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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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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, 2002

OR

|o | 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:  0-17177

|BSB Bancorp, Inc.                                                               
|--------------------------------------------------------------------------------
|                                                                                
|(Exact name of registrant as specified in its charter)                          
|                                                                                
|Delaware                                                                        
|                                                                                
|(State or other jurisdiction of incorporation or organization)                  
|                                                                                
|                                                                                
|58-68 Exchange Street, Binghamton, New York 13901                               
|                                                                                
|(Address of principal executive offices)    (Zip Code)                          
|                                                                                
|                                                                                
|Registrants telephone number, including area code:  (607) 779-2406             
|                                                                                
|n/a                                                                             
|                                                                                
|Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes: | x | No: | o
|---- | - | --- | -

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest
practicable date.  As of  November 7, 2002:  9,554,991 shares of common stock, $0.01 par value.

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INDEX

|                                |                                                                                                                              | PAGE 
|------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | -----
|                                |                                                                                                                              |      
|PART I.   FINANCIAL INFORMATION |                                                                                                                             
|                                |                                                                                                                              |      
|Item 1:                         | Interim Financial Statements (unaudited)                                                                                     |      
|                                |                                                                                                                              |      
|                                | Consolidated Statements of Condition September 30, 2002 and December 31, 2001                                                | 1    
|                                |                                                                                                                              |      
|                                | Consolidated Statements of Operations Three Months and Nine Months Ended September 30, 2002 and September 30, 2001           | 2    
|                                |                                                                                                                              |      
|                                | Consolidated Statements of Comprehensive Income Three Months and Nine Months Ended September 30, 2002 and September 30, 2001 | 3    
|                                |                                                                                                                              |      
|                                | Consolidated Statements of Cash Flows Nine Months Ended September 30, 2002 and September 30, 2001                            | 4    
|                                |                                                                                                                              |      
|                                | Consolidated Statements of Changes in Shareholders Equity Nine Months September 30, 2002 and September 30, 2001             | 5    
|                                |                                                                                                                              |      
|                                | Notes to Unaudited Interim Consolidated Financial Statements                                                                 | 6-7  
|                                |                                                                                                                              |      
|Item 2:                         | Managements Discussion and Analysis of Financial Condition and Results of Operations                                        | 8-20 
|                                |                                                                                                                              |      
|Item 3:                         | Quantitative and Qualitative Disclosures About Market Risk                                                                   | 21   
|                                |                                                                                                                              |      
|Item 4:                         | Controls and Procedures                                                                                                      | 22   
|                                |                                                                                                                              |      
|PART II.   
OTHER INFORMATION   |                                                                                                                             
|                                |                                                                                                                             
|                                | Items 1-6                                                                                                                    | 23   
|                                |                                                                                                                              |      
|                                | Signatures                                                                                                                   | 24   
|                                |                                                                                                                              |      
|                                | Certifications                                                                                                               | 25-26
|                                |                                                                                                                              |      





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Item 1

BSB BANCORP, INC.CONSOLIDATED STATEMENTS OF CONDITION

|(In Thousands, Except Share and Per Share Data)                                                                                             |                                                                                                                | September 30, 2002 |           | December 31, 2001 |  
|------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------ | --------- | ----------------- | -
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            |                                                                                                                | (unaudited)        |           |                   |  
|ASSETS                                                                                                                                      |                                                                                                                |                    |           |                   |  
|Cash and due from banks                                                                                                                     |                                                                                                                | $                  | 53,144    |                   | $
|Federal funds sold                                                                                                                          |                                                                                                                |                    | 0         |                   |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Cash and cash equivalents                                                                                      |                    |           | 53,144            |  
|Investment securities available for sale, at fair value                                                                                     |                                                                                                                |                    | 638,458   |                   |  
|Investment securities held to maturity (fair value of $34,661 and $13,962, respectively)                                                    |                                                                                                                |                    | 34,346    |                   |  
|Federal Home Loan Bank of New York stock                                                                                                    |                                                                                                                |                    | 16,899    |                   |  
|Loans held for sale                                                                                                                         |                                                                                                                |                    | 236       |                   |  
|Loans:                                                                                                                                      |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Commercial                                                                                                     |                    |           | 557,495           |  
|                                                                                                                                            | Consumer                                                                                                       |                    |           | 373,513           |  
|                                                                                                                                            | Residential real estate                                                                                        |                    |           | 260,578           |  
|                                                                                                                                            | Commercial real estate                                                                                         |                    |           | 122,148           |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Total loans                                                                                                    |                    |           | 1,313,734         |  
|                                                                                                                                            | Net deferred costs                                                                                             |                    |           | 1,196             |  
|                                                                                                                                            | Allowance for loan losses                                                                                      |                    |           | (59,754           | )
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Net loans                                                                                                      |                    |           | 1,255,176         |  
|Bank premises and equipment                                                                                                                 |                                                                                                                |                    | 15,025    |                   |  
|Accrued interest receivable                                                                                                                 |                                                                                                                |                    | 10,472    |                   |  
|Other real estate owned & repossessed assets                                                                                                |                                                                                                                |                    | 4,980     |                   |  
|Intangible assets, net                                                                                                                      |                                                                                                                |                    | 555       |                   |  
|Other assets                                                                                                                                |                                                                                                                |                    | 35,718    |                   |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            |                                                                                                                | $                  | 2,065,009 |                   | $
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                        |                                                                                                                |                    |           |                   |  
|Due to depositors                                                                                                                           |                                                                                                                | $                  | 1,480,635 |                   | $
|Borrowings                                                                                                                                  |                                                                                                                |                    | 377,876   |                   |  
|Other liabilities                                                                                                                           |                                                                                                                |                    | 16,202    |                   |  
|Company obligated mandatorily redeemable preferred securities of subsidiaries, holding solely junior subordinated debentures of the
Company |                                                                                                                |                    | 39,000    |                   |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Total liabilities                                                                                              |                    |           | 1,913,713         |  
|Shareholders Equity:                                                                                                                       |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Preferred stock, par value $0.01 per share; authorized 2,500,000 shares; none issued                           |                    |           | 0                 |  
|                                                                                                                                            | Common stock, par value $0.01 per share; authorized 30,000,000 shares; 11,642,301 and 11,535,500 shares issued |                    |           | 116               |  
|                                                                                                                                            | Additional paid-in capital                                                                                     |                    |           | 41,113            |  
|                                                                                                                                            | Undivided profits                                                                                              |                    |           | 133,337           |  
|                                                                                                                                            | Accumulated other comprehensive income                                                                         |                    |           | 9,861             |  
|                                                                                                                                            | Treasury stock, at cost: 2,056,360 and 1,907,934 shares                                                        |                    |           | (33,131           | )
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            | Total shareholders equity                                                                                     |                    |           | 151,296           |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            |                                                                                                                | $                  | 2,065,009 |                   | $
|                                                                                                                                            |                                                                                                                |                    |           |                   |  
|                                                                                                                                            |                                                                                                                |                    |           |                   |  

