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 December 31, 1999
                                       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 February 11, 1999 was 2,021,946.

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 - Consolidated Financial Statements .....................................................   1
    Consolidated Balance Sheets - December 31, 1999 (unaudited) and March 31, 1999 ...............   1
    Consolidated Income Statements - Three and nine months ended December 31, 1999 and 1998
    (unaudited) ..................................................................................   2
    Consolidated Statements of Cash Flows - Nine months ended December 31, 1999 and 1998
    (unaudited) ..................................................................................   3
    Consolidated Statements of Changes in Stockholders' Equity - Nine months ended
    December 31, 1999 (unaudited) ................................................................   4
    Notes to Consolidated Financial Statements for the Period Ended December 31, 1999 ............   5
  Item 2 - Management's Discussion and Analysis or Plan of Operation .............................   6

PART II - OTHER INFORMATION ......................................................................  19
  Item 1 - Legal Proceedings .....................................................................  19
  Item 2 - Changes in Securities .................................................................  19
  Item 3 - Defaults Upon Senior Securities .......................................................  19
  Item 4 - Submission of Matters to a Vote of Security Holders ...................................  19
  Item 5 - Other Information .....................................................................  19
  Item 6 - Exhibits and Reports on Form 8-K ......................................................  19

  SIGNATURES .....................................................................................  20
  EXHIBITS .......................................................................................  21
    Computation of per share earnings - Exhibit 11 ...............................................  21
    Financial Data Schedule - Exhibit 27 .........................................................  22
</TABLE>


<PAGE>

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

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

<TABLE>
<CAPTION>
                                                                                 December 31,           March 31,
                                                                                    1999                   1999
                                                                                  ---------             ---------
ASSETS                                                                           (Unaudited)
<S>                                                                               <C>                   <C>
Cash and due from banks                                                           $   5,711             $   3,738
Short-term investments                                                                1,098                 6,369
Investment in available-for-sale securities (at fair value)                          33,093                24,350
Investments in held-to-maturity securities (fair values of $595 as                      596                   956
of December 31, 1999 and $978 as of March 31, 1999)
Stock in Federal Home Loan Bank of Boston                                             7,798                 3,850
Mortgage loans held-for-sale                                                             --                   321
Loans receivable, net                                                               382,612               304,372
Accrued interest receivable                                                           2,317                 1,920
Premises and equipment, net                                                           2,827                 2,564
Deferred tax asset, net                                                               3,279                 2,728
Investment in bank owned life insurance                                               7,784                 6,054
Other assets                                                                          2,839                 2,182
                                                                                  ---------             ---------
                Total assets                                                      $ 449,954             $ 359,404
                                                                                  =========             =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
         Deposits                                                                 $ 222,622             $ 216,397
         Federal Home Loan Bank Advances                                            154,403                76,751
         Other borrowed funds                                                        13,078                 3,240
         Accrued expenses and other liabilities                                       3,974                 2,718
                                                                                  ---------             ---------
                 Total liabilities                                                $ 394,077             $ 299,106
                                                                                  ---------             ---------
Stockholders' equity:
         Common stock, par value $.01 per share,
                 2,535,232 shares issued                                                 25                    25
         Additional paid-in capital                                                  49,228                49,277
         Retained earnings                                                           20,985                19,463
         Accumulated other comprehensive income                                        (940)                   45
         Less: Unearned ESOP shares                                                  (3,232)               (3,232)
                 Unearned 1998 Stock-Based Incentive Plan                            (1,756)               (2,173)
                 Treasury stock, 387,586 and 126,762 shares                          (8,433)               (3,107)
                                                                                  ---------             ---------
                   Total stockholders' equity                                        55,877                60,298
                                                                                  ---------             ---------
                   Total liabilities and stockholders' equity                     $ 449,954             $ 359,404
                                                                                  =========             =========

Equity-to-asset ratio                                                                 12.42%                16.78%

