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


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

                  For the quarterly period ended June 30, 1998
                                       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 small business issuer 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)

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

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
section 13 or 15(d) of the  Exchange  Act during the past 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 July 31, 1998 was 2,535,232.

Transitional Small Business Disclosure Format                    [_] Yes [x] No

<PAGE>


                    BAY STATE BANCORP, INC. AND SUBSIDIARIES

                                      INDEX


<TABLE>
<S>                                                                                       <C>
PART I - FINANCIAL INFORMATION .......................................................    1
   Item 1 - Financial Statements .....................................................    1
       Consolidated Balance Sheets - June 30, 1998 and March 31, 1998 ................    1
       Consolidated Income Statements - Three months ended June 30, 1998
          and 1997 ...................................................................    2
       Consolidated Statements of Cash Flows - Three months ended June 30, 1998
          and 1997 ...................................................................    3
       Consolidated Statements of Changes in Stockholders' Equity - Three months ended
          June 30, 1998 ..............................................................    4
       Notes to Consolidated Financial Statements for the Period Ended
       June 30, 1998 .................................................................    5
   Item 2 - Management's Discussion and Analysis or Plan of Operation ................    6

PART II - OTHER INFORMATION ..........................................................   18
   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

SIGNATURES ...........................................................................   19
EXHIBITS .............................................................................   20
   Computation of per share earnings - Exhibit 11 ....................................   20
   Financial Data Schedule - Exhibit 27 ..............................................   21
</TABLE>

<PAGE>


PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements

                    Bay State Bancorp, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                 June 30      March 31
                                                                   1998          1998
                                                                ---------     ---------

<S>                                                             <C>           <C>      
ASSETS                                                                  Unaudited
Cash and due from banks                                         $   3,852     $   3,513
Short-term investments                                             17,900        46,000
Investment and mortgage-backed securities
        Available for sale (amortized cost of $19,474 
          and $ 5,391)                                             20,612         6,523
        
        Held to maturity (market value of $3,956 and $4,274)        3,943         4,272
Mortgage loans held for sale                                          867           822
Loans receivable, net                                             231,053       224,928
Stock in Federal Home Loan Bank of Boston                           1,873         1,873
Accrued interest receivable                                         1,420         1,260
Premises and equipment, net                                         2,595         2,581
Deferred tax asset                                                  2,060         2,065
Other assets                                                        1,442         1,454
                                                                ---------     ---------
                Total assets                                    $ 287,617     $ 295,291
                                                                =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
        Deposits                                                $ 204,547     $ 207,780
        Borrowed funds                                             15,000        20,000
        Other borrowed funds                                        1,561         2,176
        Accrued expenses and other liabilities                      2,420         1,761
                                                                ---------     ---------
              Total liabilities                                   223,528       231,717
                                                                ---------     ---------
Stockholders' equity:
        Common stock, par value $.01 per share, issued
              and outstanding 2,535,232 and 2,535,232 shares           25            25
        Additional paid-in capital                                 49,194        49,194
        Retained earnings                                          17,854        17,340
        Net unrealized gain on investments available for sale         667           666
        Less: Unearned ESOP shares                                 (3,651)       (3,651)
            Total stockholders' equity                               --            --
            Total liabilities and stockholders' equity             64,089        63,574
                                                                ---------     ---------
                                                                $ 287,617     $ 295,291
                                                                =========     =========

Equity-to-asset ratio                                               22.28%        21.53%
Book value per share                                            $   27.24     $   27.02
</TABLE>

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


                                     Page 1
<PAGE>


                    Bay State Bancorp, Inc. and Subsidiaries
                         Consolidated Income Statements
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                       Three months ended
                                                                            June 30,
                                                                            --------
                                                                       1998         1997
                                                                    ----------   ----------

Interest income:                                                            Unaudited
<S>                                                                 <C>          <C>       
        Loans                                                       $    4,652   $    4,216
        Investments                                                        238          277
        Other interest                                                     527           23
                                                                    ----------   ----------
              Total interest income                                      5,417        4,516
                                                                    ----------   ----------
Interest expense:
        Deposits                                                         2,242        2,150
        Borrowed funds                                                     216          240
                                                                    ----------   ----------
              Total interest expense                                     2,458        2,390
                                                                    ----------   ----------
              Net interest income before provision for loan losses       2,959        2,126

