FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1999
__________________________
Commission File Number 1-13936
__________________________
BOSTONFED BANCORP INC.
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 52-1940834
________________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17 New England Executive Park, Burlington, Massachusetts 01803
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(781) 273-0300
________________________________________________________________________________
(Registrant's telephone number, including area code)
Not Applicable
________________________________________________________________________________
(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 ( )
Number of shares of common stock, par value $.01 per share,
outstanding as of April 30, 1999: 5,036,371.
BOSTONFED BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
______________________________ ____
Item 1. Financial Statements:
Consolidated Balance Sheets as of
March 31, 1999 (unadudited) and December 31, 1998 2
Consolidated Statements of Operations for the Three
Months ended March 31, 1999 and 1998 (unaudited) 3
Consolidated Statement of Changes in Stockholders'
Equity for the Three Months ended
March 31, 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1999 and 1998 (unaudited) 5 - 6
Notes to Consolidated Financial Statements 7 - 8
Average Balances and Yield / Costs 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 16
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17 - 18
PART II _ OTHER INFORMATION
___________________________
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature Page 20
1
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
---------------------------
(Dollars in Thousands, Except Per Share Data)
March 31, December 31,
1999 1998
----------- --------------
Assets (Unaudited)
- ------------
Cash and cash equivalents $ 24,231 $ 37,201
Investment securities available for sale
(amortized cost of $55,010 and $48,837 at
March 31, 1999 and December 31, 1998
respectively) 54,888 49,137
Investment securities held to maturity (fair
value of $ 4,346 and $7,371 at March 31,
1999 and December 31, 1998, respectively) 4,304 7,302
Mortgage-backed securities available for sale
(amortized cost of $18,422 and $20,935 at
March 31, 1999 and December 31, 1998,
respectively) 18,424 21,029
Mortgage-backed securities held to maturity (fair
value of $18,779 and $23,333 at March 31,
1999 and December 31, 1998, respectively) 18,415 22,913
Mortgage loans held for sale 22,572 17,008
Loans, net of allowance for loan losses of $9,053
and $8,500 at March 31, 1999 and December 31,
1998, respectively 977,073 943,662
Accrued interest receivable 5,769 5,549
Stock in FHLB of Boston and Federal Reserve Bank 18,981 17,802
Premises and equipment 6,556 6,614
Real estate owned 0 47
Other assets 11,350 10,859
-------- --------
Total assets $1,162,563 $1,139,123
======== ========
Liabilities and Stockholders' Equity
- ---------------------------------------
Liabilities:
Deposit accounts $708,844 $707,144
Federal Home Loan Bank advances 360,159 337,500
Advance payments by borrowers for taxes
and insurance 3,729 3,405
Other liabilities 7,851 9,280
------- -------
Total liabilities 1,080,583 1,057,329
------- -------
Commitments and contingencies
Stockholders' equity;
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued -- -- -- --
Common stock, $0.01 par value; 17,000,000 shares
authorized; 6,589,617 shares issued (5,043,871 and
5,112,441 shares outstanding, respectively) 66 66
Additional paid-in capital 66,575 66,417
Retained earnings 45,749 44,256
Accumulated other comprehensive income (86) 312
Less Treasury Stock, (1,545,746 shares and
1,477,176 shares, respectively), at cost (27,316) (26,128)
Less unallocated ESOP shares (2,418) (2,418)
Less unearned Stock-Based Incentive Plan (590) (711)
-------- --------
Total stockholders' equity 81,980 81,794
-------- --------
Total liabilities and stockholders' equity $1,162,563 $1,139,123
======== ========
See accompanying condensed notes to consolidated financial statements.
2
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, except per share amount)
Three Months Ended
------------------
3/31/99 3/31/98
------------------
(Unaudited)
Interest income:
Loans $ 17,658 $ 15,849
Mortgage-backed securities 616 941
Investment securities 1,257 1,411
------- -------
Total interest income 19,531 18,201
------- -------
Interest expense:
Deposit accounts 6,275 5,694
Borrowed funds 5,088 4,303
------- -------
Total interest expense 11,363 9,997
------- -------
Net interest income 8,168 8,204
Provision for loan losses 430 403
------- -------
Net interest
income after provision 7,738 7,801
Non-interest income:
Loan processing and servicing
fees 161 144
Gain on sale of loans 764 655
Deposit service fees 409 409
Other 213 196
------- -------
Total non-interest income 1,547 1,404
------- -------
Non-interest expense:
Compensation and benefits 3,626 3,410
Occupancy and equipment 797 774
Federal deposit insurance
premiums 94 79
Real estate operations (21) (14)
Other 1,547 1,731
------- -------
Total non-interest expense 6,043 5,980
------- -------
Income before income taxes 3,242 3,225
Income tax expense 1,238 1,336
------- -------
Net income $ 2,004 $ 1,889
======= =======
Basic earnings per share $0.41 $0.37
Diluted earnings
per share $0.40 $0.35
Basic weighted average shares
outstanding 4,853,831 5,166,072
Common stock equivalents
due to dilutive effect
of stock options 190,890 261,588
Diluted total weighted average
shares outstanding 5,044,721 5,427,660
See accompanying condensed notes to consolidated financial statements.
