street, Brookline, Massachusetts                       02446
  (Address of principal executive offices)                       (Zip Code)

       Registrant's telephone number, including area code: (617) 739-9500

     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.   |X| Yes   |_| No

     The number of shares of common  stock  outstanding  of each of the issuer's
classes of common stock, as of November 9, 2001 was 1,651,290.

<PAGE>


                    BAY STATE BANCORP, INC. AND SUBSIDIARIES

                                      INDEX

PART I - FINANCIAL INFORMATION................................................1

  Item 1 - Condensed Consolidated Financial Statements........................1

     Condensed Consolidated Balance Sheets - September 30, 2001
     (unaudited) and March 31, 2001...........................................1

     Condensed Consolidated Income Statements - For the three and six
     months ended September 30, 2001 and 2000 (unaudited).....................2

     Condensed Consolidated Statements of Cash Flows - For the six
     months ended September 30, 2001 and 2000 (unaudited).....................3

     Condensed Consolidated Statements of Changes in Stockholders' Equity -
     For the six months ended September 30, 2001 and 2000 (unaudited) ........4

     Notes to Unaudited Condensed Consolidated Financial Statements for
     the Period Ended September 30, 2001......................................5

  Item 2 - Management's Discussion and Analysis of Financial Condition
           and Results of Operations..........................................7

  Item 3 - Quantitative and Qualitative Disclosures about Market Risk........16

PART II - OTHER INFORMATION..................................................19

  Item 1 - Legal Proceedings.................................................19

  Item 2 - Changes in Securities and Use of Proceeds.........................19

  Item 3 - Defaults Upon Senior Securities...................................19

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

  Item 5 - Other Information.................................................19

  Item 6 - Exhibits and Reports on Form 8-K..................................19

  SIGNATURES.................................................................20

  EXHIBITS...................................................................21

    Computation of per share earnings - Exhibit 11...........................21

<PAGE>


PART I - FINANCIAL INFORMATION
Item 1 - Condensed Financial Statements


                    Bay State Bancorp, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                  (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                             September 30,       March 31,
                                                                                  2001             2001
                                                                               ---------        ---------
                                                                              (Unaudited)
<S>                                                                            <C>              <C>
ASSETS

Cash and due from banks                                                        $   7,668        $   9,985
Short-term investments                                                               117              114
                                                                               ---------        ---------
   Cash and Cash Equivalents                                                       7,785           10,099
Investment in available-for-sale securities (at fair value)                       31,704           34,356
Investments in held-to-maturity securities (fair values of $234 and $345)            222              336
Stock in Federal Home Loan Bank of Boston                                          8,455            8,455
Loans receivable, net                                                            435,748          417,704
Mortgage loans held for sale                                                         682               --
Accrued interest receivable                                                        3,424            3,268
Premises and equipment, net                                                        3,089            3,222
Deferred tax asset, net                                                            2,688            2,816
Investment in bank owned life insurance                                            8,452            8,269
Other assets                                                                       3,357            3,332
                                                                               ---------        ---------
                Total assets                                                   $ 505,606        $ 491,857
                                                                               =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits                                                                    $ 312,210        $ 273,263
   Federal Home Loan Bank Advances                                               132,969          158,139
   Other borrowed funds                                                            2,000            2,000
   Accrued expenses and other liabilities                                          5,366            4,695
                                                                               ---------        ---------
         Total liabilities                                                       452,545          438,097
                                                                               ---------        ---------
Stockholders' equity:
   Common stock, par value $.01 per share,
      2,535,232 shares issued                                                         25               25
   Additional paid-in capital                                                     49,198           49,275
   Retained earnings                                                              26,293           24,382
   Accumulated other comprehensive income                                            806              617
   Less: Unearned ESOP shares                                                     (2,420)          (2,420)
      Unearned 1998 Stock-Based Incentive Plan shares                             (1,058)          (1,208)
      Treasury stock, 853,442 and 769,689 shares                                 (19,783)         (16,911)
                                                                               ---------        ---------
         Total stockholders' equity                                               53,061           53,760
                                                                               ---------        ---------
         Total liabilities and stockholders' equity                            $ 505,606        $ 491,857
                                                                               =========        =========
Equity-to-asset ratio                                                              10.49%           10.93%

Book value per share                                                           $   34.09        $   32.77
</TABLE>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                     Page 1
<PAGE>


                    Bay State Bancorp, Inc. and Subsidiaries
                    Condensed Consolidated Income Statements
                  (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                 Three months ended          Six months ended
                                                                    September 30,              September 30,
                                                             -------------------------   -------------------------
                                                                 2001          2000          2001          2000
                                                             -----------    ----------   -----------    ----------
                                                                                  (Unaudited)
<S>                                                          <C>            <C>          <C>            <C>
Interest income:
   Loans                                                     $     8,768    $    8,510   $    17,581    $   16,575
   Investments                                                       703           715         1,449         1,411
                                                             -----------    ----------   -----------    ----------
      Total interest income                                        9,471         9,225        19,030        17,986
                                                             -----------    ----------   -----------    ----------
Interest expense:
   Deposits                                                        2,813         2,887         5,650         5,542
   Borrowed funds                                                  1,960         2,494         4,199         4,771
                                                             -----------    ----------   -----------    ----------
      Total interest expense                                       4,773         5,381         9,849        10,313
                                                             -----------    ----------   -----------    ----------
      Net interest income before provision for loan losses         4,698         3,844         9,181         7,673

Provision for loan losses                                             75           150           137           315
                                                             -----------    ----------   -----------    ----------
      Net interest income after provision for loan losses          4,623         3,694         9,044         7,358
                                                             -----------    ----------   -----------    ----------
Non-interest income:
   Service charges on deposit accounts                               118           105           276           205
   Unrealized (loss) gain on trading securities                     (132)           99           (63)           37
   Gain on sale of investments and other assets                      142            40           142            40
   Gain on sale of loans                                              20             4            28             7
   Net increase in cash surrender value of bank owned life
      insurance policies                                              92           104           184           208
   Other income                                                       59            59           114           106
                                                             -----------    ----------   -----------    ----------
      Total non-interest income                                      299           411           681           603
                                                             -----------    ----------   -----------    ----------
      Income before non-interest expense and income taxes          4,922         4,105         9,725         7,961
                                                             -----------    ----------   -----------    ----------
Non-interest expense:
   Salaries and employee benefits                                  1,722         1,757         3,555         3,458
   Occupancy and equipment expense                                   417           379           810           728
   Professional fees                                                 106            77           217           145
   Advertising                                                       128           119           281           253
   Data processing                                                   118            92           226           163
   Other expenses                                                    330           315           620           618
                                                             -----------    ----------   -----------    ----------
      Total non-interest expense                                   2,821         2,739         5,709         5,365
                                                             -----------    ----------   -----------    ----------
      Income before income taxes                                   2,101         1,366         4,016         2,596