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

1





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Item 1 - continued

BSB BANCORP, INC.CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

|                                                    |                                                                         | Three Months Ended September 30, |        | Nine Months Ended September 30, |  
|--------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------- | ------ | ------------------------------- | -
|                                                    |                                                                         |                                  |        |                                 |  
|(In Thousands, Except Per Share Data)               |                                                                         | 2002                             |        | 2001                            |  
|                                                    |                                                                         |                                  |        |                                 |  
|Interest income:                                    |                                                                         |                                  |        |                                 |  
|                                                    | Interest and fees on loans                                              |                                  | $      | 22,973                          |  
|                                                    | Interest on federal funds sold                                          |                                  |        | 42                              |  
|                                                    | Interest on investment securities                                       |                                  |        | 8,477                           |  
|                                                    | Interest on loans held for sale                                         |                                  |        | 19                              |  
|                                                    |                                                                         |                                  |        |                                 |  
|                                                    | Total interest income                                                   |                                  |        | 31,511                          |  
|                                                    |                                                                         |                                  |        |                                 |  
|Interest expense:                                   |                                                                         |                                  |        |                                 |  
|                                                    | Interest on savings deposits                                            |                                  |        | 668                             |  
|                                                    | Interest on time accounts                                               |                                  |        | 6,422                           |  
|                                                    | Interest on money market deposit accounts                               |                                  |        | 1,439                           |  
|                                                    | Interest on NOW accounts                                                |                                  |        | 146                             |  
|                                                    | Interest on borrowed funds                                              |                                  |        | 3,261                           |  
|                                                    | Interest on mandatorily redeemable preferred securities of subsidiaries |                                  |        | 743                             |  
|                                                    |                                                                         |                                  |        |                                 |  
|                                                    | Total interest expense                                                  |                                  |        | 12,679                          |  
|                                                    |                                                                         |                                  |        |                                 |  
|Net interest income                                 |                                                                         |                                  | 18,832 |                                 |  
|Provision for loan losses                           |                                                                         |                                  | 4,500  |                                 |  
|                                                    |                                                                         |                                  |        |                                 |  
|Net interest income after provision for loan losses |                                                                         |                                  | 14,332 |                                 |  
|                                                    |                                                                         |                                  |        |                                 |  
|Non-interest income:                                |                                                                         |                                  |        |                                 |  
|                                                    | Service charges on deposit accounts                                     |                                  |        | 1,348                           |  
|                                                    | Checkcard interchange fees                                              |                                  |        | 352                             |  
|                                                    | Mortgage servicing fees                                                 |                                  |        | 252                             |  
|                                                    | Fees and commissions-brokerage services                                 |                                  |        | 168                             |  
|                                                    | Trust fees                                                              |                                  |        | 260                             |  
|                                                    | Gains on sale of securities, net                                        |                                  |        | 95                              |  
|                                                    | Gain of sale of branch office, net                                      |                                  |        | 0                               |  
|                                                    | Gain on sale of credit card portfolio, net                              |                                  |        | 0                               |  
|                                                    | Other charges, commissions and fees                                     |                                  |        | 649                             |  
|                                                    |                                                                         |                                  |        |                                 |  
|                                                    | Total non-interest income                                               |                                  |        | 3,124                           |  
|                                                    |                                                                         |                                  |        |                                 |  
|Operating expense:                                  |                                                                         |                                  |        |                                 |  
|                                                    | Salaries, pensions and other employee benefits                          |                                  |        | 5,923                           |  
|                                                    | Building occupancy                                                      |                                  |        | 1,056                           |  
|                                                    | Advertising and promotion                                               |                                  |        | 267                             |  
|                                                    | Professional fees                                                       |                                  |        | 641                             |  
|                                                    | Data processing costs                                                   |                                  |        | 1,253                           |  
|                                                    | Services                                                                |                                  |        | 647                             |  
|                                                    | Amortization of intangible assets                                       |                                  |        | 91                              |  
|                                                    | Conversion expenses                                                     |                                  |        | 0                               |  
|                                                    | Other real estate owned and repossessed asset expenses, net             |                                  |        | 33                              |  
|                                                    | Other expenses                                                          |                                  |        | 1,301                           |  
|                                                    |                                                                         |                                  |        |                                 |  
|                                                    | Total operating expense                                                 |                                  |        | 11,212                          |  
|                                                    |                                                                         |                                  |        |                                 |  
|Income (loss) before income taxes                   |                                                                         |                                  | 6,244  |                                 |  
|Income tax expense (benefit)                        |                                                                         |                                  | 2,318  |                                 |  
|                                                    |                                                                         |                                  |        |                                 |  
|NET INCOME (LOSS)                                   |                                                                         | $                                | 3,926  |                                 | $
|                                                    |                                                                         |                                  |        |                                 |  
|Earnings (loss) per share:                          |                                                                         |                                  |        |                                 |  
|                                                    | Basic                                                                   |                                  | $      | 0.41                            |  
|                                                    | Diluted                                                                 |                                  | $      | 0.41                            |  
|                                                    |                                                                         |                                  |        |                                 |  
|                                                    |                                                                         |                                  |        |                                 |  

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

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Item 1 - continued

BSB BANCORP, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

|                                                                          |  | Three Months Ended September 30, |        | Nine Months Ended September 30, |  
|------------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|                                                                          |  |                                  |        |                                 |  
|(Dollars in Thousands)                                                    |  | 2002                             |        | 2001                            |  
|                                                                          |  |                                  |        |                                 |  
|Net income (loss)                                                         |  | $                                | 3,926  |                                 | $
|Other comprehensive income:                                               |  |                                  |        |                                 |  
|Net unrealized gains on securities available for sale                     |  |                                  | 4,688  |                                 |  
|Reclassification adjustment for net realized gains included in net income |  |                                  | (95    | )                               |  
|                                                                          |  |                                  |        |                                 |  
|Other comprehensive income, before income tax expense                     |  |                                  | 4,593  |                                 |  
|Income tax expense on other comprehensive income                          |  |                                  | (1,847 | )                               |  
|                                                                          |  |                                  |        |                                 |  
|Other comprehensive income, net of tax                                    |  |                                  | 2,746  |                                 |  
|                                                                          |  |                                  |        |                                 |  
|Comprehensive income                                                      |  | $                                | 6,672  |                                 | $
|                                                                          |  |                                  |        |                                 |  

The accompanying notes are an integral part of the unaudited interim consolidated
financial statements.

3





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Item 1 - continued

BSB BANCORP, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

|                                                   |                                                                                                 | Nine Months Ended September 30, |       
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------- | ------
|                                                   |                                                                                                 |                                 |       
|(Dollars in Thousands)                             |                                                                                                 | 2002                            |       
|                                                   |                                                                                                 |                                 |       
|Operating activities:                              |                                                                                                 |                                 |       
|                                                   | Net (loss) income                                                                               |                                 | $     
|                                                   | Provision for loan losses                                                                       |                                 |       
|                                                   | Gains on sale of securities, net                                                                |                                 |       
|                                                   | Other gains, net                                                                                |                                 |       
|                                                   | Depreciation and amortization                                                                   |                                 |       
|                                                   | Net amortization (accretion) of premiums and discounts on investment securities                 |                                 |       
|                                                   | Net accretion of premiums and discounts on loans                                                |                                 |       
|                                                   | Sale of loans originated for sale                                                               |                                 |       
|                                                   | Additional loans originated for sale                                                            |                                 |       
|                                                   | Writedowns of other real estate owned and repossessed assets                                    |                                 |       
|                                                   | Net change in other assets and liabilities                                                      |                                 |       
|                                                   |                                                                                                 |                                 |       
|                                                   | Net cash provided by operating activities                                                       |                                 |       
|                                                   |                                                                                                 |                                 |       
|Investing activities:                              |                                                                                                 |                                 |       
|                                                   | Proceeds from calls of held to maturity investment securities                                   |                                 |       
|                                                   | Purchases of held to maturity investment securities                                             |                                 |       
|                                                   | Principal collected on held to maturity investment securities                                   |                                 |       
|                                                   | Proceeds from sales of available for sale investment securities                                 |                                 |       
|                                                   | Purchases of available for sale investment securities                                           |                                 |       
|                                                   | Principal collected on available for sale investment securities                                 |                                 |       
|                                                   | Net reduction in loans receivable                                                               |                                 |       
|                                                   | Proceeds from sale of other real estate owned and repossessed assets                            |                                 |       
|                                                   | Capital expenditures, net                                                                       |                                 |       
|                                                   |                                                                                                 |                                 |       
|                                                   | Net cash (used in) provided by investing activities                                             |                                 |       
|                                                   |                                                                                                 |                                 |       
|Financing activities:                              |                                                                                                 |                                 |       
|                                                   | Net change in demand deposits, NOW accounts, savings accounts and money market deposit accounts |                                 |       
|                                                   | Net change in time deposits                                                                     |                                 |       
|                                                   | Net change in short-term borrowings                                                             |                                 |       
|                                                   | Proceeds from long-term borrowings                                                              |                                 |       
|                                                   | Repayments of long-term borrowings                                                              |                                 |       
|                                                   | Net proceeds from issuance of trust preferred securities                                        |                                 |       
|                                                   | Repurchase of trust preferred securities                                                        |                                 |       
|                                                   | Proceeds from exercise of stock options                                                         |                                 |       
|                                                   | Purchases of treasury stock                                                                     |                                 |       
|                                                   | Dividends paid                                                                                  |                                 |       
|                                                   |                                                                                                 |                                 |       
|                                                   | Net cash provided by (used in) financing activities                                             |                                 |       
|                                                   |                                                                                                 |                                 |       
|                                                   | (Decrease) increase in cash and cash equivalents                                                |                                 |       
|Cash and cash equivalents at beginning of period   |                                                                                                 |                                 | 56,272
|                                                   |                                                                                                 |                                 |       
|Cash and cash equivalents at end of period         |                                                                                                 | $                               | 53,144
|                                                   |                                                                                                 |                                 |       
|Supplemental disclosures of cash flow information: |                                                                                                 |                                 |       
|                                                   | Cash paid during the period for:                                                                |                                 |       
|                                                   | Interest credited on deposits and paid on other borrowings                                      |                                 | $     
|                                                   | Income taxes                                                                                    |                                 | $     
|                                                   |                                                                                                 |                                 |       
|                                                   | Non-cash investing activity:                                                                    |                                 |       
|                                                   | Transfers from loans to other real estate owned and repossessed assets                          |                                 | $     
|                                                   | Adjustment of available for sale investment securities to fair value, net of tax                |                                 | $     
|                                                   |                                                                                                 |                                 |       
|                                                   |                                                                                                 |                                 |       

The accompanying notes are an integral part of the unaudited interim consolidated financial statements.