Provision for loan losses                                                   50          -- 
              Net interest income after provision for loan losses        2,909        2,126
                                                                    ----------   ----------
Non-interest income:
        Service charges on deposit accounts                                 62           70
        Gain on sale of loans                                               13            3
        Gain on sale of other real estate owned                             --           19
                                                                    ----------   ----------
              Total non-interest income                                     75           92
                                                                    ----------   ----------
              Income before non-interest expense and income taxes        2,984        2,218
                                                                    ----------   ----------
Non-interest expense:
        Salaries and employee benefits                                   1,190          852
        Equipment Expense                                                   80           63
        Occupancy Expense                                                  156          157
        Federal deposit insurance premiums                                  31           31
        Advertising                                                         45           42
        Data processing                                                     57           55
        Other                                                              508          289
                                                                    ----------   ----------
              Total non-interest expense                                 2,067        1,489
                                                                    ----------   ----------
              Income before income taxes                                   917          729
Income tax expense                                                         403          295
                                                                    ----------   ----------
              Net income                                            $      514   $      434
                                                                    ==========   ==========
Comprehensive net income                                            $      515   $      559
                                                                    ==========   ==========

Weighted average common and common equivalent shares outstanding     2,352,696          n/a
                                                                    ==========  
Basic earnings per share                                            $     0.22          n/a
                                                                    ==========  
Diluted earnings per share                                          $     0.22          n/a
                                                                    ==========  
</TABLE>
                                                                        
              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                                                         

                                     Page 2
<PAGE>

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


<TABLE>
<CAPTION>
Net cash flows from operating activities:                               Three months ended June 30,
                                                                        ---------------------------
                                                                            1998         1997
                                                                            ----         ----
                                                                                 Unaudited
<S>                                                                     <C>         <C>     
Net income                                                              $    514    $    434
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses                                                     50          --
Net increase in mortgage loans held-for-sale                                 (45)         --
Gain on sale of mortgage loans                                               (13)         (3)
Depreciation and amortization                                                 65          55
Increase (decrease) in deferred loan origination fees                        (99)         57
Amortization of securities, net of accretion                                   2           2
Gain on sale of other real estate owned                                       --         (19)
Increase in accrued interest receivable                                     (160)       (106)
Decrease in deferred income tax assets, net                                   --         131
Decrease in prepaid expenses and other assets                                 12          60
Increase in other liabilities                                                659         187
                                                                        --------    --------

Net cash provided by operating activities                                    985         798
                                                                        --------    --------

Cash flows from investing activities:
Proceeds from sales of other real estate owned                                --          92
Proceeds from maturities of held-to-maturity securities                      327         224
Purchases of available-for-sale securities                               (14,083)        (34)
Net increase in loans                                                     (6,063)     (8,693)
Capital expenditures                                                         (79)       (394)
                                                                        --------    --------

Net cash used in investing activities                                    (19,898)     (8,805)
                                                                        --------    --------


Cash flows from financing activities:
Net increase (decrease) in deposits                                       (3,233)      1,475
Repayment of advances from the Federal Home Loan Bank                     (5,000)    (14,500)
Advances from the Federal Home Loan Bank                                      --      19,500
Net increase (decrease) in other borrowed funds                             (615)      1,460
                                                                        --------    --------
Net cash (used in) provided by financing activities                       (8,848)      7,935
                                                                        --------    --------

Net increase (decrease) in cash and cash equivalents                      (27,761)       (72)
                                                                                    
Cash and cash equivalents at beginning of period                           49,513      3,617
                                                                        --------    --------
Cash and cash equivalents at end of period                              $ 21,752    $  3,545
                                                                        ========    ========
                                                                                    

Supplemental disclosure of cash flow information:
Cash paid during the period for:
        Interest                                                        $  2,465    $  2,391
        Taxes                                                                 78          93
</TABLE>

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


                                     Page 3
<PAGE>


                    Bay State Bancorp, Inc. and Subsidiaries
           Consolidated Statements of Changes in Stockholders' Equity
                                 (In thousands)


     

<TABLE>
<CAPTION>
                                                     Additional                 Net      Unearned     Total
                                           Common     Paid-in    Retained    Unrealized    ESOP    Stockholders'
                                            Stock      Capital   Earnings       Gain       shares    Equity
                                          --------   ----------  ---------   ----------  --------   --------
<S>                                       <C>        <C>         <C>            <C>       <C>       <C>    
Balance at March 31, 1997                 $     --   $     --    $19,091        $383      $  --     $19,474
     Net loss                                   --         --     (1,751)         --         --      (1,751)
     Stock issued pursuant to
      initial common
       stock offering                           23     45,245         --          --         --      45,268
     Issuance of 187,795 shares of
      common stock
       to The Bay State Federal
        Savings Charitable
         Foundation                              2      3,754         --          --         --       3,756

