EXHIBIT 99.1



FOR IMMEDIATE RELEASE                                       June 25, 2003

Contact:    Amy L. Timmerman, AVP, Investor Relations - 781-221-6396
            John A. Simas, EVP and CFO - 781-221-6307
            FAX: 781 221-7594

BOSTONFED BANCORP, INC. ANNOUNCES SETTLEMENT OF REIT TAX DISPUTE WITH
MASSACHUSETTS DOR

Burlington,  MA - BostonFed  Bancorp,  Inc.  (AMEX - BFD) (the  "Company"),  the
parent of Boston Federal Savings Bank, a federally-chartered stock savings bank,
and Broadway National Bank, a  national chartered commercial bank  (collectively
the "Banks"), announced  today that the Banks  entered into a settlement  paying
$1.9 million  (approximately  $1.2 million,  net of taxes) to the  Massachusetts
Department of Revenue ("DOR"),  representing approximately 50% of a disputed tax
liability  for which the Banks  previously  accrued a liability  of $4.6 million
($3.0 million,  net of taxes). As a result of this settlement,  the Company will
recognize income, net of taxes of approximately  $1.8 million,  or approximately
$.39 per diluted share, in the second quarter of 2003,  representing  the unused
portion of the accrual.

The dispute involved the DOR's  disallowance of the deduction taken by the Banks
for dividends received from their REIT subsidiaries for the 1999, 2000, 2001 and
2002  tax  years.  In March  2003,  legislation  was  enacted  in  Massachusetts
expressly  disallowing  the deduction for dividends  received from a real estate
investment  trust  subsidiary,  retroactive  to tax  years  ending  on or  after
December 31, 1999. As a result of the enactment of this legislation, the Company
ceased  recording  the tax  benefits  associated  with  the  dividends  received
deduction  effective  for the 2003 tax year  and  established  the $3.0  million
accrual,  representing  an  estimate  of the  additional  state  tax  liability,
including interest (net of any federal tax deduction  associated with such taxes
and interest),  relating to the deduction for dividends  received from the REITs
for the 1999 through 2002 fiscal years.

This press release may contain  statements that are not historical facts and are
considered   forward-looking  statements  within  the  meaning  of  the  federal
securities  laws.  These  statements  are based on  management's  beliefs and on
assumptions made by, and information  currently  available to,  management.  You
should not rely on  forward-looking  statements  because  the  Company's  actual
results may differ  materially  from those  indicated  by these  forward-looking
statements as a result of a number of important factors.  These factors include,
but are not limited to, changes in  legislation,  prevailing  interest rates and
changes  in  economic   conditions.   The  Company   cautions  you  that,  while
forward-looking statements reflect its good faith beliefs when the Company makes
them,  they are not guarantees of future  performance and are impacted by actual
events when they occur after the Company makes such statements.