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Item 1 - continued

BSB BANCORP, INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (unaudited) (In Thousands, Except Share and Per Share Data)

|Nine Months Ended September 30, 2001                 |  | Number of Shares Issued |            | Common Stock |   | Additional Paid-In Capital |  | Undivided Profits |        | Accumulated Other Comprehensive Income (Loss) |   | Treasury Stock |   | Total |       
|---------------------------------------------------- |  | ----------------------- | ---------- | ------------ | - | -------------------------- |  | ----------------- | ------ | --------------------------------------------- | - | -------------- | - | ----- | ------
|                                                     |  |                         |            |              |   |                            |  |                   |        |                                               |   |                |   |       |       
|Balance at December 31, 2000                         |  |                         | 11,503,272 |              | $ | 115                        |  | $                 | 38,789 |                                               | $ | 132,277        |   | $     | (1,912
|Net income                                           |  |                         |            |              |   |                            |  |                   |        |                                               |   | 15,597         |   |       |       
|Other comprehensive income                           |  |                         |            |              |   |                            |  |                   |        |                                               |   |                |   |       | 8,099 
|Stock options exercised                              |  |                         | 11,638     |              |   |                            |  |                   | 164    |                                               |   |                |   |       |       
|Cash dividend paid on common stock ($0.75 per share) |  |                         |            |              |   |                            |  |                   |        |                                               |   | (7,536         | ) |       |       
|Treasury stock purchased                             |  |                         |            |              |   |                            |  |                   |        |                                               |   |                |   |       |       
|                                                     |  |                         |            |              |   |                            |  |                   |        |                                               |   |                |   |       |       
|Balance at September 30, 2001                        |  |                         | 11,514,910 |              | $ | 115                        |  | $                 | 38,953 |                                               | $ | 140,338        |   | $     | 6,187 
|                                                     |  |                         |            |              |   |                            |  |                   |        |                                               |   |                |   |       |       



|Nine Months Ended September 30, 2002                 |  |  |            |  |   |     |  |   |        |  |   |         |   |   |       |  |   |         |   |   |         |  
|---------------------------------------------------- |  |  | ---------- |  | - | --- |  | - | ------ |  | - | ------- | - | - | ----- |  | - | ------- | - | - | ------- | -
|                                                     |  |  |            |  |   |     |  |   |        |  |   |         |   |   |       |  |   |         |   |   |         |  
|Balance at December 31, 2001                         |  |  | 11,535,500 |  | $ | 115 |  | $ | 39,331 |  | $ | 142,748 |   | $ | 2,520 |  | $ | (28,889 | ) | $ | 155,825 |  
|Net loss                                             |  |  |            |  |   |     |  |   |        |  |   | (2,187  | ) |   |       |  |   |         |   |   | (2,187  | )
|Other comprehensive income                           |  |  |            |  |   |     |  |   |        |  |   |         |   |   | 7,341 |  |   |         |   |   | 7,341   |  
|Stock options exercised                              |  |  | 106,801    |  |   | 1   |  |   | 1,782  |  |   |         |   |   |       |  |   |         |   |   | 1,783   |  
|Cash dividend paid on common stock ($0.75 per share) |  |  |            |  |   |     |  |   |        |  |   | (7,224  | ) |   |       |  |   |         |   |   | (7,224  | )
|Treasury stock purchased                             |  |  |            |  |   |     |  |   |        |  |   |         |   |   |       |  |   | (4,242  | ) |   | (4,242  | )
|                                                     |  |  |            |  |   |     |  |   |        |  |   |         |   |   |       |  |   |         |   |   |         |  
|Balance at September 30, 2002                        |  |  | 11,642,301 |  | $ | 116 |  | $ | 41,113 |  | $ | 133,337 |   | $ | 9,861 |  | $ | (33,131 | ) | $ | 151,296 |  
|                                                     |  |  |            |  |   |     |  |   |        |  |   |         |   |   |       |  |   |         |   |   |         |  

The accompanying notes are an integral part of the unaudited interim consolidated
financial statements.

5





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Item 1 - continued

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS September 30, 2002

|(1) | In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments which are of a normal recurring nature necessary for a fair statement of
the results for the interim periods presented.  All intercompany transactions have been eliminated in consolidation. Amounts in the prior periods financial statements are reclassified whenever necessary to conform to the current
periods presentation. The December 31, 2001 Consolidated Statement of Condition is derived from the audited consolidated financial statements included in the Companys 2001 Annual Report to Shareholders.  The accompanying unaudited
interim consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in the Companys 2001 Annual Report to Shareholders.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Basic earnings (loss) per share and diluted earnings (loss) per share are computed based on the weighted average shares outstanding.  Diluted earnings per share are computed,
based on the weighted average shares outstanding adjusted for the dilutive effect of the assumed exercise of stock options during the period using the treasury stock method. The following is a reconciliation of basic earnings (loss) per share to
diluted earnings (loss) per share for the quarters and nine months ended September 30, 2002 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                          



|Quarters ended September 30,     |  | Net Income        |        | Weighted Average Shares |  | Earnings Per Share        | 
|-------------------------------- |  | ----------------- | ------ | ----------------------- |  | ------------------------- | 
|                                 |  |                   |        |                         |  |                           | 
|2002                             |  |                   |        |                         |  |                           | 
|Basic earnings per share         |  | $                 | 3,926  |                         |  | 9,584,896                 | 
|Dilutive effect of stock options |  |                   |        |                         |  | 107,762                   | 
|                                 |  |                   |        |                         |  |                           | 
|Diluted earnings per share       |  | $                 | 3,926  |                         |  | 9,692,658                 | 
|                                 |  |                   |        |                         |  |                           | 
|Anti-dilutive stock options      |  |                   |        |                         |  | 102,833                   | 
|                                 |  |                   |        |                         |  |                           | 
|2001                             |  |                   |        |                         |  |                           | 
|Basic earnings per share         |  | $                 | 5,190  |                         |  | 9,893,261                 | 
|Dilutive effect of stock options |  |                   |        |                         |  | 202,658                   | 
|                                 |  |                   |        |                         |  |                           | 
|Diluted earnings per share       |  | $                 | 5,190  |                         |  | 10,095,919                | 
|                                 |  |                   |        |                         |  |                           | 
|Anti-dilutive stock options      |  |                   |        |                         |  | 59,818                    | 
|                                 |  |                   |        |                         |  |                           | 
|                                 |  |                   |        |                         |  |                           | 
|Nine months ended September 30,  |  | Net Income (Loss) |        | Weighted Average Shares |  | Earnings (Loss) Per Share | 
|                                 |  |                   |        |                         |  |                           | 
|2002                             |  |                   |        |                         |  |                           | 
|Basic loss per share             |  | $                 | (2,187 | )                       |  | 9,614,444                 | 
|Dilutive effect of stock options |  |                   |        |                         |  |                          | 
|                                 |  |                   |        |                         |  |                           | 
|Diluted loss per share           |  | $                 | (2,187 | )                       |  | 9,614,444                 | 
|                                 |  |                   |        |                         |  |                           | 
|Anti-dilutive stock options      |  |                   |        |                         |  | 1,022,905                 | 
|                                 |  |                   |        |                         |  |                           | 
|2001                             |  |                   |        |                         |  |                           | 
|Basic earnings per share         |  | $                 | 15,597 |                         |  | 10,021,402                | 
|Dilutive effect of stock options |  |                   |        |                         |  | 134,047                   | 
|                                 |  |                   |        |                         |  |                           | 
|Diluted earnings per share       |  | $                 | 15,597 |                         |  | 10,155,449                | 
|                                 |  |                   |        |                         |  |                           | 
|Anti-dilutive stock options      |  |                   |        |                         |  | 119,073                   | 
|                                 |  |                   |        |                         |  |                           | 



|    | For the  nine-month period ended September 30, 2002, all stock options are considered anti-dilutive because the Company had a net loss for the year-to-date period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | The Company has a subsidiary business trust, BSB Capital Trust I, L.L.C. (Trust I), formed in the third quarter of 1998 for the purpose of issuing preferred
securities.  Trust I issued at par $30.0 million of 8.125% preferred securities. The preferred securities are non-voting, mandatorily redeemable in 2028 and guaranteed by the Company. The Companys guarantee, together with its other
obligations under the relevant agreements, constitutes a full, irrevocable, and unconditional guarantee by the Company of the securities issued by Trust I. The entire net proceeds to Trust I from the offering were invested in junior subordinated
obligations of the Company, which are the sole assets of Trust I. In June 2002, the Company repurchased $1.0 million of Trust I preferred securities.

