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


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

                For the quarterly period ended September 30, 2000
                                       or

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

          For the transition period from ____________ to _____________

                         Commission file number 1-13691

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

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

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

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

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceeding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.|X| Yes |_| No

The number of shares of common stock outstanding of each of the issuer's classes
of common stock, as of November 8, 2000, was 1,856,866.

<PAGE>

                    BAY STATE BANCORP, INC. AND SUBSIDIARIES

                                      INDEX

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

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

       Consolidated  Balance  Sheets - September 30, 2000 and
       March 31, 2000 (unaudited)..............................................1

       Consolidated Income Statements - For the three and six months
       ended September 30, 2000 and 1999 (unaudited)...........................2

       Consolidated Statements of Cash Flows - For the six months
       ended September 30, 2000 and 1999 (unaudited)...........................3

       Consolidated Statements of Changes in Stockholders' Equity -
       For the six months ended September 30, 2000 and 1999 and the
       years ended March 31, 2000 and 1999 (unaudited).........................4

       Notes to Unaudited Consolidated Financial Statements for
       the Period Ended September 30, 2000.....................................5

    Item 2 - Management's Discussion and Analysis of Financial
             Condition and Results of Operations...............................6

    Item 3 - Quantitative and Qualitative Disclosures about Market Risk.......17

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

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

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

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

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

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

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

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

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

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

       Financial Data Schedule - Exhibit 27...................................22

<PAGE>

PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements


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

<TABLE>
<CAPTION>
                                                                                                     September 30,         March 31,
                                                                                                         2000                2000
                                                                                                         ----                ----
ASSETS                                                                                                         (Unaudited)
<S>                                                                                                  <C>                 <C>
Cash and due from banks                                                                              $   8,933           $   5,392
Short-term investments                                                                                   6,310                 600
                                                                                                     ---------           ---------
        Cash and Cash Equivalents                                                                       15,243               5,992
Investment in available-for-sale securities (at fair value)                                             31,089              31,812
Investments in held-to-maturity securities (fair values of $438 and $535)                                  434                 527
Stock in Federal Home Loan Bank of Boston                                                                8,321               8,051
Loans receivable, net                                                                                  414,858             393,093
Other real estate owned                                                                                     68                  62
Accrued interest receivable                                                                              3,041               2,470
Premises and equipment, net                                                                              3,288               3,078
Deferred tax asset, net                                                                                  3,463               3,811
Investment in bank owned life insurance                                                                  8,097               7,888
Other assets                                                                                             3,473               3,353
                                                                                                     ---------           ---------
                    Total assets                                                                     $ 491,375           $ 460,137
                                                                                                     =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
           Deposits                                                                                  $ 268,561           $ 247,344
           Federal Home Loan Bank Advances                                                             161,418             147,527
           Other borrowed funds                                                                          2,291               8,137
           Accrued expenses and other liabilities                                                        5,113               4,499
                                                                                                     ---------           ---------
                    Total liabilities                                                                  437,383             407,507
                                                                                                     ---------           ---------
Stockholders' equity:
           Common stock, par value $.01 per share,
                    2,535,232 shares issued                                                                 25                  25
           Additional paid-in capital                                                                   49,192              49,207
           Retained earnings                                                                            22,874              21,600
           Accumulated other comprehensive loss                                                           (364)             (1,788)
           Unearned ESOP shares                                                                         (2,826)             (2,826)
           Unearned 1998 Stock-Based Incentive Plan Shares                                              (1,532)             (1,681)
           Treasury stock, 638,852 and 578,952 shares                                                  (13,377)            (11,907)
                                                                                                     ---------           ---------
                    Total stockholders' equity                                                          53,992              52,630
                                                                                                     ---------           ---------
                    Total liabilities and stockholders' equity                                       $ 491,375           $ 460,137
                                                                                                     =========           =========

Equity-to-asset ratio                                                                                    10.99%              11.44%

Book value per share                                                                                 $   30.84           $   29.06
</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
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                 Three months ended            Six months ended
                                                                                    September 30,                September 30,
                                                                                    -------------                -------------
                                                                                  2000         1999            2000         1999
                                                                                  ----         ----            ----         ----
                                                                                                   (Unaudited)
<S>                                                                            <C>          <C>            <C>          <C>
Interest income:
    Loans                                                                      $     8,510  $     6,807    $    16,575  $    13,067
    Investments                                                                        715          744          1,411        1,323
                                                                               -----------  -----------    -----------  -----------
       Total interest income                                                         9,225        7,551         17,986       14,390
                                                                               -----------  -----------    -----------  -----------
 Interest expense:
    Deposits                                                                         2,887        2,168          5,542        4,287
    Borrowed funds                                                                   2,494        1,797          4,771        3,033
                                                                               -----------  -----------    -----------  -----------
       Total interest expense                                                        5,381        3,965         10,313        7,320
                                                                               -----------  -----------    -----------  -----------
       Net interest income before provision for loan losses                          3,844        3,586          7,673        7,070
 Provision for loan losses                                                             150          225            315          450
                                                                               -----------  -----------    -----------  -----------
       Net interest income after provision for loan losses                           3,694        3,361          7,358        6,620
                                                                               -----------  -----------    -----------  -----------
 Non-interest income:
    Service charges on deposit accounts                                                105           71            205          143
    Unrealized gain on trading securities                                               68          138             12          138
    Gain on sale of investments                                                         40           --             40           --
    Gain on sale of loans                                                                4            7              7            6
    Net increase in cash surrender value of bank owned life insurance policies         104           75            208          146
    Other income                                                                        90           13            131           39
                                                                               -----------  -----------    -----------  -----------
       Total non-interest income                                                       411          304            603          472
                                                                               -----------  -----------    -----------  -----------
       Income before non-interest expense and income taxes                           4,105        3,665          7,961        7,092
                                                                               -----------  -----------    -----------  -----------
 Non-interest expense:
    Salaries and employee benefits                                                   1,757        1,730          3,458        3,342
    Occupancy and equipment expense                                                    379          275            728          543
    Professional fees                                                                   77          167            145          402
    Advertising                                                                        119           73            253          141
    Data processing                                                                     92           62            163          131
    Other expenses                                                                     315          320            618          587
                                                                               -----------  -----------    -----------  -----------
       Total non-interest expense                                                    2,739        2,627          5,365        5,146
                                                                               -----------  -----------    -----------  -----------
       Income before income taxes                                                    1,366        1,038          2,596        1,946
 Income tax expense                                                                    510          365            933          689
                                                                               -----------  -----------    -----------  -----------
       Net income                                                              $       856  $       673    $     1,663  $     1,257
                                                                               ===========  ===========    ===========  ===========
 Comprehensive net income(loss)                                                $     1,949  $      (139)   $     3,087  $       469
                                                                               ===========  ===========    ===========  ===========