3
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(In Thousands)
Three Months Ended March 31, 1999
(Unaudited)
Unearned
Accumulated Stock-
Additional other Unallocated Based Total
Common paid-in Retained Treasury Comprehensive ESOP Incentive stockholders'
stock capital earnings Stock income shares Plan equity
------ -------- --------- -------- ---------- ----------- ---------- ------------
Balance at December 31, 1998 $ 66 66,417 44,256 (26,128) 312 (2,418) (711) 81,794
Net income - - - - 2,004 - - - - - - - - 2,004
Change in net unrealized gain/(loss)
on investments available for sale
(net of tax benefit of $148) - - - - - - - - (398) - - - - (398)
--------
Total comprehensive income - - - - - - - - - - - - - - 1,606
Cash dividends declared and
paid ($0.10 per share) - - - - (511) - - - - - - - - (511)
Common Stock repurchased
(68,570 shares at an average
price of $17.33 per share) - - - - - - (1,188) - - - - - - (1,188)
Allocation relating to earned
portion of Stock-Based
Incentive Plan - - - - - - - - - - - - 121 121
Appreciation in fair value of
shares charged to expense for
compensation plans - - 158 - - - - - - - - - - 158
------- ------- -------- --------- --------- -------- --------- --------
Balance at March 31, 1999 $ 66 66,575 45,749 (27,316) (86) (2,418) (590) 81,980
------- ------- -------- --------- --------- -------- --------- --------
See accompanying condensed notes to consolidated financial statements.
4
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
For the Three Months Ended
March 31,
1999 1998
------- -------
(Unaudited)
Net cash flows from operating activities:
Net income $ 2,004 $ 1,889
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, amortization and
accretion, net 337 326
Earned SIP shares 121 197
Appreciation in fair value of shares
charged to expense for compensation plans 158 217
Provision for loan losses 430 403
Loans originated for sale (80,743) (103,031)
Proceeds from sale of loans 75,943 81,241
Gain on sale of real estate
acquired through foreclosure - (16)
Gain on sale of loans (764) (655)
Increase in accrued interest receivable (220) (134)
Decrease(increase) in prepaid expenses
and other assets, net (544) 96
Increase (Decrease) in accrued expenses and
other liabilities, net (1,312) 1,448
-------- -------
Net cash used in
operating activities (4,590) (18,019)
-------- -------
Cash flows from investing activities:
Proceeds from maturities of investment
securities held to maturity 3,000 6,150
Proceeds from maturities of investment
securities available for sale 5,075 -
Purchase of investment securities
available for sale (11,249) (20,187)
Purchase of FHLB and Federal Reserve Stock (1,179) -
Principal payments on mortgage-backed
securities available for sale 2,492 1,776
Principal payments on mortgage-
backed securities held to maturity 4,478 1,799
Increase in loans, net (33,841) (22,265)
Purchases of premises and equipment (187) (117)
Proceeds from sale of real estate owned 47 16
------- -------
Net cash used in
investing activities (31,364) (32,828)
------- ---------
-Continued on next page-
5
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
For the Three Months Ended
March 31,
1999 1998
------- -------
(Unaudited)
Cash flows from financing activities:
Increase in deposit accounts 1,700 31,211
Repayments of securities sold under
agreement to repurchase - (3,640)
Repayments of Federal Home Loan
Bank advances (41,632) (104,502)
Proceeds from Federal Home Loan
Bank advances 64,291 132,502
Cash dividends paid (511) (387)
Common stock repurchased (1,188) (2,089)
Options exercised - 5
Increase in advance payments by
borrowers for taxes and insurance 324 358
-------- -------
Net cash provided by
financing activities 22,984 53,458
------- -------
Net increase (decrease)
in cash and cash equivalents (12,970) 2,611
Cash and cash equivalents at beginning of quarter 37,201 24,690
------- -------
Cash and cash equivalents at end of quarter $ 24,231 $ 27,301
======= =======
Supplemental disclosure of cash flow
information:
Payments during
the quarter for:
Interest $ 10,543 $ 9,008
======= =======
Taxes $ 2,621 $ 1,390
======= =======
See accompanying condensed notes to consolidated financial statements.
6
BOSTONFED BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of BostonFed Bancorp, Inc., ("BostonFed" or the "Company") and its
wholly-owned subsidiaries, Boston Federal Savings Bank ("BFS"), Broadway
National Bank ("BNB") and BF Funding Corporation as of March 31, 1999 and
December 31, 1998 and for the three-month periods ended March 31, 1999 and 1998.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all necessary adjustments,
consisting only of normal recurring accruals necessary for a fair presentation,
have been included. The results of operations for the three-month periods ended
March 31, 1999 and 1998 are not necessarily indicative of the results that may
be expected for the entire fiscal year.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. Under this statement, an entity that elects to
apply hedge accounting is required to establish at the inception of the hedge
the method it will use for assessing the effectiveness of the hedging derivative
and the measurement approach for determining the ineffective aspect of the
hedge. This statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of this statement is not expected to
have a material impact on the Company.
NOTE 2: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At March 31, 1999, the Company had commitments of $88.9 million to
originate mortgage loans and $9.2 million to purchase loans from correspondent
lenders. Of these $98.1 million commitments, $65.6 million were adjustable rate
mortgage loans at rates ranging from 5.00% to 9.25% and $32.5 million were fixed
rate mortgage loans with interest rates ranging from 5.88% to 8.88%. The Company
also had commitments to sell $50.7 million of mortgage loans.
At March 31, 1999, the Company was servicing first mortgage loans of
approximately $665.3 million, which are either partially or wholly-owned by
others.
NOTE 3: LEGISLATIVE MATTERS
Currently, legislation is pending that would broaden the activities in
which banks and bank holding companies may engage and could restructure the
regulation of financial service companies. The Company is unable to predict
whether legislation will be enacted or the extent to which the legislation would
impact competition or restrict or disrupt its own operations.