     Common stock acquired by ESOP              --         --         --          --     (4,056)     (4,056)
     Reduction in unearned ESOP
      shares charged to expense                 --         --         --          --        405         405
     Appreciation in fair value of
      unearned ESOP shares
       charged to expenses                      --        195         --          --         --         195
     Change in net unrealized gain on
      investments available for sale            --         --         --         283         --         283
                                          --------   --------   --------    --------   --------    --------
Balance at March 31, 1998                       25     49,194     17,340         666     (3,651)     63,574
     Net income                                 --         --        514          --         --         514
     Change in net unrealized gain
      on investments available for sale         --         --         --           1         --           1
                                          --------   --------   --------    --------   --------    --------


Balance at June 30, 1998 (Unaudited)           $25    $49,194    $17,854        $667    $(3,651)     64,089
                                          ========   ========   ========    ========   ========    ========
</TABLE>


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



                                     Page 4
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE PERIOD ENDED June 30, 1998

(1)  Organization

     Bay State Bancorp,  Inc.  ("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  Savings  Bank  ("Bank")  as part of the  Bank's
conversion  from a mutual form of  organization  to a 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  ("OTS"),  the Federal
Deposit  Insurance   Corporation   ("FDIC")  and  the  Securities  and  Exchange
Commission ("SEC"). The Conversion, completed on March 29, 1998, resulted in the
Company  issuing an aggregate  2,535,232  shares of its common stock,  par value
$.01 per share,  at a price of $20 per share,  of which  2,347,437  shares  were
issued in a  subscription  offering  and  187,795  shares were issued to The Bay
State Federal Savings Charitable  Foundation (the  "Foundation),  established by
the Bank.  Prior to the  Conversion,  Bay State had not engaged in any  material
operations.

(2)  Accounting Principles

     The accompanying  unaudited  consolidated financial statements of Bay State
Bancorp,   Inc.  have  been  prepared  in  accordance  with  generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions  to Form 10-QSB and of Regulation S-B.  Accordingly,  the financial
statements  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  adjustments  (consisting of a normal  recurring
nature)  considered  necessary  for a  fair  presentation  have  been  included.
Operating  results for the three months ended June 30, 1998 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-KSB for the period  ended
March 31, 1998, filed with the Securities and Exchange Commission.



                                     Page 5
<PAGE>


Item 2 - Management's Discussion and Analysis or Plan of Operation

General

     Bay State Bancorp, Inc. a savings and loan holding company was incorporated
under the laws of  Delaware  in October  1997 for the  purpose of serving as the
holding  company  of Bay  State  Federal  Savings  Bank as  part  of the  Bank's
conversion  from a mutual  to stock  form of  organization.  Bay  State  Federal
Savings Bank is a federally  chartered savings bank and is subject to regulation
by the Office of Thrift Supervision.

     The Bank has five full service  retail banking  offices  located in Norfolk
and Suffolk  counties.  Through these  offices,  the Bank offers a full range of
retail and commercial  banking  products and services and conduct other business
as allowable for federally  chartered banks. The Banks' lending operations focus
on,  residential  first  mortgages,  commercial  real estate loans,  residential
construction loans, home equity lines of credit, and consumer loans.

     The Banks' business  activities are concentrated in Eastern  Massachusetts.
All retail banking activity is conducted  through the banking  offices.  Lending
operations,  particularly  loan  originations,  are  conducted  from the  retail
offices  and at the point of sale.  Neither  the Company and 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 earnings 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, and
gains on sales of assets, operating expenses, and income taxes.

Comparison of Financial Condition at June 30, 1998 and March 31, 1998

     Total  assets at June 30,  1998 were  $287.6  million,  compared  to $295.3
million at March 31, 1998, a decrease of 2.6%.  The decrease in total assets was
primarily the result of a reduction of $3.2 million in deposits and $5.0 million
in borrowed funds, these outflows were funded with short-term investments. While
total assets declined, there were increases in loans receivable of $6.1 million,
or 2.8%, and investment  securities  increased  $13.8  million,  or 127.8%.  The
increases in the respective portfolios were funded from short-term  investments.
Loan receivable  growth was mainly in the residential  mortgage area,  while the
increase in the  investment  portfolio was primarily in government  agencies and
certain equity investments.