Weighted average common shares outstanding - Basic                               1,787,953    2,122,658      1,799,301    2,150,171
                                                                               ===========  ===========    ===========  ===========

Weighted average common and common equivalent shares
outstanding - Diluted                                                            1,834,490    2,125,314      1,821,452    2,161,316
                                                                               ===========  ===========    ===========  ===========
Basic earnings per share                                                       $      0.48  $      0.32    $      0.92  $      0.58
                                                                               ===========  ===========    ===========  ===========
Diluted earnings per share                                                     $      0.47  $      0.32    $      0.91  $      0.58
                                                                               ===========  ===========    ===========  ===========
</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>
                                                                                                    Six months ended September 30,
                                                                                                    ------------------------------
                                                                                                        2000             1999
                                                                                                        ----             ----
                                                                                                             (Unaudited)
<S>                                                                                                 <C>               <C>
Net cash flows from operating activities:
     Net income                                                                                     $   1,663         $   1,257
     Adjustments to reconcile net income to net cash provided
       by operating activities:
           Earned stock based incentive plan                                                              134                --
           Provision for loan losses                                                                      315               450
           Net decrease mortgage loans held-for-sale                                                       --               321
           (Gain) loss on sale of loans                                                                    (7)                6
           Gain on sale of other real estate owned                                                         (7)               --
           Depreciation and amortization                                                                  208               155
           Gain on sale of investments                                                                    (40)               --
           Amortization of securities, net of accretion                                                   (35)             (105)
           Unrealized gain on trading securities                                                          (12)               --
           Decrease in deferred income tax assets, net                                                     95                --
           Amortization of loan fees and discounts                                                          9                 2
           (Increase)in accrued interest receivable                                                      (571)             (344)
           Increase in cash surrender value B.O.L.I                                                      (209)               --
           (Increase) in prepaid expense and other assets                                                (104)             (475)
           Increase in other liabilities                                                                  614               785
                                                                                                    ---------         ---------
     Net cash provided by operating activities                                                          2,053             2,052
                                                                                                    ---------         ---------
Net cash flows from investing activities:
           Maturities and principal repayments on investments held to maturity                             93               310
           Maturities and principal repayments on investments available for sale                        4,451             5,883
           Proceeds from sales of available for sale securities                                         1,205                --
           Purchases of investments available for sale                                                 (3,185)          (21,859)
           Purchases of Federal Home Loan Bank of Boston Stock                                           (270)           (3,000)
           Investment in bank owned life insurance                                                         --            (1,646)
           Proceeds from sales of other real estate owned                                                  49                --
           Payment received on other real estate owned                                                     20                --
           Net increase in loans                                                                      (22,150)          (60,313)
           Capital expenditures                                                                          (418)             (258)
                                                                                                    ---------         ---------
     Net cash used for investing activities                                                           (20,205)          (80,883)
                                                                                                    ---------         ---------
Net cash flows from financing activities:
           Net deposit activity                                                                        21,217             8,746
           Proceeds of borrowings                                                                     143,000           156,973
           Repayment of borrowings                                                                   (129,109)          (97,572)
           Net increase (decrease) in other borrowed funds                                             (5,846)           10,130
           Dividends on common stock                                                                     (389)             (278)
           Purchases of treasury stock                                                                 (1,470)           (2,592)
                                                                                                    ---------         ---------
     Net cash provided by financing activities                                                         27,403            75,407
                                                                                                    ---------         ---------
Net increase (decrease) in cash and cash equivalents                                                    9,251            (3,424)
     Cash and cash equivalents at beginning of period                                                   5,992            10,107
                                                                                                    ---------         ---------
     Cash and cash equivalents at end of period                                                     $  15,243         $   6,683
                                                                                                    ---------         ---------
Supplemental disclosure of cash flow information:
     Cash paid during period for:
           Interest                                                                                 $  10,222         $   7,050
           Income taxes                                                                             $   1,128         $     830
     Loans transferred to other real estate owned                                                   $      68         $      --
</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, except per share data)
                                   (Unaudited)

For the six months ended September 30, 2000 and 1999, and the Fiscal years ended
March 30, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                                          Accumulated                  Unearned
                                                               Additional                    Other                    Stock-based
                                                    Common       Paid-in      Retained   Comprehensive    Unearned     Incentive
                                                     Stock       Capital      Earnings   Income (Loss)  ESOP Shares   Plan Shares
                                                   -------------------------------------------------------------------------------
<S>                                                <C>          <C>           <C>           <C>           <C>           <C>
Balance at March 31, 1998                          $     25     $ 49,194      $ 17,340      $    666      $ (3,651)     $     --
  Net Income                                             --           --         2,234            --            --            --
  Net change in unrealized gain on available
    for sale securities, net of tax effect               --           --            --          (621)           --            --
       Comprehensive income                              --           --            --            --            --            --
  Purchase of treasury stock, 126,762 shares             --           --            --            --            --            --
  Dividends paid, $0.05 per share                        --           --          (111)           --            --            --
  Reduction in unearned ESOP shares charged
    to expense                                           --           --            --            --           419            --
  Appreciation in fair value of unearned ESOP
    Shares charged to expense                            --           95            --            --            --            --
  Common stock acquired for stock-based
    Incentive plans                                      --           --            --            --            --        (2,269)
  Issuance of stock incentive plan shares                --          (12)           --            --            --            96
                                                   -------------------------------------------------------------------------------
Balance at March 31, 1999                                25       49,277        19,463            45        (3,232)       (2,173)
  Net Income                                             --           --         2,755            --            --            --
Net change in unrealized gain on available
  for sale securities, net of tax effect                 --           --            --        (1,833)           --            --
     Comprehensive income                                --           --            --            --            --            --
  Purchase of treasury stock, 452,190 shares             --           --            --            --            --            --
  Dividends paid, $0.28 per share                        --           --          (618)           --            --            --
     Reduction in unearned ESOP shares charged
      to expense                                         --           --            --            --           406            --
  Reduction in fair value of unearned ESOP
      shares charged to expense                          --          (10)           --            --            --            --
Issuance of stock incentive plan shares                  --          (60)           --            --            --           492
                                                   -------------------------------------------------------------------------------
Balance at March 31, 2000                                25       49,207        21,600        (1,788)       (2,826)       (1,681)
  Net Income                                             --           --         1,663            --            --            --
Net change in unrealized loss on available
  for sale securities, net of tax effect                 --           --            --         1,424            --            --
     Comprehensive income                                --           --            --            --            --            --
  Purchase of treasury stock, 59,900 shares              --           --            --            --            --            --
  Dividends paid, $0.20 per share                        --           --          (389)           --            --            --
  Issuance of stock incentive plan shares                --          (15)           --            --            --           149
                                                   -------------------------------------------------------------------------------
Balance at September 30, 2000 (Unaudited)          $     25     $ 49,192      $ 22,874      $   (364)     $ (2,826)     $ (1,532)
                                                   ===============================================================================