7
NOTE 4: Business Segments
The Company's wholly-owned bank subsidiaries, BFS and BNB (collectively
"the Banks"), have been identified as reportable operating segments in
accordance with the provisions of SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." BF Funding Corp., a wholly-owned
subsidiary of the Company and various subsidiaries of the Banks, did not meet
the quantitative thresholds for determining reportable segments. The Banks
provide general banking services to their customers, including deposit
accounts, residential, commercial, consumer and business loans. Each Bank also
invests in mortgage-backed securities and other financial instruments. In
addition to its own operations, the Company provides managerial expertise and
other professional services. The results of the company and BF Funding comprise
the "other" category.
The Company evaluates performance and allocates resources based on the
Banks' net income, net interest margin, return on average assets and return on
average equity. The Banks follow generally accepted accounting principles as
described in the summary of significant accounting policies. The Company and
Banks have inter-company expense and tax allocation agreements. These
inter-company expenditures are allocated at cost. Asset sales between the Banks
were accounted for at current market prices at t he time of sale and
approximated cost.
Each Bank is managed separately with its own president, who reports
directly to the respective Boards of Directors of each Bank and the Chief
Executive Officer of the Company and its Board of Directors.
The following table sets forth certain information about and the
reconciliation of reported net income for each of the reportable segments.
TOTAL
REPORTABLE CONSOLIDATED
BFS BNB SEGMENTS OTHER ELIMINATIONS TOTALS
-------- -------- ------------ ------- -------------- ------------
At or for the three-months
ended March 31, 1999:
Interest income $ 17,240 2,152 19,392 284 (145) 19,531
Interest expense 10,984 524 11,508 (145) 11,363
Provision for loan losses 400 30 430 430
Non-interest income 1,366 181 1,547 1,547
Non-interest expense 4,855 1,086 5,941 102 6,043
Income tax expense 893 273 1,166 72 1,238
Net income 1,474 420 1,894 110 2,004
Total assets 1,015,285 135,755 1,151,040 85,692 (74,169) 1,162,563
Net interest margin 2.49% 4.86% n.m. n.m. n.m. 2.95%
Return on average assets .59% 1.25% n.m. n.m. n.m. .70%
Return on average equity 10.90% 13.50% n.m. n.m. n.m. 9.48%
At or for the three-months
ended March 31, 1998:
Interest income $ 15,877 2,043 17,920 425 (144) 18,201
Interest expense 9,599 462 10,061 80 (144) 9,997
Provision for loan losses 378 25 403 403
Non-interest income 1,227 177 1,404 1,404
Non-interest expense 4,835 1,007 5,842 138 5,980
Income tax expense 950 300 1,250 86 1,336
Net income 1,341 427 1,768 121 1,889
Total assets 887,113 127,112 1,014,225 89,050 (71,676) 1,031,599
Net interest margin 2.89% 5.15% n.m. n.m. n.m. 3.39%
Return on average assets .62% 1.39% n.m. n.m. n.m. .75%
Return on average equity 10.40% 14.00% n.m. n.m. n.m. 9.00%
n.m. = not meaningful
8
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
Average Balances and Yields / Costs
(Unaudited)
For the three months ended March 31: 1999 1998
------------------------------------- ------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
---------- ---------- --------- --------- ---------- ---------
(Dollars in thousands)
Assets:
Interest-earning assets:
Investment securities (1) $ 87,078 $ 1,257 5.77% $ 91,998 $ 1,411 6.13%
Loan, net and mortgage loans held for sale (2) 977,834 17,658 7.22% 820,187 15,849 7.73%
Mortgage-backed securities (3) 40,838 616 6.03% 56,243 941 6.69%
---------- --------- --------- --------- ---------- ---------
Total interest-earning assets 1,105,750 19,531 7.07% 968,428 18,201 7.52%
--------- --------- ---------- ---------
Non-interest-earning assets 45,290 41,397
---------- ---------
Total assets $ 1,151,040 $1,009,825
========== =========
Liabilities and Stockholders' Equity:
Interest-bearing Liabilities:
Money market deposit accounts $ 59,832 426 2.85% $ 63,640 470 2.95%
Savings accounts 132,372 779 2.35% 117,551 730 2.48%
NOW accounts 108,568 261 0.96% 102,993 296 1.15%
Certificate accounts 341,398 4,809 5.63% 290,692 4,198 5.78%
---------- --------- --------- --------- ---------- ---------
Total 642,170 6,275 3.91% 574,876 5,694 3.96%
Borrowed Funds (4) 357,564 5,088 5.69% 290,327 4,303 5.93%
---------- --------- --------- --------- ---------- ---------
Total interest-bearing liabilities 999,734 11,363 4.55% 865,203 9,997 4.62%
--------- --------- ---------- ---------
Non-interest-bearing liabilities 66,735 60,662
---------- ---------
Total liabilities 1,066,469 925,865
---------- ---------
Stockholders' equity 84,571 83,960
---------- ---------
Total liabilities and
stockholders' equity $1,151,040 $1,009,825
========== =========
Net interest rate spread (5) $ 8,168 2.52% $ 8,204 2.90%
========= ========= ========== =========
Net interest margin (6) 2.95% 3.39%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities 110.60% 111.93%
========= =========
<FN>
(1) Includes investment securities available for sale and held to maturity,
short-term investments, stock in FHLB-Boston and daily federal funds sold.
(2) Amount is net of deferred loan origination costs, construction loans in
process, net unearned discount on loans purchased and allowance for loan
losses and includes non-performing loans.
(3) Includes mortgage-backed securities available for sale and held to maturity.
(4) Interest paid on borrowed funds for the periods presented includes
interest expense on FNMA deposits held in escrow accounts with the
Company related to the Company's FNMA servicing, which, if such interest
expense was excluded, would result in an average cost of borrowed funds
of 5.65% and 5.91% for the three months ended March 31, 1999 and
March 31, 1998, respectively.