     Total  equity was $64.1  million,  or 22.28%,  of total  assets at June 30,
1998, an increase of $515,000 or 0.81%,  from the $63.6 million,  or 21.53%,  of
total assets at March 31, 1998.  The Company's  book value per share at June 30,
1998 was $27.24.


                                     Page 6
<PAGE>



Investments

     Short-term  investments of $17.9 million at June 30, 1998, consisted solely
of  overnight  deposits in the Federal  Home Loan Bank of Boston,  a decrease of
$28.1 million, or 61.1%, from the $46.0 million at March 31, 1998. This decrease
was a result  of  funding  the  growth  in the  investment  securities  and loan
portfolios, to fund the minor outflow of deposits and payoff borrowed funds.

     As a result of the  stability  in  interest  rates,  and the  corresponding
impact on the market value of the investments  classified as available for sale,
a $667,000 net  unrealized  gain was recognized as an increase to equity at June
30, 1998, compared to an unrealized gain of $666,000 at March 31, 1998.

     The tables below show the investment  securities portfolios for the periods
presented:

     The amortized cost and estimated market values of investments available for
sale were:

<TABLE>
<CAPTION>
                                            June 30, 1998          March 31, 1998
                                            --------------         --------------
                                                    Estimated             Estimated
                                       Amortized     market    Amortized   market
                                         cost        value       cost       value
                                       ---------    --------   ---------  ---------
Investment securities                                    (In thousands)
<S>                                     <C>        <C>        <C>        <C>    
Marketable equity securities            $ 8,009    $ 9,067    $ 5,391    $ 6,523

Trust preferred equity securities         1,468      1,480         --         -- 

Preferred stocks                          1,000      1,066         --         -- 

Government agency securities              8,997      8,999         --         -- 
                                        -------    -------    -------    -------

                                        $19,474    $20,612    $ 5,391    $ 6,523
                                        =======    =======    =======    =======
</TABLE>


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

<TABLE>
<CAPTION>
                                          June 30, 1998         March 31, 1998
                                        --------------------  ---------------------
                                                   Estimated              Estimated
                                        Amortized   market    Amortized    market
                                          cost      value       cost       value
                                         ------     ------     ------     ------
Investment securities                                (In thousands)
<S>                                      <C>        <C>        <C>        <C>   
Government agency securities             $2,000     $2,000     $2,001     $1,999


Mortgage-backed securities                1,943      1,956      2,271      2,275
                                         ------     ------     ------     ------


                                         $3,943     $3,956     $4,272     $4,274
                                         ======     ======     ======     ======
</TABLE>



                                     Page 7
<PAGE>


Loans

     During the first quarter,  loans receivable  increased by $6.1 million,  or
2.72%, as detailed below:
                                      
<TABLE>
<CAPTION>
                                             June 30,      % of total      March 31,       % of  total
                                              1998          loans          1998             loans
                                            ---------      ------          -------          -------
Mortgage loans:                                             (Dollars in thousands)
<S>                                         <C>             <C>            <C>               <C>   
     Residential 1 - 4 family               $ 156,147       66.76%        $157,240            68.99%
     Equity lines                               4,181        1.79            4,028             1.77
     Residential multi-family                  22,738        9.72           22,411             9.83
     Commercial real estate                    39,298       16.80           35,468            15.56
     Construction and development               5,455        2.33            5,287             2.32
                                            ---------      ------         --------          -------
          Total mortgage loans                227,819       97.40          224,434            98.47
Commercial loans                                2,396        1.02               43             0.02
Other loans                                     3,692        1.58            3,434             1.51
                                            ---------      ------         --------          -------
     Total loans                              233,907      100.00%         227,911           100.00%
                                                           ======                           ======= 

Deduct:
     Allowance for loan losses                  2,483                        2,513
     Deferred loan fees                           371                          470
                                            ---------                     --------
Net loans receivable                        $ 231,053                     $224,928
                                            =========                     ========
</TABLE>

     The Banks' primary lending focus is real estate lending.  At June 30, 1998,
residential,  commercial real estate,  and  construction  and development  loans
represented 97.40% of total loans, compared to 98.47% at March 31, 1998.

     At June 30, 1998 loans serviced for investors was $16.5 million compared to
$15.6 million at March 31, 1998.