Income tax expense                                                   826           510         1,575           933
                                                             -----------    ----------   -----------    ----------
      Net income                                             $     1,275    $      856   $     2,441    $    1,663
                                                             ===========    ==========   ===========    ==========
Comprehensive net income                                     $     1,532    $    1,949   $     2,630    $    3,087
                                                             ===========    ==========   ===========    ==========

Weighted average basic shares outstanding                      1,611,448     1,787,953     1,622,529     1,799,301
                                                             ===========    ==========   ===========    ==========

Weighted average fully diluted shares outstanding              1,705,798     1,834,490     1,713,455     1,821,452
                                                             ===========    ==========   ===========    ==========

Basic earnings per share                                     $      0.79    $     0.48   $      1.50    $     0.92
                                                             ===========    ==========   ===========    ==========

Diluted earnings per share                                   $      0.75    $     0.47   $      1.42    $     0.91
                                                             ===========    ==========   ===========    ==========

Dividends per share                                          $      0.15    $     0.10   $      0.30    $     0.20
                                                             ===========    ==========   ===========    ==========
</TABLE>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                     Page 2
<PAGE>


                    Bay State Bancorp, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                      Six months ended
                                                                                        September 30,
                                                                                    ---------------------
                                                                                      2001        2000
                                                                                    --------    ---------
                                                                                         Unaudited
<S>                                                                                 <C>         <C>
Net cash flows from operating activities:
   Net income                                                                       $  2,441    $   1,663

Adjustments to reconcile net income to net cash provided by operating activities:
      Earned stock based incentive plan                                                  132          134
      Provision for loan losses                                                          137          315
      Net increase in mortgage loans held-for-sale                                      (682)          --
      Gain on sale of other real estate owned                                             --           (7)
      Gain on sale of investments                                                        (70)         (40)
      Gain on sale of other assets                                                       (72)          --
      Depreciation and amortization                                                      231          208
      Accretion of securities, net of amortization                                       (25)         (35)
      Change in loan fees and discounts                                                   59            9
      Net change in trading securities                                                    36          (12)
      Increase in cash surrender value B.O.L.I                                          (183)        (209)
      Increase in accrued interest receivable                                           (156)        (571)
      Decrease in deferred income tax assets, net                                         32           95
      Increase in prepaid expense and other assets                                       (78)        (104)
      Increase in accrued expenses and other liabilities                                 521          614
                                                                                    --------    ---------
   Net cash provided by operating activities                                           2,323        2,060
                                                                                    --------    ---------
Net cash flows from investing activities:
      Maturities and principal repayments on investments held
         to maturity                                                                     114           93
      Maturities and principal repayments on investments available
         for sale                                                                      5,355        4,451
      Proceeds from sales of available-for-sale securities                                72        1,205
      Purchases of Federal Home Loan Bank stock                                           --         (270)
      Purchases of investments available-for-sale                                     (2,248)      (3,185)
      Net decrease (increase) in loans                                                   613       (4,820)
      Proceeds from sale of other assets                                                  92           --
      Loans purchased                                                                (18,853)     (17,337)
      Payment received on other real estate owned                                         --           20
      Proceeds from sales of other real estate owned                                      --           49
      Capital expenditures                                                               (98)        (418)
                                                                                    --------    ---------
   Net cash used in investing activities                                             (14,953)     (20,212)
                                                                                    --------    ---------
Net cash flows from financing activities:
      Net deposit activity                                                            38,947       21,217
      Proceeds of borrowings                                                          46,393      143,000
      Repayment of borrowings                                                        (71,563)    (129,109)
      Net decrease in other borrowed funds                                                --       (5,846)
      Proceeds from issuance of common stock                                             161           --
      Dividends on common stock                                                         (530)        (389)
      Purchases of treasury stock                                                     (3,092)      (1,470)
                                                                                    --------    ---------
   Net cash provided by financing activities                                          10,316       27,403
                                                                                    --------    ---------
Net (decrease) increase in cash and cash equivalents                                  (2,314)       9,251
Cash and cash equivalents at beginning of period                                      10,099        5,992
                                                                                    --------    ---------
Cash and cash equivalents at end of period                                          $  7,785    $  15,243
                                                                                    ========    =========
Supplemental disclosures of cash flow information:
   Cash paid during period for:
      Interest                                                                      $ 10,051    $  10,222
      Income taxes                                                                  $  1,697    $   1,128
   Loans transferred to other real estate owned                                     $     --    $      68
</TABLE>


                 The accompanying notes are an integral part of
               these condensed consolidated financial statements.


                                     Page 3
<PAGE>


                    Bay State Bancorp, Inc. and Subsidiaries
      Condensed Consolidated Statements of Changes in Stockholders' Equity
                  (Dollars in thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                  Unearned
                                                                            Accumulated            Stock-
                                                                               Other                based
                                                    Additional            Comprehensive Unearned  Incentive                Total
                                             Common  Paid-in     Retained     Income      ESOP      Plan      Treasury Stockholders'
                                             Stock   Capital     Earnings     (Loss)     Shares    Shares      Stock       Equity
                                             ---------------------------------------------------------------------------------------
<S>                                           <C>    <C>         <C>         <C>        <C>        <C>        <C>         <C>
Balance at March 31, 2001                     $ 25   $ 49,275    $ 24,382    $   617    $(2,420)   $(1,208)   $(16,911)   $ 53,760
  Net Income                                    --         --       2,441         --         --         --          --          --
Net change in unrealized gain on available
  for sale securities, net of tax effect        --         --          --        189         --         --          --          --
     Comprehensive income                       --         --          --         --         --         --          --       2,630
  Purchase of treasury stock, 83,753 shares     --         --          --         --         --         --      (3,092)     (3,092)
  Exercise of stock options issued from
    treasury stock                              --        (59)         --         --         --         --         220         161
  Dividends paid, $0.30 per share               --         --        (530)        --         --         --          --        (530)
  Issuance of stock incentive plan shares       --        (18)         --         --         --        150          --         132
                                             ---------------------------------------------------------------------------------------
Balance at September 30, 2001 (Unaudited)     $ 25   $ 49,198    $ 26,293    $   806    $(2,420)   $(1,058)   $(19,783)   $ 53,061
                                             =======================================================================================

                                             ---------------------------------------------------------------------------------------
Balance at March 31, 2000                     $ 25   $ 49,207    $ 21,600    $(1,788)   $(2,826)   $(1,681)   $(11,907)   $ 52,630

  Net Income                                    --         --       1,663         --         --         --          --          --
Net change in unrealized loss on available
  for sale securities, net of tax effect        --         --          --      1,424         --         --          --          --
     Comprehensive income                       --         --          --         --         --         --          --       3,087
  Purchase of treasury stock, 59,900 shares     --         --          --         --         --         --      (1,470)     (1,470)
  Dividends paid, $0.20 per share               --         --        (389)        --         --         --          --        (389)
  Issuance of stock incentive plan shares       --        (15)         --         --         --        149          --         134
                                             ---------------------------------------------------------------------------------------
Balance at September 30, 2000 (Unaudited)     $ 25   $ 49,192    $ 22,874    $  (364)   $(2,826)   $(1,532)   $(13,377)   $ 53,992
                                             =======================================================================================
</TABLE>


                 The accompanying notes are an integral part of
               these condensed consolidated financial statements.