(5) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(6) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
</FN>
9
BOSTONFED BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL POSITION
AND RESULTS OF OPERATIONS
A. GENERAL
The Company is the holding company for two banking subsidiaries, Boston
Federal Savings Bank, a federally chartered community savings bank and Broadway
National Bank, a nationally chartered commercial bank. On February 7, 1997, the
Company acquired BNB and as a result of the acquisition, the Company became a
bank holding company subject to regulation by the Federal Reserve Bank ("FRB").
Boston Federal Savings Bank is regulated by the Office of Thrift Supervision and
Broadway National Bank is regulated by the Office of the Comptroller of the
Currency. Substantially all of the Company's business is coordinated through its
subsidiary banks and references herein to "Company" include the banks as
appropriate. The Company's principal business has been and continues to be
attracting retail deposits from the general public in the areas surrounding its
branch offices and investing those deposits, together with funds generated from
operations and borrowings, primarily in one- to four-family residential mortgage
loans. To a lesser extent, the Company invests in multi-family mortgages,
commercial real estate, construction and land, consumer loans, business loans,
and investment securities. The Company originates loans for investment and loans
for sale in the secondary market, generally retaining the servicing rights for
loans sold. Loan sales are made from loans held in the Company's portfolio
designated as being held for sale or originated for sale during the period. The
Company's revenues are derived principally from interest on its mortgage loans,
and to a lesser extent, interest and dividends on its investments and
mortgage-backed securities, fees, gains on sale of loans and loan servicing
income. The Company's primary sources of funds are retail deposits, wholesale
brokered deposits, principal and interest payments on loans and mortgage-backed
securities, FHLB advances, and proceeds from the sale of loans.
B. YEAR 2000 ISSUE
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act. The following "Year 2000" discussion contains forward-looking
statements which represent the Company's beliefs or expectations regarding
future events. When used in the Year 2000 discussion, the words "believes,"
"expects," "estimates," and similar expressions are intended to identify
forward-looking statements. Forward-looking statements include, without
limitation, the Company's expectations as to when it will complete the phases of
the Plan, its estimated costs, and its belief that its statements involve a
number of risks and uncertainties that could cause the actual results to differ
materially from the projected results. Factors that may cause these differences
include, but are not limited to, the availability of qualified personnel and
other information technology resources, the ability to identify and remediate
all date sensitive lines of computer code, and the actions of governmental
agencies or other third parties with respect to Year 2000 problems.
Included in other non-interest expenses for the three-month periods ended
March 31, 1999 and 1998 are charges incurred in connection with the modification
or replacement of software or hardware in order for the Company's computer and
related systems to properly recognize dates beyond December 31, 1999.
The impact of computer systems ability to process dates beyond 1999, the
Year 2000 issue, creates a significant business challenge for the Company. The
Company is addressing this issue as it affects all of its software, hardware and
other systems to insure the Company is Year 2000 compliant. The Company has
developed a plan that is based upon the Federal Financial Institutions
Examination Council ("FFIEC") recommended phases and time frames for insuring
Year 2000 compliance. These phases include awareness, assessment, renovation,
validation and implementation.
The Company has completed the awareness phase through development of a Year
2000 committee and reporting structure including quarterly project status
reports to the Company's Board. The assessment phase has been completed with a
review of all software, hardware and business systems including an evaluation of
the critical nature and year 2000 business risk that each application presents.
The Company primarily utilizes third-party vendors for the processing of its
critical data processing applications. The Company is working closely with these
critical vendors to monitor renovation and validation efforts to insure that the
time frames set out in the Company's plan are met. Based upon review of
vendor-provided Year 2000 disclosure statements, review of the applicable
testing process and verification of test results, the Company estimates that 94%
of the critical applications were renovated at March 31, 1999. The Company will
continue to work with critical application vendors to verify test results and
anticipates that the remaining critical applications will be renovated and
verified by June 30, 1999, based upon analysis of information currently
available from these vendors. The Company has created an internal Year 2000
testing environment and has developed test scripts incorporating typical
transactions in order to validate the modified systems. Testing with critical
application vendors was substantially completed in the fourth quarter of 1998.
Additional testing including follow-up and interface testing is continuing in
1999 and is expected to be completed by June 30, 1999, prior to any anticipated
impact on operating systems. The implementation phase is ongoing and
incorporates review of replaced or modified and tested systems, as well as,
contingency planning and customer awareness programs.
10
In the event that the Company's third-party vendors do not successfully or
timely achieve Year 2000 compliance, the Company's operations could be adversely
effected. The Company has begun development of contingency plans in the event
that one or all of these significant vendors fails to meet Year 2000 operating
requirements. Plans for various failure scenarios are developed on an ongoing
basis as such risks are identified and incorporate the Company's business
resumption plan. Contingency plans for unexpected Year 2000 related business
interruption will be completed for all mission critical applications after
testing of modified systems, and is expected to be substantially complete by
June 30, 1999. Further, the Company will seek alternative vendors should one of
The critical vendors fail to achieve satisfactory Year 2000 compliance. In the
Event the Company's current third party data processing vendors were not to
Achieve Year 2000 compliance and the Company could not engage alternative
vendors in a timely manner, the Company's operations would be adversely
impacted.
The total cost of the Year 2000 project is estimated at $400,000 to
$500,000 which includes estimated costs and time associated with third-party
Year 2000 issues, and an allocation of payroll costs for personnel assigned to
the Year 2000 project. Through March 31, 1999 the Company has expensed
approximately $50,000 year to date and $300,000 total toward the Year 2000
remediation effort. A significant portion of the costs associated with the year
2000 project are not expected to be incremental to the Company, but rather
represent a reprioritization of existing internal systems technology resources.