Asset Quality

     At June 30, 1998 non-performing  assets totaled $2.0 million, a decrease of
$249,000, or 10.93%, from $2.3 million at March 31, 1998.  Non-performing assets
consist of all loans that are  delinquent 90 days or more. The Bank had no other
real  estate  owned  at June 30,  1998 or  March  31,  1998.  At June 30,  1998,
non-performing  assets  represented  0.71% of total  assets  and  0.88% of loans
receivable,  compared to 0.77% and 1.00%,  respectively,  at March 31, 1998. The
decrease  in   non-performing   assets  was  primarily  in  one-to-four   family
residential mortgages.



                                     Page 8
<PAGE>


     The composition of non-performing assets for the periods presented was:

<TABLE>
<CAPTION>
                                                       June 30,        March 31,

                                                    1998       1997       1998
                                                    -----      -----      ----

                                                          (Dollars in thousands)

<S>                                                 <C>        <C>        <C>   
Non-accrual loans:
         One-to-four-family                         $  994     $1,605     $1,258

         Multi-family                                  254         --        254
                                                                   
         Commercial real estate                        739         --        739

         Construction and development                   --         --         --

         Equity lines                                   --         39         --

         Other                                          43          2         28
                                                    ------     ------     ------

                                                    $2,030     $1,646     $2,279
                                                    ======     ======     ======

Non-performing assets as a percentage of:
                                                                            
         Loans receivable                             0.88%     0.76%      1.00%

         Total assets                                 0.71      0.68       0.77
</TABLE>



The following represents the activity in the allowance for loan losses
for the three months ended June 30, 1998:

                                                                 (In thousands)

Balance at March 31, 1998                                           $2,513

Provision for loan losses                                               50

Losses charged to allowance                                             80

Recoveries                                                              --

Balance at June 30, 1998                                            $2,483
                                                                    ======

     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  substantially  from the assumptions
used in making the evaluation.



                                     Page 9
<PAGE>


Deposits and Borrowed Funds

        Deposits  decreased  slightly  during the three month period as detailed
below:

<TABLE>
<CAPTION>
                                      June 30,  % of total   March 31,  % of total
                                        1998    deposits      1998      deposits
                                      --------  ----------   --------   ---------
                                                 (Dollars in thousands)
<S>                                   <C>         <C>        <C>         <C>    
Regular savings accounts              $ 27,026     13.21%    $ 32,216     15.51%

NOW accounts                            21,782     10.65       22,989     11.06



Money market accounts                   45,663     22.32       42,440     20.43

Non-interest bearing deposits              536      0.26          485      0.23
                                      --------    ------     --------    ------
                                        95,007     46.44       98,130     47.23

Term deposits                          109,540     53.56      109,650     52.77
                                      --------    ------     --------    ------

Total deposits                        $204,547    100.00%    $207,780    100.00%
                                      ========    ======     ========    ======
</TABLE>

     During the period,  borrowed funds decreased $5,000,000,  or 25.00%, as the
Bank used short-term investments to pay off Federal Home Loan Bank borrowings as
they matured.

Comparison  of  Operating  Results for the three  months ended June 30, 1998 and
1997

Results of Operations

     Consolidated  net income for the three  months  ended June 30, 1998 totaled
$514,000,  or $0.22 per share,  compared  to  $434,000  for the same period last
year.  This  represents  an  increase of 18.43% in  earnings.  Due to the recent
Conversion,  the  earnings  per  share  numbers  for the  prior  period  are not
meaningful. The increase in earnings was directly attributable to an increase in
net  interest  income.   This  increase  in  net  interest  income  is  directly
attributable  to the increased  level of earning assets funded by the Conversion
proceeds.

     Interest Income

     Interest  income  for the  three  months  ended  June  30,  1998  increased
$901,000,  or 20.0%,  to $5.4  million,  compared  to $4.5  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, partially offset by
a decrease  in the yield on  interest-earning  assets.  The  average  balance of
interest-earning assets increased from $228.7 million for the quarter ended June
30, 1997 to $277.4  million for the quarter  ended June 30, 1998, an increase of
$48.7 million, or 21.3%. The increase in the average balance of interest-earning
assets  was  primarily  a  result  of an  increase  in the  average  balance  of
short-term investments of $35.8 million, or 34.1%, an increase in loans, net, of
$14.2  million or 6.7% and a decrease in  mortgage-backed  and mortgage  related
securities  of $1.0  million,  or 33.2%.  The yield on  interest-earning  assets
decreased 9 basis points to 7.81%.