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Item 1 - continued

|    | During the second quarter of 2002, the Company formed a subsidiary business trust, BSB Capital Trust II, L.L.C. (Trust II), for the purpose
of issuing preferred securities. Trust II issued $10.0 million of floating-rate, non-voting, preferred securities, maturing in 2032 and guaranteed by the Company.  The entire net proceeds to Trust II from the offering were invested in junior
subordinated obligations of the Company, which are the sole assets of Trust II.  Proceeds from the issuance of these securities have been used for general corporate purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.  SFAS No. 141 supercedes Accounting Principles Board (APB) No. 16, Business Combinations, and requires that all business
combinations be accounted for under the purchase method of accounting, thus eliminating the pooling-of-interests method of accounting.  SFAS No. 142 requires that acquired intangible assets (other than goodwill) be amortized over their useful
economic life, while goodwill and any acquired intangible assets with an indefinite useful economic life are not amortized, but are reviewed for impairment on an annual basis based upon guidelines specified in the Statement. SFAS No. 142 requires
that goodwill be evaluated for impairment no later than December 31, 2002, and annually thereafter.  The Company adopted SFAS No. 142 on January 1, 2002.                                                                                                                                                                                                                  
|    | At September 30, 2002, the Company has a core deposit intangible asset (CDI) with a carrying amount of $555,000 (original amount of $3.4
million, net of accumulated amortization of $2.9 million) related to the acquisition of certain branch offices and their related deposits.  The amortization expense related to the CDI totaled $91,000 for the quarter ended September 30, 2002,
and $96,000 for the quarter ended September 30, 2001.  The amortization expense related to the CDI totaled $274,000 for the nine months ended September 30, 2002, and $289,000 for the nine months ended September 30, 2001.  As of September
30, 2002, the remaining amortization period for the CDI is less than 2 years, with CDI being amortized on a straight-line basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In October 2002, the Company announced the sale of its two Elmira branch offices.  Of the total CDI of $555,000 at September 30, 2002, $492,000
relates to the purchase of these two Elmira branch offices.  The sale of the Elmira branch offices is expected to close in the fourth quarter, at which time the CDI related to these branch offices will be written-off as a reduction of the gain
on sale of the branches.  The remaining CDI will continue to be amortized.  With expected amortization expense for 2003 of approximately $46,000, the remaining CDI will be fully amortized during the third quarter of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions.  SFAS No. 147 amends SFAS No. 72,
Accounting for Certain Acquisitions of Banking or Thrift Institutions, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and FASB Interpretation No. 9, Applying APB Opinions Nos. 16 and 17
When a Savings and Loan Association or a Similar Institution is Acquired in a Business Combination Accounted for by the Purchase Method.  SFAS No. 147 removes acquisitions of financial institutions, other than transactions between two or
more mutual enterprises, from the scope of SFAS No. 72 and FASB Interpretation No. 9.  SFAS No. 147 also amends the provisions of SFAS No. 144 that apply to long-term customer-relationship intangible assets recognized in the acquisition of a
financial institution.  The provisions of SFAS No. 147 are effective October 1, 2002.  Accordingly, effective October 1, 2002, the Company will evaluate its CDI for impairment in accordance with the provisions of SFAS No. 144. 
Management does not expect any material impact on the Companys consolidated financial statements from the adoption of SFAS No. 147.

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Item 2

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

BSB Bancorp, Inc. (BSB or the Company), holding company for BSB Bank & Trust Company (the Bank), earned net income for the quarter ended September 30, 2002
of $3.9 million, or $0.41 per diluted share, compared to net income of $5.2 million, or $0.51 per diluted share for the same period of 2001. The net loss for the nine months ended September 30, 2002 was $2.2 million, or $0.23 per diluted share,
compared to net income of $15.6 million, or $1.54 per diluted share for the nine months ended September 30, 2001.On October 28, 2002, the Board of Directors declared a
quarterly cash dividend of $0.25 per share payable on December 10, 2002 to shareholders of record at the close of business on November 22, 2002.

Consolidated Financial Condition

Total assets of the Company increased to $2,065.0 million at September 30, 2002 from $2,062.9 million at December 31, 2001.  Previously, the Company announced plans to reduce
its commercial and industrial (C&I) loans, and to focus on improving credit quality.  During the first nine months of 2002, the commercial loan portfolio had a net decrease of $193.1 million to $557.5 million at September 30,
2002 from $750.6 million at December 31, 2001.  Approximately $35.7 million of this reduction was the result of loan charge-offs (see Non-performing Assets), with the remainder of the reduction in commercial loans primarily
attributed to principal reductions and loan pay-offs.  During the nine-month period ended September 30, 2002, the Company originated $72.4 million of commercial loans  compared to $74.4 million for the same period in 2001.Consumer loans decreased to $373.5 million at September 30, 2002 from $378.4 million at December 31, 2001.  However, consumer loans increased $28.1 million during the
third quarter 2002, due primarily to an increase in indirect new and used auto loans.  New originations of consumer loans increased to $137.7 million for the first nine months of 2002 from $119.9 million for the comparable period in 2001. 
Also, consumer loans were impacted by normal paydowns, a $10.7 million reduction associated with the sale of the Companys credit card portfolio in the first quarter of 2002 and year-to-date charge-offs of $3.5 million.Real estate loans, which include both residential and commercial, increased to $382.7 million at September 30, 2002 from $355.8 million at December 31, 2001.  Residential real estate loans
increased to $260.6 million at September 30, 2002 from $220.9 million at December 31, 2001.  The residential loan portfolio increased in categories with shorter term durations, specifically, increases of $17.9 million in 10 and 15 year loans
and $20.6 million in bi-weekly fixed rate loans. Originations of residential mortgages were $102.8 million for the first nine months of 2002 compared to $90.6 million for the same period in 2001.  During the same periods, commercial real estate
loans had originations of $10.0 million in 2002 compared to $21.6 million in 2001.  The growth in residential real estate loans was partially offset by the sale of $25.1 million of such loans, primarily in the first quarter of 2002.The changes in the composition of the Banks assets, including both the levels and types of loans, are a component of the Banks overall strategy to improve the
mix of loans and to reduce credit risk.  Investment securities increased to $689.7 million at September 30, 2002 from $516.5 million at December 31, 2001. Such increase included $103.0 million in mortgage-backed securities and $27.5 million in
both corporate and trust preferred held-to-maturity securities, and was primarily due to the available cashflow from the reduction of C&I loans.Other real estate
owned and repossessed assets increased to $5.0 million at September 30, 2002, primarily due to the addition of two significant commercial real estate properties for $4.0 million in June 2002.  Repossessed assets, as a component of this total,
decreased from $1.3 million at December 31, 2001 to $492,000 at September 30, 2002 due to aggressive efforts to reduce the Banks holding period for such assets.  Retail market repossession additions, primarily mobile home units, were $1.4
million for the nine months ended September 30, 2002.  Sales of such repossessed assets were $1.8 million for the same period.  Commercial market repossessions were $382,000 for the same period and were fully disposed of by September 30,
2002.Other assets increased to $35.7 million at September 30, 2002 from $25.4 million at December 31, 2001.  The principal factor for such increase is the
Companys prepaid pension asset which totaled $6.9 million at September 30, 2002, compared to a pension payable of $98,000 at December 31, 2001.  The prepayment is primarily attributed to the Companys maximum voluntary contribution
of $6.5 million in September 2002.  The level of allowable contributions was determined by the plan actuaries and was related to the poor performance in the equity markets in general, as well as the corresponding poor performance of the pension
plans investments, combined with the continued increase in the plans benefit obligations.  The voluntary contribution will provide additional investment assets for the plan, which should reduce future net periodic pension
costs.  In spite of the significant pension contribution, the Company expects substantial increases to pension expense, which for 2003, may increase as much as $500,000 based upon preliminary actuarial evaluations.  The significant
increase in future periodic pension costs is primarily

8





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Item 2 - continued

Results of
Operations

9





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Item 2 - continued

|                                                                 |                                              | Three Months Ended September 30, |        
|---------------------------------------------------------------- | -------------------------------------------- | -------------------------------- | -------
|                                                                 |                                              |                                  |        
|                                                                 |                                              | 2002                             |        
|                                                                 |                                              |                                  |        
|(Dollars in Thousands)                                           |                                              | Average Balance                  |        
|                                                                 |                                              |                                  |        
|Interest-earning assets:                                         |                                              |                                  |        
|                                                                 | Commercial loans                             |                                  | $      
|                                                                 | Consumer loans:                              |                                  |        
|                                                                 | Personal-direct                              |                                  |        
|                                                                 | Personal-indirect                            |                                  |        
|                                                                 | Other (1)                                    |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Total consumer loans                         |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Real estate loans:                           |                                  |        
|                                                                 | Residential-fixed                            |                                  |        
|                                                                 | Commercial-fixed                             |                                  |        
|                                                                 | Residential-adjustable                       |                                  |        
|                                                                 | Commercial-adjustable                        |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Total real estate loans                      |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Investment securities (2)                    |                                  |        
|                                                                 | Loans held for sale                          |                                  |        
|                                                                 | Federal funds sold                           |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Total  interest-earning assets               |                                  |        
|                                                                 |                                              |                                  |        
|Allowance for loan losses                                        |                                              |                                  | (58,395
|Non-interest-earning assets                                      |                                              |                                  | 114,974
|                                                                 |                                              |                                  |        
|                                                                 | Total assets                                 |                                  | $      
|                                                                 |                                              |                                  |        
|Interest-bearing liabilities:                                    |                                              |                                  |        
|                                                                 | Deposits:                                    |                                  |        
|                                                                 | Savings                                      |                                  | $      
|                                                                 | Money market                                 |                                  |        
|                                                                 | Certificates of deposit                      |                                  |        
|                                                                 | NOW                                          |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Total deposits                               |                                  |        
|                                                                 | Borrowings                                   |                                  |        
|                                                                 | Manditorily reedeemable preferred securities |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 | Total interest-bearing liabilities           |                                  |        
|                                                                 |                                              |                                  |        
|Non-interest-bearing liabilities                                 |                                              |                                  | 15,266 
|Commercial checking                                              |                                              |                                  | 154,778
|Shareholders equity                                             |                                              |                                  | 149,515
|                                                                 |                                              |                                  |        
|                                                                 | Total liabilities and shareholders equity   |                                  | $      
|                                                                 |                                              |                                  |        
|Net interest income/ net interest rate spread                    |                                              |                                  |        
|                                                                 |                                              |                                  |        
|Net earning assets/ net interest rate margin                     |                                              | $                                | 262,980
|                                                                 |                                              |                                  |        
|Ratio of interest-earning assets to interest-bearing liabilities |                                              |                                  |        
|                                                                 |                                              |                                  |        
|                                                                 |                                              |                                  |        



|(1) | Other loans include passbook, overdraft, credit cards, checkcard reserve and student loans.                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(2) | Investment securities include securities available for sale, securities held to maturity and Federal Home Loan Bank of New York stock.