Based on the remediation, testing and monitoring efforts to date, the
Company expects that most of its critical systems will operate successfully
through the century date change. Therefore, the Company believes that internal
system failures are not likely to adversely affect the Company's operations or
financial condition. The Company has already successfully tested with many of
its critical application vendors and will continue to monitor and validate the
remainder, including the Company's electric al power and telecommunications
providers in 1999. At this time the Company believes the most likely "worst
case" Year 2000 scenarios are temporary and localized disruptions in
infrastructure services which could disrupt the ability of the Company to
provide services to its customers an/or the ability of external service
providers to provide services to the Company.
The Company's evaluation of the Year 2000 readiness is based upon
management's best estimates and projections which are derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
C. FINANCIAL CONDITION
Total assets at March 31, 1999 were $1.163 billion, compared to $1.139
billion at December 31, 1998, an increase of $24 million or 2.1%. The major
components of asset growth included investment securities available for sale,
mortgage loans held for sale and loans, net of allowance for loan losses.
Investment securities available for sale increased to $54.9 million at March 31,
1999 from $49.1 million at December 31, 1998 as securities purchases exceeded
maturities. Mortgage loans held for sale increased from $17.0 million at
December 31, 1998 to $22.6 million at March 31, 1999 as sales near the end of
last year reduced the available for sale inventory. Loans, net of allowance for
loan losses, increased by $33.4 million, or 3.5%, from a balance of $943.7
million at December 31, 1998 to $977.1 million at March 31, 1999 as origination
of loans for portfolio exceeded amortization and prepayments. These increases
were partially offset by decreases in cash and cash equivalents, investment
securities held to maturity, mortgage-backed securities available for sale and
mortgage-backed securities held to maturity amounting to $13.0 million, $3.0
million, $2.6 million and $4.5 million, respectively, compared to the balances
at December 31, 1998. Deposit accounts increased by $1.7 million from a balance
of $707.1 million at December 31, 1998 to a balance of $708.8 million at March
31, 1999. Federal Home Loan Bank advances increased by $22.7 million, to a
balance of $360.2 million at March 31, 1999 from a balance of $337.5 million at
December 31, 1998. These advances were used to fund asset growth.
11
D. LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, (including brokered
deposits), principal and interest payments on loans, investments,
mortgage-backed and related securities and loan sales, FHLB advances and
repurchase agreements. While maturities and scheduled amortization of loans are
predictable sources of funds, deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. The
Company has maintained in excess of the required minimum levels of liquid assets
at BFS as defined by OTS regulations. This requirement, which may be varied at
the direction of the OTS depending upon economic conditions and deposit flows,
is based upon a percentage of the BFS's deposits and short-term borrowings.
BFS's current required liquidity ratio is 4%. At March 31, 1999 and December 31,
1998 BFS's liquidity ratio was 6.2% and 6.9% respectively. Management has
maintained liquidity as close as possible to the minimum requirement so that it
may invest any excess liquidity in higher yielding interest-earning assets or
use such funds to repay higher cost FHLB advances. The OCC does not have
specific guidance for liquidity ratios for BNB, but does require banks to
maintain reasonable and prudent liquidity levels. Management believes such
levels have been maintained since the acquisition date.
The Company's most liquid assets are cash, overnight federal funds sold,
and loans and investments available for sale. The levels of these assets are
dependent on the Company's operating, financing, lending and investing
activities during any given period. At March 31, 1999, BFS' cash, loans and
investments available for sale totaled $71.2 million or 7.0% of BFS's total
assets. While not all of these liquid assets qualify for BFS's regulatory
liquidity requirements, other assets in the held to maturity category qualify
for regulatory liquidity requirements.
The Company has other sources of liquidity if a need for additional funds
arises, including FHLB advances. At March 31, 1998, BFS had $354.2 million in
advances outstanding from the FHLB. The Company generally does not pay the
highest deposit rates in its market and accordingly utilizes alternative sources
of funds such as FHLB advances, wholesale brokered deposits and repurchase
agreements to supplement cash flow needs.
At March 31, 1999, the Company had commitments to originate loans and
unused outstanding lines of credit totaling $164.60 million. The Company
anticipates that it will have sufficient funds available to meet its current
loan origination commitments. Certificate accounts which are scheduled to mature
in less than one year from March 31, 1999, totaled $212.1 million.
At March 31, 1999, the consolidated stockholders' equity to total assets
ratio was 7.1%. As of March 31, 1999, the Company, BFS and BNB exceeded all of
their regulatory capital requirements. The Company's consolidated Tier 1
capital, total capital and Tier 1 leverage ratios were 11.9%, 13.2% and 6.9%,
respectively. BFS's tier 1, total risk-based, tier 1 risk-based and tangible
equity capital ratios were 5.3%, 10.1%, 8.9% and 5.2%, respectively. BNB's total
risk-based, tier 1 risk-based and tier 1 leverage capital ratios were 15.7%,
14.6%, and 7.2%, respectively.
12
E. COMPARISON OF THREE-MONTHS ENDED MARCH 31, 1999 AND 1998
General
Earnings for the quarter ended March 31, 1999 were $2.0 million, or $.41
basic earnings per share, $.40 per share on a diluted basis, compared to
earnings of $1.9 million, or $.37 basic and $.35 diluted earnings per share for
the first quarter of 1998. The current quarter's earnings amount to an 11%
increase in basic earnings per share and a 14% increase in diluted earnings per
share compared to last year's first quarter. The Company's annualized return on
average assets was .70% and the annualized return on average stockholders'
equity was 9.48% during the three-months ended March 31, 1999, compared to .75%
and 9.00%, respectively, for the three-months ended March 31, 1998 (annualized).