                                    Page 10
<PAGE>


     Interest Expense

     Interest  expense  for the  three  months  ended  June 30,  1998  increased
$68,000, or 2.9%, to $2.5 million, compared to $2.4 million for the three months
ended June 30, 1997.  The increase in interest  expense was  primarily  due to a
$7.3  million,  or 3.4%,  increase  in the average  balance of  interest-bearing
liabilities  which increased from $213.5 million for the three months ended June
30,  1997 to $220.9  million  for the three  months  ended  June 30,  1998.  The
increase in the average balance of interest-bearing  liabilities was primarily a
result of an  increase in the average  balance of deposits of $6.8  million,  or
3.5% and a decrease in the average balance of borrowed funds of $.5 million,  or
2.9%. The cost of average interest-bearing  liabilities decreased 3 basis points
to 4.45%.



                                    Page 11
<PAGE>



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.


<TABLE>
<CAPTION>
For the three months ended June 30,                                          1998                                    1997
                                                           ---------------------------------        --------------------------------
                                                                         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                                   $ 36,813       $    527       5.73%      $  1,050      $     23      8.76%

 Investment securities                                      14,007            203       5.80         14,242           225      6.32

 Mortgage-backed and mortgage related
     securities                                              2,094             35       6.88          3,133            52      6.64

 Loans, net and mortgage loan
   held-for-sale                                           224,494          4,652       8.29        210,313         4,216      8.02
                                                          --------       --------                  --------      --------          

Total interest-earning assets                              277,408          5,417       7.81        228,738         4,516      7.90
                                                                         --------                                --------

Non interest-earning assets                                 12,291                                    7,093
                                                          --------                                 --------
  Total                                                   $289,699                                 $235,831
                                                          ========                                 ========

Liabilities and Equity

Interest-bearing liabilities:

  NOW accounts                                            $ 21,776             94       1.73       $ 20,751            94      1.81

  Regular savings accounts                                  28,627            174       2.43         30,262           186      2.46

  Money market accounts                                     38,571            450       4.67         38,733           385      3.98

  Certificate accounts                                     114,416          1,524       5.33        106,800         1,485      5.56
                                                          --------       --------                  --------      --------          

Total interest-bearing deposits                            203,390          2,242       4.41        196,546         2,150      4.38

  FHLB advances                                             17,500            216       4.88         17,000           240      5.59
                                                          --------       --------                  --------      --------          

Total interest-bearing liabilities                         220,890          2,458       4.45        213,546         2,390      4.48
                                                                         --------                                --------
     
  Demand deposits                                              498                                       92
                                                                                                 
  Other liabilities                                          4,461                                    2,423
                                                                                                 
  Equity                                                    63,850                                   19,770
                                                          --------                                 --------                        
                                                                                                 
  Total                                                   $289,699                                 $235,831
                                                          ========                                 ========                        
                                                                                                 
Net interest income                                                      $  2,959                                $  2,126
                                                                         ========                                ========
                                                                       
Interest rate spread                                                                    3.36%                                  3.42%
                                                                                        ====                                   ====

Net interest margin                                                                     4.14%                                  3.72%
                                                                                        ====                                   ====
</TABLE>




                                    Page 12
<PAGE>

     The increase of $833,000 in net interest income is analyzed as follows:


<TABLE>
<CAPTION>
                                                         Quarters ended June 30,
                                                             1998 vs. 1997
                                                         ------------------------
                                                Change due to Increase (Decrease)
                                                ---------------------------------
                                          Volume              Rate          Net
                                          ------              ----          ----
                                                             (In thousands)
<S>                                        <C>               <C>          <C>  
Interest income:                                        
        Loans                              $ 291             $ 144        $ 435
        Investment securities                487               (21)         466
                                           -----             -----        -----
           Total                             778               123          901
                                                        
Interest expense:                                       
        Deposits                              83                 9           92
        Borrowings                             7               (31)         (24)
           Total                              90               (22)          68
                                           -----             -----        -----
Net interest income                        $ 688             $ 145        $ 833
                                           =====             =====        =====
</TABLE>                                          

Provision for Loan Losses

     The  provision for loan losses  totaled  $50,000 for the quarter ended June
30,  1998,  compared to none for the same period last year.  The increase in the
provision  reflected  the  risks  associated  with the  Banks'  primary  lending
objective to increase the overall loan portfolio.  The allowance for loan losses
is  maintained at an amount  management  considers  adequate to cover  estimated
losses on loans  receivable  which are deemed  probable and  estimable  based on
information currently known to management.  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  substantially  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 decreased $17,000,  or 18.5%, to $75,000.  Other
fees and  charges  decreased  $8,000 due to  decreased  volumes  in  transaction
accounts  and  fees  charged  on  certain  transactions.  Gain on sale of  loans
increased $10,000, or 333.33%, due to the increased level of sales over the same
period last year. During the previous fiscal quarter the Bank recognized $19,000
in gains on the sale of other  real  estate,  of which  there  were  none in the
current fiscal quarter.