                                                   -------------------------------------------------------------------------------
Balance at March 31, 1999                          $     25     $ 49,277      $ 19,463      $     45      $ (3,232)     $ (2,173)
  Net Income                                             --           --         1,257            --            --            --
Net change in unrealized gain on available
  for sale securities, net of tax effect                 --           --            --          (788)           --            --
     Comprehensive income                                --           --            --            --            --            --
  Purchase of treasury stock, 120,424 shares             --           --            --            --            --            --
  Dividends paid, $0.12 per share                        --           --          (278)           --            --            --
                                                   -------------------------------------------------------------------------------
Balance at September 30, 1999 (Unaudited)          $     25     $ 49,277      $ 20,442      $   (743)     $ (3,232)     $ (2,173)
                                                   ===============================================================================

<CAPTION>
                                                                  Total
                                                   Treasury    Stockholders'
                                                     Stock        Equity
                                                   -------------------------
<S>                                                <C>           <C>
Balance at March 31, 1998                          $     --      $ 63,574
  Net Income                                             --            --
  Net change in unrealized gain on available
    for sale securities, net of tax effect               --            --
       Comprehensive income                              --         1,613
  Purchase of treasury stock, 126,762 shares         (3,107)       (3,107)
  Dividends paid, $0.05 per share                        --          (111)
  Reduction in unearned ESOP shares charged
    to expense                                           --           419
  Appreciation in fair value of unearned ESOP
    Shares charged to expense                            --            95
  Common stock acquired for stock-based
    Incentive plans                                      --        (2,269)
  Issuance of stock incentive plan shares                --            84
                                                   -------------------------
Balance at March 31, 1999                            (3,107)       60,298
  Net Income                                             --            --
Net change in unrealized gain on available
  for sale securities, net of tax effect                 --            --
     Comprehensive income                                --           922
  Purchase of treasury stock, 452,190 shares         (8,800)       (8,800)
  Dividends paid, $0.28 per share                        --          (618)
     Reduction in unearned ESOP shares charged
      to expense                                         --           406
  Reduction in fair value of unearned ESOP
      shares charged to expense                          --           (10)
Issuance of stock incentive plan shares                  --           432
                                                   -------------------------
Balance at March 31, 2000                           (11,907)       52,630
  Net Income                                             --            --
Net change in unrealized loss on available
  for sale securities, net of tax effect                 --            --
     Comprehensive income                                --         3,087
  Purchase of treasury stock, 59,900 shares          (1,470)       (1,470)
  Dividends paid, $0.20 per share                        --          (389)
  Issuance of stock incentive plan shares                --           134
                                                   -------------------------
Balance at September 30, 2000 (Unaudited)          $(13,377)     $ 53,992
                                                   =========================

                                                   -------------------------
Balance at March 31, 1999                          $ (3,107)     $ 60,298
  Net Income                                             --            --
Net change in unrealized gain on available
  for sale securities, net of tax effect                 --            --
     Comprehensive income                                --           469
  Purchase of treasury stock, 120,424 shares         (2,592)       (2,592)
  Dividends paid, $0.12 per share                        --          (278)
                                                   -------------------------
Balance at September 30, 1999 (Unaudited)          $ (5,699)     $ 57,897
                                                   =========================
</TABLE>

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


                                     Page 4
<PAGE>

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE PERIOD ENDED September 30, 2000

(1) Organization

     Bay State  Bancorp,  Inc. (the  "Company" or "Bay State") was  incorporated
under the laws of  Delaware  in October  1997 for the  purpose of serving as the
holding  company of Bay State  Federal  Bank (the  "Bank") as part of the Bank's
conversion  from 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-Q and of  Regulation  S-X.  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  six  months  ended  September  30,  2000  are  not
necessarily  indicative  of the  results  that may be  expected  for the current
fiscal year.

     For further  information,  refer to the consolidated  financial  statements
included in the Company's annual report and Form 10-K for the period ended March
31, 2000 and Form 10-Q for the period ended June 30, 2000 filed with the SEC.

(3) Stock Repurchase Program

     On October 31, 2000 the Company  announced the  completion of its fifth 5%,
or 97,814 shares,  stock  repurchase  program and the approval of a sixth 5%, or
92,293 shares,  repurchase program. Upon completion of this sixth repurchase the
Company  will  have  1,765,543  shares  outstanding  and will  have  repurchased
approximately 30% of its outstanding shares.

(4) Impact on New Accounting Standards

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


                                     Page 5
<PAGE>

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

     This report contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  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 on Form 10-K
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.  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 are primarily
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 Bank depend primarily on its net 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.

Comparison of Financial Condition at September 30, 2000 and March 31, 2000

     Total assets at September 30, 2000 were $491.4 million,  compared to $460.1
million at March 31, 2000, an increase of 6.8%. Net loans  receivable  increased
$21.8  million,  or  5.5%,  primarily  in  1-4  family  residential   mortgages,
multi-family and to a lesser extent commercial real estate loans and home equity
lines of credit.  Short-term  investments,  which  consist  mainly of  overnight
investments, increased $5.7 million. The increase in assets was funded primarily
from a $21.2 million,  or 8.6%,  increase in deposits,  and a $13.9 million,  or
9.4% increase in Federal Home Loan Bank advances. The increase in deposits was a
result of  increased  marketing  efforts of the Bank's new deposit  products and
continued  customer  migration  resulting from the recent merger activity in the
Bank's primary market area.


                                     Page 6
<PAGE>

     Total stockholders' equity was $54.0 million, or 10.99% of total assets, at
September 30, 2000, an increase of $1.4 million, or 2.6%, from $52.6 million, or
11.44% of total  assets,  at March 31,  2000.  The  change in equity was the net
result  of net  income  for the  period,  an  increase  in the  market  value of
investment  securities  classified as available for sale, offset by the purchase
of additional  treasury  stock.  The Company's book value per share at September
30, 2000 was $30.84, compared to $29.06 at March 31, 2000.