Comments regarding the components of net income are detailed in the following
paragraphs.
Interest Income
Total interest income on interest-earning assets for the quarter ended
March 31, 1999 increased by $1.3 million, or 7.3%, to $19.5 million, compared to
the quarter ended March 31, 1998. The increase in interest income was primarily
attributable to a $137.3 million increase in average interest-earning assets,
offset by a 45 basis point decrease in the average yield. The average yield on
interest-earning assets decreased to 7.07% for the three months ended March 31,
1999 from 7.52% for the three months ended March 31, 1998.
Interest income on loans, net, for the quarter ended March 31, 1999
increased by $1.8 million, or 11.4%, to $17.7 million compared to $15.8 million
for the same quarter in 1998. The increase in interest income from loans, net,
for the quarter ended March 31, 1999, compared to the same period last year, was
primarily attributable to an increase in the average balance of $157.6 million.
The earnings impact of higher balances of loans, net was partially offset by a
decline in the average yield on loans, net, which decreased by 51 basis points
to 7.22% during the quarter ended March 31, 1999, compared to 7.73% during the
quarter ended March 31, 1998. Interest on mortgage-backed securities for the
quarter ended March 31, 1999 decreased by $325,000 to $616,000, compared to
$941,000 for the same quarter in 1998. This decrease in income was due primarily
to the $15.4 million lower average balance during the quarter ended March 31,
1999, compared to the quarter ended March 31, 1998. Additionally, the average
yield declined by 66 basis points to an average of 6.03% during the March 31,
1999 quarter, compared to the same quarter last year. Income from investment
securities was $1.3 million for the quarter ended March 31, 1999 compared to
$1.4 million for the prior year quarter. The average yield on investment
securities decreased by 36 basis points in the current three-month period,
compared to last year's quarter ended March 31, 1998. The average balance
decreased by $4.9 million to an average of $87.1 million during the quarter
ended March 31, 1999, compared to an average balance of $92.0 million for the
quarter ended March 31, 1998.
13
Interest Expense
Total interest expense on interest-bearing liabilities for the quarter
ended March 31, 1999 increased by $1.4 million or 13.7%, to $11.4 million
compared to the quarter ended March 31, 1998. The increase in interest expense
for the quarter ended March 31, 1999 was due primarily to an increase of $134.5
million in the average balance of interest-bearing liabilities, which averaged
$999.7 million during the current quarter, compared to an average balance of
$865.2 million during the quarter ended March 31, 1998. The increase in interest
expense was partially offset by a decrease of 7 basis points in the average cost
of interest-bearing liabilities. The average cost of interest-bearing
liabilities decreased to 4.55% during the quarter ended March 31, 1999, compared
to 4.62% for last year's comparable quarter. The decrease was due to generally
lower market rates, offset by an increase in higher cost certificates of
deposit.
Interest expense on deposit accounts was $6.3 million for the quarter ended
March 31, 1999, an increase of $581,000 from the $5.7 million for the quarter
ended March 31, 1998. The increase in the expense was due to higher average
deposit account balances of $67.3 million, partially offset by a 5 basis point
decrease in the average cost of funds during the quarter ended March 31, 1999,
compared to the quarter ended March 31, 1998. The cost of funds declined due to
lower rates paid on core deposit accounts, offset somewhat by an increase in
higher costing certificate account balances. The average balance of deposit
accounts increased from $574.9 million for the quarter ending March 31, 1998, to
an average balance of $642.2 million for the current quarter. Most of the
increase is attributable to the 15 month retail certificate of deposit
acquisition program initiated by BFS during 1998. Interest expense on borrowed
funds increased from $4.3 million for the quarter ended March 31, 1998 to $5.1
million for the current quarter. The average cost of borrowed funds decreased
from 5.93% during the quarter ended March 31, 1998 to an average of 5.69% during
the current quarter. The average balance increased from $290.3 million during
the first quarter of 1998 to an average balance of $357.6 million during the
first quarter of 1999.
Net Interest Income
Net interest income during the first quarters of 1999 and 1998 was $8.2
million, as industry-wide margin shrinkage was offset by net interest income
earned from asset growth. The net interest margin, at 2.95% for the quarter
ended March 31, 1999 was 44 basis points lower than last year's comparable
quarter.
14
Provision for Loan Losses
The Company's provision for loan losses amounted to $430,000 for the
quarter ended March 31, 1999, compared to the $403,000 loan loss provision for
the comparable quarter last year. The allowance for loan losses increased from
$8.5 million at December 31, 1998 to $9.1 million at March 31, 1999 due to the
quarter's provision and net recoveries.
The Company establishes provisions for loan losses, which are charged to
operations, in order to maintain the allowance for loan losses at a level which
is deemed to be appropriate based upon management's assessment of the risk
inherent in its loan portfolio in light of current economic conditions, actual
loss experience, industry trends and other factors which may affect the real
estate values in the Company's market area. In addition various regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses. Such agencies may require the Company
to make additional provisions for estimated loan losses based upon judgements
different from those of management. While management believes the current
allowance for loan losses is adequate, actual losses are dependent upon future
events, and as such, future provisions for loan losses may be necessary. As part
of the Company's determination of the adequacy of the allowance for loan losses,
the Company monitors its loan portfolio through its Asset Classification
Committee. The Committee classifies loans depending on risk of loss
characteristics. The most severe classification before a charge-off is required
is "sub-standard." At March 31, 1999, the Company classified $3.6 million of
loans ($3.2 million at BFS and $443,000 at BNB) as sub-standard compared to $4.2
million ($3.4 million of BFS and $770,000 of BNB) at December 31, 1998. The
Asset Classification Committee, which meets quarterly, determines the adequacy
of the allowance for loan losses through ongoing analysis of historical loss
experience, the composition of the loan portfolios, delinquency levels,
underlying collateral values, cash flow values and state of the real estate
economy. Utilizing these procedures, management believes that the allowance for
loan losses at March 31, 1999 was sufficient to provide for anticipated losses
inherent in the loan portfolio.