                                     Page 4
<PAGE>


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED September 30, 2001
                                   (Unaudited)


(1)  Organization

     Bay State  Bancorp,  Inc. (the  "Company" or "Bay State") was  incorporated
under the laws of  Delaware  in October  1997 for the  purpose of serving as the
holding  company of Bay State  Federal  Bank (the  "Bank") as part of the Bank's
conversion   from  the  mutual  form  of  organization  to  the  stock  form  of
organization  (the  "Conversion").  The  Company is a savings  and loan  holding
company and is subject to  regulation by the Office of Thrift  Supervision  (the
"OTS"),  the  Federal  Deposit  Insurance   Corporation  (the  "FDIC")  and  the
Securities and Exchange  Commission (the "SEC").  Prior to the  Conversion,  Bay
State had not engaged in any material operations.

(2)  Accounting Principles

     The accompanying  unaudited condensed  consolidated financial statements of
Bay State have been prepared in accordance with accounting  principles generally
accepted in the United States of America for interim  financial  information and
with the  instructions  to Form 10-Q and of  Regulation  S-X.  Accordingly,  the
financial  statements  do  not  include  all of the  information  and  footnotes
required by  accounting  principles  generally  accepted in the United States of
America for complete  financial  statements.  In the opinion of management,  all
adjustments (consisting of a normal recurring nature) considered necessary for a
fair presentation have been included. Operating results for the six months ended
September  30, 2001 are not  necessarily  indicative  of the results that may be
expected for the current fiscal year.

     For further  information,  refer to the consolidated  financial  statements
included in the Company's annual report and Form 10-K for the period ended March
31, 2001, filed with the SEC.

     The  year-end  condensed  balance  sheet  data  was  derived  from  audited
financial  statements,   but  does  not  include  all  disclosures  required  by
accounting principles generally accepted in the United States of America.

(3)  Stock Repurchase Program

     On  September  26,  2001  the  Company  announced  the  completion  of  the
repurchase  of 88,277 shares under its seventh 5% stock  repurchase  program and
the approval of an eighth 5% repurchase  program consisting of 84,315 shares. As
of November 9, 2001 approximately 38,500 shares have been repurchased under this
program, at an average price of $34.88.


                                     Page 5
<PAGE>


(4)  Impact on New Accounting Standards

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  Statement No. 133, as amended by SFAS No.
138, establishes accounting and reporting standards for derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging activities. The Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In management's  opinion,  SFAS No. 133 did
not have a material effect on the Company's consolidated financial statements.

     FASB has issued SFAS No. 140,  Accounting  for  Transfers  and Servicing of
Financial Assets and  Extinguishments  of Liabilities.  This Statement  replaces
SFAS No. 125,  Accounting  for Transfers  and Servicing of Financial  Assets and
Extinguishments  of Liabilities,  and rescinds SFAS Statement No. 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125." SFAS No.
140 provides  accounting and reporting  standards for transfers and servicing of
financial assets and  extinguishments  of liabilities.  This statement  provides
consistent  standards for distinguishing  transfers of financial assets that are
sales from  transfers that are secured  borrowings.  This statement is effective
for  transfers  and  servicing  of  financial  assets  and   extinguishments  of
liabilities  occurring after March 31, 2001; however, the disclosure  provisions
are  effective  for fiscal years ending after  December 15, 2000.  The effect of
this  statement  did not  have a  material  impact  on the  Company's  financial
position or result of operations.

     Statement  of  Financial   Accounting   Standards   No.  141  improves  the
consistency  of the  accounting  and  reporting  for  business  combinations  by
requiring that all business  combinations be accounted for under a single method
- the  purchase  method.  Use of the  pooling-of-interests  method  is no longer
permitted.  Statement  No. 141  requires  that the  purchase  method be used for
business  combinations  initiated  after  June  30,  2001.  Management  does not
anticipate any impact on the consolidated  financial statements upon adoption of
this statement.

     Statement of Financial  Accounting Standards No. 142 requires that goodwill
no longer be amortized to earnings, but instead be reviewed for impairment.  The
amortization of goodwill  ceases upon adoption of the Statement,  which for most
companies,  will be January 1, 2002 Management does not anticipate any impact on
the consolidated financial statements upon adoption of this statement.


                                     Page 6
<PAGE>


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations (Unaudited)

     This report contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995,  and is including  this statement for purposes of these safe harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identified  by  use  of  the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project,"  or similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries  include, but are not limited to,
changes in: interest rates, general economic conditions,  legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S.  Treasury and the Federal Reserve Board,  the quality or composition
of the loan or investment portfolios,  demand for loan products,  deposit flows,
competition,  demand for  financial  services in the  Company's  market area and
accounting  principles and guidelines.  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 Form 10-K filing with
the SEC for the fiscal year ended March 31, 2001.

     Except as required by applicable law and  regulations  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.

General

     The Bank is a federally chartered savings bank and is subject to regulation
by  the  OTS.  The  Bank's  business  activities  are  concentrated  in  Eastern
Massachusetts through six full service retail banking offices located in Norfolk
and Suffolk counties,  Massachusetts.  Through these offices,  the Bank offers a
full range of retail and commercial  banking  products and services and conducts
other business as allowable for federally  chartered  banks.  The Bank primarily
makes residential first mortgages, commercial and multi-family real estate loans
and, to a lesser  extent,  home equity lines of credit,  other  consumer  loans,
residential construction loans, development and land loans and commercial loans.
Lending operations, particularly loan originations are conducted from the retail
offices  and at the point of sale.  Neither  the Company nor the Bank nor any of
their subsidiaries conduct business on a national or international basis.

     The operating  results of the Company depend  primarily on its net interest
and dividend income,  which is the difference  between (i) interest and dividend
income on earning  assets,  primarily  loans and investment  securities and (ii)
interest expense on interest bearing liabilities,  which consist of deposits and
borrowings.  Results of  operations  are also affected by the provision for loan
losses, the level of non-interest income, including deposit and loan fees, gains
on sales of assets, operating expenses and income taxes.