Investments

     Short-term  investments were $6.3 million at September 30, 2000, consisting
of federal funds sold to the Federal Home Loan Bank of Boston ("FHLB"), and to a
lesser extent funds invested in The Bank  Investment  Fund which  represented an
increase  of $5.7  million,  or 951.7%,  from the  $600,000  at March 31,  2000.
Investment securities  available-for-sale decreased $723,000, or 2.3%, primarily
in  mortgage-backed  securities.  The total  increase  in  investments  was $5.0
million.

     The  Company's  investment  portfolio  at  September  30,  2000  reflects a
$364,000  net  unrealized  loss on  available-for-sale  securities,  net of tax,
compared  to a net  unrealized  loss of $1.8  million,  net of tax, at March 31,
2000.

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

<TABLE>
<CAPTION>
                                                   September 30, 2000                      March 31, 2000
                                                   ------------------                      --------------
                                              Amortized            Fair            Amortized             Fair
                                                 Cost              Value              Cost               Value
                                               -------            -------            -------            -------
                                                                        (In thousands)
<S>                                            <C>                <C>                <C>                <C>
  Marketable equity securities                 $ 8,865            $ 9,337            $ 9,840            $ 9,049

  Mortgage-backed securities                    15,120             14,772             16,937             16,476

  Trust preferred equity securities              4,499              4,167              2,501              1,916

  Corporate bonds and notes                        496                464                495                462

  Preferred stocks                               1,500              1,373              1,500              1,342

  Government agency securities                   1,000                976              2,607              2,567
                                               -------            -------            -------            -------

Total                                          $31,480            $31,089            $33,880            $31,812
                                               =======            =======            =======            =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                             September 30, 2000               March 31, 2000
                                                             ------------------               --------------
                                                          Amortized         Fair          Amortized         Fair
                                                            Cost            Value           Cost            Value
                                                            ----            ----            ----            ----
                                                                               (In thousands)
<S>                                                         <C>             <C>             <C>             <C>
Mortgage-backed and mortgage-related securities             $434            $438            $527            $535
                                                            ----            ----            ----            ----
Total Mortgage-backed and mortgage related
Securities                                                  $434            $438            $527            $535
                                                            ====            ====            ====            ====
</TABLE>


                                     Page 7
<PAGE>

Loans

     During the six month period ended  September 30, 2000, net loans  increased
by $21.8 million, or 5.5%, as detailed below:

<TABLE>
<CAPTION>
                                                               September 30,      % of total       March 31,       % of total
                                                                   2000              Loans           2000             Loans
                                                                   ----              -----           ----             -----
                                                                                    (Dollars in thousands)
<S>                                                            <C>                   <C>        <C>                   <C>
Mortgage loans:
           Residential 1 - 4 family                            $   207,741           49.12%     $   201,256           50.32%
           Multi-family                                             92,189           21.80           78,610           19.65
            Commercial real estate                                  96,123           22.73           95,869           23.97
           Construction and development/land                         9,837            2.33           10,009            2.50
                                                               -----------          ------      -----------          ------
                Total mortgage loans                               405,890           95.98          385,744           96.44
Commercial loans                                                     1,322            0.31              225            0.06
Consumer loans:
           Equity lines                                             11,002            2.60            9,500            2.37
            Other consumer loans                                     4,703            1.11            4,520            1.13
                                                               -----------          ------      -----------          ------
                  Total loans                                      422,917          100.00%         399,989          100.00%

Deduct:
           Allowance for loan loss                                   4,230                            3,915
            Undisbursed proceeds of construction
                   and development loans in process                  3,663                            2,825
           Deferred loan fees                                          166                              156
                                                               -----------                      -----------
Net loans receivable                                           $   414,858                      $   393,093
                                                               ===========                      ===========
</TABLE>

     At September 30, 2000 loans serviced for others was $22.0 million, compared
to $20.8 million at March 31, 2000.

Asset Quality

     At  September  30, 2000  non-performing  assets  totaled $1.5  million,  an
increase  of  $200,000,   or  18.5%,  from  $1.3  million  at  March  31,  2000.
Non-performing  assets consist of all loans that are delinquent 90 days or more,
and any real estate  owned.  The increase in  non-performing  assets was the net
result of one loan being placed on non-accrual  status.  The Bank had $68,000 in
real estate owned at September 30, 2000,  compared to $62,000 at March 31, 2000,
a decrease of $6,000,  or 9.7%.  At September  30, 2000,  non-performing  assets
represented 0.31% of total assets and 0.35% of loans receivable net, compared to
0.28% and 0.33%, respectively, at March 31, 2000.


                                     Page 8
<PAGE>

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

<TABLE>
<CAPTION>
                                                              September 30,                    March 31,
                                                        2000                1999                 2000
                                                      ------               ------               ------
                                                                   (Dollars in thousands)
<S>                                                   <C>                  <C>                  <C>
Non-accrual loans:
        Mortgage Loans:
               One-to-four-family                     $  568               $  861               $  731
               Multi-family                               --                  279                   --
               Commercial real estate                    818                  774                  443
               Construction and development               --                   --                   --
                                                      ------               ------               ------
                  Total mortgage loans                 1,386                1,914                1,174
                                                      ------               ------               ------
        Consumer Loans:
               Equity lines                               20                   --                   --
               Other consumer loans                       50                   65                   50
                                                      ------               ------               ------
                  Total consumer loans                    70                   65                   50
                                                      ------               ------               ------
               Total non-accrual loans                 1,456                1,979                1,224
Real estate owned, net                                    68                   --                   62
                                                      ------               ------               ------
Total non-performing assets                           $1,524               $1,979               $1,286
                                                      ------               ------               ------
Non-performing assets as a percentage of:
               Loans receivable, net                    0.35%                0.54%                0.33%
               Total assets                             0.31                 0.45                 0.28
</TABLE>

               The following  represents  the activity in the allowance for loan
losses for the six months ended September 30, 2000:

                                                       (Dollars in thousands)

               Balance at March 31, 2000                              $3,915
               Provision for loan losses                                 315
               Losses charged to allowance                                (2)
               Recoveries                                                  2
                                                                      ------
               Balance at September 30, 2000                          $4,230
                                                                      ======

     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  $21.2  million,  or 8.6%,  during the six month period
ending September 30, 2000, as detailed below:

<TABLE>
<CAPTION>
                                                September 30,   % of total     March 31,     % of total
                                                    2000         deposits        2000         deposits
                                                  --------        ------       --------        ------
                                                                 (Dollars in thousands)
<S>                                               <C>              <C>         <C>              <C>
          Regular savings accounts                $ 28,698         10.69%      $ 26,876         10.87%
          NOW accounts                              27,733         10.33         22,392          9.05
          Money market accounts                     67,697         25.21         71,117         28.75
          Non-interest bearing deposits              8,163          3.04          6,301          2.55
                                                  --------        ------       --------        ------
                                                   132,291         49.27        126,686         51.22
          Term deposits                            136,270         50.73        120,658         48.78
                                                  --------        ------       --------        ------
                  Total deposits                  $268,561        100.00%      $247,344        100.00%
                                                  ========        ======       ========        ======
</TABLE>

     During the period,  FHLB advances  increased $13.9 million,  or 9.4%. Other
borrowed  funds,  consisting  of a Fannie Mae  Repurchase  Agreement and Federal
Funds purchased,  decreased $5.8 million,  due to the maturity of the repurchase
agreement.

