<PAGE>1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549


                                   FORM 10-QSB

                 Quarterly Report Pursuant to Section 13 or 15(d)
                      of the Securities Exchange Act of 1934

                For the quarterly period ended September 30, 1996

                          Commission File Number 0-19829


                                ARGO BANCORP, INC.
                                ------------------
         (Exact name of small business issuer as specified in its charter)



               Delaware                                 36-3620612
    (State or other jurisdiction                     (I.R.S. Employer
   of incorporation or organization)                 Identification No.)





                7600 W. 63rd Street, Summit, Illinois 60501-1830
                    (Address of principal executive offices)

                                  (708) 496-6010
                            (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days. Yes  X   No 
                                                             -----   -----

The registrant had 312,791 shares outstanding as of October 31, 1996.

Transitional Small Business Disclosure Format (check one): Yes       No   X
                                                               -----    -----


                                     1

<PAGE>2

                          ARGO BANCORP, INC. AND SUBSIDIARIES
                                      FORM 10-QSB
                                         INDEX
                                         -----

PART I - FINANCIAL INFORMATION                                         PAGE NO.
------------------------------                                         --------

Item 1 Financial Statements

             Consolidated Statements of Financial Condition
             as of September 30, 1996 (unaudited) and
             December 31, 1995......................................        3

             Consolidated Statements of Income for the Three
             and Nine Months ended September 30, 1996 and
             1995 (unaudited).......................................        4

             Consolidated Statements of Stockholders' Equity 
             for the Nine Months Ended September 30, 1996, and
             1995 (unaudited).......................................        5

             Consolidated Statements of Cash Flows for the 
             Nine Months ended September 30, 1996, 
             and 1995 (unaudited)...................................        6

             Notes to Consolidated Financial Statements.............        7

Item 2 Management Discussion and Analysis of Financial
             Condition and Results of Operations....................       11

PART II - OTHER INFORMATION
---------------------------

Item 1 Legal Proceedings ..............................................    20

Item 2 Changes in Securities  .........................................    20

Item 3 Default Upon Senior Securities .................................    20

Item 4 Submission of Matters to a Vote
               of Security Holders ....................................    20

Item 5 Other Information ..............................................    20

Item 6 Exhibits and Reports on Form 8-K................................    20

Signature Page ........................................................    21


                                       2

<PAGE>3

<TABLE>
<CAPTION>
                                     ARGO BANCORP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in Thousands)                                                         9/30/96       12/31/95
======================================================================================================

ASSETS                                                                       (Unaudited)
<S>                                                                            <C>           <C> 
Cash...................................................................        $ 10,442      $  7,224
Interest-earning deposits..............................................           1,993         3,837
FHLB of Chicago stock..................................................           2,989         2,669
Securities available for sale .........................................           6,413         7,573
Loans receivable ......................................................         162,410       143,141
Loans available for sale...............................................           1,607           ---
Accrued interest receivable............................................           1,956         1,709
Foreclosed real estate and real estate in judgment.....................           1,594         1,473
Premises and equipment, net............................................           8,189         6,684
Goodwill ..............................................................             365           507
Purchased mortgage servicing rights ...................................           4,234         4,033
Prepaid expenses and other assets......................................           7,631         7,618
                                                                               --------      --------
                                                                               $209,823      $186,468
                                                                               ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY:

Liabilities:
  Deposits.............................................................        $134,258      $122,758
  Borrowed money.......................................................          53,575        38,181
  Interest-bearing custodial escrow balances for loans serviced........               4         2,623
  Custodial escrow balances for loans serviced.........................           5,076         7,073
  Advance payments by borrowers for taxes and insurance................              67           167
  Other liabilities....................................................           4,722         4,336
                                                                               --------      --------
    Total liabilities..................................................        $197,702      $175,138
                                                                               --------      --------

Stockholders' Equity:
  Preferred stock, $0.01 par value;
    Authorized 500,000 shares; none issued
      or outstanding...................................................             ---           ---
  Common Stock:
    Class A, $0.01 par value; Authorized
      3,020,000 shares; issued and outstanding
      312,791 shares...................................................               3             3
    Class B, $0.01 par value; Authorized
      340,000 shares; none issued or outstanding.......................             ---           ---
    Class C, $0.01 par value; Authorized
      340,000 shares; none issued or outstanding.......................             ---           ---
    Class D, $0.01 par value; Authorized
      340,000 shares; none issued or outstanding.......................             ---           ---
  Additional paid-in capital...........................................           2,828         2,739
  Retained earnings - substantially restricted.........................           9,546         8,773
  Unrealized gain on marketable securities, net of tax.................              32            42
  Common stock acquired by:
    Employee Stock Ownership Plan......................................            (132)         (177)
    Management Recognition Plan........................................            (156)          (50)
                                                                               --------      --------
      Total stockholders' equity.......................................          12,121        11,330
                                                                               --------      --------
                                                                               $209,823      $186,468 
                                                                               ========      ========
</TABLE>
                                                                          3



<PAGE>4

                                        ARGO BANCORP, INC. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                            For the Three Months Ended     For the Nine Months Ended
(Dollars in thousands, except per share data)                 9/30/96        9/30/95        9/30/96         9/30/95
====================================================================================================================
                                                                                   (Unaudited)
<S>                                                           <C>            <C>           <C>              <C>  
Interest income:
  Loans receivable ..................................         $ 3,967        $ 3,400       $ 10,911         $ 9,528
  Mortgage-backed securities ........................              86            101            272             307
  Interest-earning deposits .........................             165            147            487             407
                                                              -------        -------       --------         -------
    Total interest income ...........................           4,218          3,648         11,670          10,242
                                                              -------        -------       --------         -------
Interest expense:
  Deposits ..........................................           1,639          1,474          4,673           4,071
  Custodial escrow balances for loans
    serviced ........................................               9             42             75             185
  Borrowed money ....................................             620            663          1,761           1,917
                                                              -------        -------       --------         -------

    Total interest expense ..........................           2,268          2,179          6,509           6,173
                                                              -------        -------       --------         -------
    Net interest income before provision
      for loan losses ...............................           1,950          1,469          5,161           4,069
Provision for loan losses ...........................              45             15            100              40
                                                              -------        -------       --------         -------
Net interest income after provision
  for loan losses ...................................           1,905          1,454          5,061           4,029
                                                              -------        -------       --------         -------

Non-interest income:
  Purchased mortgage servicing income, net ..........              76             83            273             255
  Mortgage banking ..................................              20             17             52              56
  Gain on sale of mortgage servicing rights, loans
    receivable, mortgage-backed securities, and
    securities available for sale ...................             332            586          1,096           1,221
  Fees for other customer services ..................             102             93            290             273
  Data processing income.............................           2,701            ---          8,185             ---
  Other .............................................              22             33            117             116
                                                              -------        -------       --------         -------
    Total non-interest income .......................           3,253            812         10,013           1,921
                                                              -------        -------       --------         -------