                                     Page 7
<PAGE>


Comparison  of  Financial  Condition  at  September  30, 2001 and March 31, 2001
(Unaudited)

     Total assets at September 30, 2001 were $505.6 million,  compared to $491.9
million at March 31, 2001, an increase of 2.8%. Net loans receivable,  including
mortgage loans held for sale,  increased  $18.7 million,  or 4.5%,  primarily in
multi-family loans,  commercial real estate and construction loans. The increase
in assets was funded  primarily  from a $38.9  million,  or 14.3%,  increase  in
deposits, which was also used to reduce Federal Home Loan Bank advances by $25.2
million,  or 15.9%. The increase in deposits was a result of increased marketing
efforts,  competitively  priced  products  offered  by the  Bank  and  continued
customer  migration  resulting from merger activity in the Bank's primary market
area. Total  stockholders'  equity was $53.1 million, or 10.49% of total assets,
at September 30, 2001, a decrease of $699,000,  or 1.3%, from $53.8 million,  or
10.93% of total  assets,  at March 31, 2001.  The net decrease in equity was the
result  of the  increase  in  treasury  stock of  83,753  shares at cost of $3.1
million and the payment of  dividends,  offset by net income for the period,  an
increase in the market value of  investment  securities  classified as available
for sale, and a reduction in the stock-based  benefit plans.  The Company's book
value per share at  September  30, 2001 was $34.09,  compared to $32.77 at March
31, 2001, an increase of 4.0%.

Investments

     Investment securities  available-for-sale  decreased $2.7 million, or 7.7%,
primarily  due  to  a  decrease  in  Government  Securities  and  Mortgage  Back
Securities, offset by an increase in Trust Preferred Securities.

     The  Company's  investment  portfolio  at  September  30,  2001  reflects a
$806,000  net  unrealized  gain  on  available-for-sale  securities  net of tax,
compared to $617,000 at March 31, 2001.

     The table  below shows the  investment  securities  portfolio  at the dates
presented.   The  amortized   cost  and  estimated  fair  value  of  investments
available-for-sale were:


                                         September 30, 2001     March 31, 2001
                                          -----------------   ------------------
                                          Amortized    Fair   Amortized    Fair
                                             Cost     Value      Cost     Value
                                           -------   -------   -------   -------
                                                       (in thousands)

Marketable equity securities               $ 7,699   $ 8,879   $ 7,496   $ 8,654

Mortgage-backed securities                   9,805    10,145    14,141    14,314

Trust preferred equity securities            9,602     9,794     7,559     7,510

Corporate bonds and notes                    1,455     1,413     1,452     1,408

Preferred stocks                             1,500     1,473     1,500     1,467
Government agency securities                    --        --     1,000     1,003
                                           -------   -------   -------   -------
Total                                      $30,061   $31,704   $33,148   $34,356
                                           =======   =======   =======   =======


                                     Page 8
<PAGE>


     The   amortized   cost  and   estimated   market   values  of   investments
held-to-maturity were:


                                        September 30, 2001       March 31, 2001
                                         -----------------     -----------------
                                         Amortized    Fair     Amortized    Fair
                                           Cost      Value       Cost      Value
                                           ----       ----       ----       ----
                                                     (in thousands)

Mortgage-backed and mortgage-
  related securities                       $222       $234       $336       $345
                                           ----       ----       ----       ----
Total Mortgage-backed and
  mortgage related Securities              $222       $234       $336       $345
                                           ====       ====       ====       ====

Loans

     During the six-month period ended September 30, 2001, net loans receivable,
including mortgage loans held for sale,  increased by $18.7 million, or 4.5%, as
detailed below:

<TABLE>
<CAPTION>
                                               September 30,    % of total       March 31,     % of total
                                                   2001           Loans            2001           Loans
                                                 --------      -----------       --------      -----------
                                                                (Dollars in thousands)
<S>                                              <C>                 <C>         <C>                 <C>
Mortgage loans:
   Residential 1 - 4 family                      $188,831            41.86%      $205,284            47.93%
   Multi-family                                    94,978            21.05         87,040            20.32
   Commercial real estate                         114,473            25.37         98,566            23.01
   Construction and development/land               24,282             5.38         17,319             4.04
                                                 --------         --------       --------         --------
      Total mortgage loans                        422,564            93.66        408,209            95.30

Commercial loans                                   10,967             2.43          3,893             0.91
Consumer loans:
   Equity lines                                    12,532             2.78         11,819             2.76
   Other consumer loans                             5,065             1.13          4,397             1.03
                                                 --------         --------       --------         --------
      Total loans                                 451,128           100.00%       428,318           100.00%
                                                                  ========                        ========
Deduct:
   Allowance for loan losses                        4,353                           4,258
   Undisbursed proceeds of construction
      and development loans in process             10,766                           6,154
   Unearned income, net                               261                             202
                                                 --------                       ---------
      Loans, net                                  435,748                         417,704
                                                                                ---------
   Mortgage loans held-for-sale                       682                              --
                                                 --------                       ---------
Loans, net and mortgage loans held-for-sale      $436,430                       $ 417,704
                                                 ========                       =========
</TABLE>

     At September 30, 2001 loans serviced for others was $23.9 million, compared
to $22.6 million at March 31, 2001.


                                     Page 9
<PAGE>


Asset Quality

     At September 30, 2001 non-performing  assets totaled $59,000, a decrease of
$309,000,  or 84.0%,  from  $368,000 at March 31,  2001.  Non-performing  assets
consist of all loans that are  delinquent  90 days or more,  and any real estate
owned.  This decrease was the result of certain  non-accrual loans being brought
current and paid off, and the charge-off of certain consumer loans. The Bank had
no other  real  estate  owned at  September  30,  2001 and  March 31,  2001.  At
September 30, 2001,  non-performing assets represented 0.01% of total assets and
0.01% of loans  receivable net,  compared to 0.07% and 0.09%,  respectively,  at
March 31, 2001.