The Company's allowance for loan losses at March 31, 1999 was $9.1 million,
which represented 733.0% of non-performing loans or .90% of total loans,
compared to $8.5 million at December 31, 1998, or 1,029.1% of non-performing
loans and .88% of total loans. Management believes this increased coverage ratio
is prudent due to the balance increase in the combined total of construction and
land, commercial real estate, multi-family, home equity and improvement,
consumer and business loans. These combined total balances increased from $153.8
at December 31, 1998 to $159.6 million at March 31, 1999.
Non-performing loans at March 31, 1999 amounted to $1.2 million or .12% of
total loans, compared to $0.8 million, or .09% of total loans, at December 31,
1998.
The amount of interest income on non-performing loans that would have been
recorded had these loans been current in accordance with their original terms,
was $25,000 and $49,000 for the three-month periods ended March 31, 1999 and
1998, respectively. The amount of interest income that was recorded on these
loans was $11,000 and $7,000 for the three-month periods ended March 31, 1999
and 1998, respectively.
At March 31, 1999, loans characterized as impaired, (which include all
non-performing loans and some other sub-standard assets), pursuant to SFAS No.
114, "Accounting by Creditors for Impairment of a Loan", ("SFAS 114") and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition
and Disclosure", ("SFAS 118") totaled $1.7 million. All of the impaired loans
have been measured using the fair value of the collateral method. During the
three-months ended March 31, 1999, the average recorded value of impaired loans
was $1.6 million, $24,000 interest income was recognized and $38,000 of interest
income would have been recognized under the loans' original terms.
At March 31, 1999 and at December 31, 1998, the Company had $0 and $47,000
in real estate owned, respectively. Further, at March 31, 1999 the Company also
had restructured real estate loans amounting to $213,000 for which interest is
being recorded in accordance with the loans' restructured terms. The amount of
the interest income lost on these restructured loans is not material to the
Company's financial statements.
15
Non-Interest Income
Total non-interest income in the first quarter of 1999 increased by
$143,000, or 10.2%, to $1.5 million from $1.4 million for the three months ended
March 31, 1998. The largest component of non-interest income was gain on sale of
loans, which increased to $764,000 during the quarter ended March 30, 1999,
compared to $655,000 for the comparable quarter last year. The gain on sale of
loans increased, despite a slight reduction in the volume of loans sold, due to
more favorable market conditions. Generally lower market interest rates and the
position of the interest rate yield curve have provided many borrowers an
opportunity to re-finance their mortgages to lower, and generally fixed interest
rates. The Company sells the vast majority of fixed-rate loans it originates.
The continuation of a strong housing market and economy also contributed to
increased volume for financing of home purchases. Loan processing and servicing
fees were $161,000 for the first quarter of 1999, compared to $144,000 for the
comparable quarter last year.
Non-Interest Expense
Total non-interest expense was $6.0 million for the quarters ended March
31, 1999 and 1998. Compensation and benefits increased by $216,000, or 6.3%,
from $3.4 million for the three-months ended March 31, 1998 to $3.6 million for
the three-months ended March 31, 1999 due to additional staff hired to expand
the Company's corporate lending department and normal year over year salary
increases. Other non-interest expense declined to $1.5 million for the quarter
ended March 31, 1999 compared to $1.7 million for the quarter ended March 31,
1998 as the prior year's first quarter included consulting and legal costs
incurred to assist in establishing the Company's tax saving strategies. These
strategies included the formation of real estate investment trusts and
securities subsidiaries in early 1998.
Income Tax Expense
Income tax expense for the quarter ended March 31, 1999 was $1.2 million,
compared to $1.3 million for the quarter ended March 31, 1998. The effective
income tax rate was 38.2% during the current quarter, compared to 41.4% for the
quarter ended March 31, 1998. The lower effective rate during the current
quarter is due to the full implementation of the tax saving strategies.
16
Item 3. MARKET RISK AND MANAGEMENT OF INTEREST RATE RISK
The principal market risk affecting the Company is interest rate risk. The
objective of the Company's interest rate risk management function is to evaluate
the interest rate risk included in certain balance sheet accounts, determine the
level of risk appropriate given the Company's business strategy, operating
environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with Board of Directors' approved guidelines. Through
such management, the Company seeks to reduce the vulnerability of its operations
to changes in interest rates. The Company monitors its interest rate risk as
such risk relates to its operating strategies. The Company's Board of Directors
has established a management Asset/Liability Committee that is responsible for
reviewing the Company's asset/ liability policies and interest rate risk
position. The Committee reports trends and interest rate risk position to the
Board of Directors on a quarterly basis. The extent of the movement of interest
rates is an uncertainty that could have a negative impact on the earnings of the
Company.