Comparison  of Operating  Results for the Three Months ended  September 30, 2000
and 1999

General

     Net income for the three months ended September 30, 2000 totaled  $856,000,
or $0.48 per basic share,  compared to $673,000,  or $0.32 per basic share,  for
the same period last year. This represents an increase of $183,000, or 27.2%, in
net  income and a $0.16 or 50.0%  increase  in  earnings  per basic  share.  The
increase was primarily  due to higher net interest  income due to an increase in
the average balance of interest  earning assets,  primarily loans, a decrease in
the provision for loan losses,  and an increase in  non-interest  income.  These
increases  were  offset  in part by higher  income  taxes  and  slightly  higher
non-interest expense.

Interest Income

     Interest  income for the three months ended  September  30, 2000  increased
$1.7 million,  or 22.2%, to $9.2 million,  compared to $7.6 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
$399.4  million for the quarter ended  September 30, 1999 to $450.4  million for
the quarter ended  September 30, 2000, an increase of $51.0  million,  or 12.8%.
The increase in the average balance of  interest-earning  assets was primarily a
result of an increase in the average  balance of net loans of $58.2 million,  or
16.7%,  an increase  in the average  balance of  interest-earning  deposits  and
federal funds sold of $1.1 million,  or 50.7%, to $3.2 million from $2.1 million
for the same period last year. The average balance of Investment  securities and
Mortgage-backed  and mortgage related  securities  totaling $39.8 decreased $8.3
million,  or 17.2%,  from $48.1 million for the same period last year.  Also the
growth  in   interest   income  was  due  to  an   increase   in  the  yield  on
interest-earning assets of 63 basis points, to 8.19%.

Interest Expense

     Interest  expense for the three months ended  September 30, 2000  increased
$1.4 million,  or 35.7%,  to $5.4 million  compared to $4.0 million for the same
period last year.  The  increase  in interest  expense was the result of a $56.6
million,  or  16.0%,   increase  in  the  average  balance  of  interest-bearing
liabilities  which  increased  from $353.5  million for the three  months  ended
September  30, 1999 to $410.2  million for the three months ended  September 30,
2000. The increase in the average  balance of  interest-bearing  liabilities was
primarily  a result of an increase of $36.5  million,  or 16.7%,  in the average
balance of deposits, and an increase in the average balance of FHLB advances and
other borrowings of $20.1 million, or 14.9%.


                                    Page 10
<PAGE>

The  increase  in  interest  expense  was also due to an increase in the cost of
funds of 70 basis  points  to 5.19%,  due to an  increase  in  market  rates and
increases  in the average  balance of term deposit  accounts and FHLB  advances,
which generally bear higher  interest rates than core deposits,  such as savings
accounts and money market accounts.

Net interest income

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

<TABLE>
<CAPTION>
For the three months ended September 30,                            2000                                 1999
                                               -------------------------------------------------------------------------
                                                              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                          $  2,431     $     42         6.91%    $  2,123    $     25        4.80%
Interest-earning deposits                            769           12         6.24           --          --          --
Taxable investment securities                     21,260          363         6.83       27,195         407        5.98
Mortgage backed & related securities              18,570          297         6.40       20,887         312        5.97
Loans (net of unearned income)                   407,342        8,511         8.36      349,173       6,807        7.80
                                                --------     --------                  --------    --------
Total interest-earning assets                    450,372        9,225         8.19      399,378       7,551        7.56
                                                             --------                              --------
Non interest-earning assets                       36,392                                 27,306
                                                --------                               --------
   Total                                        $486,764                               $426,684
                                                --------                               --------

Liabilities and Equity
Interest-bearing liabilities:
   NOW accounts                                 $ 24,183     $     54         0.88%    $ 23,695    $     66        1.12%
   Regular savings accounts                       26,642          134         2.01       25,438         125        1.96
   Money market accounts                          67,912          739         4.35       59,991         578        3.85
   Certificate accounts                          135,987        1,960         5.77      109,102       1,399        5.13
                                                --------     --------                  --------    --------
Total interest-bearing deposits                  254,724        2,887         4.48      218,226       2,168        3.97
   FHLB advances                                 153,318        2,459         6.34      127,811       1,690        5.23
   Other Borrowings                                2,146           35         6.45        7,505         107        5.73
                                                --------     --------                  --------    --------
Total interest-bearing liabilities               410,188        5,381         5.19      353,542       3,965        4.49
   Demand deposits                                 7,549                                  3,967
   Other liabilities                              15,070                                 11,145
   Equity                                         53,957                                 58,030
                                                --------                               --------
   Total                                        $486,764                               $426,684
                                                ========                               ========
Net interest income                                          $  3,844                              $  3,586
                                                             ========                              ========
Interest rate spread                                                          3.00%                                3.08%
                                                                              ====                                 ====
Net interest margin                                                           3.41%                                3.59%
                                                                              ====                                 ====
</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.

<TABLE>
<CAPTION>
                                                                  Quarters ended September 30,
                                                                         2000 vs. 1999
                                                                         -------------
                                                               Change due to Increase (Decrease)
                                                               ---------------------------------
                                                    Volume           Rate               Net
                                                   -------         -------           -------
                                                                (In thousands)
<S>                                                <C>             <C>               <C>
Interest income:
           Loans                                   $ 1,191         $   513           $ 1,704
           Interest earning deposits                    12              --                12
           Federal Funds Sold                            4              13                17
           Investments                                (166)            107               (59)
                                                   -------         -------           -------
                Total                                1,041             633             1,674
                                                   -------         -------           -------
Interest expense:
           Deposits                                    462             257               719
           Borrowings                                  283             414               697
                                                   -------         -------           -------
                Total                                  745             671             1,416
                                                   -------         -------           -------
Net interest income                                $   296         $   (38)          $   258
                                                   -------         -------           -------
</TABLE>

Provision for Loan Losses

     Provisions for loan losses are charged to operations to bring the allowance
for loan  losses to a level  considered  by  management  to be adequate to cover
estimated  losses on loans  receivable  which are deemed  probable and estimable
based on  information  currently  known to  management.  The  provision for loan
losses totaled  $150,000 for the quarter ended  September 30, 2000,  compared to
$225,000 for the same period last year.  The decrease in the loan loss provision
for the  period is a direct  result of the slower  growth in the loan  portfolio
from the previous  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 overall size
and mix of the loan portfolio during the period.