                                    Page 13
<PAGE>



Non-interest expense

     Salaries and benefits increased $338,000,  or 39.7%, the result of $147,000
in  compensation   expense  associated  with  the  Employee  Stock  Option  Plan
allocation,  a general increase in salaries and benefits, and an increase in the
number of  employees  over the same  period  last  fiscal  year.  Occupancy  and
equipment  expenses  increased  $16,000,  or 7.3%,  primarily  a  result  of the
increased level of depreciation  on building and leasehold  improvements.  Other
expenses  increased  $219,000,  or 75.8%,  primarily  as a result of $188,000 in
non-recurring   expenses   associated   with  the   implementation   of  certain
developmental strategies and programs associated with the strategic planning for
the future.

Income Taxes

     Income  taxes for the three  months  ended June 30,  1998 were  $403,000 on
pretax income of $917,000, for an effective rate of 43.95%, compared to $295,000
on pretax  income of  $729,000,  for an  effective  rate of 40.47%  for the same
period last fiscal year.  The higher than previous  years  effective tax rate is
mainly due to the  non-deductibility  of certain  expenses in the current fiscal
year.

Capital Adequacy

     The  Company  and its  subsidiary  Bank are  subject to various  regulatory
capital  requirements  administered by the federal banking agencies.  Failure to
meet minimum capital  requirements can initiate certain mandatory - and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct  material  effect on the Company's  financial  statements.  Under capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Company and the Bank must meet  specific  capital  guidelines  that  involve
quantitative measures of their assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Their capital amounts
and classification  are also subject to qualitative  judgments by the regulators
about components, risk weighting and other factors.

     At June 30, 1998 the  Company's  capital  ratio was 22.28% of total assets.
The Bank at June 30, 1998 had total  capital of 14.09% and risk based capital of
26.23% (unaudited).

     The  FDIC  sets  minimum  leverage  ratios  for  each  insured  institution
depending upon its CAMELS rating. Banks with the highest ratings are required to
carry a 3.0% leverage  ratio,  with less highly rated  institutions  required to
have minimum  ratios at least 1.0% to 2.0% greater.  Additionally,  the FDIC has
risk-based  capital  regulations.  Under these  requirements,  banks must have a
minimum risk-based capital rate of 8.00%.

     At June 30,  1998 the  Company  and the Bank met all the  capital  adequacy
requirements  to which they are subject.  As of June 30,  1998,  the most recent
notification from the Office of Thrift Supervision categorized the Bank as "well
capitalized" under the regulatory framework for prompt corrective action.


                                    Page 14
<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 quarterly  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 short-term 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.

     As part of its interest rate risk analysis,  the Bank uses an interest rate
sensitivity  model  which  generates  estimates  of the change in the Bank's net
portfolio  value  ("NPV") over a range of interest  rate  scenarios and which is
prepared by the OTS on a quarterly  basis.  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.  The OTS  produces
such  analysis  using its own  model,  based upon data  submitted  on the Bank's
quarterly Thrift Financial Reports,  including  estimated loan prepayment rates,
reinvestment  rates and deposit decay rates.  The following table sets forth the
Bank's NPV as of March 31, 1998 (the latest NPV  analysis  prepared by the OTS),
as calculated by the OTS.


                                    Page 15
<PAGE>



<TABLE>
<CAPTION>
  Change in
  Interest
  Rates in                        Net Portfolio Value            NPV as % of
Basis Points                                                     Portfolio
(Rate Shock)                                                   Value of Assets
                                                            NPV              
                   Amount     $ Change       % Change     Ratio       Change(1) 
                             -------------------------------------------------
                                           (Dollars in thousands)
<S>                <C>         <C>              <C>       <C>           <C>  
   400             $38,326     $(6,256)         (14)%     13.22%        (167)
                 
                 
                 
   300              40,766      (3,816)          (9)      13.91          (98)
                 
                 
   200              42,745      (1,837)          (4)      14.45          (45)
                 
                 
   100              44,096        (487)          (1)      14.79          (10)
                 
                 
Static              44,582          --           --       14.89           --
                 
                 
  (100)             44,750         168           --       14.90            1
                 
                 
  (200)             44,883         301            1       14.89           --
                 
                 
  (300)             45,491         909            2       15.02           13
                 
                 
  (400)             46,820       2,238            5       15.35           45
</TABLE>
          
(1)  Expressed in basis points.