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|                                                                 |                                              | Nine Months Ended September 30, |        
|---------------------------------------------------------------- | -------------------------------------------- | ------------------------------- | -------
|                                                                 |                                              |                                 |        
|                                                                 |                                              | 2002                            |        
|                                                                 |                                              |                                 |        
|(Dollars in Thousands)                                           |                                              | Average Balance                 |        
|                                                                 |                                              |                                 |        
|Interest-earning assets:                                         |                                              |                                 |        
|                                                                 | Commercial loans                             |                                 | $      
|                                                                 | Consumer loans:                              |                                 |        
|                                                                 | Personal-direct                              |                                 |        
|                                                                 | Personal-indirect                            |                                 |        
|                                                                 | Other (1)                                    |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Total consumer loans                         |                                 |        
|                                                                 | Real estate loans:                           |                                 |        
|                                                                 | Residential-fixed                            |                                 |        
|                                                                 | Commercial-fixed                             |                                 |        
|                                                                 | Residential-adjustable                       |                                 |        
|                                                                 | Commercial-adjustable                        |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Total real estate loans                      |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Investment securities (2)                    |                                 |        
|                                                                 | Loans held for sale                          |                                 |        
|                                                                 | Federal funds sold                           |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Total  interest-earning assets               |                                 |        
|                                                                 |                                              |                                 |        
|Allowance for loan losses                                        |                                              |                                 | (57,112
|Non-interest-earning assets                                      |                                              |                                 | 107,963
|                                                                 |                                              |                                 |        
|                                                                 | Total assets                                 |                                 | $      
|                                                                 |                                              |                                 |        
|Interest-bearing liabilities:                                    |                                              |                                 |        
|                                                                 | Deposits:                                    |                                 |        
|                                                                 | Savings                                      |                                 | $      
|                                                                 | Money market                                 |                                 |        
|                                                                 | Certificates of deposit                      |                                 |        
|                                                                 | NOW                                          |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Total deposits                               |                                 |        
|                                                                 | Borrowings                                   |                                 |        
|                                                                 | Manditorily reedeemable preferred securities |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 | Total interest-bearing liabilities           |                                 |        
|                                                                 |                                              |                                 |        
|Non-interest-bearing liabilities                                 |                                              |                                 | 16,321 
|Commercial checking                                              |                                              |                                 | 148,331
|Shareholders equity                                             |                                              |                                 | 155,641
|                                                                 |                                              |                                 |        
|                                                                 | Total liabilities and shareholders equity   |                                 | $      
|                                                                 |                                              |                                 |        
|Net interest income/ net interest rate spread                    |                                              |                                 |        
|                                                                 |                                              |                                 |        
|Net earning assets/ net interest rate margin                     |                                              |                                 |        
|                                                                 |                                              |                                 |        
|Ratio of interest-earning assets to interest-bearing liabilities |                                              |                                 |        
|                                                                 |                                              |                                 |        
|                                                                 |                                              |                                 |        



|(1) | Other loans include passbook, overdraft, credit cards, checkcard reserve and student loans. The Bank sold its credit card portfolio in March 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Investment securities include securities available for sale, securities held to maturity and Federal Home Loan Bank of New York stock.            

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Item 2 - continued

The following table presents changes in interest income and interest expense attributable to (i) changes in
volume (change in volume multiplied by old rate), and (ii) changes in rate (change in rate multiplied by old volume).  The net change attributable to the combined impact of volume and rate has been allocated proportionately to the change due to
volume and the change due to rate.

|                                                  |                                                            | Three Months Ended September 30, 2002 Compared to 2001 Increase (Decrease) |   | Nine Months Ended September 30, 2002 Compared to 2001 Increase (Decrease) |  
|------------------------------------------------- | ---------------------------------------------------------- | -------------------------------------------------------------------------- | - | ------------------------------------------------------------------------- | -
|                                                  |                                                            |                                                                            |   |                                                                           |  
|(Dollars in Thousands)                            |                                                            | Volume                                                                     |   | Rate                                                                      |  
|                                                  |                                                            |                                                                            |   |                                                                           |  
|Interest income on interest-earning assets:       |                                                            |                                                                            |   |                                                                           |  
|                                                  | Commercial loans                                           |                                                                            | $ | (4,315                                                                    | )
|                                                  | Consumer loans                                             |                                                                            |   | (921                                                                      | )
|                                                  | Real estate loans                                          |                                                                            |   | (16                                                                       | )
|                                                  | Investment securities                                      |                                                                            |   | 8,118                                                                     |  
|                                                  | Other interest-earning assets                              |                                                                            |   | (444                                                                      | )
|                                                  |                                                            |                                                                            |   |                                                                           |  
|                                                  | Total                                                      |                                                                            | $ | 2,422                                                                     |  
|                                                  |                                                            |                                                                            |   |                                                                           |  
|Interest expense on interest-bearing liabilities: |                                                            |                                                                            |   |                                                                           |  
|                                                  | Deposits                                                   |                                                                            | $ | (1,333                                                                    | )
|                                                  | Borrowings and mandatorily redeemable preferred securities |                                                                            |   | 3,216                                                                     |  
|                                                  |                                                            |                                                                            |   |                                                                           |  
|                                                  | Total                                                      |                                                                            |   | 1,883                                                                     |  
|                                                  |                                                            |                                                                            |   |                                                                           |  
|                                                  | Net interest income                                        |                                                                            | $ | 539                                                                       |  
|                                                  |                                                            |                                                                            |   |                                                                           |  
|                                                  |                                                            |                                                                            |   |                                                                           |  

Interest Income

12





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Item 2 - continued

Interest
Expense

13



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Item 2 - Continued

Net Interest Income

Net interest income declined to $18.8 million
from $20.4 million for the three months ended September 30, 2002 and 2001, respectively.  Net interest income also declined to $59.0 million from $61.4 million for the nine months ended September 30, 2002 and 2001, respectively.  Such
declines reflect the significant and rapid decline in general interest rates discussed above, as well as the impact of the Banks current shift from loans to lower yielding investments due to the flattening yield curve and accelerated
prepayments on mortgage loans and mortgage-backed securities.  In the future, additional pressure is expected based on the prospective difficulty in reducing core funding costs.The Banks net interest margin has decreased 16 basis points to 3.80% for the third quarter of 2002 compared to the margin of 3.96% for the third quarter of 2001; however, the margin has
increased 13 basis points to 3.95% for the nine months ended September 30, 2002 compared to the margin of 3.82% for the nine months ended September 30, 2001.  The improvement for the nine-month period was attributable to the Banks ability
to lower its cost of funds more rapidly than asset yields declined.

Provision for Loan Losses

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Item 2 - Continued

Management maintains the allowance for loan losses at an amount sufficient to
cover the level of estimated losses inherent in the loan portfolio.  The inherent risk of loss in the loan portfolio is estimated based on a quarterly review of the loan portfolio and its specific problem loans, historic loss experience and
other factors that management believes are pertinent to the determination of the allowance.  These factors include the risks inherent in specific types of loans, an analysis of the collateral associated with certain loans and the economic
conditions impacting the loan portfolio.The Bank continues its progress in reducing delinquent loans, with loans 30-89 days past due at September 30, 2002 totaling $8.1
million, or 0.62% of total gross loans outstanding, compared to $18.1 million, or 1.22% of total gross loans outstanding at December 31, 2001 and $27.9 million, or 1.81% of total gross loans outstanding at September 30, 2001.Third quarter 2002 gross loan charge-offs were $3.7 million, compared to second quarter 2002 gross loan charge-offs of $24.6 million and $3.8 million in the third quarter of 2001.  Recoveries
were $1.9 million for the third quarter of 2002, as compared to $2.1 million in the second quarter of 2002 and $961,000 in the third quarter of 2001. While net charge-offs are significantly down from the $22.5 million in the second quarter of
2002, given the continued high level of non-performing loans, management expects that net charge-offs for the next few quarters could be higher than net charge-offs in the third quarter of 2002. The coverage of the allowance for loan losses to
non-performing loans was 114.42% at September 30, 2002, 96.96% at December 31, 2001 and 129.37% at September 30, 2001.  Based upon managements evaluation of the non-performing loans, and in consideration of partial charge-offs taken, as
well as the restructuring of certain loan agreements designed to maximize the Banks collections, management believes the September 30, 2002 coverage ratio of 114.42% is reasonable.  The allowance for loan losses and net charge-offs are
shown within this report in a table called Allowance for Loan Losses. At September 30, 2002, management believes that the allowance for loan losses is adequate.

Non-interest
Income

Non-interest income decreased to $3.1 million for the quarter ended September 30, 2002 from $3.5 million for the quarter ended September 30, 2001, and
increased to $11.1 million for the nine months ended September 30, 2002 from $10.1 million for the nine months ended September 30, 2001.  Trust fees for the comparative quarter and nine-month periods were down in 2002 in part due to adverse
market conditions; however, the third quarter of 2001 also included $286,000 associated with a change to recognize such fee income using the accrual method instead of the cash basis.  The primary factor impacting the overall increase in
non-interest income for the comparative nine-month periods was the $1.8 million net gain from the sale of the credit card portfolio in March 2002.  An increase of $198,000 from fees and commissions earned from brokerage services also
contributed to the overall increase in 2002.  The primary factors to partially offset the overall increase for the nine-month period were decreases of $358,000 in other charges, commissions and fees and $299,000 from the sale of a branch office
in 2001.