Book value per share
                                                                                  $ 28.19             $ 26.88
</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              Nine months ended
                                                                                 December 31,                    December 31,
                                                                          --------------------------      --------------------------
                                                                             1999            1998            1999            1998
                                                                          ----------      ----------      ----------      ----------
Interest income:                                                                   Unaudited                    Unaudited
                                                                                   ---------                    ---------
<S>                                                                       <C>             <C>             <C>             <C>
   Loans                                                                  $    7,364      $    5,551      $   20,431      $   15,201
   Investments                                                                   728             500           2,051           1,809
                                                                          ----------      ----------      ----------      ----------
      Total interest income                                                    8,092           6,051          22,482          17,010
                                                                          ----------      ----------      ----------      ----------
Interest expense:
   Deposits                                                                    2,243           2,199           6,530           6,689
   Borrowed funds                                                              2,141             580           5,174           1,042
                                                                          ----------      ----------      ----------      ----------
      Total interest expense                                                   4,384           2,779          11,704           7,731
                                                                          ----------      ----------      ----------      ----------
      Net interest income before provision for loan losses                     3,708           3,272          10,778           9,279
Provision for loan losses                                                        200             260             650             410
                                                                          ----------      ----------      ----------      ----------
      Net interest income after provision for loan losses                      3,508           3,012          10,128           8,869
                                                                          ----------      ----------      ----------      ----------
Non-interest income:
   Service charges on deposit accounts                                            69              70             211             202
   Gain on sale of loans                                                           1              17               7              46
   Other income                                                                  115              --             301              --
                                                                          ----------      ----------      ----------      ----------
      Total non-interest income                                                  185              87             519             248
                                                                          ----------      ----------      ----------      ----------
      Income before non-interest expense and income taxes                      3,693           3,099          10,647           9,117
                                                                          ----------      ----------      ----------      ----------
Non-interest expense:
   Salaries and employee benefits                                              1,660           1,448           4,864           3,780
   Occupancy and equipment expense                                               291             253             835             750
   Federal deposit insurance premiums                                             33              32              97              95
   Advertising                                                                   150              62             291             162
   Data processing                                                                69              63             200             185
   Other expenses                                                                375             316           1,299           1,275
                                                                          ----------      ----------      ----------      ----------
      Total non-interest expense                                               2,578           2,174           7,586           6,247
                                                                          ----------      ----------      ----------      ----------
      Income before income taxes                                               1,115             925           3,061           2,870
Income tax expense                                                               392             378           1,081           1,203
                                                                          ----------      ----------      ----------      ----------
      Net income                                                          $      723      $      547      $    1,980      $    1,667
                                                                          ==========      ==========      ==========      ==========
Comprehensive net income                                                  $      526      $      714      $      995      $    1,229
                                                                          ==========      ==========      ==========      ==========

Weighted average common and common equivalent shares
outstanding                                                                2,089,515       2,317,682       2,136,773       2,340,982
                                                                          ==========      ==========      ==========      ==========
Basic earnings per share                                                  $     0.35      $     0.24      $     0.93      $     0.71
                                                                          ==========      ==========      ==========      ==========
Diluted earnings per share                                                $     0.35      $     0.23      $     0.93      $     0.71
                                                                          ==========      ==========      ==========      ==========
</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
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                Nine months ended December 31,
                                                                                                ------------------------------
                                                                                                    1999             1998
                                                                                                  ---------       ---------
                                                                                                         (Unaudited)
<S>                                                                                               <C>             <C>
Net cash flows from operating activities:
         Net income                                                                               $   1,980       $   1,667
         Adjustments  to reconcile  net income to net cash provided by operating activities:
                 Earned stock based incentive plan                                                      368              --
                 Provision for possible loan losses                                                     650             410
                 Net decrease (increase) in mortgage loans held-for-sale                                321            (822)
                 (Gain) loss on sale of loans                                                             7             (46)
                 Depreciation and amortization                                                          237             232
                 Amortization of securities, net of accretion                                          (150)              6
                 Amortization of loan fees and discounts                                                (34)           (235)
                 Increase in accrued interest receivable                                               (397)           (454)
                 Increase in prepaid expense and other assets                                          (518)         (3,801)
                 Increase in other liabilities                                                        1,255             676
                                                                                                  ---------       ---------
         Net cash provided by (used in) operating activities                                          3,719          (2,367)
                                                                                                  ---------       ---------
Net cash flows from investing activities:
                 Maturities and principal repayments on investments held to maturity                    358           2,969
                 Maturities and principal repayments on investments available for sale               12,821           5,217
                 Purchase of investments available for sale                                         (22,948)        (25,391)
                 Purchase of Federal Home Loan Bank of Boston Stock                                  (3,948)         (1,367)
                 Distribution to Rabbi Trust                                                           (138)           (400)
                 Investment in bank owned life insurance                                             (1,730)             --
                 Net increase in loans                                                              (78,863)        (56,858)
                 Capital expenditures                                                                  (500)           (258)
                                                                                                  ---------       ---------
         Net cash used in investing activities                                                      (94,948)        (76,088)
                                                                                                  ---------       ---------
Net cash flows from financing activities:
                 Net deposit activity                                                                 6,225           5,387
                 Proceeds of borrowings                                                             220,113          49,965
                 Repayment of borrowings                                                           (142,461)         (5,516)
                 Net increase in other borrowed funds                                                 9,838           2,464
                 Purchase of stock for stock-based incentive plans                                       --          (2,269)
                 Dividend on common stock                                                              (458)             --
                 Purchase of treasury stock                                                          (5,326)         (3,107)
                                                                                                  ---------       ---------
         Net cash provided by financing activities                                                   87,931          46,924
                                                                                                  ---------       ---------
Net decrease in cash and cash equivalents:                                                           (3,298)        (31,531)
Cash and cash equivalents at beginning of period                                                     10,107          49,513
                                                                                                  ---------       ---------
Cash and cash equivalents at end of period                                                        $   6,809       $  17,982
                                                                                                  =========       =========
Supplemental disclosure of cash flow information:
         Cash paid during period for:
                 Interest                                                                         $  11,682       $   7,730
                 Income taxes                                                                     $   1,349       $   1,089
</TABLE>