     At September 30, 2000 and March 31, 2000, the allowance for loan losses was
$4.2  million  and  $3.9  million,  respectively,  which  represents  290.5%  of
non-performing loans and 1.01% of total loans at September 30, 2000, compared to
319.9% of non-performing loans and 0.99% of total loans at March 31, 2000.

     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  $107,000,  or 35.2%,  to  $411,000,
primarily  due to increased  fees on loans and deposit  accounts  because of the
increased level of accounts,  income received on alternative investment services
the bank offers and tax-advantaged income received on Bank Owned Life Insurance.
In addition the Company took  advantage of the  improvement in the market values
to restructure certain  investments,  resulting in a $40,000 gain on the sale of
investments  during  the three  month  period.  Such  increases  were  offset by
unrealized gains on trading  securities  totaling $68,000,  compared to $138,000
for the same period last year,  a decrease  of  $70,000,  or 50.7%.  These gains
represent  an  increase  in the market  value of the assets  supporting  certain
benefit plans,  which also results in a  corresponding  increase in salaries and
benefits expense.


                                    Page 12
<PAGE>

Non-interest expense

     Total non-interest expense was $2.7 million for the quarter ended September
30, 2000, compared to $2.6 million for the same period last year, an increase of
4.3%.  Total  salaries and benefits  increased  $27,000,  or 1.6% primarily as a
result of a general  increase in salaries and benefits and due to the  increased
number  of  employees  compared  to the same  quarter  last  year and the  costs
associated with the Company's  employee  benefit plans.  Occupancy and equipment
expense totaled $379,000  compared to $275,000 for the same period last year, an
increase  of  37.8%,  primarily  from the  increased  level of  depreciation  on
leasehold  improvements  associated with the addition of the new Walpole branch,
the  relocation  of the  Dedham  branch  and  additional  leased  space  for the
administrative  and  support  service  areas of the  Bank.  Advertising  expense
totaled $119,000  compared to $73,000 for the same period last year, an increase
of 63.0%, primarily as a result of the promotion and introduction of new deposit
products and retail  services.  The total of Professional  fees, data processing
and other expenses had a net decrease of $65,000,  or 11.8%,  primarily a result
of a reduction in professional  service expenses associated with the development
of new products and services introduced during last fiscal year.

Income Taxes

     Income taxes for the three months ended September 30, 2000 were $510,000 on
pretax  income of $1.4  million,  for an  effective  rate of 37.3%,  compared to
$365,000 on pretax  income of $1.0 million,  for an effective  rate of 35.2% for
the same period last year.

Comparison of Operating  Results for the Six Months Ended September 30, 2000 and
1999

General

     Consolidated net income for the six months ended September 30, 2000 totaled
$1.7 million,  or $0.92 per basic share,  compared to $1.3 million, or $0.58 per
basic  share,  for the same period  last year.  This  represents  an increase of
$406,000,  or 32.3% in net  income  and a $0.34,  or  58.6%,  increase  in basic
earnings per share.

Interest Income

     Interest  income for the six months ended September 30, 2000 increased $3.6
million,  or 25.0%,  to $18.0  million,  compared to $14.4  million for the same
period  last year.  The  increase  in interest  income was  primarily  due to an
increase in the average balance of interest-earning  assets,  specifically loans
receivable. The average balance of interest-earning assets increased from $379.2
million for the six months ended  September  30, 1999 to $444.2  million for the
six months ended September 30, 2000, an increase of $65.0 million, or 17.2%. The
increase in the average balance of interest-earning assets was primarily the net
result of an increase in the average balance of loans receivable,  net, of $67.6
million,  or 20.3%,  offset by a decrease in the average  balance of  short-term
investments and taxable  investment  securities of $3.0 million,  or 11.5%.  The
increase  in  interest  income  was  also  due to an  increase  in the  yield on
interest-earning assets of 51 basis points, to 8.10%.

Interest Expense

     Interest expense for the six months ended September 30, 2000 increased $3.0
million,  or 40.9%,  to $10.3  million,  compared  to $7.3  million for the same
period last year.

     The increase in interest  expense was primarily due to a $70.5 million,  or
21.2%,  increase in the average balance of  interest-bearing  liabilities  which
increased  from $333.1  million for the six months ended  September  30, 1999 to
$403.6 million for the six months ended  September 30, 2000. The increase in the
average  balance of  interest-bearing  liabilities  was primarily a result of an
increase in the average balance of FHLB advances of $37.9 million, or 33.7%, and
an increase in the average balance of deposits of $33.3 million,  or 15.4%.  The
increase  was also due to an increase in the cost of funds of 67 basis points to
5.06%,  due to an increase in market rates and increases in the average  balance
of term deposit accounts and FHLB advances, which generally bear higher interest
rates than core deposits, such as savings accounts and money market accounts.


                                    Page 13
<PAGE>

Net interest income

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

<TABLE>
<CAPTION>
For the six months ended September 30,                         2000                                  1999
                                                               ----                                  ----
                                                              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                        $  2,061     $     68         6.61%    $  2,489    $     59        4.78%
  Taxable investment securities                   21,312          732         6.87       23,908         685        5.73
  Interest-earning deposits                          357           12         6.72           --          --          --
  Mortgage-backed & related securities            19,473          598         6.14       19,354         579        5.98
  Loans, net of unearned income                  400,997       16,576         8.27      333,414      13,067        7.84
                                                --------     --------                  --------    --------
Total interest-earning assets                    444,200       17,986         8.10      379,165      14,390        7.59
                                                             --------                              --------
Non interest-earning assets                       31,688                                 24,469
                                                --------                               --------
  Total                                         $475,888                               $403,634
                                                ========                               ========