Non-interest expense:
  Compensation and benefits .........................           2,019            709          6,213           2,064
  Occupancy and equipment ...........................           1,099            224          3,183             687
  Data processing cost of services ..................             449            ---          1,132             ---
  Federal deposit insurance premiums.................             863             69          1,011             196
  Other general and administrative fees .............             754            521          2,184           1,429
  Amortization of goodwill ..........................              27             26             54              51
                                                              -------        -------       --------         -------
    Total non-interest expense ......................           5,211          1,549         13,805           4,453
                                                              -------        -------       --------         -------
Earnings before provision for
  income tax expense ................................            (53)            717          1,269           1,497
Provision for income tax expense (benefit)...........            (85)            255            339             513
                                                              -------        -------       --------         -------
Net earnings ........................................              32            462            930             984
                                                              -------        -------       --------         -------
Primary net earnings per share ......................             .09           1.33           2.56            2.83
                                                              -------        -------       --------         -------
Fully diluted earnings per share ....................             .09           1.30           2.53            2.78
                                                              -------        -------       --------         -------
</TABLE>

                                                                      4


<PAGE>5


<TABLE>
<CAPTION>

                                                 ARGO BANCORP, INC. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                       (Dollars in thousands)
                                                             (Unaudited)

                                                                                          Unrealized
                                                                                         Gain (Loss)
                                                            Common  Additional            Marketable Common Stock Common Stock
                                                             Stock     paid-in  Retained      Equity     acquired     acquired
Nine Months ended September 30, 1995                       Class A     Capital  earnings  Securities      by ESOP       by MRP Total
------------------------------------                       -------------------------------------------------------------------------
<S>                                                         <C>          <C>       <C>         <C>          <C>         <C>  <C>    

Balance at December 31, 1994............................... $    3       2,664     7,240       (224)        (237)       (21)  9,425

Net Income.................................................    ---         ---       984        ---          ---        ---     984

Change in unrealized loss on securities available for
  sale, net................................................    ---         ---       ---        237          ---        ---     237

Purchase of Common Stock for MRP ..........................    ---         ---       ---        ---          ---         14      14

Principal payments of ESOP loan............................    ---         ---       ---        ---           45        ---      45

Amortization of purchase price of MRP's stock..............    ---         ---       ---        ---          ---         21      21

Proceed from exercise of stock options.....................    ---          49       ---        ---          ---        ---      49

Fair value adjustment for committed ESOP shares ...........    ---          18       ---        ---          ---        ---     ---

Cash dividends.............................................    ---         ---      (103)       ---          ---        ---    (103)
                                                            ------       -----     -----      -------      -----       ----  ------

Balance at September 30, 1995.............................. $    3       2,731     8,069         13         (192)       (14) 10,610
                                                            ======       =====     =====      =======      =====       ====  ======

Nine months ended September 30, 1996
------------------------------------

Balance at December 31, 1995............................... $    3       2,739     8,773         42         (177)       (50) 11,330

Exercise of Stock Options..................................    ---          15       ---        ---          ---        ---      15

Purchase of Common Stock for MRP...........................    ---         ---       ---        ---          ---       (115)   (115)

Net income.................................................    ---         ---       930        ---          ---        ---     930

Adjustment of marketable equity securities to market.......    ---         ---       ---        (10)         ---        ---     (10)

Principal payments on ESOP loan............................    ---         ---       ---        ---           45        ---      45

Amortization of purchase price of MRP stock................    ---         ---       ---        ---          ---          9       9

Fair value adjustment for committed ESOP shares............    ---          74       ---        ---          ---        ---      74

Dividends..................................................    ---         ---      (157)       ---          ---        ---    (157)
                                                            ------       -----     -----      -------      -----       ----  ------ 

Balance at September 30, 1995.............................. $    3       2,828     9,546         32         (132)      (156) 12,121
                                                            ======       =====     =====      =======      =====       ====  ====== 

                        See accompanying notes to unaudited consolidated financial statements.
</TABLE>

                                                                 5


<PAGE>6

<TABLE>
<CAPTION>
                                                 ARGO BANCORP, INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                         Nine Months Ended
                                                                                                            September 30,
(Dollars in Thousands)                                                                                1996                 1995
==================================================================================================================================
                                                                                                           (Unaudited)
<S>                                                                                                <C>                  <C> 
Cash flows from operating activities:
  Net income............................................................................           $   930             $    984
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:
      Depreciation......................................................................             1,352                  362
      Accretion of discounts and deferred loan fees.....................................              (571)                (231)
      Provision for loan losses.........................................................               100                   40
      Provision for losses on foreclosed real estate....................................               126                   30
      (Gain) loss on sale of:
        Securities held for sale........................................................                (5)                (191)
        Loans receivable................................................................            (1,275)              (1,032)
        Foreclosed real estate..........................................................               184                    3
     Loans originated and purchased for sale............................................           (22,011)             (46,211)
     Proceeds from sale of loans receivable.............................................            32,100               44,096
     Amortization of goodwill...........................................................                82                   76
     Amortization of purchase price of MRP and ESOP stock...............................                54                   66
     Recognition of fair value of ESOP shares scheduled to be released..................                74                   18
      FHLB stock dividends..............................................................               ---                  (40)
      (Increase) decrease in accrued interest receivable, prepaid expenses, and other assets.         (194)              (1,359)
      Increase (decrease) in accrued interest payable and other liabilities.............               387                  950
                                                                                                   -------             ---------
          Net cash provided by (used in) operating activities...........................            11,333               (2,439)
                                                                                                   -------             ---------
Cash flows from investing activities:
  Loans originated and purchased for portfolio..........................................           (66,682)             (47,350)
  Principal repayments on:
    Loans receivable....................................................................            36,065               26,807
    Mortgage-backed securities..........................................................               555                  762
  Proceeds from maturities of investment securities.....................................               600                  ---
  Proceeds from sale of:
    Foreclosed real estate..............................................................               982                  296
    Securities available for sale.......................................................                83                1,130
    Premises and equipment..............................................................               ---                   14
  Purchase of:
    FHLB stock..........................................................................              (320)                 (53)
    Loan servicing rights...............................................................              (201)                (297)
    Securities held for sale............................................................              (105)                (799)
    Premises and equipment..............................................................            (2,857)                (237)
  Contribution to MRP and ESOP..........................................................              (115)                 (14)
                                                                                                   -------             ---------
          Net cash provided by (used in) investing activities...........................           (31,995)             (19,741)
                                                                                                   -------             ---------
Cash flows from financing activities:
  Net increase in deposits..............................................................            11,500               17,155
  Proceeds from borrowed funds..........................................................            86,718              114,009
  Repayment of borrowed funds...........................................................           (71,324)            (107,381)
  Proceeds from exercise of stock options...............................................                15                   49
  Dividends paid........................................................................              (157)                (155)
  Net increase (decrease) in advance payments by borrowers
    for taxes and insurance.............................................................              (100)                 (10)
  Net increase (decrease) in custodial escrow balances for loans serviced...............            (4,616)              (4,032)
                                                                                                   -------             ---------
      Net cash provided by financing activities.........................................            22,036               19,635
                                                                                                   -------             ---------
      Net increase (decrease) in cash and cash equivalents..............................             1,374               (2,545)
Cash and cash equivalents at beginning of year..........................................            11,061                9,286
                                                                                                   -------             ---------
  Cash and cash equivalents at end of year..............................................            12,435                6,741
                                                                                                   =======             =========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest expense....................................................................             6,459                4,019
    Income taxes........................................................................               400                  ---
  Non-cash investing activity - transfer of loans to foreclosed real estate.............           $ 1,413             $  1,111
                                                                                                   =======             =========