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



<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                             Unearned       Total
                                                Additional  Accumulated    Other      Unearned              Stock-based     Stock-
                                        Common    Paid-in     Retained  Comprehensive   ESOP     Treasury    Incentive     holders'
                                         Stock    Capital     Earnings     Income      Shares      Stock    Plan Shares     Equity
                                       -------------------------------------------------------------------------------------------
<S>                                    <C>        <C>         <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 expense                               --        195          --          --          --          --          --         195
  Net Change in unrealized gain
    on available for sale securities         --         --          --         283          --          --          --         283
                                       -------------------------------------------------------------------------------------------
Balance at March 31, 1998                    25     49,194      17,340         666      (3,651)         --          --      63,574
  Net Income                                 --         --       2,234          --          --          --          --          --
  Net change in unrealized gain
    on available for sale
    securities, net of                       --         --          --        (621)         --          --          --          --
    tax effect
      Comprehensive income                   --         --          --          --          --          --          --       1,613
  Purchase of treasury stock,
    126,762 shares                           --         --          --          --          --      (3,107)         --      (3,107)
  Dividends paid, $0.05 per
    share                                    --         --        (111)         --          --          --          --        (111)
  Reduction in unearned ESOP
    shares charged to expense                --         --          --          --         419          --          --         419
  Appreciation in fair value of
    unearned ESOP shares
    charged to expense                       --         95          --          --          --          --          --          95
  Common stock acquired for
    stock-based Incentive plans              --         --          --          --          --          --      (2,269)     (2,269)
  Issuance of stock incentive
    plan shares                              --        (12)         --          --          --          --          96          84
                                       -------------------------------------------------------------------------------------------
Balance at March 31, 1999              $     25   $ 49,277    $ 19,463    $     45    $ (3,232)   $ (3,107)   $ (2,173)     60,298
  Net Income                                 --         --       1,980          --          --          --          --          --
  Net change in unrealized gain
    on available for sale
    securities, net of tax effect            --         --          --        (985)         --          --          --          --
      Comprehensive income                   --         --          --          --          --          --          --         995
  Purchase of treasury stock,
    260,824 shares                           --         --          --          --          --      (5,326)         --      (5,326)
  Dividends paid, $0.20 per
    share                                    --         --        (458)         --          --          --          --        (458)
  Issuance of stock incentive
    plan shares                              --        (49)         --          --          --          --         417         368
                                       -------------------------------------------------------------------------------------------
Balance at December 31, 1999
  (Unaudited)                          $     25   $ 49,228    $ 20,905    $   (940)   $ (3,232)   $ (8,433)   $ (1,756)   $ 55,877
                                       ===========================================================================================
</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 DECEMBER 31, 1999

(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  Savings Bank (the "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  (the
"OTS"),  the  Federal  Deposit  Insurance   Corporation  (the  "FDIC")  and  the
Securities and Exchange  Commission (the "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.  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 and nine months ended December 31, 1999 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,  1999,  and Form  10-QSB  for the  periods  ended  June 30,  1999 and
September 30, 1999, filed with the Securities and Exchange Commission.

(3)  Stock Repurchase Program

     During the quarter  ended  December 31,  1999,  the Company  completed  the
repurchase of 5% of its  outstanding  common  stock,  or 114,402  shares,  at an
average price of $19.45 per share.  This third  repurchase  program  reduced the
Company's  outstanding  shares to  2,173,644.  Also,  on  December  21, 1999 the
company  announced  that it had requested and received  approval from the OTS to
purchase an additional 10%, or 217,364, of its outstanding common stock. Subject
to provisions  established by the OTS, this repurchase program must be completed
by March 28, 2000.  Upon  completion  of this  repurchase  the company will have
repurchased  approximately  25% of its  common  stock  since  becoming  a public
company in March of 1998.  As of February  11, 2000 the company had  repurchased
151,698 shares of the 10% repurchase program, at an average price of $18.75.

                                     Page 5

<PAGE>

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

     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  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 filing with the SEC.

     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

     Bay State, 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 the Bank as part of the Bank's conversion from a mutual to stock form
of organization.  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, consumer loans and residential  construction
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 6

<PAGE>

Comparison of Financial Condition at December 31, 1999 and March 31, 1999

     Total assets at December 31, 1999 were $450.0  million,  compared to $359.4
million at March 31,  1999,  an increase of 25.2%.  Loans  receivable  increased
$78.2 million,  or 25.7%,  primarily in multi-family  residential and commercial
real estate loans and to a lesser extent 1-4 family residential mortgages, which
were  originated  and  purchased.  The  increase  in assets was  funded  from an
increase of $77.7 million,  or 101.2%,  in Federal Home Loan Bank  advances,  an
increase  in Other  Borrowed  Funds  totaling  $9.8  million,  or 303.6%  and an
increase in deposits of $6.2 million, or 2.9%.