Gains On Sale of Securities

Gains on sale of securities were $95,000 for the third quarter of 2002 and
$270,000 for the nine months ended September 30, 2002 compared to gains of $64,000 for the same quarter of 2001 and $150,000 for the nine months ended September 30, 2001.  The Companys securities available for sale portfolio is primarily
used to maintain its liquidity position and as collateral for borrowings. From time to time, securities are sold when deemed prudent by management to adjust the interest rate sensitivity of the Companys balance sheet.

Operating Expense

Operating expense increased to $11.2 million for the quarter ended September 30, 2002 compared to $10.9 million
for the quarter ended September 30, 2001, with a similar increase to $36.6 million for the nine months ended September 30, 2002 from $32.5 million for the nine months ended September 30, 2001.  For the comparative third quarters, the primary
factor impacting operating expense was the $437,000 increase in salaries, pension and other employee benefits. Total salary increases of approximately $267,000 were associated with previously announced plans to increase staffing in certain areas of
the Bank.  Promotion and merit raises effective at the beginning of 2002 were the principal factor associated with the remainder of the increase.Benefit costs
rose $171,000 for the third quarter of 2002 compared to the same quarter of 2001, as health insurance and pension costs each had significant increases.  The current trend for increased health insurance and pension costs is expected to continue
into 2003.  Though the Companys significant pension contribution in September 2002, discussed earlier, should provide some reduction to future costs, the net periodic pension cost charged to operations is expected to increase
substantially in future years.  For 2003, the projected pension expense may increase as much as $500,000 based upon preliminary actuarial evaluations.

15



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##### Table of Contents

Item 2 - Continued

Other significant increases in operating expense for the comparative third
quarters related to professional fees, as well as advertising and promotion fees.  Professional fees, which increased $94,000, were associated with the level of problematic credits and negotiations related to certain credit recoveries. 
Advertising and promotion fees increased by $42,000 for the comparative quarters, and were associated with extended media promotions for specific loan products and checking and other deposit accounts. For the nine-month period comparisons, a similar trend with increases of $2.4 million in salaries, pensions and other employee benefits was the most significant factor.  Other increases
include $515,000 in professional fees, $406,000 associated with repossessed or foreclosed property and $401,000 in advertising and promotion. Professional fees on a comparative year-to-date basis were higher due to higher second quarter fees
incurred in connection with required expanded asset quality reviews.  In addition, legal costs associated with problematic credits continued at high levels and were about $184,000 higher in the second and third quarters of 2002.  Most of
the expense increase associated with repossessed or foreclosed property is attributable to write-downs or charge-offs of such assets in the second quarter as their fair value declined during the period.  Also, one-time expenses related to the
conversion to Proof of Deposit (POD) processing were $387,000 in the nine-month period of 2002. The POD system will enable the Bank to realize operational benefits in future quarters that include efficiencies at the teller
line, consistency in float management and a more efficient, centralized fee monitoring and assessment system. The Banks efficiency ratio for the third quarter was
51.07%, compared to 45.64% for the third quarter of 2001, and 53.03% for the nine months ended September 30, 2002, compared to 45.66% for the nine months ended September 30, 2001.  The increases in the efficiency ratios were due to the
reductions in net interest income, as well as the increases in costs as detailed above. Income tax expense (benefit) reflects a substantial decrease in the projected
annual effective tax rate to 25.1% for the year-to-date September 30, 2002 compared to 38.3% for the same period in the previous year.  The decrease in the effective tax rate is primarily attributed to comparable levels of tax exempt income in
both periods, as well as the benefit of significant new state income tax credits recognized for 2002 on substantially lowest levels of projected annual pre-tax income.

Non-performing
Assets

If a borrower fails to make a scheduled payment on a loan, the Company attempts to cure the deficiency by contacting the borrower and seeking payment. 
Contacts are generally made within five business days after the expiration of the payment grace period set forth in the loan contract for residential mortgage and consumer loans. Commercial customers are contacted within five days after a payment
falls past due. The Company has established a Special Assets unit that performs all collection activity for retail loans. Commercial loans are transferred to this unit as soon as it is determined that loan payments may not continue on a timely
basis.  While the Company generally prefers to work with borrowers to resolve such problems, the Company does initiate foreclosure or repossession proceedings or pursues other legal collection procedures, as necessary, to minimize any potential
loss.  Once the Company takes legal title, the property is classified as other real estate owned and repossessed assets on the Consolidated Statement of Condition. Loans are placed on a non-accrual status when, in the judgment of management, the probability of collection of principal or interest is deemed to be insufficient to warrant further accrual. 
When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income.  Other than with respect to consumer loans, the Company does not accrue interest on loans greater than 90 days or more past
due for the payment of interest unless the value of the collateral and active collection efforts ensure full recovery.

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##### Table of Contents

Item 2 - Continued

The following table sets forth information regarding non-performing
assets:

NON-PERFORMING ASSETS (unaudited)

|(Dollars in Thousands)                                                     |                                  | September 30, 2002 |       | June 30, 2002 |  | March 31, 2002 |        | December 31, 2001 |       | September 30, 2001 | 
|-------------------------------------------------------------------------- | -------------------------------- | ------------------ | ----- | ------------- |  | -------------- | ------ | ----------------- | ----- | ------------------ | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|Non-accrual loans:                                                         |                                  |                    |       |               |  |                |        |                   |       |                    | 
|                                                                           | Commercial loans                 |                    | $     | 40,447        |  | $              | 39,420 |                   | $     | 31,813             | 
|                                                                           | Residential real estate loans    |                    |       | 755           |  |                | 722    |                   |       | 842                | 
|                                                                           | Commercial real estate loans     |                    |       | 4,080         |  |                | 1,219  |                   |       | 4,342              | 
|                                                                           | Consumer loans                   |                    |       | 365           |  |                | 438    |                   |       |                    | 
|                                                                           | Troubled debt restructured loans |                    |       | 6,219         |  |                | 11,915 |                   |       | 19,402             | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|                                                                           | Total non-accrual loans          |                    |       | 51,866        |  |                | 53,714 |                   |       | 56,399             | 
|Accruing loans with principal or interest payments 90 days or more overdue |                                  |                    | 357   |               |  | 374            |        |                   | 736   |                    | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|                                                                           | Total non-performing loans       |                    |       | 52,223        |  |                | 54,088 |                   |       | 57,135             | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|Other real estate owned and repossessed assets                             |                                  |                    | 4,980 |               |  | 4,872          |        |                   | 1,972 |                    | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|                                                                           | Total non-performing assets      |                    | $     | 57,203        |  | $              | 58,960 |                   | $     | 59,107             | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|Total non-performing loans to total loans                                  |                                  |                    | 3.98  | %             |  | 4.10           | %      |                   | 4.15  | %                  | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|Total non-performing assets to total assets                                |                                  |                    | 2.77  | %             |  | 2.86           | %      |                   | 2.87  | %                  | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 
|                                                                           |                                  |                    |       |               |  |                |        |                   |       |                    | 

In addition to the non-accruing troubled debt restructured loans shown in the above schedule, the Bank also had accruing loans classified as
troubled debt restructured loans totaling $5.1 million, $4.9 million, $7.6 million, $8.8 million, and $5.3 million at September 30, 2002, June 30, 2002, March 31, 2002, December 31, 2001, and September 30, 2001, respectively.  The Bank does not
consider these loans to be non-performing. Total non-performing assets were $57.2 million or 2.77% of total assets at September 30, 2002, compared to $62.7 million
or 3.04% of total assets at December 31, 2001.  Non-performing loans were $52.2 million or 3.98% of total gross loans outstanding at September 30, 2002, compared to $60.7 million or 4.09% of total gross loans outstanding at December 31,
2001.  Non-performing loans decreased $8.5 million or 13.9% at September 30, 2002, as compared to December 31, 2001, primarily as a result of gross charge-offs totaling $40.3 million for the nine months ended September 30, 2002, offset by
additions to non-performing loans. Non-performing residential real estate loans totaled $755,000 for 13 loans at September 30, 2001.  Non-performing residential real
estate loans totaled $882,000 at December 31, 2001. At September 30, 2002, non-performing commercial real estate loans totaled $4.1 million and ranged from $38,000 to $2.2
million for 8 loans. At December 31, 2001, non-performing commercial real estate loans were $4.2 million consisting primarily of loans from two relationships of $2.1 million and $1.2 million, respectively, with two customers in the Western New York
region. Commercial loans that have not been restructured in a troubled debt restructuring and are in non-accrual status totaled $40.4 million at September 30, 2002, and
consisted of 106 loans ranging in size from less than $1,000 to $3.6 million. Non-accrual commercial loans that have not been restructured in a troubled debt restructuring at December 31, 2001 totaled $42.4 million and consisted of 157 individual
loans ranging in size from $1,000 to $4.5 million.  Charge-offs or write-downs of commercial and industrial loans amounted to $2.3 million during the quarter ended September 30, 2002, and reduced non-performing loans.  New loans of
approximately $11.4 million were added to non-accrual to bring the total of commercial and industrial loans in non-accruing status to $40.4 million at September 30, 2002.  The three largest relationships entering non-accrual during the quarter
totaled $8.3 million, with the largest single relationship totaling $4.6 million. Restructured loans which are also in the non-accrual status (primarily commercial-related
loans) at September 30, 2002 decreased to $6.2 million and consisted of 7 individual loans, ranging in size from $44,000 to $3.7 million.  The largest of these loans was reduced by $5.4 million during the quarter ended September 30, 2002 as a
result of paydowns.  At December 31, 2001, restructured loans which were also in the non-accrual status totaled $12.3 million and consisted of 14 individual loans ranging in size from $329,000 to $6.3 million. The Company had $357,000 at September 30, 2002 of consumer and small business loans 90 days or more past due which were accruing interest, as compared to $879,000 at December 31, 2001.
At September 30, 2002, loans considered to be impaired in accordance with SFAS No. 114 totaled $55.8 million, of which $12.6 million related to loans with no allocated allowance
because the loans have been partially written down through charge-offs.  The $45.1 million remainder related to loans with a corresponding allocated allowance of $14.0 million.  The Company recognized no interest on impaired loans during
the portion of the year they were impaired.