     The  composition  of  non-performing   assets,   which  consist  solely  of
non-performing loans for the dates presented was:


                                                 September 30,        March 31,
                                               2001         2000        2001
                                              ------       ------      ------
                                                    (Dollars in thousands)

Non-accrual loans:
        Mortgage Loans:
            One-to-four-family                $   19       $  568       $ 320
            Multi-family                          --           --           --
            Commercial real estate                --          818           --
            Construction and development          --           --           --
                                              ------       ------       ------
               Total mortgage loans               19        1,386          320

        Consumer Loans:
            Equity lines                          40           20           20
            Other consumer loans                  --           50           28
                                              ------       ------       ------
               Total consumer loans               40           70           48
                                              ------       ------       ------
               Total non-accrual loans            59        1,456          368
Real estate owned, net                            --           68           --
                                              ------       ------       ------
Total non-performing assets                   $   59       $1,524       $  368
                                              ======       ======       ======
Non-performing assets as a percentage of:
            Loans receivable, net               0.01%        0.35%      0.09%
            Total assets                        0.01         0.31       0.07


The following  represents  the activity in the allowance for loan losses for the
six months ended September 30, 2001:

                                                           (in thousands)
            Balance at March 31, 2001                          $4,258
            Provision for loan losses                             137
            Losses charged to allowance                           (42)
            Recoveries                                             --
                                                               ------
            Balance at September 30, 2001                      $4,353
                                                               ======

     The Bank  continually  reviews its delinquency  position,  underwriting and
appraisal  procedures,  charge-off  experience  and current  real estate  market
conditions with respect to its entire loan portfolio.  While management uses the
best information available in establishing the allowance, future adjustments may
be necessary if economic  conditions  differ from the assumptions used in making
the current evaluation.


                                     Page 10
<PAGE>

Deposits and Borrowed Funds

As of September 30, 2001 and March 31, 2001 deposits are as follows:

<TABLE>
<CAPTION>
                                     September 30,    % of total      March 31,      % of total
                                          2001         deposits         2001          deposits
                                     -------------    ----------      ---------      ----------
                                                             (Dollars in thousands)
<S>                                     <C>              <C>         <C>                 <C>
Regular savings accounts                $ 28,919         9.26%       $ 28,031            10.26%
NOW accounts                              33,024        10.58          30,146            11.03
Money market accounts                    105,248        33.71          77,857            28.49
Non-interest bearing deposits             17,611         5.64          11,721             4.29
                                        --------       ------        --------           ------
                                         184,802        59.19         147,755            54.07
Term deposits                            127,408        40.81         125,508            45.93
                                        --------       ------        --------           ------
            Total deposits              $312,210       100.00%       $273,263           100.00%
                                        ========       ======        ========           ======
</TABLE>

     During the period, FHLB advances decreased $25.2 million, or 15.9%.

Comparison of Operating Results for the Three Months ended September 30, 2001
and 2000.

General

     Consolidated  net income for the three  months  ended  September  30,  2001
totaled $1.3 million, or $0.79 basic and $0.75 fully diluted earnings per share,
compared to $856,000, or $0.48 basic and $0.47 fully diluted earnings per share,
for the same period last year.  This  represents  an  increase of  $419,000,  or
48.9%, in net income,  a $0.31,  or 64.6%,  increase in basic earnings per share
and a $0.28,  or 59.6%,  fully  diluted  earnings  per share.  The  increase was
primarily  due to higher net  interest  income due to an increase in the average
balance of interest earning assets, an improving net interest margin and spread,
a decrease in the  provision  for loan losses,  offset in part by higher  income
taxes, lower non-interest income and a small increase in non-interest expense.

Interest Income

     Interest  income for the three months ended  September  30, 2001  increased
$246,000, or 2.7%, to $9.5 million, compared to $9.2 million for the same period
last year.  The increase in interest  income was primarily due to an increase in
the average  balance of  interest-earning  assets,  which  increased from $450.4
million  for the quarter  ended  September  30,  2000 to $467.8  million for the
quarter ended  September 30, 2001, an increase of $17.4  million,  or 3.9%.  The
increase in the average balance of  interest-earning  assets was primarily a net
result of an increase in the average balance of loans, net of $17.4 million,  or
4.3%. The yield on interest-earning assets decreased 9 basis points to 8.10%.

Interest Expense

     Interest  expense for the three months ended  September 30, 2001  decreased
$608,000, or 11.3%, to $4.8 million compared to $5.4 million for the same period
last  year.  The  decrease  in  interest  expense  was the net result of a $10.0
million,   or  2.4%,   increase  in  the  average  balance  of  interest-bearing
liabilities  which  increased  from $410.2  million for the three  months  ended
September  30, 2000 to $420.2  million for the three months ended  September 30,
2001,  and a  decrease  of 65 basis  points in the cost of funds to  4.54%.  The
increase in the average balance of interest-bearing  liabilities was primarily a
net result of an increase in the average  balance of deposits of $29.1  million,
or 11.4%,  and a decrease  in the  average  balance of FHLB  advances  and other
borrowings of $19.2 million, or 12.3%.


                                    Page 11
<PAGE>

Although  the average  balance of interest  bearing  liabilities  increased  the
decrease in interest  expense was  attributed to the lower interest rate levels,
which are a direct result of the actions of the Federal Reserve,  and the growth
in the lower costing core deposit accounts.

Net interest income

     The table below shows the average  balance sheet,  the interest  earned and
paid  on  interest-earning  assets  and  interest-bearing  liabilities  and  the
resulting net interest spread and margin for the periods presented.

For the three months ended September 30,

<TABLE>
<CAPTION>
                                                               2001                                  2000
                                                               ----                                  ----
                                                              Interest                              Interest
                                                 Average      Income/      Yield/       Average      Income/     Yield/
                                                 balance      expense      rate         balance      expense      rate
                                                 -------      -------      ------       -------      -------      ----
<S>                                              <C>          <C>           <C>        <C>           <C>          <C>
     Assets                                                              (Dollars in thousands)
Interest-earning assets:
Short-term investments                           $  1,819     $     17      3.74%      $  2,431      $   42       6.91%
Interest-earning deposits                             769            8      4.16            769          12       6.24
Taxable investment securities                      24,745          457      7.39         21,260         363       6.83
Mortgage backed & related securities               15,687          221      5.64         18,570         297       6.40
Loans (net of unearned income)                    424,761        8,768      8.26        407,342       8,511       8.36
                                                 --------     --------                 --------      ------
Total interest-earning assets                     467,781        9,471      8.10        450,372       9,225       8.19
                                                 --------     --------                 --------      ------
Non interest-earning assets                        33,480                                36,392
                                                 --------                              --------
      Total                                      $501,261                              $486,764
                                                 ========                              ========

Liabilities and Equity
Interest-bearing liabilities:
      Now accounts                               $ 28,115     $     62      0.88%      $ 24,183      $   54       0.88%
      Regular savings accounts                     27,523          105      1.53         26,642         134       2.01
      Money market accounts                       100,904          938      3.72         67,912         739       4.35
      Certificate accounts                        127,322        1,708      5.37        135,987       1,960       5.77
                                                 --------     --------                 --------      ------
Total interest-bearing deposits                   283,864        2,813      3.96        254,724       2,887       4.48
      FHLB advances                               134,292        1,940      5.65        153,318       2,459       6.34
      Other borrowings                              2,000           20      3.91          2,146          35       6.45
                                                 --------     --------                 --------      ------
Total interest-bearing liabilities                420,156        4,773      4.54        410,188       5,381       5.19
                                                 --------     --------                 --------      ------
      Demand deposits                              14,755                                 7,549
      Other liabilities                            12,280                                15,070
      Equity                                       54,070                                53,957
                                                 --------                              --------
      Total                                      $501,261                              $486,764
                                                 ========                              ========
Net interest income                                           $  4,698                             $  3,844
                                                              ========                             ========