     Total stockholder's equity was $55.9 million, or 12.42% of total assets, at
December 31, 1999, a decrease of $4.4 million,  or 7.3%, from the $60.3 million,
or 16.8% of total assets, at March 31, 1999. The change in equity was the result
of the net income for the  period,  offset by a  reduction  in capital  from the
completion of a 5% stock repurchase  program during the period and the reduction
in the market value of investment  securities  classified as available for sale.
The Company's book value per share at December 31, 1999 was $28.19,  compared to
$26.88 at March 31, 1999.

Investments

     Short-term  investments of $1.1 million at December 31, 1999,  consisted of
overnight  deposits  in the  Federal  Home  Loan  Bank of  Boston  and the  Bank
Investment Fund, a decrease of $5.3 million,  or 82.8%, from the $6.4 million at
March  31,  1999.  Investment  securities  increased  $8.4  million,  or  33.2%,
primarily  in  investment  securities  available  for sale  and  mortgage-backed
securities. The net increase in total investments was $3.1 million.

     The Company's investment portfolio at December 31, 1999 reflects a $940,000
net unrealized loss on available-for-sale securities,  compared to an unrealized
gain of $45,000 at March 31, 1999.

     The tables below show the investment  securities  portfolios at the periods
presented: The amortized cost and fair value of investments available-for-sale.

<TABLE>
<CAPTION>
                                            December 31, 1999            March 31, 1999
                                         ----------------------      ----------------------

                                         Amortized       Fair        Amortized       Fair
                                           Cost          Value         Cost          Value
                                          -------       -------       -------       -------
                                                           (In thousands)
<S>                                       <C>           <C>           <C>           <C>
Investment securities
  Marketable equity securities            $ 9,755       $ 9,490       $ 9,525       $ 9,737
  Mortgage-backed securities               18,167        17,706         5,371         5,391
  Trust preferred equity securities            --            --         2,506         2,521
  Corporate bonds and notes                   495           476         1,247         1,234
  Preferred stocks                          4,002         3,447         1,500         1,460
  Government agency securities              2,010         1,974         4,000         4,007
                                          -------       -------       -------       -------
Total                                     $34,429       $33,093       $24,149       $24,350
                                          =======       =======       =======       =======
</TABLE>

                                     Page 7

<PAGE>

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

<TABLE>
<CAPTION>
                                                    December 31, 1999       March 31, 1999
                                                    -----------------       --------------

                                                    Amortized    Fair     Amortized     Fair
                                                       Cost      Value       Cost       Value
                                                       ----       ----       ----       ----
                                                                  (In thousands)
<S>                                                    <C>        <C>        <C>        <C>
Investment securities
Mortgage-backed  and mortgage-related securities       $596       $595       $956       $978
                                                       ----       ----       ----       ----
Total Mortgage-backed and mortgage related
  Securities                                           $596       $595       $956       $978
                                                       ====       ====       ====       ====
</TABLE>

Loans

     During  the first  nine  months of the fiscal  year,  net loans  receivable
increased by $78.2 million, or 25.7%, as detailed below:

<TABLE>
<CAPTION>
                                                 December 31,   % of total     March 31,     % of total
                                                     1999          Loans         1999           Loans
                                                   --------       --------     --------       --------
                                                                 (Dollars in thousands)
<S>                                                <C>               <C>       <C>               <C>
Mortgage loans:
     Residential 1 - 4 family                      $196,210          50.49%    $168,786          54.62%
     Multi-family                                    77,294          19.89       57,744          18.69
          Commercial real estate                     91,895          23.64       67,806          21.94
     Construction and development                    10,276           2.64        5,494           1.78
                                                   --------       --------     --------       --------
               Total mortgage loans                 375,675          96.66      299,830          97.03
                                                   --------       --------     --------       --------
Commercial loans                                        225           0.06          500           0.16
                                                   --------       --------     --------       --------
Consumer loans:
     Equity lines                                     8,198           2.11        5,156           1.67
          Other consumer loans                        4,547           1.17        3,535           1.14
                                                   --------       --------     --------       --------
     Total loans                                    388,645         100.00%     309,021         100.00%
                                                                  ========                    ========

Deduct:
     Allowance for loan loss                          3,691                       3,027
          Undisbursed proceeds of construction
               and development loans in process       2,178                       1,424
     Deferred loan fees                                 164                         198
                                                   --------                    --------
Net loans receivable                               $382,612                    $304,372
                                                   ========                    ========
</TABLE>

     At December 31, 1999 loans  serviced for others was $23.2 million  compared
to $22.6 million at March 31, 1999.

                                     Page 8

<PAGE>

Asset Quality

         At December 31, 1999  non-performing  assets  totaled $1.8  million,  a
decrease  of  $200,000,   or  8.4%,   from  $2.0  million  at  March  31,  1999.
Non-performing  assets consist of all loans that are delinquent 90 days or more.
The Bank had no other real estate  owned at December 31, 1999 or March 31, 1999.
At December 31, 1999,  non-performing  assets  represented 0.40% of total assets
and 0.47% of loans receivable net, compared to 0.55% and 0.64%, respectively, at
March 31, 1999. The decrease in  non-performing  assets was primarily the result
of  certain,  previously  non-performing  loans  being  brought  current and the
repayment of two delinquent loans.