                                        See accompanying notes to unaudited financial statements.
</TABLE>
                                                                 6

<PAGE>7

                       ARGO BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial  information and with the instructions to Form 10-QSB,  and 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  adjustments,  including  normal
recurring  accruals,  considered  necessary  for  fair  presentation  have  been
included.  The results of operations  for the three months and nine months ended
September 30, 1996,  are not  necessarily  indicative of the results that may be
expected for the year ending December 31, 1996.

The unaudited  consolidated  financial  statements  include the accounts of Argo
Bancorp,  Inc. ("Argo Bancorp," the "Corporation" or "Holding  Company") and its
wholly owned subsidiaries,  On-Line Financial Services,  Inc. ("On-Line"),  Argo
Federal  Savings Bank, FSB ("Argo  Savings" or "Savings Bank") and Argo Savings'
wholly owned  subsidiaries,  Argo  Mortgage  Corporation,  and  Dolton-Riverdale
Savings Service  Corporation and Argo Saving's  majority owned limited liability
corporation,  Margo  Financial  Services,  LLC. The statements also include Argo
Bancorp's majority owned limited liability  corporation,  Argo / Empire Mortgage
LLC. Significant  intercompany accounts and transactions have been eliminated in
consolidation.

NOTE B - STOCK BENEFIT PLANS

The Savings Bank adopted the Argo Federal  Savings 401(K) Plan (Plan)  effective
October 1, 1988, for the exclusive benefit of eligible  employees of the Savings
Bank.  The Plan is a qualified  plan  covering all employees of the Savings Bank
who have completed at least 1,000 hours of service  within a twelve  consecutive
month period and are age 21 or older. Participants may make contributions to the
Plan from 1% to 12% of their  earnings,  subject  to  Internal  Revenue  Service
limitations.  Matching contributions of 50% of each participants contribution up
to 12% are made at the Savings  Bank's  discretion  each Plan year.  The Savings
Bank made contributions of $46,000 and $43,000,  to the Plan for the nine months
ended September 30, 1996, and 1995. The Plan also provides benefits in the event
of death, disability, or other termination of employment.

On-Line has a 401(k) Plan covering all employees who have  completed one or more
years of service.  Participants may make  contributions to the Plan from 1.0% to
12.0% of their  earnings,  subject  to  Internal  Revenue  Service  limitations.
Matching contributions of 50.0% of each participant's contribution up to 3.0% of
gross  income  are  made  at  On-Line's   discretion  each  year.  On-Line  made
contributions of $61,000 to the Plan in 1996.

In conformity with Internal Revenue Service (IRS) rules governing separate lines
of business, the 401(k) Plan for On-Line will continue to be operated separately
from the 401(k) Plan for the Savings Bank.

                                        7

<PAGE>8


In connection with the Merger Conversion,  Argo Savings formed an Employee Stock
Ownership Plan ("ESOP") for eligible employees.  The ESOP borrowed funds from an
unrelated third party lender in the amount of $60,180 in order to purchase 7% of
the Common Stock  issued in the Merger  Conversion  (5,233  shares at $11.50 per
share). The ESOP has subsequently  borrowed additional funds from the same third
party lender in the amount of $245,000 in order to purchase  additional  shares.
The ESOP has purchased an additional 13,020 shares at an average price of $18.79
per share. Argo Savings will make scheduled  discretionary cash contributions to
the ESOP sufficient to service the amounts  borrowed.  The unpaid balance of the
ESOP has been included in borrowed funds on the unaudited consolidated statement
of condition  and  stockholders'  equity has been  reduced by a similar  amount.
Contributions of $55,000 and $59,000 were made to the ESOP to fund principal and
interest  payments  for the nine months  ended  September  30,  1996,  and 1995,
respectively.

On January 1, 1994, Argo Bancorp adopted the provisions of Statement of Position
93-6, (SOP 93-6),  "Employers'  Accounting for Employee Stock Ownership  Plans",
issued by the  American  Institute  of Certified  Public  Accountants.  SOP 93-6
requires Argo Bancorp to consider outstanding only those shares of the ESOP that
are  committed to be released  when  calculating  both primary and fully diluted
earnings  per  share.  SOP 93-6 also  requires  the  Savings  Bank to record the
difference between the fair value of the shares committed to be released and the
cost of those shares to the ESOP as a charge to additional  paid-in-capital with
the corresponding  increase or decrease to compensation expense. The adoption of
SOP 93-6 had the effect of increasing  additional paid-in capital by $74,000 for
the nine months ended September 30, 1996.

On-Line does not offer an ESOP for On-Line employees.  On-Line employees are not
eligible for participation under the Savings Bank's ESOP.

The Board of Directors of Argo Savings formed a Management  Recognition Plan and
Trust ("MRP") effective October 31, 1991, which purchased 6.8% or 15,400 shares,
of the  Corporation's  authorized but unissued common stock in December 1991. In
addition,  Argo Savings  contributed  $34,385 to allow the MRP to purchase 2,990
shares in the merger  conversion  or on the open market.  All initial MRP shares
have been awarded to employees in key management positions with the Savings Bank
and are fully vested.