Liquidity

     The Bank's  primary  sources of funds are deposits,  principal and interest
payments on loans,  mortgage-backed and investment securities and FHLB advances.
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 Bank has continued to
maintain the  required  levels of liquid  assets as defined by OTS  regulations.
This  requirement  of the OTS,  which may be varied at the  direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term  borrowings.  The Bank's currently required liquidity
ratio is 4%. At June 30, 1998 the Bank's liquidity ratio was 14.7%. Management's
strategy is to maintain liquidity as close as possible to the minimum regulatory
requirement   and  to  invest   any   excess   liquidity   in  higher   yielding
interest-earning assets. The Bank manages its liquidity position and demands for
funding  primarily  by  investing  excess funds in  short-term  investments  and
utilizing FHLB advances in periods when the Bank's demands for liquidity  exceed
funding from deposit inflows.

     The Bank's most liquid assets are cash and cash equivalents and securities.
The levels of these  assets are  dependent on the Bank's  operating,  financing,
lending and investing activities during any given period. At June 30, 1998, cash
and cash  equivalents and securities  totaled $48.2 million,  or 16.75% of total
assets.

     The Bank has other  sources of  liquidity  if a need for  additional  funds
arises, including FHLB advances. At June 30, 1998, the Bank had $15.0 million in
advances  outstanding  from the FHLB,  and at June 30, 1998,  had an  additional
overall borrowing capacity from the FHLB of $151.8 million.  Depending on market
conditions,  the pricing of deposit  products  and FHLB  advances,  the Bank may
continue to rely on FHLB borrowings to fund asset growth.


                                    Page 16
<PAGE>


Year 2000 Compliance

     As the year 2000  approaches,  an  important  business  issue  has  emerged
regarding how existing  application  software programs and operating systems can
accommodate  this date value. The Bank primarily  utilizes a third-party  vendor
for processing the primary banking applications. In addition, the Bank also uses
third-party vendor application software for all ancillary computer applications.
The third-party vendor for the Bank's banking  applications is in the process of
modifying  and  upgrading  its  computer   applications   to  ensure  Year  2000
compliance.  In the event that the Bank's third party vendor or its  significant
suppliers  or  customers  do not  successfully  and  timely  achieve  Year  2000
compliance,  the Bank's  business or  operations  could be  adversely  affected.
However,  management believes that the Bank's own internal system,  networks and
resources would allow the Bank to effectively  operate and service its customers
in the event its  significant  vendors  do not  achieve  satisfactory  Year 2000
compliance.  In  addition,  if  significant  vendors  failed  to meet  Year 2000
operating  requirements,  the Bank  intends to engage  alternative  vendors  and
suppliers. While the Bank cannot estimate the costs and expenses associated with
hiring new vendors and suppliers,  management believes that such costs would not
have a material impact on the Bank's earnings or results of operations.

     Statements contained in this document,  which are not historical facts, are
forward-looking  statements  as that term is defined in the  Private  Securities
Litigation  Reform Act of 1995. Such  forward-looking  statements are subject to
risk and  uncertainties,  which could cause actual results to differ  materially
from those currently anticipated due to a number of factors,  which include, but
are not limited to, factors discussed in documents filed by the Company with the
Securities and Exchange Commission from time to time.



                                    Page 17
<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

     Not applicable.

Item 5 - Other Information

     Not applicable.

Item 6 - Exhibits and Reports on Form 8-K

     (a)  Exhibits

          11.0
          27.0

     (b)  Reports on Form 8-K

          (i)  None


                                    Page 18
<PAGE>


                                   SIGNATURES


Under 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.


August 10, 1998                          \s\ John F. Murphy
--------------------                     --------------------------
Date                                     John F. Murphy
                                         Chairman, President, and
                                         Chief Executive Officer
                                         (Principal Executive Officer)


August 10, 1998                          \s\ Michael O. Gilles 
--------------------                     -----------------------------
Date                                     Michael O. Gilles
                                         Senior Vice President and
                                         Chief Financial Officer
                                         (Principal Accounting and Financial
                                         Officer)


                                    Page 19