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

                                                  December 31,         March 31,
                                               1999         1998         1999
                                              ------       ------       ------
                                                   (Dollars in thousands)

Non-accrual loans:
         One-to-four-family                   $  915       $  862       $  862
         Multi-family                             --          280          280
         Commercial real estate                  792          742          745
         Construction and development             --           --           --
         Equity lines                             65           --           65
         Other                                    28           14           12
                                              ------       ------       ------
                                              $1,800       $1,898       $1,964
                                              ======       ======       ======

Non-performing assets as a percentage of:
         Loans receivable, net                  0.47%        0.89%        0.64%
         Total assets                           0.40         0.80         0.55

     The following  represents the activity in the allowance for loan losses for
the nine months ended December 31, 1999:

                                                 (In thousands)

     Balance at March 31, 1999                       $ 3,027
     Provision for loan losses                           650
     Losses charged to allowance                          (1)
     Recoveries                                           15
                                                     -------
     Balance at December 31, 1999                    $ 3,691
                                                     =======

     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 9

<PAGE>

Deposits and Borrowed Funds

     Deposits  increased  slightly  during the nine month period ending December
31, 1999, as detailed below:

                                December 31, % of total    March 31,  % of total
                                    1999      deposits       1999      deposits
                                  --------    --------     --------    --------
                                              (Dollars in thousands)

Regular savings accounts          $ 25,095      11.27%     $ 27,460      12.70%
NOW accounts                        22,035       9.90        24,155      11.16
Money market accounts               59,402      26.68        54,305      25.09
Non-interest bearing deposits        2,049       0.92           867       0.40
                                  --------     ------      --------     ------
                                   108,581      48.77       106,787      49.35
Term deposits                      114,041      51.23       109,610      50.65
                                  --------     ------      --------     ------
         Total deposits           $222,622     100.00%     $216,397     100.00%
                                  ========     ======      ========     ======

     During the period, FHLB advances increased $77.6 million, or 101.1%, as the
Bank took advantage of competitive pricing to fund asset growth.

Comparison of Operating Results for the Three Months ended December 31, 1999 and
1998

General

     Consolidated  net income  for the three  months  ended  December  31,  1999
totaled $723,000,  or $0.35 per share, compared to $547,000, or $0.24 per share,
for the same period last year.  This  represents  an  increase of  $176,000,  or
32.2%, in net income and a $0.11 or 45.8% increase in earnings per share.

Interest Income

     Interest income for the three months ended December 31, 1999 increased $2.0
million, or 33.7%, to $8.1 million, compared to $6.1 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,  increased from $316.3 million
for the quarter ended  December 31, 1998 to $420.1 million for the quarter ended
December 31, 1999, an increase of $103.8 million,  or 32.8%. 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 $94.0 million, or 33.7%, and an
increase in mortgage-backed and mortgage related securities of $15.0 million, or
276.8%. The yield on interest-earning assets increased 6 basis points to 7.71%.

Interest Expense

     Interest  expense for the three  months ended  December 31, 1999  increased
$1.6 million,  or 57.8%,  to $4.4 million  compared to $2.8 million for the same
period  last year.  The  increase  in  interest  expense was the net result of a
$120.6 million,  or 47.1%,  increase in the average balance of  interest-bearing
liabilities  which  increased  from $256.0  million for the three  months  ended
December  31, 1998 to $376.6  million for the three  months  ended  December 31,
1999, offset by a increase of 32 basis points in the cost of funds to 4.66%. The
increase in the average balance of interest-bearing  liabilities was primarily a
result of an increase in the average  balance of deposits of $14.7  million,  or
7.1% and the average  balance of FHLB  advances and other  borrowings  of $105.9
million, or 216.9%.

                                    Page 10

<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 December 31,                  1999                                       1998
                                            --------------------------------          ----------------------------------
                                                       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                     $  1,055     $     14       5.31%          $  9,718     $    102       4.20%
Investment securities                        25,274          370       5.86             21,813          321       5.89
Mortgage backed & related securities         20,447          344       6.73              5,426           77       5.68
Loans and mortgage loans held-for-sale      373,283        7,364       7.89            279,309        5,551       7.95
                                           --------     --------                      --------     --------
Total interest-earning assets               420,059        8,092       7.71            316,266        6,051       7.65
                                                        --------                                   --------
Non interest-earning assets                  25,528                                      7,278
                                           --------                                   --------
  Total                                    $445,587                                   $323,544
                                           ========                                   ========