On April 26, 1995,  an amendment to the MRP was  approved,  which  increased the
amount  of  shares  available  to be  awarded  under  the MRP to  24,498.  As of
September 30, 1996, an additional 5,704 shares have been purchased under the MRP
and none have been  awarded.  The  awards  will be  earned by  employees  over a
three-year period.  Once awarded the aggregate purchase price of the shares will
be amortized  to expense as a portion of annual  compensation  as the  employees
become  vested in their stock  awards and the  amortized  cost is reflected as a
reduction of stockholders' equity.

                                        8

<PAGE>9

The Board of Directors of Argo Bancorp formed a Management  Recognition Plan and
Trust ("MRP")  effective  August 27, 1996,  which purchased 12,500 shares of the
Corporation's  common  stock.  As of September  30, l996 none of the shares have
been awarded.  The awards will be earned by employees  over a five-year  period.
Once  awarded the  aggregate  purchase  price of the shares will be amortized to
expense as a portion of annual  compensation  as the employees  become vested in
their  stock  awards and the  amortized  cost is  reflected  as a  reduction  of
stockholders' equity.

Argo  Bancorp's  Board of Directors  adopted the 1991 Stock Option and Incentive
Plan (the 1991  Stock  Option  Plan),  which was  approved  by its  shareholders
effective  December 23, 1991, under which up to 107,450 shares of Argo Bancorp's
common  stock were  reserved  for  issuance  by Argo  Bancorp  upon  exercise of
incentive stock options to be granted to full-time employees of Argo Bancorp and
its  subsidiaries  from time to time.  All 107,450  options were awarded by Argo
Bancorp  under the 1991 Stock  Option Plan.  The exercise  price for the options
awarded  was equal to the fair market  value of the common  stock at the date of
grant. To date there have been 7,941 options exercised and of which 1,072 shares
were exercised during the nine months ended September 30, 1996. At September 30,
1996, options to purchase 99,509 shares were outstanding.

Argo Bancorp's Board of Directors  adopted the  Non-Qualified  Stock Option Plan
for Non-Employee Directors (Non-Qualified Stock Option Plan), which was approved
by its  shareholders  effective  December  23,  1991,  under which up to 107,450
shares of Argo Bancorp's common stock were reserved for issuance by Argo Bancorp
upon  exercise  of  non-incentive  stock  options to be granted to  non-employee
directors  of the  Corporation  and  its  subsidiaries  from  time to  time.  At
September 30, 1996,  50,100 options for shares have been awarded by Argo Bancorp
under the  Non-Qualified  Stock Option Plan.  To date,  options to acquire 4,700
shares have been exercised of which 3,200 shares were exercised  during the nine
months ended  September 30, 1996. The exercise price for the options awarded was
equal to the fair  market  value of the  common  stock at the date of grant.  At
September 30, 1996, options to purchase 45,400 shares were outstanding under the
Non-Qualified Stock Option Plan.

On-Line  does not  offer a stock  option  plan for  On-Line  employees.  On-Line
employees are not eligible for  participation  under Argo Bancorp's Stock Option
Plan.



                                         9

<PAGE>10

NOTE C - REGULATORY CAPITAL

Pursuant  to the  Office  of Thrift  Supervision  ("OTS")  regulations,  savings
institutions  must meet three separate minimum  capital-to-assets  requirements:
(1) a risk-based  capital  requirement of 8.0% of  risk-weighted  assets,  (2) a
leverage or core ratio of 3% core capital to total  adjusted  assets,  and (3) a
tangible  capital  requirement  of 1.5%  tangible  core capital to total assets.
Although the minimum capital  requirement is 3.0%, the OTS  Regulations  provide
that  an  institution  with  less  than  4.0%  core  capital  is  deemed  to  be
"under-capitalized."  The following table summarizes,  as of September 30, 1996,
Argo Savings' capital requirements under FIRREA and its actual capital ratios at
that date:
<TABLE>
<CAPTION>
                REQUIRED          ACTUAL            REQUIRED           ACTUAL           EXCESS
                CAPITAL           CAPITAL           CAPITAL            CAPITAL          CAPITAL
               PERCENTAGE        PERCENTAGE         BALANCE            BALANCE          BALANCE
               ----------        ----------         -------            -------          -------
                                          (Dollars in Thousands)

<S>                 <C>              <C>             <C>               <C>              <C>   
Risk-based          8.0%             10.76%          $8,499            $11,429          $2,930
Core                3.0               5.44%           5,976             10,835           4,859
Tangible            1.5               5.44%           2,988             10,835           7,847

</TABLE>


NOTE D - EARNINGS PER SHARE

Primary  earnings  per  share is based on a  weighted  average  number of shares
outstanding of 363,815 and 347,334 for the nine months ended September 30, 1996,
and 1995,  respectively.  Fully  diluted  earnings per share for the nine months
ended  September  30,  1996,  and  1995,  is based  upon  367,461  and  354,105,
respectively.

NOTE E - COMMITMENTS AND CONTINGENCIES

At September 30, 1996, Argo Savings had loan commitments  totaling $1.9 million,
and $4.5  million  in unused  lines of  credit.  Commitments  to fund loans have
credit  risk  essentially  the  same as that  involved  in  extending  loans  to
customers and are subject to Argo Savings' normal credit policies.  Argo Savings
also had community reinvestment act ("CRA") investment  commitments  outstanding
of $1.7 million.


                                         10



<PAGE>11

                                 ARGO BANCORP, INC.

                       MANAGEMENT DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Argo Bancorp was  incorporated in August 1987, for the sole purpose of acquiring
Argo Savings.  Argo Bancorp was originally  capitalized  through the sale of 300
shares  (which  split in  December  of 1991 at 700/1)  of common  stock to three
investors for total proceeds of $60,000.  Argo Bancorp  acquired Argo Savings on
November 17, 1987 for a capital  infusion of $1.1 million.  On May 26, 1992, the
Corporation  completed  a merger  conversion  whereby  Dolton-Riverdale  Savings
converted from a state  chartered  mutual  association to a federally  chartered
stock association and simultaneously merged with and into Argo Savings with Argo
Savings as the surviving  entity.  The  transaction  was accounted for under the
pooling of interests  method.  There was no goodwill or other intangible  assets
recorded as a result of the transaction.  As part of the merger  conversion with
Dolton-Riverdale  Savings,  the Corporation sold an additional  74,750 shares of
common  stock at an  issuance  price of  $11.50.  Net  proceeds  from the merger
conversion  were $326,000  after the deduction of the conversion  expenses.  The
Corporation  retained 50% of the net  proceeds  from the merger  conversion  and
injected the remaining 50% into Argo Savings. All proceeds were used for general
business uses.