Liabilities and Equity
Interest-bearing liabilities:
  NOW accounts                                  $ 23,414          117         1.00%    $ 23,533         131        1.11%
  Regular savings accounts                        26,434          269         2.03       25,950         261        2.01
  Money market accounts                           68,573        1,480         4.32       58,109       1,111        3.82
  Certificate accounts                           130,724        3,676         5.62      108,250       2,784        5.14
                                                --------     --------                  --------    --------
Total interest-bearing deposits                  249,145        5,542         4.45      215,842       4,287        3.97
  FHLB advances                                  150,354        4,650         6.12      112,442       2,897        5.10
  Other Borrowings                                 4,051          121         5.92        4,812         136        5.65
                                                --------     --------                  --------    --------
Total interest-bearing liabilities               403,550       10,313         5.06      333,096       7,320        4.39
  Demand deposits                                  7,071                                  1,471

  Other liabilities                               11,641                                 10,488
  Equity                                          53,626                                 58,579
                                                --------                               --------
  Total                                         $475,888                               $403,634
                                                ========                               ========

Net interest income                                          $  7,673                              $  7,070
                                                             ========                              ========
Interest rate spread                                                          3.04%                                3.20%
                                                                              ====                                 ====
Net interest margin                                                           3.45%                                3.73%
                                                                              ====                                 ====
</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.

<TABLE>
<CAPTION>
                                                              Six Months ended September 30,
                                                                      2000 vs. 1999
                                                             Change due to Increase (Decrease)
                                                             ---------------------------------
                                                     Volume                 Rate                  Net
                                                     ------                 ----                  ---
                                                                            (In thousands)
<S>                                                 <C>                   <C>                   <C>
Interest income:
           Loans                                    $ 2,763               $   746               $ 3,509
           Interest-earning deposits                     12                    --                    12
           Federal Funds Sold                            (7)                   16                     9
           Investment & mortgage backed
                securities                              (53)                  119                    66
                                                    -------               -------               -------
                Total                                 2,715                   881                 3,596
                                                    -------               -------               -------
Interest expense:
           Deposits                                     834                   421                 1,255
           Borrowings                                 1,077                   661                 1,738
                                                    -------               -------               -------
                Total                                 1,911                 1,082                 2,993
                                                    -------               -------               -------
Net interest income                                 $   804               $  (201)              $   603
                                                    =======               =======               =======
</TABLE>

Provision for Loan Losses

     The  provision  for loan losses  totaled  $315,000 for the six months ended
September  30,  2000,  compared to $450,000  for the same period last year.  The
level of reserve provisions for the six months ended September 30, 2000 was made
as 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  increased  $131,000,  or 27.8%,  to  $603,000,
primarily due to increased fees on loans originated and deposit accounts because
of a larger  number of  accounts,  income  received  on  alternative  investment
services the bank offers and  tax-advantaged  income received on Bank Owned Life
Insurance.  In addition the Company took  advantage  of the  improvement  in the
market values to restructure certain investments, resulting in a $40,000 gain on
the sale of investments during the six month period.  Such increases were offset
by unrealized gain on trading securities totaling $12,000,  compared to $138,000
for the same period last year,  a decrease of  $126,000,  or 91.3%.  These gains
represent  an  increase  in the market  value of the assets  supporting  certain
benefit plans,  which also results in a  corresponding  increase in salaries and
benefits.

Non-interest expense

     Total  non-interest  expense  was $5.4  million  for the six  months  ended
September  30, 2000,  compared to $5.1 million for the same period last year, an
increase of 4.3%.  Total  salaries  and  benefits  increased  $116,000,  or 3.5%
primarily as a result of a general  increase in salaries and benefits and due to
the increased number of employees  compared to the same period last year in part
due to the opening of an additional  branch  location,  and the costs associated
with the Company's  employee  benefit  plans.  Occupancy  and equipment  expense
totaled $728,000 compared to $543,000 for the same period last year, an increase
of 34.1%,  primarily  from the  increased  level of  depreciation  on  leasehold
improvements  associated  with  the  addition  of the new  Walpole  branch,  the
relocation   of  the  Dedham  branch  and   additional   leased  space  for  the
administrative and support service areas of the Bank.


                                    Page 15
<PAGE>

Advertising  expense totaled  $253,000  compared to $141,000 for the same period
last year,  an increase of 79.4%,  primarily  as a result of the  promotion  and
introduction  of  new  deposit  products  and  retail  services.  The  total  of
professional  fees,  data  processing,  and other expenses had a net decrease of
$194,000,  or 17.3%,  primarily a result of a reduction in professional  service
expenses associated with the development of new products and services introduced
during last fiscal year.

Income Taxes

     Income taxes for the six months ended  September  30, 2000 were $933,000 on
pretax  income of $2.6  million,  for an  effective  rate of 35.9%,  compared to
$689,000 on pretax  income of $1.9 million,  for an effective  rate of 35.4% for
the same period last year.

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 September  30, 2000,  the  Company's  capital  ratio was 10.99% of total
assets. The Bank at September 30, 2000 had total capital of 8.90% and risk based
capital of 13.54%  (unaudited),  as compared to 9.15% and 15.84%  (unaudited) at
March 31, 2000.

     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 September 30, 2000 the Company and
the Bank met all the capital adequacy requirements to which they are subject.

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  September  30, 2000 the Bank's  liquidity  ratio was
5.68%.  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 September 30, 2000,
cash and due from banks,  short-term investments and securities,  excluding FHLB
stock, totaled $46.8 million, or 9.5% of total assets.


                                    Page 16
<PAGE>

     The Bank has other  sources of  liquidity  if a need for  additional  funds
arises,  including  FHLB  advances.  At September 30, 2000,  the Bank had $161.4
million in advances outstanding from the FHLB, and at September 30, 2000, had an
additional overall borrowing capacity from the FHLB of $43.0 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.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

     Management is responsible  for monitoring and limiting the Bank's  exposure
to  interest  rate risk  within  established  guidelines  while  maximizing  net
interest  income.  The Bank will  continue to monitor  its'  interest  rate risk
sensitivity with the primary objective to prudently  structure the balance sheet
so that  movements  of  interest  rates on assets  and  liabilities  are  highly
correlated  and  produce a  reasonable  net  interest  margin even in periods of
volatile interest rates.  Further  discussion on market risk is in the Company's
Form 10-K for the year ended March 31, 2000.

Asset/Liability Management

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

     The Bank  monitors  its  interest  rate  risk as such risk  relates  to its
operating  strategies.   The  Bank's  Board  of  Directors  has  established  an
Asset/Liability   Committee,   responsible  for  reviewing  its  asset/liability
policies and interest  rate risk  position,  which meets on a monthly  basis and
reports  trends and interest  rate risk  position to the Board of Directors on a
quarterly  basis. The extent of the movement of interest rates is an uncertainty
that could have a negative impact on the earnings of the Bank.