Liabilities and Equity

Interest-bearing liabilities:
  NOW accounts                             $ 23,043     $     65       1.13%          $ 22,451           76       1.35
  Regular savings accounts                   24,693          125       2.02             26,664          137       2.06
  Money market accounts                      59,187          570       3.85             49,561          483       3.90
  Certificate accounts                      114,911        1,483       5.16            108,474        1,503       5.54
                                           --------     --------                      --------     --------
Total interest-bearing deposits             221,834        2,243       4.04            207,150        2,199       4.25
                                           --------     --------                      --------     --------
  FHLB advances                             144,547        1,999       5.43             48,830          580       4.75
  Other Borrowings                           10,169          142       5.58                 --           --         --
                                           --------     --------                      --------     --------   --------
Total interest-bearing liabilities          376,550        4,384       4.66            255,980        2,779       4.34
                                                        --------                                   --------
  Demand deposits                             1,884                                        715
  Other liabilities                           9,691                                      4,878
  Equity                                     57,462                                     61,971
                                           --------                                   --------
  Total                                    $445,587                                   $323,544
                                           ========                                   ========
Net interest income                                     $  3,708                                   $  3,272
                                                        ========                                   ========
Interest rate spread                                                   3.05%                                      3.31%
                                                                   ========                                   ========
Net interest margin                                                    3.53%                                      4.14%
                                                                   ========                                   ========
</TABLE>

                                     Page 11

<PAGE>

     The Following  table  presents the effects of changing rates and volumes on
the interest income and interest  expense of the Company.  The rate column shows
the effects attributable to changes in rate (changes in rate multiplied by prior
volume).  The volume column shows the effects  attributable to changes in volume
(changes in volume  multiplied by prior rate). The net column represents the sum
of the prior columns.

                                                Quarters ended December 31,
                                                      1999 vs. 1998
                                           -------------------------------------
                                             Change due to Increase (Decrease)
                                           -------------------------------------
                                           Volume          Rate             Net
                                           ------         ------          ------
                                                      (In thousands)
Interest income:
         Loans                             $1,854         $  (41)         $1,813
         Investments                          180             48             228
                                           ------         ------          ------
              Total                         2,034              7           2,041
                                           ------         ------          ------
Interest expense:
         Deposits                             213           (169)             44
         Borrowings                         1,309            252           1,561
                                           ------         ------          ------
              Total                         1,522             83           1,605
                                           ------         ------          ------
Net interest income                        $  512         $  (76)         $  436
                                           ======         ======          ======

Provision for Loan Losses

     Provisions  for possible 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
possible loan losses  totaled  $200,000 for the quarter ended December 31, 1999,
compared to  $260,000  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 level of provision is
reflective  of the  increase in the overall  size and mix of the loan  portfolio
during the period.

     At December 31, 1999 and March 31, 1999,  the allowance for loan losses was
$3.7  million  and  $3.0  million,  respectively,  which  represents  205.1%  of
non-performing  loans and 0.96% of total loans at December 31, 1999  compared to
154.1% of non-performing loans and 0.98% of total loans at March 31, 1999.

     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  increased  $98,000,  or 112.6%,  to  $185,000,
primarily due to the purchase of Bank Owned Life Insurance,  the  implementation
of the new debit card program and the new  alternative  investment  services the
bank offers.

                                    Page 12

<PAGE>

Non-interest expense

     Total non-interest  expense was $2.6 million for the quarter ended December
31, 1999, compared to $2.2 million for the same period last year, an increase of
18.6%.  Total salaries and benefits  increased  $212,000,  or 14.6%  primarily a
result in a general  increase in salaries  and  benefits  due  primarily  to the
increased number of employees compared to the same quarter last year.  Occupancy
and equipment  expense totaled $291,000 compared to $253,000 for the same period
last  year,  an  increase  of  15.0%,  primarily  from  the  increased  level of
depreciation on building and leasehold improvements. Advertising expense totaled
$150,000  compared  to $62,000  for the same  period  last year,  an increase of
141.9%, primarily as a result of the development and introduction of new deposit
products and retail services.  Data processing expense increased $6,000, or 9.5%
as a result  of the  increased  number  of  deposit  accounts  serviced  and the
implementation of new retail deposit products. Other expenses increased $59,000,
or 18.7%, primarily as a result of increases in general expenses associated with
the normal course of business.

Income Taxes

     Income taxes for the three months ended  December 31, 1999 were $392,000 on
pretax  income of $1.1  million,  for an effective  rate of 35.16%,  compared to
$378,000 on pretax income of $925,000,  for an effective  rate of 40.86% for the
same period last year.  The effective  tax rate for the current  period is lower
than the prior periods due to various tax planning strategies implemented by the
Company,  specifically the purchase of non-taxable  life insurance  products and
the establishment of a Massachusetts securities corporation at the Bank level.

Comparison of Operating  Results for the Nine Months ended December 31, 1999 and
1998

General

     Consolidated net income for the nine months ended December 31, 1999 totaled
$1,980,000,  or $0.93 per share, compared to $1,667,000,  or $0.71 per share for
the same period last year.  This represents an increase of $313,000 or 18.8%, in
net income,  and a 31.0%  increase in earnings  per share,  over the same period
last year.