Argo  Bancorp is a unitary  savings and loan company and is  registered  as such
with  the  OTS.  The  Corporation  is an  active  holding  company  with  assets
consisting of Argo Savings' stock, On-Line Financial Services Stock,  marketable
securities,  interest-earning  deposits and a majority  interest in  Argo/Empire
Mortgage LLC, a limited liability  corporation which engages in the purchase and
disposition  of loans.  Argo  Bancorp  is a Federal  Housing  Authority  ("FHA")
approved  originator and servicer,  a licensed  Illinois  mortgage banker and an
approved Federal National Mortgage Association ("FNMA") servicer.

The principal business of Argo Savings consists of attracting  deposits from the
general public and investing  those  deposits,  together with  custodial  escrow
accounts associated with purchased mortgage servicing rights and funds generated
internally,  primarily in one-to-four  family mortgage loans.  Argo Savings is a
member of the Federal  Home Loan Bank  ("FHLB")  System,  and its  deposits  are
insured  to the  maximum  allowable  amount  by the  Federal  Deposit  Insurance
Corporation ("FDIC").

Argo  Savings  operates  one  wholly-owned   service   corporation   subsidiary.
Dolton-Riverdale  Savings Service Corporation is a wholly owned subsidiary which
offers life  insurance  annuities to the  customer  base of Argo  Savings.  Argo
Savings also has two operating subsidiaries, Argo Mortgage Corporation and Margo
Financial  Services LLC. Argo Mortgage  Corporation is a wholly owned  operating
subsidiary,  which  engages  in  mortgage  brokerage  activities  that  focus on
purchase and sale of mortgage loans into the secondary  market.  Margo Financial
Services LLC is a majority owned operating  subsidiary,  which was  incorporated
and fully  operational on August 20, 1996. The activities of Margo relate to the
origination, investment, sale and servicing of mortgage loans.

                                        11

<PAGE>12

Argo  Savings'  results of operations  are  dependent  primarily on net interest
income,  representing  the difference  between the interest income earned on its
loans,  mortgage-backed  securities,  investment securities and interest-earning
deposits and its cost of funds, consisting of the interest paid on its deposits,
escrows and borrowings. Argo Savings' operating results are also affected by the
profit  recognized  on the sale of mortgage  loans,  the fees  generated  by its
investment in purchased  mortgage servicing rights, and customer service charges
and  other  income.   Argo  Savings'  operating  expenses  consist  of  employee
compensation,  occupancy expenses,  federal insurance premiums,  amortization of
goodwill, and other general and administrative  expenses.  Results of operations
are also significantly affected by general economic and competitive  conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities.

On October 31, 1995, Argo Bancorp acquired On-Line, an Oak Brook, Illinois based
computer  services  bureau,  serving  bank and  thrift  clients  throughout  the
Midwest.  The  purchase  transaction  was  consummated  through  the  use  of  a
wholly-owned subsidiary,  OLF Acquisition Corporation,  which acquired shares of
three  separate state  chartered  savings and loan services  corporations  which
owned, in the aggregate, 98.9% of the outstanding shares of On-Line. Sale of the
remaining 1.1% of On-Line shares was made by a single institutional  stockholder
which held shares in On-Line directly.  The intervening  acquisition  subsidiary
and state chartered savings and loan service  corporation shells were liquidated
and merged by Argo Bancorp during 1996.

Financial  terms of the  transaction  included a cash sweep to  shareholders  of
On-Line funds on hand on the closing date,  less amounts  necessary to establish
certain agreed-upon escrow balances,  a two (2) year asset note of approximately
$1,026,000,  representing  the  closing  date  net  book  value  of  On-Line;  a
twenty-six (26) month escrow note in the amount of $460,000,  representing funds
held for future performance under a third party computer lease; and a structured
schedule of  contingent  payments  based on future  revenues of On-Line over the
next seven (7) years.  The total  transaction  value,  including asset notes and
contingent payments, will not exceed $10.0 million.

On-Line  is a third  party  provider  of  on-line,  real-time,  electronic  data
processing  services to financial  institutions  located throughout the Midwest.
On-Line currently provides data processing services to thrifts, community banks,
savings  banks,  and mortgage  brokers  representing  over 1.5 million  customer
accounts  in six  Midwestern  states.  On-Line  has  historically  marketed  its
services  to  institutions  with  assets of less than  $1.0  billion,  where the
company's  orientation toward superior customer service and specialized products
allows it to effectively  compete.  The acquisition by Argo Bancorp will promote
the development and sale of technological advances in the systems, programs, and
services  offered by On-Line,  which  includes  resale of  software  produced by
Information  Technology  Incorporated,  integrated  check and  document  imaging
systems,  and computer output laser disc storage technology.  These services are
in addition to new  offerings by On-Line in the planning and  deployment of wide
area and local  area  network  systems,  the sale of all  related  hardware  and
services,  expanded  technical  and  communications  support,  consultation  and
training,  and the  maintenance of in-house  systems.  On-Line's  business plans
included marketing to small to mid-size  commercial and community banks, as well
as other  corporate users of advanced  technology,  as it moves to expand beyond
its traditional thrift institution client base.

                                        12

<PAGE>13


LIQUIDITY AND CAPITAL RESOURCES

Argo Savings' primary sources of funds are deposits, proceeds from principal and
interest  payments  on  the  loan  and  mortgage-backed  securities  portfolios,
custodial escrow accounts related to loans serviced for others,  and the sale of
newly originated fixed rate long-term mortgage loans. The most liquid assets are
cash and short-term investments. The levels of these assets are dependent on the
operating,  financing and investing activities during any given period. Cash and
interest-earning deposits totaled $12.4 million at September 30, 1996.

The primary investment  activity of Argo Savings is the origination and purchase
of mortgage  loans.  During the nine months ended  September 30, 1996, and 1995,
Argo Savings originated and purchased mortgage loans in the principal amounts of
$66.7  million and $47.4  million,  respectively.  During the nine months  ended
September 30, 1996, and 1995,  these investing  activities were primarily funded
by principal repayments on loans and mortgage-backed securities of $36.6 million
and $27.6  million,  respectively,  and the proceeds  from the sale of loans and
securities available for sale of $33.1 million and $45.2 million,  respectively.
During the nine months ended September 30, 1996 and 1995, additional funding was
provided  by the  increase  in  deposits  of $11.5  million  and $17.2  million,
respectively,  and the increase in  borrowings of $15.4 million and $6.6 million
respectively.

Argo Savings is required to maintain  minimum levels of liquid assets as defined
by OTS regulation. At September 30, 1996, Argo Savings liquid assets represented
7.92% of its liquidity  base as compared to the required  level of 5%. The level
of liquidity  maintained  is believed by  management  to be adequate to meet the
requirements of normal operations,  potential deposit outflows,  and the current
loan demand.