Interest rate spread                                                          3.56%                               3.00%
                                                                            ======                                ====
Net interest margin                                                           4.02%                               3.41%
                                                                            ======                                ====
</TABLE>


                                    Page 12
<PAGE>

Provision for Loan Losses

     Provisions for loan losses are charged to operations to bring the allowance
for loan  losses to a level  considered  by  management  to be adequate to cover
estimated  losses on loans  receivable  which are deemed  probable and estimable
based on  information  currently  known to  management.  The  provision for loan
losses  totaled  $75,000 for the quarter ended  September 30, 2001,  compared to
$150,000  for the same period last year.  The  provision  reflects  management's
analysis of the risks  associated with the Banks' primary  lending  objective to
increase  the  overall  loan  portfolio.  The  current  level  of  provision  is
reflective of the increase in the overall size and mix of the loan portfolio and
the decline in  non-performing  loans during the period.  The decrease  from the
level added during the last fiscal year was directly  related to the lower level
of non-performing  loans and the lower net growth in the loan portfolio from the
same period last year.

     The  allowance  for loan losses was $4.4 million at September  30, 2001 and
$4.3  at  March  31,   2001,   respectively,   which   represents   7,378.0%  of
non-performing  assets and 0.99% of total loans at September 30, 2001,  compared
to 1,157.1% of non-performing assets and 1.01% of total loans at March 31, 2001.

     While  management   believes  the  Bank's  allowance  for  loan  losses  is
sufficient  to cover  losses  inherent in its loan  portfolio  at this time,  no
assurances  can be given that the Bank's level of allowance for loan losses will
be  sufficient  to cover  future  losses  incurred  by the Bank,  or that future
adjustments  to the  allowance for loan losses will not be necessary if economic
and other conditions  differ from the economic and other conditions  analyzed by
management to determine the current level of the allowance for loan losses.

Non-interest income

     Total non-interest income, net of gains and losses on investment activities
and other  assets,  was  $289,000  for the quarter  ended  September  30,  2001,
compared to $272,000 for the same period last year,  an increase of $17,000,  or
6.3%.  These increases were primarily a result of increases in fees on loans and
deposit  accounts due to the increased  number of accounts and gains on sales of
loans. In addition,  the Company recognized a net gain of $10,000, for the three
month  period  ended  September  30,  2001,  in gains and losses on trading  and
investment securities compared to $139,000 for the three month period last year.
This  net  gain  represents  the  changes  in the  market  value  of the  assets
supporting certain employee benefit plans.

Non-interest expense

     Total non-interest expense was $2.8 million for the quarter ended September
30, 2001, compared to $2.7 million for the same period last year, an increase of
$82,000,  or 3.0%.  Total  salaries and  benefits  decreased  $35,000,  or 2.0%,
primarily the result of a general increase in salaries and benefits, offset by a
reduction in the costs associated with the Company's stock  compensation  plans.
Occupancy and equipment  expense totaled  $417,000  compared to $379,000 for the
same period last year, an increase of $38,000,  or 10.0%. This was the result of
the increased level of depreciation on leasehold improvements and an increase in
utility and  maintenance  costs  associated  with the Bank's various  locations.
Advertising  expense totaled  $128,000  compared to $119,000 for the same period
last year,  an increase  of $9,000,  or 7.6%,  primarily  as a result of special
promotions run by the Bank. Data processing costs increased  $26,000,  or 28.3%,
due to the  increased  level of deposits and new  products  and  services  being
offered. Other expenses including professional fees increased $44,000, or 11.2%.


                                    Page 13
<PAGE>

Income Taxes

     For the quarter  ended  September  30, 2001 income  taxes of $826,000  were
provided  on net income  before tax of $2.1  million  for an  effective  rate of
39.3%,  compared  to  $510,000  on income  before  taxes of $1.4  million for an
effective rate of 37.3%,  for the same period last year. The change in effective
tax rates from year to year was a result of setting up a valuation  allowance on
the deferred tax asset for the contribution  deduction carryover relating to the
funding of the  Charitable  Foundation  established  at the  conversion  and the
increase in  non-deductible  expense portion  associated with the Company's ESOP
plan.

Comparison of Operating  Results for the Six Months Ended September 30,
2001 and 2000

General

     Consolidated net income for the six months ended September 30, 2001 totaled
$2.4  million,  or $1.50  basic and $1.42  fully  diluted  earnings  per  share,
compared to $1.7 million,  or $0.92 basic and $0.91 fully  diluted  earnings per
share,  for the same period last year.  This represents an increase of $778,000,
or 46.8% in net income and a $0.58,  or 63.0%,  increase in basic  earnings  per
share and $0.51, or 56.0%, increase in fully diluted earnings per share.

Interest Income

     Interest  income for the six months ended September 30, 2001 increased $1.0
million,  or 5.8%,  to $19.0  million,  compared  to $18.0  million for the same
period  last year.  The  increase  in interest  income was  primarily  due to an
increase in the average balance of interest-earning  assets,  specifically loans
receivable. The average balance of interest-earning assets increased from $444.2
million for the six months ended  September  30, 2000 to $463.5  million for the
six months ended September 30, 2001, an increase of $19.3 million,  or 4.3%. The
increase in the average  balance of  interest-earning  assets was  primarily the
result of an increase in the average balance of loans receivable,  net, of $18.5
million,  or 4.6%, and an increase in the average balance of taxable  investment
securities  totaling  of $3.3  million,  or 15.5%,  offset by a decrease  in the
average balance of  mortgage-backed  securities of $2.8 million,  or 14.4%.  The
increase  in  interest  income  was  also  due to an  increase  in the  yield on
interest-earning assets of 11 basis points, to 8.21%.

Interest Expense

     Interest  expense for the six months  ended  September  30, 2001  decreased
$464,000,  or 4.5%,  to $9.8  million,  compared  to $10.3  million for the same
period last year. During the period interest-bearing liabilities increased $14.3
million,  or 3.5%,  from $403.6  million for the six months ended  September 30,
2000 to $417.9 million for the six months ended September 30, 2001. The increase
in the average  balance of  interest-bearing  liabilities  was primarily the net
result of an increase in the average balance of deposits totaling $23.1 million,
or 9.3%,  offset by a decrease in the average balance of FHLB advances and other
borrowings of $8.8 million,  or 5.7%.  Although the average  balance of interest
bearing  liabilities  increased,  due to the  aggressive  actions of the Federal
Reserve  and the lower  interest  rate  levels,  and the  ability to replace the
Federal Home loan Bank advances with lower  costing core deposit  accounts,  the
cost of liabilities decreased 40 basis points to 4.66%.