Interest Income

     Interest  income for the nine months ended December 31, 1999 increased $5.5
million or 32.2%,  to $22.5  million,  compared  to $17.0  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, which increased from
$291.5 million for the nine months ended December 31, 1998 to $392.8 million for
the nine months  ended  December  31, 1999,  an increase of $101.3  million,  or
34.8%.  The  increase  in the  average  balance of  interest-earning  assets was
primarily  the net result of an increase in the  average  balance of  investment
securities  of $4.5  million,  or 22.5%,  an  increase  in loans,  net, of $97.7
million or 39.2%, an increase in mortgage backed and mortgage related securities
of $16.6 million or 536.1%,  offset by a decrease in short term  investments  of
$17.5 million, or 89.7%. The yield on interest-earning assets decreased 15 basis
points to 7.63%.

Interest Expense

     Interest expense for the nine months ended December 31, 1999 increased $4.0
million,  or 51.4%,  to $11.7  million,  compared  to $7.7  million for the same
period last year. The increase in interest expense was primarily due to a $114.2
million,  or  48.9%,   increase  in  the  average  balance  of  interest-bearing
liabilities  which  increased  from $233.4  million  for the nine  months  ended
December 31, 1998 to $347.6 million for the nine months ended

                                    Page 13

<PAGE>

December  31,  1999,  offset  by an  increase  of 7 basis  points in the cost of
interest-bearing  liabilities to 4.49%.  The increase in the average  balance of
interest-bearing  liabilities  was  primarily  a result  of an  increase  in the
average  balance of  deposits of $13.0  million,  or 6.3% and an increase in the
average  balance of FHLB  advances and other  borrowings of $101.2  million,  or
354.4%.

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>
                                                                       1999                                      1998
                                                      -----------------------------------       -----------------------------------
For the nine months ended December 31,
                                                                     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                               $  2,011       $     73       4.87%       $ 19,514       $    806       5.51%
 Investment securities                                  24,363          1,055       5.77          19,885            860       5.77
 Mortgage-backed and mortgage related
  securities                                            19,719            923       6.24           3,100            143       6.15
 Loans, net and mortgage loan
  held-for-sale                                        346,703         20,431       7.86         248,997         15,201       8.14
                                                      --------       --------                   --------       --------
Total interest-earning assets                          392,796         22,482       7.63         291,496         17,010       7.78
                                                      --------       --------                   --------       --------
Non interest-earning assets                             24,822                                    10,292
                                                      --------                                  --------
  Total                                               $417,618                                  $301,788
                                                      ========                                  ========
Liabilities and Equity
Interest-bearing liabilities:
  NOW accounts                                        $ 23,370            196       1.12%       $ 21,848            264       1.61
  Regular savings accounts                              25,531            386       2.02          27,481            477       2.31
  Money market accounts                                 58,468          1,681       3.83          44,993          1,404       4.16
  Certificate accounts                                 110,470          4,267       5.15         110,514          4,544       5.48
                                                      --------       --------                   --------       --------
Total interest-bearing deposits                        217,839          6,530       4.00         204,836          6,689       4.35
  Other Borrowings                                       6,598            278       5.62              --             --         --
  FHLB advances                                        123,144          4,896       5.30          28,555          1,042       4.87
                                                      --------       --------                   --------       --------
Total interest-bearing liabilities                     347,581         11,704       4.49         233,391          7,731       4.42
                                                      --------       --------                   --------       --------
  Demand deposits                                        1,608                                       608
  Other liabilities                                     10,222                                     4,495
  Equity                                                58,207                                    63,294
                                                      --------                                  --------
  Total                                               $417,618                                  $301,788
                                                      ========                                  ========
Net interest income                                                  $ 10,778                                  $  9,279
                                                                     ========                                  ========
Interest rate spread                                                                3.14%                                     3.36%
                                                                                    ====                                      ====
Net interest margin                                                                 3.66%                                     3.62%
                                                                                    ====                                      ====
</TABLE>

                                    Page 14

<PAGE>

     The Following  table  presents the effects of changing rates and volumes on
the interest income and interest  expense of the Company.  The rate column shows
the effects attributable to changes in rate (changes in rate multiplied by prior
volume).  The volume column shows the effects  attributable to changes in volume
(changes in volume  multiplied by prior rate). The net column represents the sum
of the prior columns.

                                             Nine months ended December 31,
                                                     1999 vs. 1998
                                          -------------------------------------
                                            Change due to Increase (Decrease)
                                          -------------------------------------
                                          Volume          Rate            Net
                                          -------        -------        -------
                                                     (In thousands)

Interest income:
         Loans                            $ 5,737        $  (507)       $ 5,230
         Investment securities                324            (82)           242
                                          -------        -------        -------
              Total                         6,061           (589)         5,472
                                          -------        -------        -------
Interest expense:
         Deposits                             362           (521)          (159)
         Borrowings                         3,753            379          4,132
                                          -------        -------        -------
              Total                         4,115           (142)         3,973
                                          -------        -------        -------
Net interest income                       $ 1,946        $  (447)       $ 1,499
                                          =======        =======        =======

Provision for Loan Losses

     The  provision for loan losses  totaled  $650,000 for the nine months ended
December 31, 1999, compared to $410,000 for the same period last year. The level
of reserve provisions for the nine months ended December 31, 1999 was made after
an  assessment  of the  composition  of and  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 was $519,000 for the nine months ended December
31,  1999,  compared to $248,000  for the same period last year,  an increase of
$271,000 or 109.3%. Gain on sale of loans decreased $39,000 due to the decreased
level of loans sold over the same  period  last  year.  Other  income  increased
$301,000, primarily the result of income recognized on bank owned life insurance
policies  purchased by the Bank and income  recognized  from the new alternative
investment services and insurance products being offered by the Bank.