Liquidity  management for Argo Savings is both a daily and long-term function of
the Argo Savings' senior management.  Argo Savings'  management meets on a daily
basis and monitors interest rates, current and projected commitments to purchase
loans and the likelihood of funding such commitments,  and projected cash flows.
Excess funds are generally  invested in short-term  investments  such as federal
funds.   Cash  flow  projections  are  updated  regularly  to  assure  necessary
liquidity.

At  September  30,  1996,  Argo  Savings'  capital  exceeded  all of the capital
requirements  of the OTS on a current  and fully  phased-in  basis.  The Savings
Bank's  tangible,  core and  risk-based  capital  ratios were  5.44%,  5.44% and
10.76%, respectively.

The Office of Thrift  Supervision  has adopted a final rule that requires  every
savings  association with more than normal interest rate risk exposure to deduct
from its  total  capital,  for  purposes  of  determining  compliance  with such
requirement,  an  amount  equal  to  50.0% of its  interest-rate  risk  exposure
multiplied by the present value of its assets. This exposure is a measure of the
potential decline in the net portfolio value of a savings  association,  greater
than 2.0% of the present  value of its  assets,  based upon a  hypothetical  200
basis point  increase or decrease  in  interest  rates  (whichever  results in a
greater  decline).  Net  portfolio  value is the present  value of expected cash
flows from assets,  liabilities,  and off-balance  sheet contracts.  The OTS has
deferred implementation of this

                                        13


<PAGE>14


rule. Any savings  association with less than $300 million in assets and a total
capital ratio in excess of 12.0% is exempt from this requirement  unless the OTS
determines  otherwise.  Management  does not believe  that this rule will have a
material impact on the Company.

CHANGES IN FINANCIAL CONDITION

Total assets increased $23.4 million to $210 million at September 30, 1996, from
$186.5  million at  December  31,  1995.  The  increase  in total  assets is due
primarily  to the  increase  of $20.9  million  in loans  which was funded by an
increase  in deposits of $11.5  million and an increase in  borrowings  of $15.4
million, partially offset by a decrease in custodial accounts of $4.6 million.

Cash and  interest-earning  deposits  increased $1.4 million to $12.4 million at
September 30, l996, primarily due to liquidity management.  Because Argo Savings
is leveraged,  all excess funds not necessary to meet  regulatory  liquidity are
used to reduce borrowings.

Net loans  receivable and loans  available for sale  increased  $20.9 million to
$164.0  million at September  30, 1996,  primarily  due to the  origination  and
purchase of $88.7 million of loans partially  offset by principal  repayments of
$36.1  million  and the  sale of $32.1  million  of loans  available  for  sale.
Mortgage-backed  securities  decreased $657,000 to $5.1 million at September 30,
1996, due to principal repayments. All mortgage-backed securities are classified
as available for sale at September 30, 1996.

Deposits  increased  $11.5 million to $134.3 million at September 30, 1996, from
$122.8 million at December 31, 1995. The increase can primarily be attributed to
net cash inflow of $6.8  million and  interest  credited of $4.7 million for the
nine  months  ended  September  30,  1996.  The cash  inflow  was  caused  by an
aggressive  marketing  effort aimed at attracting a larger customer base and the
growth in deposits attributable to the new Gurnee branch.

Borrowings  increased $15.4 million to $53.6 million at September 30, 1996, from
$38.2  million at December 31, 1995.  The increase is primarily  due to proceeds
from  short-term  advances  from the  Federal  Home Loan Bank.  The  increase in
advances  were  used to fund  loan  purchases  and as an  additional  source  of
liquidity.

Custodial  escrow  balances for loans  serviced  decreased  $4.6 million to $5.1
million at  September  30,  1996.  The  custodial  accounts  pertain to escrowed
payments of taxes and insurance and the float on principal and interest payments
on  loans  serviced  either  for Argo  Savings  or on  behalf  of  others  by an
independent  mortgage  servicing  operation.  The custodial  accounts related to
loans  serviced by others are  maintained  at Argo  Savings in  interest-bearing
accounts.  The custodial  accounts  associated with loans or purchased  mortgage
servicing  rights  serviced  for Argo  Savings are  maintained  in  non-interest
bearing  accounts.  At  September  30,  1996,  and 1995,  $5.1  million and $3.0
million,  respectively,  of all  custodial  escrow  balances  pertain  to  loans
subserviced on behalf of Argo Savings for portfolio  loans,  servicing  retained
loans and purchased  mortgage  servicing rights.  Due to the nature of custodial
escrow deposits, balances fluctuate widely on a day-to-day basis.


                                        14

<PAGE>15


Currently,  management  does not  anticipate a material  increase or decrease of
custodial escrow balances over the current balance.

Stockholders'  equity increased $791,000 to $12.1 million at September 30, 1996,
from $11.3 million at December 31, 1995, primarily due to net income of $930,000
partially  offset by  dividends  paid of  $157,000.  Book value per common share
outstanding increased to $38.75 at September 30, 1996.

INTEREST RATE RISK

Argo Savings'  financial  objective is to reduce the sensitivity of its earnings
to interest  rate  fluctuations  by  attempting  to achieve a match  between the
interest rate  sensitivity of its assets and  liabilities.  The major strategies
Argo Savings has  implemented are (i) the origination and purchase of adjustable
rate  loans and  mortgage-backed  securities;  (ii) the  origination  of balloon
mortgages;  (iii) the sale of newly  originated  long-term fixed rate mortgages;
(iv) the  investment  in purchased  mortgage  servicing  rights which  provide a
source of non-interest income and also act as a hedge against the decline in the
value of fixed rate  mortgages in a rising  interest rate  environment;  (v) the
increase of non-interest  bearing  custodial  accounts  related to the purchased
mortgage   servicing  rights;  and  (vi)  the  control  of  deposit  growth  and
maintenance of long-term  deposits.  The strategies listed have been implemented
by Argo Savings and are monitored on a monthly basis by management. Argo Savings
does not use any  artificial  hedge  products to reduce its exposure to interest
rate risk.

As part of its asset/liability  strategy, Argo Savings' objective is to maintain
the cumulative  one-year hedged gap within a range of plus or minus 15% of total
assets,  which  helps  maintain  a more  stable net  interest  spread in various
interest  rate  environments.  The gap  ratio  fluctuates  as a result of market
conditions and management's expectations of future interest rate trends.

Argo  Savings had an excess of interest  sensitive  liabilities  which mature or
reprice within one year over interest sensitive assets of $26.4 million or 14.8%
of total  assets at September  30,  1996.  As a result of the excess of interest
sensitive  liabilities  over  interest  sensitive  assets,  Argo Savings is "Net
Liability  Sensitive" which would indicate that its earnings would be negatively
affected  by rising  interest  rates.  In  periods of  falling  interest  rates,
however, the opposite effect on net interest income is expected.