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Item 2 - Continued

As noted above, over the last two years the Bank has focused on establishing
consistent and conservative underwriting standards, as well as identifying and managing non-performing assets.  As part of this process, the Bank has also expanded the definition of loans identified as potential problem loans to include all
accruing loans classified as substandard on which to focus management efforts to address problems.  By identifying these loans under the Banks current rating system, management is focused on addressing problems associated with loans
before they might become non-performing.  Under that expanded scope, the Bank has identified approximately $78.8 million in potential problem loans at September 30, 2002, as compared to $91.1 million at June 30, 2002.  Potential problem
loans are loans that are currently performing, but where known information about possible credit problems of the related borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment
terms and which may result in disclosure of such loans as non-performing at some time in the future.  At September 30, 2002, potential problem loans primarily consisted of commercial and industrial loans. Other real estate owned and repossessed assets totaled $5.0 million at September 30, 2002 compared to $2.0 million at December 31, 2001.  The largest factor in the increase was the addition
of two commercial properties totalling $4.0 million.

The following table summarizes activity in the Companys allowance for loan losses during the periods
indicated:

|                                 |                                              | Quarters Ended     |          
|-------------------------------- | -------------------------------------------- | ------------------ | ---------
|                                 |                                              |                    |          
|(Dollars in Thousands)           |                                              | September 30, 2002 |          
|                                 |                                              |                    |          
|Average gross loans outstanding  |                                              | $                  | 1,307,398
|                                 |                                              |                    |          
|Allowance at beginning of period |                                              | $                  | 56,988   
|                                 |                                              |                    |          
|Charge-offs:                     |                                              |                    |          
|                                 | Commercial loans                             |                    |          
|                                 | Consumer loans                               |                    |          
|                                 | Residential real estate loans                |                    |          
|                                 | Commercial real estate loans                 |                    |          
|                                 |                                              |                    |          
|                                 | Total loan charge-offs                       |                    |          
|Recoveries                       |                                              |                    | 1,926    
|                                 |                                              |                    |          
|Net charge-offs                  |                                              |                    | 1,734    
|                                 |                                              |                    |          
|Provision for loan losses        |                                              |                    | 4,500    
|                                 |                                              |                    |          
|Allowance at end of period       |                                              | $                  | 59,754   
|                                 |                                              |                    |          
|Ratio of net charge-offs to:     |                                              |                    |          
|                                 | Average gross loans outstanding (annualized) |                    |          
|Ratio of allowance to:           |                                              |                    |          
|                                 | Non-performing loans                         |                    |          
|                                 | Period-end loans outstanding                 |                    |          
|                                 |                                              |                    |          

Net charge-offs were $1.7 million and $2.8 million for the third quarters of 2002 and 2001, respectively.  The action taken during the second
quarter of 2002 for both charge-offs and the provision for loan loss was necessary due to the further deterioration of collateral and repayment ability for certain borrowers.  As reported financial results of these borrowers were received,
write-downs were taken to levels considered appropriate for the financial results received. Consumer loan charge-offs increased from $432,000 in the second quarter of 2002
to $1.4 million in the third quarter of 2002.  In the second quarter 2002, a change in procedure for certain real estate secured loans (home equity loans) was instituted for such loans where sufficient equity exists; however, the borrower
requires additional time for resolution.  Rather than charge these loans off, the loans will be treated as non-accrual until disposition.  In addition, aggressive writedowns of new consumer loan repossessions, as well as slower moving
inventories, caused charge-offs in this area to be higher in the first quarter compared to the second quarter.  Third quarter levels reflect more normal levels of activity.  The strength or weakness of the economy within our geographic
lending area also influences the level of consumer loan charge-offs.  Additions of higher-quality new loans to the portfolio are expected to lower future charge-off levels.  New

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##### Table of Contents

Item 2 - Continued

consumer loans to our portfolio have an average FICO score of approximately 750.  Loans charged-off
during the quarter, that had been FICO scored, averaged approximately 650. Commercial loan charge-offs have decreased substantially to $2.3 million from $23.1
million in the second quarter. While commercial loan net charge-offs are significantly down in the third quarter of 2002 as compared to the second quarter of 2002, given the continued level of non-performing loans, management expects that net
charge-offs in the next few quarters could be higher than net charge-offs in the third quarter of 2002. Management continually reviews the adequacy of the allowance for
loan losses.  At September 30, 2002, the allowance was considered adequate by management.

Sources of Funds

Funding for the Companys assets is derived primarily from demand and time deposits as well as long- and short-term borrowings.  The competition for core deposits continues to be very
strong in the market area and remains a focus of the Banks effort. The average balance of all interest-bearing liabilities decreased to $1,717.2 million for the three-month period ended September 30, 2002 from $1,789.9 million for the
three-month period ended September 30, 2001.  The most significant change in interest-bearing liabilities for the quarter ended September 30, 2002 compared to the quarter ended September 30, 2001, was a decrease in the average balance of
certificates of deposit accounts, which decreased to $673.7 million for the third quarter of 2002 from $848.6 million for the third quarter of 2001.  In the past, to sustain new loan activities, the Bank looked to other areas to augment retail
deposits as a source of funds.  In conjunction with the Banks planned reduction in its loan portfolio, the Company was able to decrease higher-cost funds.  Certificates of deposit from the moneydesk decreased to an average balance of
$19.8 million in the third quarter of 2002 from a $34.8 million average balance in the same quarter in 2001. The average balance of brokered deposits decreased to $62.4 million for the third quarter of 2002 from $206.0 million for the third quarter
of 2001.  With the recent declines in interest rates, the overall cost of funds for all certificates of deposits decreased to 3.81% from 5.33% for the second quarter of 2002 to the same period in 2001.  Total borrowings increased to an
average balance of $330.6 million from $274.5 million for the quarter ended September 30, 2002 compared to the quarter ended September 30, 2001 as borrowings provided more favorable pricing in many instances.  As there was a decrease in the
average rate paid on borrowings to 3.95% for the third quarter 2002 from 5.02% for the same quarter in 2001, this more than offset the increased average balance for the quarter ended September 30, 2002, as interest expense on these borrowings
decreased to $3.3 million for the third quarter of 2002 from $3.4 million for the third quarter of 2001.

Liquidity and Capital Resources

A fundamental objective of the Company is to manage its liquidity effectively.  Prudent liquidity management ensures that the Company can meet all of its contractual obligations, meet its
customers loan demands, fund all of its operations and minimize the effects of interest rate fluctuation on earnings.  Management monitors current and projected liquidity needs and responds by adjusting levels of liquidity as
needed.  A detailed contingency plan exists to promptly provide additional levels of liquidity as needed.  With the reduction of assets during 2001 and into 2002, the pressure on liquidity has dropped accordingly. The Companys primary sources of funds consist of deposits, amortization and prepayments of outstanding loans and mortgage-backed securities, bond maturities, and such other sources as long-
and short-term borrowings, and sales of securities available for sale.  At September 30, 2002, the total of approved loan commitments amounted to $137.8 million.  Long-term borrowings of $160.9 million are scheduled to mature in the years
2003 through 2019.  Retail and brokered certificates of deposit, which are scheduled to mature during the next 12 months, totaled $457.2 million.  Management expects that a substantial portion of these maturing certificates will remain on
deposit with the Bank. The Companys primary source of funds for ongoing operating expenses, shareholder dividends, debt service payments and treasury stock
repurchases is dividends from BSB Bank and Trust.  The ability of the Bank to pay dividends is subject to various regulatory limitations.  Without specific regulatory approval, the amount of dividends that the Bank may pay is limited to
the current years net retained earnings. Due to the net loss incurred in the second quarter of 2002, coupled with dividends previously paid, the Bank has exceeded its dividend limitations for 2002. However, in October 2002, the Bank received
regulatory approval for and paid a special dividend of $30 million to the Company. As a result of this special divided, and based on the regulatory limitations described above, the Company does not anticipate receiving dividends from the Bank until
2004. Management believes current levels of cash are adequate to meet the Company's ordinary course obligations and to pay customary dividends on the Company's stock until the Bank is able to pay dividends once again, without regulatory approval.
However, extraordinary events, including stock and capital trust security repurchases, may require the Company to seek additional sources of capital if the Bank is unable to pay dividends to the Company. At September 30, 2002, the Banks Tier I leverage ratio, as defined in regulatory guidelines, was 8.64%, down from 8.74% at December 31, 2001, and exceeds the current requirements for the
Bank.  At September 30, 2002, the Banks total capital-to-risk-weighted assets ratio, calculated under the Federal Reserve Boards risk-based capital requirements, was 13.89%, up from 12.88% at December 31, 2001, and also exceeds the
current requirements for the Bank.  The

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Item 2 - Continued

Company continues to work to improve its risk profile and strengthen its capital ratios as is evidenced by
the previously mentioned capital ratios. The Companys book value per common share was $15.78 at September 30, 2002 compared to $16.19 at December 31, 2001.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with accounting principles generally accepted in the United States which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of
money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature.  As
a result, interest rates have a more significant impact on a financial institutions performance than do the effects of general levels of inflation.  Interest rates do not necessarily move in the same direction or in the same magnitude as
the price of goods and services.