In recent years, the Company has utilized the following strategies to
manage interest rate risk: (1) emphasizing the origination and retention of
adjustable-rate, one- to four-family mortgage loans; (2) generally selling in
the secondary market substantially all fixed-rate mortgage loans originated with
terms greater than 15 years while generally retaining the servicing rights
thereof; (3) primarily investing in investment securities or mortgage- backed
securities with adjustable interest rates; and (4) attempting to reduce the
overall interest rate sensitivity of liabilities by emphasizing longer-term
deposits and utilizing FHLB advances to replace rate sensitive deposits.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring the Company's interest rate sensitivity "gap." An asset or liability
is said to be interest rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. These differences are
a primary component of the risk to net interest income. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities. A gap is considered negative when the
amount of interest rate sensitive liabilities exceeds the amount of interest
rate sensitive assets. Accordingly, during a period of rising interest rates, an
institution with a positive gap position would be in a better position to invest
in higher yielding assets which, consequently, may result in the yield on its
assets increasing at a pace more closely matching the increase in the cost of
its interest-bearing liabilities than if it had a negative gap. During a period
of falling interest rates, an institution with a positive gap would tend to have
its assets repricing at a faster rate than one with a negative gap which,
consequently, may tend to restrain the growth of its net interest income.
Certain shortcomings are inherent in gap analysis. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable-rate loans, have features which restrict changes in
interest rates both on a short-term basis and over the life of the asset.
Further, in the event of change in interest rates, prepayment and early
withdrawal levels would likely deviate significantly from those assumed in
calculating the table. Finally, the ability of many borrowers to service their
adjustable-rate loans may decrease in the event of an interest rate increase.
At March 31, 1999, the Company's one year gap was a positive .66% of total
assets, compared to a positive 6.6% of total assets at December 31, 1998.
The Company's interest rate sensitivity is also monitored by management
through the use of a model which internally generates estimates of the change in
net portfolio value (NPV") over a range of interest rate change scenarios. NPV
is the present value of expected cash flows from assets, liabilities, and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same scenario.
17
As in the case with the gap analysis, certain shortcomings are inherent in
the methodology used in the above interest rate risk measurements. Modeling
changes in NPV require the making of certain assumptions which may or may not
reflect the manner in which actual yields and costs respond to changes in market
interest rates. In this regard, the NPV model used assumes that the composition
of the Company's interest sensitive assets and liabilities existing at the
beginning of a period remains constant over the period being measured and also
assumes that a particular change in interest rates is reflected uniformly across
the yield curve regardless of the duration to maturity or repricing of specific
assets and liabilities. Accordingly, although the NPV measurements and net
interest income models provide an indication of the Company's interest rate risk
exposure at a particular point in time, such measurements are not intended to
and do not provide a precise forecast of the effect of changes in market
interest rates on the Company's net interest income and will differ from actual
results. See the Company's Form 10-K for the year ended December 31, 1998 for a
detail of the GAP and NPV tables. There have been no material changes in the net
portfolio value since December 31, 1998.
In addition to historical information, this 10-Q includes certain
forward-looking statements based on current management expectations. Generally,
verbs in the future tense and the words, "believe", "expect", "anticipate",
"intends", "opinion", "potential", and similar expressions identify
forward-looking statements. Examples of this forward-looking information can be
found in, but are not limited to, the allowance for losses discussion, Year 2000
issues and any quantitative and qualitative disclosure about market risk. The
Company's actual results could differ materially from those management
expectations. Factors that could cause future results to vary from current
management expectations include, but are not limited to, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of
the federal government, changes in tax policies, rates and regulations of
federal, state and local tax authorities, changes in interest rates, deposit
flows, the cost of funds, demand for loan products, demand for financial
services, competition, changes in the quality or composition of the Company'
loan and investment portfolios, changes in accounting principles, policies or
guidelines, and other economic, competitive, governmental and technological
factors (including Year 2000 problems) affecting the Company's operations,
markets, products, services and prices.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Except as described below, the Company is not involved in any pending
material legal proceedings other than routine legal proceedings occurring in the
ordinary course of business. Such routine legal proceedings, in the aggregate,
are believed by management to be immaterial to the Company's financial condition
or results of operations. Broadway National Bank, a national bank subsidiary of
the Company, was named a defendant in the Superior Court for Suffolk County,
Massachusetts, civil action No. SUCV 99-018F served on April 12, 1999 in a
matter captioned "Glyptal, Inc. v. John Hetherton, Jr., Fleet Bank, NA and
Broadway National Bank of Chelsea." The suit alleges that an officer of the
Plaintiff, Glyptal, embezzled funds from Plaintiff, by making unauthorized
transfers from Plaintiff's corporate accounts and subsequently deposited checks
drawn on such account into an account at Broadway National Bank. Plaintiff
alleges that Broadway National Bank knew or should have known of the alleged
fraudulent actions of Plaintiff's Officer, and that Broadway National Bank owed
a duty to Plaintiff to investigate the transactions and protect Plaintiff from
the alleged fraudulent actions. The Plaintiff is seeking damages for the
alleged breach of duty by the defendants. Broadway National Bank intends to
deny the allegations that it owed or breached any duty to Plaintiff or that it
is liable for any losses incurred by Plaintiff. Broadway National Bank intends
to vigorously defend the action and believes the action is not likely to result
in any material loss or adverse effect on the financial condition of the
Company.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
18
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation*
3.2 Bylaws*
27 Financial Data Schedule
* Incorporated herein to the Company's Registration Statement on Form S-1,
as amended, (SEC No. 33-94860) originally filed on July 21, 1995
19
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.
BOSTONFED BANCORP, INC.
(Registrant)
Date: May 17, 1999 By: /s/ David F. Holland
__________________________________
David F. Holland
President and
Chief Executive Officer
Date: May 17, 1999 By: /s/ John A. Simas
__________________________________
John A. Simas
Executive Vice President,
Chief Financial Officer
and Corporate Secretary
20