In  determining  the gap  position,  Argo  Savings  has  assumed  that  passbook
accounts, NOW accounts,  money market accounts, and interest-bearing escrows are
withdrawn based on assumptions  prepared by the OTS in its latest  published gap
analysis  report.  The  assumptions  used,  although  standardized,  may  not be
indicative of the actual withdrawals experienced by Argo Savings. Fixed maturity
deposits  reprice at  maturity.  The  combined  effect of these  assumptions  on
passbook, NOW, money market accounts and interest-bearing  escrows assumes 17.0%
of these  accounts  are  withdrawn  within  three  years,  and  15.0%  per year,
thereafter.   Management   believes  that  these  decay  rate   assumptions  are
reasonable.

                                        15

<PAGE>16

LEGISLATIVE MATTERS

On September  30,  1996,  legislation  was enacted  which,  among other  things,
imposes a special one-time assessment on SAIF member institutions, including the
Savings  Bank,  to  recapitalize  the SAIF and spreads the payments of Financing
Corporation  Bonds  ("FICO")  across all SAIF and BIF members.  The FDIC special
assessment  being levied is 65.7 basis  points on the amount of SAIF  assessable
deposits held as of March 31, l995. The special assessment was recognized in the
third quarter and is tax  deductible.  The Savings Bank  recognized  $789,000 in
connection with the FDIC special  assessment.  This legislation should eliminate
the substantial  disparity between the amount that BIF and SAIF members had been
paying in deposit insurance premiums.

Under legislation,  the FDIC estimated that BIF members will be paying a portion
of the FICO payment equal to 1.3 basis points on BIF-insured deposits on January
1, l997,  compared to 6.5 basis points on  SAIF-insured  deposits and will pay a
pro rata share of the FICO payment on the earlier of January 1, 2000 or the date
upon which the last savings  association  ceases to exist.  The legislation also
requires  the BIF and  SAIF to be  merged  by  January  1,  1999  provided  that
subsequent  legislation is adopted to eliminate the savings  association charter
and there are no remaining savings associations as of that date.

The FDIC has recently  proposed to lower SAIF  assessments to a range comparable
to that of BIF members,  although  SAIF members must also make the FICO payments
described  above.   Management  cannot  predict  the  level  of  FDIC  insurance
assessments on an on-going basis or whether the BIF and SAIF will  eventually be
merged.

Legislation regarding bad debt recapture has been enacted into law on August 20,
1996. The legislation requires recapture of reserves accumulated after 1987. The
recapture tax on post 1987 reserves must be paid over a six year period starting
in 1996.  The  payment of the tax can be deferred in each of 1996 and 1997 if an
institution  originates  at least the same average  annual  principal  amount of
mortgage  loans that it  originated  in the six years prior to 1996.  Management
does not  believe  that  this  legislation  will have a  material  impact on the
operations of the Company.

ACCOUNTING DEVELOPMENTS

In  March  1995,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
Of." SFAS No. 121  prescribes  the  accounting  for the impairment of long-lived
assets and goodwill  related to those assets.  The new rules specify when assets
should  be  reviewed  for  impairment,  how to  determine  whether  an  asset is
impaired,  how to measure  an  impairment  loss,  and what  financial  statement
disclosures  are  necessary.  Also  prescribed is the  accounting for long-lived
assets and  identifiable  intangibles  that a company plans to dispose of, other
than those that are a part of a  discontinued  operation.  Any  impairment  of a
long-lived  asset  resulting from  management's  review is to be recognized as a
component of non-interest  expense.  The Company adopted SFAS No. 121 on January
1,  1996,  and has not had a  material  effect  on the  Corporation's  financial
statements.

                                        16

<PAGE>17


In May 1995,  FASB issued  SFAS No.  122,  "Accounting  for  Mortgage  Servicing
Rights." SFAS No. 122, an amendment of SFAS No. 65,  requires the recognition of
rights to service loans for others as separate  assets,  however those servicing
rights  are  acquired.  SFAS  No.  122 also  requires  that a  mortgage  banking
enterprise  assess its capitalized  servicing rights for impairment based on the
fair  value  of  those  rights,  using a  disaggregated  approach  for  mortgage
servicing  rights  capitalized  after  adoption  of the new  standard.  Mortgage
servicing rights are amortized on an accelerated basis over the estimated period
of net servicing revenue. Adjustments to reduce amortized cost to estimated fair
value  are  included  in  non-interest   income  or  non-interest   expense,  as
appropriate.  The Company  adopted SFAS No. 122 on January 1, 1996,  and has not
had a material effect on the Corporation's financial statement.

ASSET QUALITY

Argo  Bancorp and Argo  Savings  regularly  review  assets to  determine  proper
valuation.  Loans are reviewed on a regular  basis and an allowance for possible
loan  losses  is  established  when,  in the  opinion  of  management,  the  net
realizable  value of the  property  collateralizing  the  loan is less  than the
outstanding  principal  and  interest  and  the  collectibility  of  the  loan's
principal and interest becomes doubtful.

At September 30, 1995,  Argo Savings had twelve (12)  properties,  totaling $1.6
million  classified as foreclosed  real estate,  as compared to twenty-one  (21)
properties for  $1,473,000 at December 31, 1995.  The  underlying  properties on
September 30, 1996,  consisted of eleven(11) single family  residences,  and one
(1) commercial property. The foreclosed real estate has been written down to its
estimated  fair value at September  30,  1996.  The total amount of loans ninety
(90) days or more past due at September  30, 1996,  was $1.8 million or 1.23% of
total loans as compared to $2.0  million or 2.15% of total loans on December 31,
1995.  At September  30, 1996,  all loans ninety (90) days or more past due were
secured  by  one-to-four  family  residences.  Total  non-performing  assets  at
September 30, 1996, totaled $3.4 million or 1.63% of total assets..

There were no  restructured  loans  within the meaning of  Financial  Accounting
Standards Board Statement 15 for any of the indicated periods.

RESULTS OF OPERATIONS - COMPARISON  OF OPERATING  RESULTS FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1996, AND 1995.

GENERAL

Net income for the three and nine months ended  September 30, 1996,  was $32,000
or $.09 per share (fully diluted) and 930,000 or $2.53 per share (fully diluted)
respectively  as compared  to net income of  $462,000 or $1.30 per share  (fully
diluted)  and $984,000 or $2.78 per share  (fully  diluted)  for the  comparable
three  and nine  month  periods  ended  September  30,  1995.  The  decrease  in
comparable  three month and nine month earnings  resulted from the one-time SAIF
charge  of  $489,000  net of  taxes  during  the  third  quarter  of  1996,  see
"Legislative Matters." Partially offsetting this one-time charge was an increase
in net  interest  income of  $480,000  and the net  revenues  of  On-Line  which
contributed $507,000.