                                    Page 14
<PAGE>

Net interest income

     The table below shows the average balances, the interest earned and paid on
interest-earning  assets and interest-bearing  liabilities and the resulting net
interest spread and margin for the periods presented.

For the six months ended September 30,

<TABLE>
<CAPTION>
                                                              2001                                          2000
                                                              ----                                          ----
                                                                 Interest                                Interest
                                                  Average        Income/         Yield/     Average       Income/        Yield/
                                                  balance        expense         rate       balance       expense         rate
                                                  -------        -------         ------     -------       -------         ----
                                                                              (Dollars in thousands)
<S>                                              <C>             <C>             <C>       <C>            <C>             <C>
Assets

Interest-earning assets:

 Short-term investments                          $  1,979        $     35        3.54%     $  2,061       $     68        6.61%
 Taxable investment securities                     24,610             906        7.36        21,312            732        6.87
 Interest-earning deposits                            769              18        4.68           357             12        6.72
 Mortgage-backed & related securities              16,662             490        5.88        19,473            599        6.14
 Loans, net of unearned income                    419,475          17,581        8.38       400,997         16,575        8.27
                                                 --------        --------                  --------       --------
 Total interest-earning assets                    463,495          19,030        8.21       444,200         17,986        8.10
                                                                 --------                                 --------
 Non interest-earning assets                       32,994                                    31,688
                                                 --------                                  --------
  Total                                          $496,489                                  $475,888
                                                 ========                                  ========

Liabilities and Equity

Interest-bearing liabilities:
  NOW accounts                                   $ 27,655             125        0.90%     $ 23,414            117        1.00%
  Regular savings accounts                         27,388             239        1.75        26,434            269        2.03
  Money market accounts                            91,514           1,840        4.02        68,573          1,480        4.32
  Certificate accounts                            125,640           3,446        5.48       130,724          3,676        5.62
                                                ---------        --------                  --------       --------
Total interest-bearing deposits                   272,197           5,650        4.15       249,145          5,542        4.45
  FHLB advances                                   143,655           4,154        5.72       150,354          4,650        6.12
  Other Borrowings                                  2,000              45        4.45         4,051            121        5.92
                                                ---------        --------                  --------       --------
Total interest-bearing liabilities                417,852           9,849        4.66       403,550         10,313        5.06
                                                                 --------                                 --------
  Demand deposits                                  13,215                                     7,071
  Other liabilities                                11,401                                    11,641
                                                   54,021                                    53,626
  Equity                                        ---------                                  --------
  Total                                       $   496,489                                  $475,888
                                              ===========                                  ========
Net interest income                                              $  9,181                                 $  7,673
                                                                 ========                                 ========
Interest rate spread                                                             3.55%                                    3.04%
                                                                                 ====                                     ====
Net interest margin                                                              3.96%                                    3.45%
                                                                                 ====                                     ====
</TABLE>



                                    Page 15
<PAGE>

Provision for Loan Losses

     The  provision  for loan losses  totaled  $137,000 for the six months ended
September  30,  2001,  compared to $315,000  for the same period last year.  The
lower level of reserve  provisions  for the six months ended  September 30, 2001
was made based upon an assessment of the composition of the loan portfolio and a
slight decline in the rate of growth in the loan portfolio. The Company plans to
add to the provision for loan losses to support any loan portfolio  expansion as
considered necessary by management.

Non-interest income

     Total  non-interest  income  increased  $78,000,  or  12.9%,  to  $681,000,
primarily due to a result of increases in fees on loans and deposit accounts due
to the  increased  number of accounts and gains on sales of loans.  In addition,
the Company  recognized a net gain of $79,000 for the six-month  period in gains
and  losses on  trading  and  investment  securities  compared  to a net gain of
$77,000 for the same period last year. These net gains represents the changes in
the market value of the assets supporting certain employee benefit plans.

Non-interest expense

     Total  non-interest  expense  was $5.7  million  for the six  months  ended
September  30, 2001,  compared to $5.4 million for the same period last year, an
increase of $344,000, or 6.4%. Total salaries and benefits increased $97,000, or
2.8%,  primarily  the result of annual salary  increases and employee  benefits.
Occupancy and equipment expense increased  $82,000,  or 11.3%. This increase was
the result of the increased level of  depreciation  on  improvements  associated
with the  added  space  for the  retail  and  administrative  areas of the Bank.
Advertising  expense totaled  $281,000  compared to $253,000 for the same period
last year,  an  increase  of  $28,000,  or 11.1%,  primarily  as a result of the
promotion and  introduction of new deposit  products and retail  services.  Data
processing  costs  increased  $63,000,  or 38.6%,  due to the increased level of
deposits and new products and services being offered. Other expenses,  including
professional fees,  increased $74,000, or 9.7%,  primarily a result of increases
in professional  services and other expenses  associated with the development of
new products and services introduced during last fiscal year.

Income Taxes

     For the six months  ended  September  30, 2001 income taxes of $1.6 million
were provided on net income before tax of $4.0 million for an effective  rate of
39.2%,  compared  to  $933,000  on income  before  taxes of $2.6  million for an
effective rate of 35.9%,  for the same period last year. The change in effective
tax rates from year to year was a result of setting up a valuation  allowance on
the deferred tax asset for the contribution  deduction carryover relating to the
funding of the  Charitable  Foundation  established  at the  conversion  and the
increase in  non-deductible  expense portion  associated with the Company's ESOP
plan.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

     Management is responsible  for monitoring and limiting the Bank's  exposure
to  interest  rate risk  within  established  guidelines  while  maximizing  net
interest  income.  The Bank will  continue  to monitor  its  interest  rate risk
sensitivity with the primary objective to prudently  structure the balance sheet
so that  movements  of  interest  rates on assets  and  liabilities  are  highly
correlated  and  produce a  reasonable  net  interest  margin even in periods of
volatile interest rates.  Further  discussion on market risk is in the Company's
Form 10-K for the year  ended  March 31,  2001 and the Form 10-Q for the  period
ending June 30, 2001.


                                    Page 16
<PAGE>

Asset/Liability Management

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

     The Bank  monitors  its  interest  rate  risk as such risk  relates  to its
operating  strategies.   The  Bank's  Board  of  Directors  has  established  an
Asset/Liability   Committee,   responsible  for  reviewing  its  asset/liability
policies and interest  rate risk  position,  which meets on a monthly  basis and
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 Bank.