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


                                    Page 17
<PAGE>

Gap Analysis.

     The matching of assets and  liabilities  may be analyzed by  examining  the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring a bank's interest rate  sensitivity  "gap." An asset and liability is
said to be  interest  rate  sensitive  within a specific  time period if it will
mature or reprice within that time period.  The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing  within a specific  time period and the amount of  interest-bearing
liabilities maturing or repricing within that same time period. At September 30,
2000,  the  Company's  cumulative  one  year  interest  rate gap  (which  is the
difference between the amount of  interest-earning  assets maturing or repricing
within one year and  interest-bearing  liabilities  maturing or repricing within
one year) as a  percentage  of total  assets,  was a  negative  17.0%.  A gap is
considered  negative  when the amount of  interest  rate  sensitive  liabilities
exceeds the amount of interest  rate  sensitive  assets.  Accordingly,  during a
period of rising  interest  rates,  an institution  with a negative gap position
would  be in a worse  position  to  invest  in  higher  yielding  assets  which,
consequently,  may  result  in  the  cost  of its  interest-bearing  liabilities
increasing at a rate faster than its yield on interest-earning assets than if it
had a positive gap.  Conversely,  during a period of falling  interest rates, an
institution  with a  negative  gap  would  tend  to  have  its  interest-bearing
liabilities  repricing  downward  at a faster  rate than its  interest  -earning
assets as compared to an  institution  with a positive gap which,  consequently,
may tend to positively affect the growth of its net interest income.

<TABLE>
<CAPTION>
                                                      More           More           More          More
                                                      than           than           than          than
                                                     1 Year        2 Years        3 Years       4 Years         More
                                      1 Year           to             to             to            to           than         Total
                                      or Less        2 Years       3 Years        4 Years       5 Years       5 Years       Amount
                                    ------------------------------------------------------------------------------------------------
                                                                           (Dollars in thousands)
<S>                                 <C>            <C>            <C>            <C>           <C>           <C>           <C>
Interest-earning assets:
 Short-term investments .........   $   6,310      $      --      $      --      $      --     $      --     $      --     $   6,310
 Investment in B.O.L.I ..........       8,097             --             --             --            --            --         8,097
 Securities .....................      15,360             --             --          1,000            --           299        16,659
 Mortgage-backed
    Securities ..................          --             --             --             --            --        15,255        15,255
 Stock in FHLB-Boston ...........       8,321             --             --             --            --            --         8,321
 Loans (1) ......................     114,072         36,111         71,967         81,585        43,899        69,999       417,633
                                    ---------      ---------      ---------      ---------     ---------     ---------     ---------
    Total interest-earning assets   $ 152,160      $  36,111      $  71,967      $  82,585     $  43,899     $  85,553     $ 472,275
                                    ---------      ---------      ---------      ---------     ---------     ---------     ---------
Interest-bearing liabilities:
 Money market accounts ..........   $  54,158      $  10,155      $   3,384      $      --     $      --     $      --     $  67,697
 Regular savings accounts .......       4,305          4,305          4,305          4,305         4,305         7,173        28,698
 NOW accounts ...................       1,387          1,387          1,387          1,387         1,387        20,798        27,733
 Certificate accounts ...........     107,100         21,410          3,440            880         3,439             1       136,270
 Other borrowed funds ...........       2,291             --             --             --            --            --         2,291
 FHLB advances ..................      66,529         31,098          8,791             --            --        55,000       161,418
                                    ---------      ---------      ---------      ---------     ---------     ---------     ---------
    Total interest-bearing
       liabilities ..............   $ 235,770      $  68,355      $  21,307      $   6,572     $   9,131     $  82,972     $ 424,107
                                    =========      =========      =========      =========     =========     =========     =========
Interest-earning assets less
 interest-bearing liabilities ...   $ (83,610)     $ (32,244)     $  50,660      $  76,013     $  34,768     $   2,581     $  48,168
                                    =========      =========      =========      =========     =========     =========     =========
Cumulative interest-rate
 sensitivity gap ................   $ (83,610)     $(115,854)     $ (65,194)     $  10,819     $  45,587     $  48,168
                                    =========      =========      =========      =========     =========     =========
Cumulative interest-rate gap as
 a percentage of total assets ...      (17.02)%       (23.58)%       (13.27)%        2.20%         9.28%         9.80%
Cumulative interest-rate gap as
 a percentage of total interest-
 earning assets .................      (17.70)%       (24.53)%       (13.80)%        2.29%         9.65%        10.20%
Cumulative interest-earning
 assets as a percentage of
 cumulative interest-bearing
 liabilities ....................       64.54%         61.91%         79.97%       103.26%       113.36%       111.36%
</TABLE>


                                    Page 18
<PAGE>

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

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

Item 2 - Changes in Securities and Use of Proceeds

     Not applicable.

Item 3 - Defaults Upon Senior Securities

     Not applicable.

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

     On July 27, 2000 the Company held its Annual  Meeting of  Shareholders.  At
that meeting the following items were brought before the shareholders for a vote
and the results were as indicated.

1. Election of Directors

                                   For           %         Withheld        %
                                   ---          ---        --------       ---
     Denise M. Renaghan         1,752,302      98.2         31,788        1.8
     Richard F. McBride         1,761,528      98.7         22,562        1.4

2. The ratification of the appointment of Shatswell,  MacLeod & Company, P.C. as
independent  auditors  for Bay State  Bancorp,  Inc.  for the fiscal year ending
March 31, 2001.

                      For         %      Against       %      Abstained     %
                      ---        ---     -------      ---     ---------    ---
                   1,764,466     99       2,141       .01      16,483      .09

Item 5 - Other Information

     On July 27,  2000 the  Board of  Directors  appointed  Denise  M.  Renaghan
President and Chief Operating Officer of Bay State Federal Bank, a subsidiary of
Bay State Bancorp, Inc.

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

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

(b)  Reports on Form 8-K

     (i)  None


                                    Page 19
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                             Bay State Bancorp, Inc.


November 10, 2000
-----------------                            -----------------------------
Date                                         John F. Murphy
                                             Chairman, President, and
                                             Chief Executive Officer
                                             (Principal Executive Officer)


November 10, 2000
-----------------                            -----------------------------
Date                                         Michael O. Gilles
                                             Senior Vice President and
                                             Chief Financial Officer
                                             (Principal Accounting and Financial
                                             Officer)


                                    Page 20