                                        17

<PAGE>18

INTEREST INCOME

Interest  income for the three months ended September 30, 1996, was $4.2 million
as compared to $3.6 million for the three months ended  September 30, 1995.  The
$570,000  increase was caused by the $5.0 million  increase in average  interest
earning assets to $165.5 million for the quarter ended September 30, 1996, and a
77 basis point increase in the weighted average yield on interest earning assets
to 10.19% for the quarter ended September 30, 1996.

Interest  income for the nine months ended  September  30, 1996,  totaled  $11.7
million,  as compared to $10.2 million for the comparable 1995 period.  The $1.4
million   increase  was  caused  by  the  $4.6   million   increase  in  average
interest-earning  assets to $158.9  million for the nine months ended  September
30,  1996,  and the 94 basis point  increase in the  weighted  average  yield on
interest-earning assets to 9.77% for the nine months ended September 30, 1996

INTEREST EXPENSE

Interest expense for the three months ended September 30, 1996, was $2.3 million
as compared to $2.2 million for the comparable 1995 period. The $89,000 increase
was caused by the $14.1 million increase in average interest-bearing liabilities
to $175.5 million for the quarter ended September 30, 1996,  partially offset by
the 24 basis point  decrease in the weighted  average  cost of  interest-bearing
liabilities to 5.17% for the quarter ended September 30, 1996.

Interest  expense for the nine months ended  September  30,  1996,  totaled $6.5
million as compared to $6.2 million for the comparable 1995 period. The $336,000
increase was driven by the $12.3  million  increase in average  interest-bearing
liabilities  to $167.1  million for the nine months  ended  September  30, 1996,
partially  offset by the 12 basis point decrease in the weighted average cost of
interest  bearing  liabilities to 5.18% for the nine months ended  September 30,
1996.

NET INTEREST INCOME

Net interest  income  totaled $1.9 million for the three months ended  September
30, 1996,  reflecting  an increase of $451,000  over the amount  recorded in the
comparable  1995 period.  The  effective net interest rate for the quarter ended
September  30,  1996,  increased  101 basis  points to 5.02%  from 4.01% for the
comparable 1994 period.

Net interest income totaled $5.1 million for the nine months ended September 30,
1996,  reflecting  an increase of $1.0 million  over the amount  recorded in the
comparable  1995  period.  The  effective  net spread for the nine months  ended
September  30, 1996,  increased  107 basis  points to 4.59%,  from 3.52% for the
comparable 1995 period.

                                        18

<PAGE>19


The  increases in the  effective  net interest  rate for both the three and nine
month periods ended September 30, 1996 were caused  primarily by the purchase of
higher  yielding  seasoned  mortgage loans during the three month and nine month
periods ended September 30, l996.

PROVISION FOR LOAN LOSSES

A general loan loss  provision  of $100,000 was recorded  during the nine months
ended  September 30, 1996, as compared to $40,000 for the comparable 1995 period
bringing the  cumulative  allowance for loan losses to $594,000 or .37% of gross
loans receivable and 32.66% of total non-performing loans at September 30, 1996.
A general loan loss  provision  of $45,000 was recorded  during the three months
ended  September  30,  1996,  as compared to $15,000 for the three  months ended
September  30,  1995.  Management  believes  that the loan loss  provisions  are
adequate and will  continue to monitor the mortgage  portfolio  and  substandard
assets for loss exposure.

NON-INTEREST INCOME

Non-interest  income increased $2.6 million and $8.1 million for the three month
and nine month periods ended September 30, 1996,  respectively.  These increases
were the result of $2.7 million and $8.2 million in data processing  revenue for
the three month and nine month periods  ended  September 30, 1996 as a result of
the acquisition of On-Line.

NON-INTEREST EXPENSE

Non-interest expense increased $3.7 million and $9.3 million for the three month
and nine month periods ended September 30, l996,  respectively.  These increases
were due to  increases  in  compensation,  occupancy,  costs of data  processing
services,  and  other  general  and  administrative  fees  as a  result  of  the
acquisition of On-Line.  Also contributing to the increase was the one-time SAIF
assessment recapitalization charge.

INCOME TAX EXPENSE

The provision  for income tax expense  decreased to $339,000 or 26.7% of pre-tax
earnings for the nine months ended  September  30, 1996, as compared to $513,000
or 34.2% of pre-tax earnings for the comparable 1995 period.

The decrease was the result of the utilization of $154,000 in low income housing
credits and the  $300,000  tax benefit  generated  by the SAIF  recapitalization
assessment.




                                         19

<PAGE>20


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Argo  Bancorp and Argo  Savings are not  engaged in any legal  proceedings  of a
material nature at the present time.

ITEM 2.  CHANGES IN SECURITIES

Not applicable.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES

Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5.  OTHER INFORMATION

During the third  quarter 1996,  3,772 stock  options were  exercised at average
price of $14.71. These transactions increased outstanding shares to 312,791.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

  A.  EXHIBITS:

    The following exhibits are incorporated herein by reference:

    (3)  The Certificate of Incorporation and By-Laws.

           3.1  Certificate of Incorporation of Argo Bancorp, Inc. *
           3.2  By-Laws of Argo Bancorp, Inc. *
           4.0  Stock Certificate of Argo Bancorp, Inc. *
           10.0 Argo Bancorp, Inc. 1996 Management Recognition and
                Retention Plan **
           27.0 Financial Data Schedule (filed herewith).

  B.  REPORTS ON FORM 8-K:
    None
-----------------
* Incorporated herein by reference into this document from Exhibits to Form S-1,
Registration  Statement,  and filed on January 28, 1992, any amendments thereto,
Registration No. 33-45222.

** Incorporated  herein by reference into this document from the Form S-8, filed
on September 30, l996, Registration No. 333-13047.

                                           20
<PAGE>21




                                    SIGNATURES


Pursuant to the  requirement  of the  Securities  and Exchange Act of 1934,  the
Registrant  had duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                        ARGO BANCORP, INC.




Date:  November 5, 1996                 /S/ John G. Yedinak
      ------------------                ---------------------------------------
                                        John G. Yedinak, President of the Board
                                        and Chief Executive Officer




Date:  November 5, 1996                 /S/ Carol J. Delgado
      ------------------                ---------------------------------------
                                        Carol J. Delgado, Vice President and
                                        Treasurer




                                           21