     In recent years, the Bank has primarily  utilized the following  strategies
to manage  interest rate risk: (i)  emphasizing  the origination and purchase of
adjustable-rate loans; (ii) investing primarily in U.S. Government securities or
mortgage-backed   and   mortgage-related   securities  with  shorter   estimated
maturities;  (iii) utilizing FHLB advances to better structure the maturities of
its interest rate  sensitive  liabilities;  and (iv) to a  substantially  lesser
extent,  selling in the secondary market longer-term  fixed-rate  mortgage loans
originated while generally retaining the servicing rights on such loans.

Gap Analysis.

     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 a bank's interest rate sensitivity  "gap." Assets and liabilities are
said to be interest  rate  sensitive  within a specific time period if they 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 same time period. At September 30,
2001,  the  Company's  cumulative  one  year  interest  rate gap  (which  is the
difference between the amount of  interest-earning  assets maturing or repricing
within one year and  interest-bearing  liabilities  maturing or repricing within
one year) as a  percentage  of total  assets,  was a  negative  16.4%.  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 negative gap position
would  be in a worse  position  to  invest  in  higher  yielding  assets  which,
consequently,  may  result  in  the  cost  of its  interest-bearing  liabilities
increasing at a rate faster than its yield on interest-earning assets than if it
had a positive gap.  Conversely,  during a period of falling  interest rates, an
institution  with a  negative  gap  would  tend  to  have  its  interest-bearing
liabilities repricing downward at a faster rate than its interest earning assets
as compared to an institution with a positive gap which, consequently,  may tend
to positively affect the growth of its net interest income.


                                    Page 17
<PAGE>

<TABLE>
<CAPTION>
                                                                          More       More          More
                                                                          than       than          than
                                                                         1 Year     3 Years      5 Years    Greater
                                                          1 Year           to         to            to        than      Total
                                                          or Less       3 Years    5 Years      15 Years     15 Years   Amount
                                                          ---------------------------------------------------------------------
                                                                                   (Dollars in thousands)
<S>                                                       <C>           <C>        <C>          <C>        <C>       <C>
Interest-earning assets:
 Short-term investments                                   $     117     $    --    $      --    $     --   $    --   $    117
 Investment in B.O.L.I                                        8,452          --           --          --        --      8,452
 Taxable investment Securities                               11,667         497          957       7,134        --     20,255
 Mortgage-backed securities                                      --          --           --       3,228     6,799     10,027
 Stock in FHLB-Boston                                         8,455          --           --          --        --      8,455
 Loans (1)                                                  114,534      77,300       75,532     117,642    55,034    440,042
                                                          ---------    --------    ---------    --------   -------   --------
    Total interest-earning assets                         $ 143,225    $ 77,797    $  76,489    $128,004   $61,833   $487,348
                                                          =========    ========    =========    ========   =======   ========
Interest-bearing liabilities:
 Money market accounts                                    $  84,198    $ 15,787    $   5,262    $     --   $    --   $105,247
 Regular savings accounts                                     4,338       8,676        8,675       7,230        --     28,919
 NOW accounts                                                 1,651       3,302        3,303       8,256    16,512     33,024
 Certificate accounts                                       104,771      18,353        4,284          --        --    127,408
 Other borrowed funds                                         2,000          --           --          --        --      2,000
 FHLB advances                                               29,314      33,654       70,000          --        --    132,968
                                                          ---------    --------    ---------    --------   -------   --------
    Total interest-bearing liabilities                    $ 226,272    $ 79,772    $  91,524    $ 15,486   $16,512   $429,566
                                                          =========    ========    =========    ========   =======   ========
Interest-earning assets less
 interest-bearing liabilities                             $ (83,047)   $ (1,975)   $ (15,035)   $112,518   $45,321   $ 57,782
                                                          =========    ========    =========    ========   =======   ========
Cumulative interest-rate
 sensitivity gap                                          $ (83,047)   $(85,022)   $(100,057)   $ 12,461   $57,782
                                                          =========    ========    =========    ========   =======
Cumulative interest-rate gap as
   a percentage of total assets.............                (16.43)%     (16.82)%     (19.79)%      2.46%    11.43%
  Cumulative interest-rate gap as
   a percentage of total interest-
   earning assets...........................                (17.04)%     (17.45)%     (20.53)%      2.56%    11.86%
  Cumulative interest-earning
   assets as a percentage of
   cumulative interest-bearing
   liabilities..............................                  63.30%       72.22%       74.83%    103.02%   113.45%

-------------
  (1) Excludes non-accrual loans
</TABLE>


                                    Page 18
<PAGE>



PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

     Neither the Company nor any of its subsidiaries is party to any pending
legal proceedings which are material other than routine litigation incidental to
their business activities.

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

     On July 26, 2001 the Company held its Annual Meeting of Shareholders. At
that meeting the following items were brought before the shareholders for a vote
and the results were as indicated.

1. Election of Directors

                                   For             %     Withheld          %
                                ---------        -----   --------        -----
     Robert B. Cleary           1,640,416         99.5     8,582         0.5
     Kent T. Spellman           1,640,408         99.5     8,590         0.5

2. The ratification of the appointment of Shatswell,  MacLeod & Company, P.C. as
independent  auditors  for Bay State  Bancorp,  Inc.  for the fiscal year ending
March 31, 2002.

     For                 %      Against         %     Abstained        %
     ----              -----    -------       -----   ---------      -----
     1,630,920         98.9     1,880         0.1     16,198         1.0

Item 5 - Other Information

            Not applicable.

Item 6 - Exhibits and Reports on Form 8-K

          (a)  Exhibits

               3.1  Certificate of Incorporation of Bay State Bancorp, Inc. *

               3.2  Amended and Restated Bylaws of Bay State Bancorp, Inc. **

               4.0  Stock Certificate of Bay State Bancorp, Inc. *

               11.0 Computation of per share earnings (filed herewith)

* Incorporated herein by reference from the exhibits to Form SB-2 registration
     statement as amended, Registration No. 333-40115

** Incorporated  herein by reference from the registrants Form 10-KSB,  as filed
     with the Securities and Exchange Commission on September 14, 1999.

          (b)  Reports on Form 8-K

               None

                                    Page 19
<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.


                                    Bay State Bancorp, Inc.


November 13, 2001                   \s\ John F. Murphy
------------------                  -------------------------------------
Date                                John F. Murphy
                                    Chairman,  President, and
                                    Chief Executive Officer
                                    (Principal Executive Officer)


November 13, 2001                   \s\ Michael O. Gilles
-----------------                   -------------------------------------
Date                                Michael O. Gilles
                                    Senior Vice President and
                                    Chief Financial Officer
                                    (Principal Accounting and Financial Officer)




                                    Page 20