Non-interest expense

     Total  non-interest  expense was $7.6  million  for the nine  months  ended
December  31, 1999,  compared to $6.3 million for the same period last year,  an
increase of $1.3 million or 21.4%.  Total  salaries and benefits  increased $1.1
million, or 28.7%, the result of an increase of $484,000 in compensation expense
associated with the Company's  stock-based benefit plans, and a general increase
in salaries and benefits due to the increase in the number of employees compared
to the same period last year.  Occupancy and equipment  expense totaled $835,000
compared  to $750,000  for the same period last year,  an increase of $85,000 or
11.3%, primarily from the increased

                                    Page 15

<PAGE>

level of  depreciation  on building  and  leasehold  improvements  and  expenses
associated with the additional  purchases of furniture,  fixtures and equipment.
Advertising expense increased $129,000, or 79.6%,  primarily due to the expenses
associated  with the  introduction  of new  deposit and  alternative  investment
services now offered by the Bank.

Income Taxes

     For the nine months  ended  December  31, 1999 income taxes of $1.1 million
were provided on net income before tax of $3.1 million for an effective  rate of
35.32%,  compared to $1.2 million on income  before taxes of $2.9 million for an
effective rate of 41.92%,  for the same period last year. The effective tax rate
for the  current  period is lower  than the prior  periods  due to  various  tax
planning  strategies  implemented by the Company,  specifically  the purchase of
non-taxable  life insurance  products and the  establishment  of a Massachusetts
securities corporation at the Bank level.

Capital Adequacy

     The  Company  and the  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 December  31,  1999,  the  Company's  capital  ratio was 12.42% of total
assets.  The Bank at December 31, 1999 had total capital of 9.57% and risk based
capital of 16.71%  (unaudited),  as compared to 9.75% and 17.28%  (unaudited) at
September 30, 1999.

     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 December 31, 1999 the Company and the Bank met all the capital  adequacy
requirements to which they are subject. As of December 31, 1999, the most recent
notification from the Office of Thrift Supervision categorized the Bank as "well
capitalized" under the regulatory framework for prompt corrective action.

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

                                    Page 16

<PAGE>

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 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  September  30, 1999 (the latest NPV  analysis  prepared by the
OTS), as calculated by the OTS.

   Change in
Interest Rates
      in
 Basis Points              Net Portfolio Value             NPV as % of Portfolio
 (Rate Shock)                                                Value of Assets
                                                            NPV
                   Amount       $ Change      % Change     Ratio      Change(1)
                   -----------------------------------------------------------
                                      (Dollars in thousands)

     300           17,760        (17,253)        (49)       4.48        (389)
     200           24,118        (10,895)        (31)       5.96        (240)
     100           29,898         (5,116)        (15)       7.26        (111)
     Static        35,013             --          --        8.36          --
     (100)         39,008          3,994          11        9.19          83
     (200)         37,783          2,770           8        8.90          53
     (300)         41,716          6,703          19        9.69         133

(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.

                                     Page 17

<PAGE>

     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  December  31,  1999 the Bank's  liquidity  ratio was
7.43%.  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 December 31, 1999,
cash and due from banks,  short-term  investments  and securities  totaled $40.5
million, or 9.0% of total assets.

     The Bank has other  sources of  liquidity  if a need for  additional  funds
arises,  including  FHLB  advances.  At December 31,  1999,  the Bank had $154.4
million in advances  outstanding from the FHLB, and at December 31, 1999, had an
additional overall borrowing capacity from the FHLB of $44.3 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.

Year 2000 Compliance

     The century  change over did not have an impact on the daily  operations of
the bank.


                                    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

     Not applicable

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)

          27.0 Financial data schedule (filed herewith)

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

     (b)  Reports on Form 8-K

          (i)  None

                                    Page 19

<PAGE>

                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                   Bay State Bancorp, Inc.


February 14, 1999                  \s\ John F. Murphy
----------------------             --------------------------------------------
Date                               John F. Murphy
                                   Chairman, President, and
                                   Chief Executive Officer
                                   (Principal Executive Officer)


February 14, 1999                  \s\ Michael O. Gilles
----------------------             --------------------------------------------
Date                               Michael O. Gilles
                                   Senior Vice President and
                                   Chief Financial Officer
                                   (Principal Accounting and Financial Officer)


                                    Page 20