Forward-Looking Statements

Certain statements in Managements Discussion
and Analysis of Financial Condition and Results of Operations are forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended.  Actual results, performance, or developments may differ materially from those
expressed or implied by such forward-looking statements as a result of market uncertainties and other factors. The financial services market generally, and the market for the Companys products and services specifically, is characterized by a
high degree of competition and rapidly changing local, national, and global market, financial and economic conditions.  Such developments, as well as unforeseen developments in the financial services industry, could have an adverse impact on
the Companys financial position and results of operations.

Market Prices and Related Shareholder Matters

The stock of the Company is listed on The Nasdaq Stock Markets National Market System under the symbol BSBN. As of September 30, 2002, the Company had 2,226 shareholders of record and
9,585,941shares of common stock outstanding.  The number of shareholders does not reflect persons or entities who hold their stock in nominee or street name through various brokerage firms. The following table sets forth the market price information as reported by The Nasdaq Stock Market for the common stock.

|               |  | Price Range |       | Cash Dividends |  
|-------------- |  | ----------- | ----- | -------------- | -
|               |  |             |       |                |  
|               |  | High        |       | Low            |  
|               |  |             |       |                |  
|2001           |  |             |       |                |  
|First Quarter  |  | $           | 20.25 |                | $
|Second Quarter |  | $           | 23.36 |                | $
|Third Quarter  |  | $           | 27.00 |                | $
|Fourth Quarter |  | $           | 27.40 |                | $
|2002           |  |             |       |                |  
|First Quarter  |  | $           | 30.24 |                | $
|Second Quarter |  | $           | 32.80 |                | $
|Third Quarter  |  | $           | 26.67 |                | $

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Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys consolidated results of
operations depend to a large extent on the level of its net interest income, which is the difference between interest income from interest-earnings assets (such as loans and investments) and interest expense on interest-bearing liabilities (such as
deposits and borrowings).  If interest rate fluctuations cause the Companys cost of funds to increase faster than the yield on its interest-bearing assets, net interest income will decrease.  In addition, the market values of most of
its financial assets are sensitive to fluctuations in market interest rates.  The Company measures and manages its interest rate risk by focusing on the Companys gap, which is the measure of the mismatch between the dollar
amount of the Companys interest-earning assets and interest-bearing liabilities which mature or reprice within certain time frames. Based on the Companys latest
analysis of asset/liability mix at September 30, 2002, managements simulation analysis of the effects of changing interest rates on a static balance sheet projected that an immediate 100 basis point increase in interest rates over the 12
months ended September 30, 2003 would decrease net interest income for that period by 1.01% or less and that a similar decrease in interest rates would decrease net interest income by 1.58% or less.  The test is based on a number of assumptions
and there can be no assurance that if interest rates did move by two percent that the Companys results of operations would be impacted as estimated.  These estimates and assumptions assume that management takes no action to mitigate any
negative effects from changing interest rates.  Although the Company uses various monitors of interest rate risk, the Company is unable to predict future fluctuations in interest rates or the specific impact thereof. Changes in interest rates can also affect the amount of loans the Company originates, as well as the value of its loans and other interest-earning assets and its ability to realize gains on the
sale of such assets and liabilities.  Prevailing interest rates also affect the extent to which borrowers prepay loans owned by the Company.  When interest rates increase, borrowers are less likely to prepay their loans, and when interest
rates decrease, borrowers are more likely to prepay loans.  Funds generated by prepayment might be invested at less favorable interest rates.  Prepayments may adversely affect the value of mortgage loans, the levels of such assets that are
retained in the Companys portfolio, net interest income, and loan servicing income.  Similarly, prepayments on mortgage-backed securities can adversely affect the value of such securities and the interest income generated by them.
Increases in interest rates might cause depositors to shift funds from accounts that have a comparatively lower cost (such as regular savings accounts) to accounts with a higher
cost (such as certificates of deposits).  If the cost of deposits increases at a rate greater than yields on interest-earning assets increase, the interest rate spread will be negatively affected.  Changes in the asset and liability mix
also affect the Companys interest rate risk. The Company faces substantial competition for deposits and loans throughout its market area both from local financial
institutions and from out-of-state financial institutions that either solicit deposits or maintain loan production offices in the Companys market area.  The Company competes for deposits and loans primarily with other financial service
providers such as savings institutions, commercial banks, credit unions, money market funds, and other investment alternatives.  The Company believes that its ability to compete effectively depends largely on its ability to compete with regard
to interest rates, as well as service fees, personalized services, quality and range of financial products and services offered, convenience of office hours and locations, and automated services.

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Item 4.

CONTROLS AND PROCEDURES

(a)          The Companys management, including the Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) (the Exchange Act) as of a
date (the Evaluation Date) within 90 days prior to the filing date of this report.  Based upon that evaluation, the Companys management, including the Chief Executive Officer and Chief Financial Officer, concluded that, as of
the Evaluation Date, the Companys disclosure controls and procedures were effective in timely alerting them to any material information relating to the Company and its subsidiaries required to be included in the Companys Exchange Act
filings.

(b)          There were no significant changes made in the Companys internal controls or in other factors that  could
significantly affect these internal controls subsequent to the date of the evaluation performed by the Companys Chief Executive Officer and Chief Financial Officer.

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|PART II.
OTHER INFORMATION
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|Item 1 -                  
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PART II. OTHER INFORMATION



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.

BSB BANCORP, INC.

|      |                                                                     |    
|----- | ------------------------------------------------------------------- | ---
|      |                                                                     |    
|Date: | November 14, 2002                                                   | By:
|      |                                                                     |    
|      | HOWARD W. SHARP President and Chief Executive Officer               |    
|      |                                                                     |    
|      |                                                                     |    
|Date: | November 14, 2002                                                   | By:
|      |                                                                     |    
|      | REXFORD C. DECKER Senior Vice President and Chief Financial Officer |    

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CERTIFICATION

I, Howard W. Sharp, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of BSB Bancorp, Inc.

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrants other certifying
officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls;
and

6.  The registrants other certifying officers and I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

|Date:  November 14, 2002 |                                                      
|------------------------ | -----------------------------------------------------
|                         |                                                      
|By:                      | /S/ HOWARD W. SHARP                                  
|                         |                                                      
|                         | Howard W. Sharp President and Chief Executive Officer

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CERTIFICATION

I, Rexford C. Decker, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of BSB Bancorp, Inc.

2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.  The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)  designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.  The registrants other certifying
officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):

a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls;
and

6.  The registrants other certifying officers and I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

|Date:  November 14, 2002 |                                          
|------------------------ | -----------------------------------------
|                         |                                          
|By:                      | /s/ REXFORD C. DECKER                    
|                         |                                          
|                         | Rexford C. Decker Chief Financial Officer

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##### Table of Contents

Correspondence:

Written Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002

The undersigned, the Chief Executive Officer of BSB Bancorp, Inc. (the Company), hereby certifies that to his knowledge on the date hereof:

|(a) | The Quarterly Report on Form 10-Q of the Company for the Quarter Ended September 30, 2002 filed on the date hereof with the Securities and Exchange Commission (the
Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                         
|(b) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.                                                                                                                                        



| | /s/ HOWARD W. SHARP                                       | 
| | --------------------------------------------------------- | 
| |                                                           | 
| | Howard W. Sharp Chief Executive Officer November 14, 2002 | 

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---

##### Table of Contents

Correspondence:

Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002

The undersigned, the Chief Financial Officer of BSB Bancorp, Inc. (the Company), hereby certifies that to his knowledge on the date hereof:

|(c) | The Quarterly Report on Form 10-Q of the Company for the Quarter Ended September 30, 2002 filed on the date hereof with the Securities and Exchange Commission (the
Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                         
|(d) | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.                                                                                                                                        



| | /s/ REXFORD C. DECKER                                       | 
| | ----------------------------------------------------------- | 
| |                                                             | 
| | Rexford C. Decker Chief Financial Officer November 14, 2002 | 

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